-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AZecYWAqilgnOR7r50ZdV3/LNuQXov4AlLEe1bYpel9ikbTcrIX/0KoMhKCBxu69 QbR5SvQhVyU9lXui4IbEIg== 0000950115-97-001542.txt : 19971007 0000950115-97-001542.hdr.sgml : 19971007 ACCESSION NUMBER: 0000950115-97-001542 CONFORMED SUBMISSION TYPE: S-1/A PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 19971006 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: JEVIC TRANSPORTATION INC CENTRAL INDEX KEY: 0001044066 STANDARD INDUSTRIAL CLASSIFICATION: TRUCKING (NO LOCAL) [4213] IRS NUMBER: 222373402 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-1/A SEC ACT: SEC FILE NUMBER: 333-33469 FILM NUMBER: 97691183 BUSINESS ADDRESS: STREET 1: 600 CREEK RD P O BOX 5157 CITY: DELANCO STATE: NJ ZIP: 08075 BUSINESS PHONE: 6094617111 S-1/A 1 REGISTRATION STATEMENT AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 6, 1997 REGISTRATION NO. 333-33469 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------ AMENDMENT NO. 4 TO FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------ JEVIC TRANSPORTATION, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) New Jersey 4213 22-2373402 (State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer of incorporation or organization) Classification Code Number) Identification No.)
P.O. Box 5157 Delanco, NJ 08075 (609) 461-7111 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) ------------------ Mr. Harry J. Muhlschlegel Chief Executive Officer and Chairman of the Board Jevic Transportation, Inc. P.O. Box 5157 Delanco, NJ 08075 (609) 461-7111 (Name, address, including zip code, and telephone number, including area code, of agent for service) ------------------ COPIES TO: Barry M. Abelson, Esquire Stephen A. Riddick, Esquire Robert A. Friedel, Esquire Piper & Marbury L.L.P. Pepper, Hamilton & Scheetz LLP 36 South Charles Street 3000 Two Logan Square Baltimore, MD 21201 Philadelphia, PA 19103 (410) 539-2530 (215) 981-4000 APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE. 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, check the following box: / / If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / __________________ If this Form is a post-effective amendment filed pursuant to Rule 462(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, check the following box. / /
CALCULATION OF REGISTRATION FEE ================================================================================================================== PROPOSED MAXIMUM AMOUNT OF TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED AGGREGATE OFFERING PRICE (1) REGISTRATION FEE (2) - ------------------------------------------------------------------------------------------------------------------ Common Stock, no par value........................................ $4,370,000 $1,325 ==================================================================================================================
(1) Estimated solely for purposes of calculating the registration fee pursuant to Rule 457(o). Includes amount to be sold pursuant to an over-allotment option to be granted to the Underwriters. (2) A registration fee of $18,540 has previously been paid with respect to the offering being registered hereby. 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 THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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 MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BY 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. SUBJECT TO COMPLETION October 6, 1997 3,800,000 SHARES [LOGO] COMMON STOCK ------------------ All of the 3,800,000 shares of Common Stock offered hereby are being sold by Jevic Transportation, Inc. ("Jevic" or the "Company"). Prior to this offering, there has been no public market for the Common Stock. It is currently estimated that the initial public offering price will be between $13 and $15 per share. See "Underwriting" for a discussion of the factors to be considered in determining the initial public offering price. The Common Stock has been approved for quotation on the Nasdaq National Market under the symbol "JEVC." The Common Stock offered hereby is entitled to one vote per share, while the Class A Common Stock is entitled to two votes per share and may be held only by or for the benefit of its existing holders or their lineal descendants. The rights of the holders of the Common Stock and the Class A Common Stock are otherwise identical. See "Description of Capital Stock". Upon completion of this offering, the Company's directors and executive officers will beneficially own shares representing in the aggregate 71.9% of the voting power of the capital stock of the Company and will be able to control the outcome of all matters requiring a shareholder vote, including the election of directors. ------------------ SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR CERTAIN INFORMATION THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS. ------------------ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
======================================================================================================= PRICE UNDERWRITING PROCEEDS TO DISCOUNTS AND TO PUBLIC COMMISSIONS COMPANY (1) - ------------------------------------------------------------------------------------------------------- Per Share................................ $ $ $ - ------------------------------------------------------------------------------------------------------- Total (2)............................... $ $ $ =======================================================================================================
(1) Before deducting expenses payable by the Company estimated at $800,000. (2) Certain of the Company's shareholders (the "Option Shareholders") have granted the Underwriters a 30-day option to purchase up to 570,000 additional shares of Common Stock solely to cover over-allotments, if any. To the extent that the option is exercised, the Underwriters will offer the additional shares to the public at the Price to Public shown above. If the option is exercised in full, the Price to Public and Underwriting Discounts and Commissions will be $ and $ , respectively, and the Option Shareholders will receive $ . No proceeds from the sale of shares pursuant to an exercise of the over-allotment option will be received by the Company. See "Underwriting." ------------------ The shares of 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 , 1997. BT ALEX. BROWN WILLIAM BLAIR & COMPANY SCHRODER & CO. INC. THE DATE OF THIS PROSPECTUS IS , 1997 The Company intends to furnish its shareholders with annual reports containing audited financial statements and to make available quarterly reports containing unaudited financial statements for the first three quarters of each year. ------------------ CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK. SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THIS OFFERING AND MAY BID FOR AND PURCHASE SHARES OF COMMON STOCK IN THE OPEN MARKET TO COVER SYNDICATE SHORT POSITIONS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING." ------------------ Breakbulk-Free(Registered) is a trademark of the Company. Freightliner(Registered) is a trademark of Freightliner Corp., Cummins(Registered) is a trademark of Cummins Engine Company, Inc., NCR(Registered) is a trademark of NCR Corporation, Novell(Registered) and Novell/NT(Registered) are trademarks of Novell, Inc., Sequent(Registered) is a trademark of Sequent Computer Systems, Inc., UNIX(Registered) is a trademark of X/Open Co. and QUALCOMM(Registered) and OmniTRACS(Registered) are trademarks of QUALCOMM, Inc. 2 PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and the Financial Statements, including the notes thereto, appearing elsewhere in this Prospectus. Unless otherwise indicated, all information in this Prospectus gives retroactive effect to (i) the reclassification of the Company's capital stock into series designated "Common Stock" and "Class A Common Stock" (collectively, the "Common Equity") and (ii) a 34,291-for-one split of the shares of Common Stock and assumes no exercise of the Underwriters' over-allotment option. References in this Prospectus to "Jevic" or the "Company" refer to Jevic Transportation, Inc. THE COMPANY Jevic is a motor carrier that combines the high revenue yield characteristics of a typical less-than-truckload ("LTL") carrier with the operating flexibility and low fixed costs of a truckload carrier. Jevic utilizes a simplified in-route delivery system in which over 70% of the Company's shipments are delivered to their destinations directly from line-haul trailers, eliminating the need for an expensive network of labor-intensive breakbulk terminals, which most LTL carriers use to distribute shipments. Jevic's revenue per terminal for 1996 was approximately $31.0 million. The Company serves shippers throughout the eastern half of the United States and in selected markets in the remainder of the continental United States and Canada through its origination facilities located in the metropolitan areas of Atlanta, Boston, Charlotte, Chicago, Houston and Philadelphia. From 1992 to 1996, the Company's operating revenues and operating income grew at compound annual rates of 26.6% and 29.2%, respectively. Jevic began operations as a motor carrier in 1983, soon after deregulation of the trucking industry. Regulation had caused trucking industry participants to develop as either truckload carriers or as terminal-based LTL carriers. Following deregulation, most carriers continue to focus their operations and price their services as either truckload carriers or LTL carriers. Traditional truckload and LTL carriers can efficiently handle freight that is compatible with their respective operating systems but typically do not have the flexibility to accommodate a wide range of shipment size, length of haul and delivery options. Jevic developed its Breakbulk-Free(Registered) operating system to provide the capabilities of both truckload and LTL service without the inherent infrastructure requirements and operational limitations of truckload and LTL carriers. Jevic's Breakbulk-Free system utilizes a simplified network of terminals, which serve as regional origination points for initial consolidation of freight on a trailer. The Company strategically combines smaller shipments (typically handled by LTL carriers) with larger shipments (typically handled by truckload carriers) in a sequence which permits direct unloading at each shipment's destination, with no need to rehandle individual shipments at one or more breakbulk terminals. Typical LTL carriers have to reload shipments into local trucks for final delivery, whereas, in most cases, Jevic's operating system avoids further rehandling at the destination facility. This generally results in less damage to freight and faster transit times for less than full truckload shipments. Jevic's flexible operating system minimizes rehandling of freight and provides a broad range of transportation services. MARKETING STRATEGY Jevic targets prospective customers whose logistics needs are not being met, develops solutions for those needs and offers a broad range of transportation services. o Offer Logistics-Based Solutions. The Company utilizes a consultative approach to develop customized logistics-based solutions to meet its customers' transportation and distribution needs. The Company's customer-focused approach helps expand its customer base and forge long-term customer relationships. o Offer a Broad Range of Differentiated Services. By creating a "one-stop-shop" and offering a broad range of transportation services, the Company seeks to become its customers' core carrier. Jevic offers its customers a wide range of shipment size, length of haul and delivery options as well as heated service. By increasing the number of shipments from existing customers, the Company achieves operating efficiencies through higher pick-up and lane density, improved terminal utilization and reduced administrative duplication. o Focus on Customer Selectivity. The Company targets customers based on disciplined sales criteria designed to identify shippers whose service requirements drive the carrier selection process. This approach has generated 3 significant incremental business in service-sensitive industries, such as the chemical industry, which accounted for approximately 45% of the Company's operating revenues from its top 200 customers in the first half of 1997. o Solicit Optimal Mix of Shipment Sizes. Jevic selectively solicits business from its customers in order to load trailers strategically by integrating larger shipments with smaller shipments and thereby optimizes revenue yields and asset utilization. OPERATING STRATEGY Jevic seeks to maximize its results of operations by providing flexible and timely service. o Utilize Breakbulk-Free System. Jevic sequences multiple deliveries from a single trailer, eliminating the need for a network of breakbulk terminals and, in most cases, destination terminals, at which typical LTL carriers unload and reload shipments for final delivery. As a result, the Company reduces transit times and freight damage while avoiding the infrastructure and labor costs associated with a large breakbulk terminal network. o Utilize Technology to Improve Productivity and Customer Service. The Company utilizes technology to improve its customer service and to increase productivity. The Company's tractors are equipped with state-of-the-art QUALCOMM OmniTRACS satellite tracking units to provide real-time customer information and increase fleet utilization. Jevic uses its EDI system to improve customer communications and reduce administrative costs. o Increase Utilization of Owner-Operator Drivers. Jevic has recently expanded its driver force to include owner-operators in order to reduce capital expenditure requirements, improve return on equity, reduce direct exposure to fuel price fluctuations and provide access to an additional pool of drivers. o Maintain a Positive Workforce Environment. Through stringent driver selection criteria, a favorable wage and benefit structure and a positive working environment, the Company minimizes driver turnover, maintains a high level of employee satisfaction and motivates employees to provide high quality service. The Company's annual driver turnover rate was 20.1% in 1996. None of Jevic's employees, including drivers, is represented by a collective bargaining unit. GROWTH STRATEGY The Company seeks sustainable growth by increasing the amount of business generated by existing customers, acquiring new customers within existing regions and expanding into new regions. In response to customer demand, Jevic initiates service to a new region by introducing high-yield inbound LTL service to its existing customer base, delivering in-route from line-haul trailers, consistent with the Company's operating strategy. Until a sufficient volume of inbound business is generated, the Company avoids the up-front capital costs of building or purchasing a new facility by soliciting lower-yielding truckload shipments for the backhaul to return the equipment to one of the Company's existing facilities. This results in increased asset utilization and reduced empty miles. Once the Company opens a new facility, it serves as a consolidation point for a wide range of higher yielding shipments originating in the region, replacing the lower yielding truckload shipments. The Company most recently employed these techniques in opening its Houston facility in June 1997. By providing a broad range of services, Jevic has the ability to build volume rapidly in targeted geographic areas. The Company's growth plans include constructing new, substantially larger facilities in metropolitan Boston and Chicago, adding selected regional facilities in new regions and adding new points served in route when supported by customer demand. Jevic also intends to selectively pursue acquisitions of companies that are complementary with the Company's operations. The Company was incorporated in New Jersey in 1981. Jevic's headquarters are located at 600 Creek Road, P.O. Box 5157, Delanco, New Jersey 08075, and its telephone number is (609) 461-7111. 4 THE OFFERING Common Stock offered by the Company.......... 3,800,000 shares Common Equity to be outstanding after this offering: Common Stock............................... 4,348,656 shares (1) Class A Common Stock....................... 6,309,544 shares Total................................... 10,658,200 shares (1) Use of proceeds.............................. To reduce indebtedness, purchase and expand regional facilities and fund a distribution to certain current shareholders and for the purchase of revenue equipment. See "Use of Proceeds." Proposed Nasdaq National Market symbol....... JEVC
- ------------------ (1) Excludes approximately 1,285,820 shares of Common Stock issuable upon the exercise of options which will be outstanding upon completion of this offering and an aggregate of approximately 1,200,000 shares of Common Stock reserved for issuance under the Company's employee benefit plans. See "Management - Executive Incentive Plans" and Note 9 of "Notes to Financial Statements." 5 SUMMARY FINANCIAL AND OPERATING DATA (IN THOUSANDS, EXCEPT PER SHARE AND CERTAIN OPERATING DATA)
SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, -------------------------------------------------- ------------------- 1992 1993 1994 1995 1996 1996 1997 ------- ------- -------- -------- -------- ------- --------- INCOME STATEMENT DATA: Operating revenues............... $60,296 $90,161 $119,299 $125,973 $154,799 $73,568 $90,417 Operating income................. 3,370 4,024 11,737 6,050 9,390 2,166 6,109 Net income (1)................... 2,104 2,833 10,412 4,239 6,195 748 4,355 Pro forma data (1): Net income..................... 3,849 481 2,647 Net income per share........... $ 0.49 $ 0.06 $ 0.34 Shares used in computing net income per share............. 7,843 7,843 7,843 Supplemental pro forma net income per share (2)......... $ 0.46 $ 0.07 $ 0.32 OPERATING DATA: Total shipments (000s)........... 155 269 370 453 586 284 329 Total miles (000s)............... 38,842 57,924 65,855 65,599 75,795 36,288 42,873 Average operating revenue: Per mile....................... $ 1.55 $ 1.56 $ 1.81 $ 1.92 $ 2.04 $ 2.03 $ 2.11 Per tractor per week........... $ 3,084 $ 3,085 $ 3,553 $ 3,539 $ 3,764 $ 3,705 $ 3,772 Number of tractors at end of period: Company........................ 450 626 685 740 776 777 853 Owner-Operator................. -- -- -- -- 63 15 105
JUNE 30, 1997 ----------------------------------------- PRO FORMA ACTUAL PRO FORMA (3) AS ADJUSTED (4) ------- ------------- --------------- BALANCE SHEET DATA: Working capital (deficit)................................... $(3,342) $(13,728) $ 23,256 Property and equipment, net................................. 67,426 68,726 68,726 Total assets................................................ 96,047 94,961 112,322 Long-term debt, less current maturities..................... 36,910 36,910 28,752 Shareholders' equity........................................ 27,228 8,528 53,670
- ------------------ (1) For all periods presented, the Company was an S Corporation and, accordingly, was not subject to corporate income taxes, except for certain states during certain periods. Pro forma data assumes (a) the Company's purchase of its Charlotte facility from certain of its current shareholders (the "Charlotte Purchase") occurred on January 1, 1996 which would have resulted in additional annual depreciation and interest expense of $70,000 and $190,000, respectively, and a reduction in annual rent expense of $260,000 and (b) the Company had been subject to corporate income taxes for all periods presented, based on the tax laws in effect during the periods. Pro forma net income per share includes that number of shares that would be required to be sold (at an assumed initial public offering price of $13 per share, less underwriting discounts and commissions and estimated offering expenses) to fund a distribution of $10.0 million (the "Distribution") to shareholders as of August 11, 1997 immediately prior to the offering. See "Prior S Corporation Status" and Note 2 of "Notes to Financial Statements." (2) Supplemental pro forma net income per share is calculated by dividing pro forma net income (adjusted for the pro forma reduction in interest expense that specifically corresponds to the repaid indebtedness discussed in (a) and (b) below) by the number of shares used in (1) above plus the estimated number of shares that would be required to be sold (at an assumed initial public offering price of $13 per share, less underwriting discounts and commissions and estimated offering expenses) to (a) repay bank mortgage indebtedness of $2.0 million in connection with the Charlotte Purchase and (b) repay approximately $18.2 million of other indebtedness. See "Use of Proceeds" and "Certain Transactions." (3) Gives pro forma effect to (a) the Charlotte Purchase, which results in a $1.3 million increase in property and equipment, a $2.0 million increase in short-term indebtedness and a $700,000 deemed distribution to shareholders, (b) the payment of the Distribution with $4.0 million of cash and bank borrowings of $6.0 million and (c) the termination of the Company's S Corporation status resulting in a non-cash charge estimated at $8.0 million in recognition of an increase in the Company's net deferred tax liability, as if such termination had occurred on June 30, 1997. (4) Adjusted to give effect to (a) the pro forma adjustments described in (3) above, and (b) the sale by the Company of the 3,800,000 shares of Common Stock offered hereby (at an assumed initial public offering price of $13 per share) and the application of the estimated net proceeds therefrom as described in "Use of Proceeds." See "Prior S Corporation Status" and "Capitalization." 6 RISK FACTORS In addition to the other information contained in this Prospectus, the following factors should be considered carefully in evaluating an investment in the Company's Common Stock. Economic Factors. Fuel prices, insurance costs, liability claims, interest rates, the availability of qualified drivers or owner-operators, 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. Difficulty in attracting or retaining qualified drivers or owner-operators or a downturn in customers' business cycles or shipping demands also could have a materially adverse effect on the profitability and growth of the Company. Although owner-operators are responsible for purchasing their own equipment and fuel and paying for other operating expenses, significant increases in these expenses could cause them to seek higher compensation from the Company. If the resale value of the Company's revenue equipment were to decline, the Company could be forced to retain some of its equipment longer, with a resulting increase in operating expenses for maintenance and repairs. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business." Geographic Concentration. A significant portion of the Company's business is concentrated in the Northeast region. As a result, a general economic decline in that geographic market could have a materially adverse effect on the growth and profitability of the Company. Dependence on Chemical Industry. Approximately 45% of the Company's revenues from its top 200 customers in the first half of 1997 was generated from customers in the chemical industry, and this level has remained relatively consistent in recent years. An economic downturn in the chemical industry could have a materially adverse effect on the Company's operating results. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business." Availability of Employee Drivers and Owner-Operators. The Company utilizes the services of both employee drivers and owner-operators. Competition for employee drivers and owner-operators is intense within the transportation industry and, from time to time, there have been industry-wide shortages of qualified employee drivers and owner-operators. There can be no assurance that the Company will not be affected by a shortage of qualified employee drivers or owner-operators in the future, which could result in temporary underutilization of revenue equipment, difficulty in meeting shipper demands and increased compensation levels. Prolonged difficulty in attracting or retaining qualified employee drivers or owner-operators could have a materially adverse effect on the Company's operations and limit its growth. The Company's annual driver turnover rate was 20.1% in 1996. See "Business - Drivers" and " - Owner-Operators." Capital Requirements. The transportation industry is capital intensive. Historically, the Company has depended on debt financing and operating and capital leases to supplement its internally generated cash to maintain and expand its fleet of revenue equipment. If the Company were unable in the future to enter into acceptable lease or debt financing arrangements, sell additional equity, generate sufficient cash flow from operations or borrow sufficient funds, it would be forced to limit its growth and might be required to operate its fleet for longer periods, which would likely adversely affect the Company's operating results. See "Use of Proceeds" and "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources." Competition. The trucking portion of the transportation industry is highly competitive and fragmented. Jevic competes with regional, inter-regional and national LTL and truckload carriers of varying sizes and, to a lesser extent, with air freight carriers and railroads, a number of which have greater financial resources, operate more revenue equipment and have larger freight capacity than the Company. In certain regions, the Company also faces competition from local carriers. The Company's strategy is to provide high-quality service at competitive prices to meet the needs of customers whose operations demand consistent, timely service. The Company believes that there are substantial barriers to entry which restrict the ability of competitors to adopt a Breakbulk-Free operating model. Small LTL carriers typically lack the necessary critical mass, freight density and capital, while large LTL carriers typically have work rules and labor practices that lack the flexibility which a Breakbulk-Free system requires. Truckload carriers lack a system to accommodate both multiple pick-ups and multiple deliveries and would require a substantial capital investment to build the necessary terminals. Additionally, 7 the Breakbulk-Free operating model requires high quality drivers and sophisticated operating systems and management, which the Company has developed internally over an extended period of years. See "Business - Competition." Acquisition of Revenue Equipment. The Company's strategy for continued growth is dependent on the acquisition and deployment of additional revenue equipment. Delays in the availability of equipment could occur due to work stoppages at the equipment supplier, equipment and supply shortages or other factors beyond the Company's control. Any delay or interruption in the availability of equipment in the future could impede the Company's growth and could have an adverse effect on the Company's operations and profitability. See "Business - Revenue Equipment and Maintenance." Voting Control of the Company; Anti-Takeover Provisions. The voting rights of the Common Stock are limited by the Company's Restated Certificate of Incorporation ("Restated Certificate"). On all matters with respect to which the Company's shareholders have a right to vote, including the election of directors, each share of Common Stock is entitled to one vote, while each share of Class A Common Stock is entitled to two votes. The Common Stock and Class A Common Stock vote together as a single class on virtually all matters. Shares of Class A Common Stock can be converted into shares of Common Stock on a share-for-share basis at the election of the holder and will be automatically converted to shares of Common Stock upon certain events specified in the Restated Certificate or upon transfer, except for certain transfers among Harry J. Muhlschlegel, Karen B. Muhlschlegel, certain of their relatives, certain trusts established for the benefit of, partnerships comprised solely of, or corporations wholly owned by, the Muhlschlegels or such relatives, and charitable organizations controlled by the Muhlschlegels or their family members (collectively, the "Muhlschlegel Family"). See "Description of Capital Stock." Upon completion of the offering, the Muhlschlegel Family will beneficially own all of the outstanding shares of Class A Common Stock representing in the aggregate 77.6% of the total voting power of both series of Common Equity (73.3% if the Underwriters' over-allotment option is exercised in full). As long as the Muhlschlegel Family controls a majority of the voting power of the Company, they will be able, acting together, to elect the entire Board of Directors of the Company (the "Board") and to amend the Restated Certificate and By-laws and, subject to certain limitations, effect or preclude fundamental corporate transactions involving the Company, including the acceptance or rejection of any proposals relating to an acquisition of the Company or a going private transaction. Although the Company has no present intention to issue additional shares of Class A Common Stock, the Board will have the ability to issue such shares of Class A Common Stock in the future, which would increase the voting power of the Muhlschlegel Family. See "Principal Shareholders." The Company's Restated Certificate authorizes the issuance of "blank check" preferred stock with such designations, rights and preferences as may be determined from time to time by the Board. Accordingly, the Board is empowered, without shareholder approval, to issue preferred stock with dividend, liquidation, conversion, voting or other rights which could materially adversely affect the voting power or other rights of the holders of the Common Stock (including those of the purchasers in the offering). Holders of the Common Stock will have no preemptive rights to subscribe for a pro rata portion of any capital stock which may be issued by the Company. In the event of issuance, such preferred stock could be utilized, under certain circumstances, as the method of discouraging, delaying or preventing a change in control of the Company. Although the Company has no present intention to issue any shares of preferred stock, there can be no assurance that the Company will not do so in the future. See "Description of Capital Stock." Furthermore, the Company is subject to provisions of the New Jersey Shareholders Protection Act and its Restated Certificate and By-laws contain certain corporate governance provisions that may inhibit unsolicited changes in control of the Company. First, the Restated Certificate provides for a classified Board of Directors, with directors serving for three-year terms, subject to removal only for cause and upon the vote of 80 percent of the voting power of all outstanding capital stock of the Company entitled to vote (the "Voting Power"). Second, the Restated Certificate and the By-laws do not generally permit shareholders to call, or to require that the Board of Directors call, a special meeting, and limit the business permitted to be conducted at any such special meeting. In addition, the Restated Certificate does not permit action to be taken by the shareholders of Jevic by written consent of less than all shareholders. Third, the By-laws establish an advance notice procedure for shareholders to nominate candidates for election as directors or to bring other business before meetings of shareholders of Jevic. Only those shareholder nominees who are nominated in accordance with this procedure will be eligible for election as directors of Jevic, and 8 only such shareholder proposals may be considered at a meeting of shareholders as have been presented to Jevic in accordance with the procedure. Finally, the Restated Certificate provides that the affirmative vote of at least 80 percent of the Voting Power would be required to amend or repeal the foregoing provisions of the Restated Certificate. In addition, the By-laws provide that the amendment or repeal by shareholders of any By-laws made by the Board of Directors of Jevic would require the affirmative vote of at least 80 percent of the Voting Power. See "Description of Capital Stock - New Jersey Shareholders Protection Act" and "- Certain Provisions of Restated Certificate of Incorporation and By-laws." The existence of these provisions would be expected to have an anti-takeover effect, including possibly discouraging takeover attempts that might result in a premium over the market price for the Common Stock. Labor. None of the Company's employees are currently represented by a collective bargaining unit, and management believes that relations with its employees are good. However, there can be no assurance that the Company's employees will not unionize in the future, which could increase the Company's operating costs and force it to alter its operating methods, which in turn could have a materially adverse effect on the Company's operating results. See "Business - Drivers" and "- Employees." Fuel. Fuel is one of the Company's largest operating expenses. Any increase in fuel taxes or fuel prices or any change in federal or state regulations which results in such an increase, to the extent not offset by freight rate increases, or any interruption in the supply of fuel, could have a materially adverse effect on the Company's operating results. The Company is a party to agreements with two fuel suppliers to purchase approximately 40% of its estimated fuel needs through March 1998 at fixed prices, which are consistent with market prices on the date of this Prospectus. To the extent of the Company's commitment to purchase fuel under these fixed-price contracts, the Company will not benefit from a reduction in the price of fuel. See "Business - Fuel Availability and Cost." Claims Exposure and Insurance Costs. Trucking companies, including the Company, face multiple claims for personal injury and property damage relating to accidents, cargo damage, and workers' compensation. The Company currently maintains liability insurance for bodily injury and property damage with a deductible of $20,000 and workers' compensation insurance with a deductible, in states in which a deductible is allowed, of $250,000. The Company also carries cargo and physical damage insurance with a deductible of $5,000 per occurrence. To the extent that the Company experiences a material increase in the frequency or severity of accidents or workers' compensation claims, or unfavorable developments on existing claims, the Company's operating results and financial condition could be materially adversely affected. Significant increases in the Company's claims and insurance cost, to the extent not offset by rate increases, would reduce the Company's profitability. See "Business - Safety and Risk Management." Growth of Business. The Company has experienced significant and rapid growth in revenues and profits in the last five years. There is no assurance that the Company's business will continue to grow in a similar fashion in the future or that the Company can effectively adapt its administrative and operational systems and accounting and financial controls to manage future growth effectively. Further, there can be no assurance that the Company's operations will not be adversely affected by future changes in and expansion of the Company's business or by changes in economic conditions. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business." Regulation. Motor carriers are subject to regulation by various federal and state agencies, including the United States Department of Transportation ("DOT"). These regulatory authorities exercise broad powers, generally governing activities such as authorization to engage in motor carrier operations, rates and charges, operations, safety, accounting systems, financial reporting and certain mergers, consolidations and acquisitions. In the event the Company should fail to comply with applicable regulations, the Company could be subject to substantial fines or penalties and to civil or criminal liability. There is no assurance that compliance with regulations promulgated from time to time by the DOT or other regulatory bodies exercising jurisdiction over the Company will not increase the Company's operating costs, which could adversely affect the Company's results of operations. See "Business - Regulation." Environmental Hazards. The Company's operations are subject to various environmental laws and regulations dealing with the transportation, storage, presence, use, disposal and handling of hazardous materials, discharge of stormwater and underground fuel storage tanks. The Company's drivers are trained in the handling and transportation of hazardous substances and are required to have a hazardous materials endorsement on their drivers' licenses. If the Company should be involved in a spill or other accident involving hazardous substances, if any such 9 substances were found on the Company's properties or if the Company were found to be in violation of applicable laws and regulations, the Company could be responsible for clean-up costs, property damage and fines or other penalties, any one of which could have a materially adverse effect on the Company. Approximately 45% of the Company's revenues from its top 200 customers in the first half of 1997 was generated from customers in the chemical industry. See "Business - Regulation." Dependence on Key Personnel. The success of the Company's business will continue to be dependent upon the Company's Chief Executive Officer, Harry J. Muhlschlegel, and its other senior executive officers. The loss of the services of any of the Company's key personnel could materially adversely affect the Company. The Company does not have employment contracts with, and does not intend to maintain key man life insurance on, any of its executive officers. See "Management." No Prior Public Market for Common Stock; Determination of Offering Price. Prior to this offering, there has been no public market for the Common Stock, and there can be no assurance that an active trading market for the Common Stock will develop after this offering or, if developed, that such market will be sustained. The initial public offering price will be determined solely through negotiation between the Company and the Representatives of the Underwriters and may not be indicative of the market price for the Common Stock after the offering. See "Underwriting" for a description of the factors to be considered in determining the initial public offering price. From time to time, the stock market experiences price and volume volatility, which may affect the market price for the Common Stock for reasons unrelated to the Company's performance. Dilution. The current shareholders of the Company acquired their Common Stock at a cost substantially below the public offering price of the Common Stock offered hereby and, accordingly, purchasers of Common Stock in this offering will experience immediate, substantial dilution of approximately $7.96 in net tangible book value per share. See "Dilution." Dividend Policy; Distribution. Until immediately prior to the completion of the offering, the Company will be treated as an S Corporation under the Internal Revenue Code of 1986, as amended (the "Code"). Accordingly, the Company has made and, prior to that time, will make periodic distributions to its shareholders in amounts sufficient to enable the shareholders to pay income taxes on account of the Company's income. Following consummation of the offering, the Company does not anticipate declaring any further cash dividends for the foreseeable future. Immediately prior to the completion of this offering, the Company will convert from S Corporation to C Corporation status. In connection with this conversion, the Company will make distributions to its current shareholders for their remaining federal and state income tax liabilities arising from the Company's S Corporation income in 1997 through the termination date. In addition, as a result of the payment of the Distribution, the Company's retained earnings and stockholders' equity will be significantly reduced. In addition, the Company will record a one-time, non-cash charge against earnings in the third quarter of 1997, resulting from an increase in its net deferred tax liability in connection with the Company's conversion from S Corporation to C Corporation status. Had the Company recorded this additional liability on June 30, 1997, the amount of this charge would have been approximately $8.0 million. See "Prior S Corporation Status" and "Capitalization." Shares Eligible for Future Sale. Sales of a substantial number of shares of the Common Stock or their availability for sale in the public market following this offering may have an adverse effect on prevailing market prices for the Common Stock. Upon completion of this offering, 4,348,656 shares of Common Stock will be outstanding. All of these shares (plus up to 570,000 additional shares if the Underwriters' over-allotment option is exercised) will be freely tradeable without restriction or further registration (except by affiliates of the Company or persons voting as underwriters) under the Securities Act of 1933, as amended (the "Securities Act"). None of the 548,656 outstanding shares of Common Stock or the 6,309,544 outstanding shares of Class A Common Stock (collectively, the "Restricted Shares") may be sold until the expiration of the lock-up periods described below and thereafter unless they are registered under the Securities Act or are sold pursuant to a exemption for registration, such as the exemption provided by Rule 144 promulgated under the Securities Act. In general, Rule 144 allows a person who has beneficially owned Restricted Shares for at least one year, including persons who may be deemed affiliates of the Company, to sell Restricted Shares commencing 90 days after completion of this offering, subject to certain volume and manner of sale restrictions. 10 Upon completion of this offering there will be approximately 1,285,820 shares of Common Stock issuable upon exercise of outstanding options under the Company's employee benefit plans and an additional approximately 1,200,000 shares of Common Stock reserved for issuance under such plans. The Company intends to file registration statements on Form S-8, within one year of the date of this Prospectus, covering all such shares. The shares registered under such registration statement will be freely transferable in the open market upon the exercise of options or other stock-based awards, subject, in the case of affiliates, to the Rule 144 volume limitations. The Company, its executive directors and officers and current shareholders have agreed that, for a period of 180 days after the date of this Prospectus, they will not, without the prior written consent of BT Alex. Brown Incorporated, sell or otherwise dispose of, or agree to sell or otherwise dispose of, any shares of Common Stock or Class A Common Stock. See "Shares Eligible for Future Sale." Disclosure Regarding Forward-Looking Statements. This Prospectus contains forward-looking statements relating to future events or the future financial performance of the Company. Such statements may relate, but not be limited, to projections of revenues, income or loss, capital expenditures, construction or expansion of regional facilities, acquisitions, plans for growth and future operations, financing needs or plans or intentions relating to acquisitions by the Company, as well as assumptions relating to the foregoing. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. Such risks include, but are not limited to, the matters discussed in the foregoing paragraphs under "Risk Factors." Future events and actual results could differ materially from those set forth in, contemplated by or underlying the forward-looking statements. 11 USE OF PROCEEDS The net proceeds to be received by the Company from the sale of the 3,800,000 shares offered hereby are estimated to be approximately $45.1 million, assuming an initial public offering price of $13 per share, after deducting underwriting discounts and commissions and estimated offering expenses. The Company will use approximately $18.2 million of the net proceeds to repay certain borrowings incurred to purchase revenue equipment. At June 30, 1997, these obligations had an aggregate principal balance of $19.8 million, bore interest at a weighted average annual rate of 7.4% and provided for maturity dates between October 1997 and May 2007. The Company plans to use approximately $15.0 million of the net proceeds to purchase and expand regional facilities. Of this amount, $2.0 million will be used to repay an existing mortgage obligation in connection with the acquisition of the Company's Charlotte facility from certain of its current shareholders. See "Certain Transactions." The Company will use a portion of the net proceeds to repay borrowings (estimated at $6.0 million) under the Company's line of credit incurred to fund a portion of the Distribution. The line of credit expires on June 28, 1998. At June 30, 1997, the interest rate on the line of credit was 7.0% per annum and no amounts were outstanding thereunder. See "Prior S Corporation Status." The balance of the net proceeds, or approximately $5.9 million, will be used for the purchase of revenue equipment, including tractors and trailers. Pending their use by the Company as described above, the Company intends to invest the net proceeds of the offering in short-term, investment-grade instruments. 12 PRIOR S CORPORATION STATUS Beginning in 1990 for Federal tax purposes, and subsequent to 1990 for certain states, the Company elected to be treated under Subchapter S (an "S Corporation") of the Internal Revenue Code of 1986. As a result, since such elections were made, the Company's income has been taxed directly to the current shareholders rather than to the Company. The Company has historically made distributions to its current shareholders from its income, primarily to fund the shareholders' income tax obligations on account of the Company's taxable income. Aggregate net cash distributions made during the three years ended December 31, 1996 and during the six months ended June 30, 1997 were approximately $4.5 million and $1.2 million, respectively. The Company's S Corporation status will terminate in connection with the offering, after which the Company will be required to pay Federal and state taxes on its taxable income. Subsequent to June 30, 1997, the Company will make additional distributions to its current shareholders for their remaining federal and state income tax liabilities arising from the Company's S Corporation income in 1997 through the termination date (estimated at approximately $500,000). In addition, immediately prior to the consummation of this offering, the Company will effect the Distribution, the majority of which represents the sum of such shareholders' stock basis and previously taxed, but undistributed income (including such income arising during periods prior to the time the Company became an S Corporation). A portion of the Distribution will be borrowed by the Company under its line of credit (estimated at $6.0 million) and repaid from the proceeds of this offering. The Board determined that the Distribution was reasonable and appropriate in light of the shareholders' investment in and ownership risks associated with the Company prior to the Distribution. Purchasers of shares in this offering will not receive any portion of these distributions. Prior to completion of the offering, the Company will enter into a Tax Indemnity Agreement with its current shareholders in order to provide that all federal (and certain state) income taxes payable on account of the income of the Company earned during the period that it was an S Corporation are borne by the current shareholders and that all such taxes on account of the income of the Company earned after such period are borne by the Company. The agreement provides for payments to be made by the shareholders to the Company (up to the amount of any tax refunds received) or by the Company to the shareholders as necessary in order to take into account any future adjustments which may take place in the Company's income taxes attributable to prior periods. DIVIDEND POLICY Except as described above under "Prior S Corporation Status," the Company has not declared or paid any cash dividends or distributions on its capital stock. The Company currently intends to retain any future earnings to fund operations and the continued development of its business and, therefore, does not anticipate paying any cash dividends on its Common Equity in the foreseeable future. The payment of dividends is restricted by the Company's bank financing agreements. Future cash dividends, if any, will be determined by the Board of Directors, and will be based upon the Company's earnings, capital requirements, financial condition and other factors deemed relevant by the Board of Directors. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources." 13 CAPITALIZATION The following table sets forth the short-term obligations and capitalization of the Company (i) at June 30, 1997, (ii) on a pro forma basis as of June 30, 1997 giving effect to (a) additional indebtedness incurred in connection with the Charlotte Purchase, (b) bank borrowings (estimated at $6.0 million) under the Company's line of credit incurred to fund a portion of the Distribution and the payment of such Distribution and (c) an estimated $8.0 million increase in the Company's net deferred tax liability resulting from the termination of its S Corporation status, as if such termination had occurred on June 30, 1997; and (iii) pro forma as adjusted at June 30, 1997 to reflect the pro forma adjustments described in (ii) and the sale of 3,800,000 shares of Common Stock offered hereby at an assumed initial public offering price of $13 per share and the application of the estimated net proceeds therefrom as described in "Use of Proceeds." The information set forth below should be read in conjunction with the Financial Statements and notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations."
JUNE 30, 1997 --------------------------------------- PRO FORMA ACTUAL PRO FORMA(2) AS ADJUSTED(3) ------- ------------ -------------- (IN THOUSANDS, EXCEPT SHARE DATA) Current portion of long-term debt and capital lease obligations.............................................. $13,493 $21,493 $ 1,870 ======= ======= ======= Long-term debt, less current maturities.................... $36,910 $36,910 $28,752 ------- ------- ------- Shareholders' equity: Preferred Stock, no par value, 10,000,000 shares authorized; none issued and outstanding............... -- -- -- Common Stock, no par value, 40,000,000 shares authorized; no shares issued and outstanding actual and pro forma; 3,800,000 shares issued and outstanding pro forma as adjusted (1).......................................... -- -- -- Class A Common Stock, no par value, 10,000,000 shares authorized; 6,858,200 shares issued and outstanding actual and pro forma; 6,858,200 shares issued and outstanding pro forma as adjusted..................... -- -- -- Additional paid-in capital............................... 1,128 8,528 53,670 Retained earnings........................................ 26,100 -- -- ------- ------- ------- Total shareholders' equity............................... 27,228 8,528 53,670 ------- ------- ------- Total capitalization.................................. $64,138 $45,438 $82,422 ======= ======= =======
- ------------------ (1) Excludes approximately 1,285,820 shares of Common Stock reserved for issuance upon the exercise of options which will be outstanding upon completion of this offering, which will have a weighted average exercise price of $10.59 per share, and an aggregate of approximately 1,200,000 shares of Common Stock reserved for issuance under the Company's employee benefit plans. Also excludes 548,656 shares of Common Stock issued upon conversion of Class A Common Stock after June 30, 1997. See "Management - Executive Incentive Plans" and Note 9 of "Notes to Financial Statements." (2) Gives pro forma effect to (a) the Charlotte Purchase which results in $2.0 million of additional short-term indebtedness and a $700,000 deemed distribution to shareholders, (b) the payment of the Distribution with $4.0 million of cash and bank borrowings of $6.0 million and (c) the termination of the Company's S Corporation status resulting in a non-cash charge estimated at $8.0 million in recognition of an increase in the Company's net deferred tax liability, as if such termination had occurred on June 30, 1997. (3) Adjusted to give effect to (a) the pro forma adjustments described in (2) above, and (b) the sale by the Company of the 3,800,000 shares of Common Stock offered hereby (at an assumed initial public offering price of $13 per share) and the application of the estimated net proceeds therefrom as described in "Use of Proceeds." See "Prior S Corporation Status." 14 DILUTION As of June 30, 1997, the Company's net tangible book value was $27.2 million or $3.97 per share of Common Equity and its pro forma net tangible book value was $8.5 million, or $1.24 per share of Common Equity. Pro forma net tangible book value per share represents the amount of the Company's total tangible assets minus its total liabilities after giving effect to (i) an estimated $8.0 million non-cash charge relating to the termination of the Company's S Corporation tax status, (ii) the Distribution and (iii) the Charlotte Purchase, divided by the total number of shares of Common Equity outstanding. After giving effect to the sale by the Company of 3,800,000 shares of Common Stock in this offering at an assumed initial public offering price of $13 per share (and after deduction of underwriting discounts and commissions and estimated offering expenses), the pro forma net tangible book value as of June 30, 1997 would have been approximately $53.7 million or $5.04 per share of Common Equity. This represents an immediate increase in pro forma net tangible book value of $3.80 per share to current shareholders and an immediate dilution in net tangible book value of $7.96 per share to purchasers of Common Stock in this offering, as illustrated in the following table: Assumed initial public offering price per share............. $13.00 Net tangible book value per share at June 30, 1997........ $3.97 Decrease attributable to the Distribution................. (1.46) Decrease attributable to the termination of S Corporation status and the Charlotte Purchase...................... (1.27) Increase attributable to new investors.................... 3.80 ------ Pro forma net tangible book value per share after this offering.................................................. 5.04 ------ Dilution per share to new investors......................... $ 7.96 ====== The following table sets forth, as of June 30, 1997, the number of shares of Common Equity purchased from the Company, the total consideration paid to the Company and the average price per share paid by current shareholders and by the purchasers of Common Stock in this offering (before deduction of underwriting discounts and commissions and estimated offering expenses).
SHARES PURCHASED FROM THE COMPANY (1) TOTAL CONSIDERATION WEIGHTED -------------------- --------------------- AVERAGE PRICE NUMBER PERCENT AMOUNT PERCENT PER SHARE ---------- ------- ----------- ------- ------------- Current shareholders................. 6,858,200 64.3% $ 1,128,000(2) 2.2% $ 0.16 New investors........................ 3,800,000 35.7 49,400,000 97.8 $13.00 ---------- ----- ----------- ----- Total.............................. 10,658,200 100.0% $50,528,000 100.0% ========== ===== =========== =====
- ------------------ (1) The current shareholders hold 6,309,544 shares of Class A Common Stock and 548,656 shares of Common Stock, and the new investors will hold Common Stock. (2) After giving effect to the Distribution, the consideration paid by current shareholders for their Common Equity will have been repaid to them. Upon completion of this offering, the Company will have outstanding stock options to purchase approximately 1,285,820 shares of Common Stock at a weighted average exercise price of $10.59 per share. If all options outstanding at June 30, 1997 were exercised, the net tangible book value per share after the offering would be $5.24 per share and the dilution per share to new investors would be $7.76 per share. The Company may also issue additional shares to effect future potential business acquisitions or upon exercise of future stock option grants or equity awards which could also result in additional dilution to then existing shareholders. See "Management - Executive Compensation." If the over-allotment option is exercised in full, sales by the Option Shareholders in the offering will reduce the number of shares held by current shareholders to 6,288,200 or 59.0% of the Common Equity outstanding after the offering, and will increase the number of shares held by new investors to 4,370,000 or 41.0% of the Common Equity outstanding after the offering. 15 SELECTED FINANCIAL AND OPERATING DATA The selected income statement data for the years ended December 31, 1994, 1995 and 1996 and the selected balance sheet data as of December 31, 1995 and 1996 have been derived from the financial statements of the Company, audited by Arthur Andersen LLP, independent public accountants, included elsewhere in this Prospectus. The selected income statement data for the years ended December 31, 1992 and 1993 and the selected balance sheet data as of December 31, 1992, 1993 and 1994 have been derived from the Company's audited financial statements not included herein. The selected financial data presented below as of June 30, 1996 and 1997 and for the six-month periods then ended have been derived from the unaudited financial statements of the Company, which, in management's opinion, include all adjustments necessary for a fair presentation of the information set forth therein. The results of operations for the six months ended June 30, 1997 are not necessarily indicative of results to be expected for the entire year. The information set forth below should be read in conjunction with the Company's Financial Statements and notes thereto included elsewhere in this Prospectus and "Management's Discussion and Analysis of Financial Condition and Results of Operations."
SIX MONTHS YEAR ENDED DECEMBER 31, ENDED JUNE 30, -------------------------------------------------- ------------------ 1992 1993 1994 1995 1996 1996 1997 ------- ------- -------- -------- -------- ------- -------- (IN THOUSANDS, EXCEPT PER SHARE AND CERTAIN OPERATING DATA) INCOME STATEMENT DATA: Operating revenues................ $60,296 $90,161 $119,299 $125,973 $154,799 $73,568 $ 90,417 ------- ------- -------- -------- -------- ------- -------- Operating expenses: Salaries, wages and benefits.... 30,442 46,429 58,276 67,541 81,215 39,659 46,583 Supplies and other expenses..... 15,032 25,065 30,553 30,290 32,824 16,231 17,371 Purchased transportation........ 3,003 2,480 4,019 5,608 10,761 5,518 8,595 Depreciation and amortization... 2,714 3,249 4,395 6,445 8,732 4,031 5,382 Operating taxes and licenses.... 4,075 6,286 7,369 7,767 8,722 4,318 4,302 Insurance and claims............ 1,720 2,792 3,141 2,612 3,325 1,772 1,975 (Gain) loss on sale of equipment..................... (60) (164) (191) (340) (170) (127) 100 ------- ------- -------- -------- -------- ------- -------- 56,926 86,137 107,562 119,923 145,409 71,402 84,308 ------- ------- -------- -------- -------- ------- -------- Operating income.............. 3,370 4,024 11,737 6,050 9,390 2,166 6,109 Interest expense, net........... 720 1,012 1,080 1,773 2,966 1,386 1,629 Other income, net............... (117) (144) (106) (153) (200) (48) (55) ------- ------- -------- -------- -------- ------- -------- Income before income taxes and cumulative effect adjustment.................... 2,767 3,156 10,763 4,430 6,624 828 4,535 Income taxes (1)................ 250 323 351 191 429 80 180 ------- ------- -------- -------- -------- ------- -------- Income before cumulative effect adjustment(1)................. 2,517 2,833 10,412 4,239 6,195 748 4,355 Cumulative effect of a change in accounting principle(1)....... (413) -- -- -- -- -- -- ------- ------- -------- -------- -------- ------- -------- Net income(1)................... $ 2,104 $ 2,833 $ 10,412 $ 4,239 $ 6,195 $ 748 $ 4,355 ======= ======= ======== ======== ======== ======= ======== Pro forma data: Net income (1)................ $ 3,849 $ 481 $ 2,647 ======== ======= ======== Net income per share (1)...... $ 0.49 $ 0.06 $ 0.34 ======== ======= ======== Shares used in computing net income per share(1)......... 7,843 7,843 7,843 ======== ======= ======== Supplemental pro forma net income per share(2)......... $ 0.46 $ 0.07 $ 0.32 ======== ======= ======== OPERATING DATA: Total shipments (000s)............ 155 269 370 453 586 284 329 Total miles (000s)................ 38,842 57,924 65,855 65,599 75,795 36,288 42,873 Average operating revenue: Per mile........................ $ 1.55 $ 1.56 $ 1.81 $ 1.92 $ 2.04 $ 2.03 $ 2.11 Per tractor per week............ $ 3,084 $ 3,085 $ 3,553 $ 3,539 $ 3,764 $ 3,705 $ 3,772 Number of tractors at end of period: Company......................... 450 626 685 740 776 777 853 Owner-operator.................. -- -- -- -- 63 15 105
16
DECEMBER 31, JUNE 30, 1997 -------------------------------------------------- ------------------ PRO 1992 1993 1994 1995 1996 ACTUAL FORMA(3) ------- ------- -------- -------- -------- ------- -------- (IN THOUSANDS) BALANCE SHEET DATA: Working capital (deficit)......... $ 190 $ (188) $ 1,336 $ (2,727) $ (5,917) $(3,342) $(13,728) Property and equipment, net....... 13,781 20,541 31,204 46,958 58,967 67,426 68,726 Total assets...................... 22,426 32,943 49,037 66,427 82,355 96,047 94,961 Long-term debt, less current maturities...................... 7,267 11,965 14,554 25,734 28,855 36,910 36,910 Shareholders' equity.............. 6,436 8,246 17,702 18,236 24,071 27,228 8,528
- ------------------ (1) For all periods presented, the Company was an S Corporation and, accordingly, was not subject to corporate income taxes, except for certain states during certain periods. Pro forma data assumes (a) the Charlotte Purchase occurred on January 1, 1996, which would have resulted in additional annual depreciation and interest expense of $70,000 and $190,000, respectively, and a reduction in annual rent expense of $260,000 and (b) the Company was subject to corporate income taxes for all periods presented, based on the tax laws in effect during the periods. Pro forma net income per share includes that number of shares that would be required to be sold (at an assumed initial public offering price of $13 per share, less underwriting discounts and commissions and estimated offering expenses) to fund the Distribution. See "Prior S Corporation Status" and "Note 2 of Notes to Financial Statements." (2) Supplemental pro forma net income per share is calculated by dividing pro forma net income (adjusted for the pro forma reduction in interest expense that specifically corresponds to the repaid indebtedness discussed in (a) and (b) below) by the number of shares used in (1) above plus the estimated number of shares that would be required to be sold (at an assumed initial public offering price of $13 per share, less underwriting discounts and commissions and estimated offering expenses) to (a) repay bank mortgage indebtedness of $2.0 million in connection with the Charlotte Purchase and (b) repay approximately $18.2 million of other indebtedness. See "Use of Proceeds," and "Certain Transactions." (3) Gives pro forma effect to (a) the Charlotte Purchase, which results in a $1.3 million increase in property and equipment, a $2.0 million increase in short-term indebtedness and a $700,000 deemed distribution to shareholders, (b) the payment of the Distribution with $4.0 million of cash and bank borrowings of $6.0 million and (c) the termination of the Company's S Corporation status resulting in a non-cash charge estimated at $8.0 million, in recognition of an increase in the Company's net deferred tax liability, as if such termination had occurred on June 30, 1997. 17 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW Jevic was founded in 1981, after the deregulation of the trucking industry, and has developed an operating system which combines the high revenue yield characteristics of a typical LTL carrier with the operating flexibility and low fixed costs of a truckload carrier. Most other motor carriers have continued to specialize as either truckload, moving one shipment at a time, or as less-than-truckload, moving multiple small shipments through networks of up to 500 terminals. The Company's system uses a small number of regional facilities which serve as origination points for consolidation of both small and large shipments. The shipments are then loaded onto line-haul trailers in a sequence which permits direct unloading at each shipment's destination, eliminating the need to rehandle individual shipments at one or more breakbulk terminals. Management focuses on adjusting freight mix to maximize asset utilization. The Company maintains a high percentage of variable costs in order to minimize the impact of short term swings in demand. Because of the distinct nature of Jevic's operating system, the Company believes that profitability measures and expense ratios traditionally used to evaluate truckload or less-than-truckload carriers are not meaningful. Jevic's results of operations for the last three years were impacted by several factors. Jevic has been increasing the percentage of its shipments transported by owner-operators, who supply their own tractor and bear all associated expenses in return for a contracted rate. As a result, purchased transportation has increased as a percentage of operating revenues, offset by a reduction, as a percentage of operating revenues, of drivers' salaries, wages and benefits, depreciation, fuel (and other supplies and operating expenses) and operating taxes and licenses. A portion of the increase in owner-operator transportation results from the Company replacing outside line-haul purchased transportation with less costly owner-operators. Additionally, Jevic has shifted from a policy of leasing tractors to purchasing them. As a result, depreciation and interest expense has increased as a percentage of operating revenues while lease expense, which is included in supplies and other expenses, has decreased. Finally, results for 1994 were unusually impacted by the surge in freight that was diverted to carriers, like Jevic, that did not have work forces represented by the Teamsters during the trucking strike that took place in April and May. RESULTS OF OPERATIONS The following table sets forth for the periods indicated the percentage of operating revenues represented by certain items in the Company's statements of income:
SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, ---------------------------- ------------------- DESCRIPTION 1994 1995 1996 1996 1997 ----------- ------- ------- -------- -------- -------- Operating revenues................ 100.0% 100.0% 100.0% 100.0% 100.0% ------- ------- -------- -------- -------- Operating expenses: Salaries, wages and benefits................... 48.8 53.6 52.5 53.9 51.5 Supplies and other expenses................... 25.6 24.0 21.2 22.1 19.2 Purchased transportation..... 3.4 4.5 7.0 7.5 9.5 Depreciation and amortization............... 3.7 5.1 5.6 5.5 6.0 Operating taxes and licenses................... 6.2 6.2 5.6 5.9 4.8 Insurance and claims......... 2.6 2.1 2.1 2.4 2.2 (Gain) loss on sale of equipment.................. (0.2) (0.3) (0.1) (0.2) 0.1 ------- ------- -------- -------- -------- 90.1 95.2 93.9 97.1 93.3 ------- ------- -------- -------- -------- Operating income.................. 9.9 4.8 6.1 2.9 6.7 Interest expense, net............. 0.9 1.4 1.9 1.9 1.8 Other income, net................. (0.1) (0.1) (0.1) (0.1) (0.1) ------- ------- -------- -------- -------- Income before income taxes........ 9.1% 3.5% 4.3% 1.1% 5.0% ======= ======= ======== ======== ========
18 SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996 Operating Revenues Operating revenues increased 22.8% for the six months ended June 30, 1997 to $90.4 million from $73.6 million for the comparable period of 1996. The increase resulted primarily from a 15.8% increase in total shipments, due to increased volume from existing customers and, to a lesser extent, the addition of new customers. The Company's average tractor fleet grew 20.7% in the first half of 1997 compared to the first half of 1996, and average revenues per tractor per week increased slightly to $3,772 during the six months ended June 30, 1997 from $3,705 during the six months ended June 30, 1996. Operating Expenses Operating expenses increased 18.1% to $84.3 million for the six months ended June 30, 1997 from $71.4 million for the comparable period of 1996. As a percentage of operating revenues, operating expenses decreased to 93.3% for the six months ended June 30, 1997 from 97.1% for the comparable period of 1996. The increase in operating expenses is primarily due to increased revenues, as the majority of the Company's operating expenses are variable in nature. The percentage decrease was primarily due to a difficult freight market and adverse weather conditions in early 1996, which caused lower tractor utilization during the six months ended June 30, 1996. In addition, in 1997, driver wages, equipment rent and outside line-haul and local transportation expense as a percentage of operating revenues decreased due to the increased use of owner-operators. Increased tractor utilization in 1997, due primarily to the increased use of owner-operators, resulted in increased revenues per mile, and led to overall operating efficiencies. Salaries, wages and benefits increased 17.4% to $46.6 million for the six months ended June 30, 1997 from $39.7 million for the comparable period of 1996. As a percentage of operating revenues, salaries, wages and benefits decreased to 51.5% for the six months ended June 30, 1997 from 53.9% for the comparable period of 1996. This percentage decrease was primarily due to the Company's increased use of owner-operators in 1997. Supplies and other expenses, which primarily consist of operating leases, fuel, tolls, tires, parts and bad debt expense, increased 7.4% to $17.4 million for the six months ended June 30, 1997 from $16.2 million for the comparable period of 1996. As a percentage of operating revenues, supplies and other expenses decreased to 19.2% for the six months ended June 30, 1997 from 22.1% for the comparable period of 1996. This percentage decrease was primarily due to the Company's continuing shift toward the purchase of revenue equipment financed with debt rather than leasing such equipment under operating leases, and, to a lesser extent, the Company's increased use of owner-operators in 1997. Purchased transportation increased 56.4% to $8.6 million for the six months ended June 30, 1997 from $5.5 million for the comparable period of 1996. As a percentage of operating revenues, purchased transportation increased to 9.5% for the six months ended June 30, 1997 from 7.5% for the comparable period of 1996. The increase was primarily due to the increased use of owner-operators to supplement the Company's fleet and to substitute for higher cost, outside line-haul transportation. This increase was partially offset by a decrease in the use of outside local cartage in the Midwest, as the Company increased its local fleet in that region in 1997. As a percentage of total purchased transportation expense, owner-operator expense increased to 59.0% for the six months ended June 30, 1997 from 4.8% for the comparable period of 1996. Depreciation and amortization expense increased 35.0% to $5.4 million for the six months ended June 30, 1997 from $4.0 million for the comparable period of 1996. As a percentage of operating revenues, depreciation and amortization expense increased to 6.0% for the six months ended June 30, 1997, from 5.5% for the comparable period of 1996. The increase was primarily attributable to the Company's continuing shift toward the purchase of additional and replacement revenue equipment financed with debt rather than leasing such equipment under operating leases. Operating taxes and licenses were flat at $4.3 million. As a percentage of operating revenues, operating taxes and licenses decreased to 4.8% for the six months ended June 30, 1997 from 5.9% for the comparable period of 1996. This percentage decrease was primarily attributable to a decrease in fuel taxes due to the Company's increased use of owner-operators, who pay for their own taxes and licenses. 19 Insurance and claims increased 11.1% to $2.0 million for the six months ended June 30, 1997 from $1.8 million for the comparable period of 1996. As a percentage of operating revenues, insurance and claims decreased to 2.2% for the six months ended June 30, 1997 from 2.4% for the comparable period of 1996. This percentage decrease was primarily due to auto liability insurance being based upon miles rather than revenues and the Company experiencing efficiencies through the increase in revenues per mile during the first six months of 1997. Interest Expense Interest expense increased 14.3% to $1.6 million for the six months ended June 30, 1997 from $1.4 million for the comparable period of 1996. As a percentage of operating revenues, interest expense was relatively flat between periods at 1.8% for the six months ended June 30, 1997 and 1.9% for the comparable period of 1996. Increased debt levels in 1997, resulting from the increase in owned rather than leased equipment, were partially offset by lower average interest rates. YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995 Operating Revenues Operating revenues increased 22.9% in 1996 to $154.8 million from $126.0 million in 1995. The increase resulted from a 29.5% growth in total shipments. The Company's average tractor fleet grew 15.6% in 1996, and improved utilization led to an increase in revenue per tractor per week of 6.4% in 1996 to $3,764 from $3,539 in 1995. Operating Expenses Operating expenses increased 21.3% to $145.4 million in 1996 from $119.9 million in 1995. Operating expenses as a percentage of operating revenues decreased to 93.9% in 1996 from 95.2% in 1995. The increase in operating expenses is primarily due to increased revenues, as the majority of the Company's operating expenses are variable in nature. The percentage decrease was primarily the result of decreased equipment rent in 1996, partially offset by increased purchased transportation expense. Increased tractor utilization, which resulted in increased revenues per mile, also contributed to the overall decrease in operating ratio in 1996 compared to 1995. Salaries, wages and benefits increased 20.3% to $81.2 million in 1996 from $67.5 million in 1995. As a percentage of operating revenues, salaries, wages and benefits decreased to 52.5% in 1996 from 53.6% in 1995. This percentage decrease was primarily due to a decrease in medical insurance expense resulting from decreased claims and increased employee co-pay percentages. As a percentage of operating revenues, non-driver wages increased due to the addition of new staff and management positions in 1996. This increase was offset by a decrease in driver wages as a percentage of operating revenues, resulting from the use of owner-operators, which commenced in 1996. Supplies and other expenses increased 8.3% to $32.8 million in 1996 from $30.3 million in 1995. As a percentage of operating revenues, supplies and other expenses decreased to 21.2% in 1996 from 24.0% in 1995. This percentage decrease was primarily due to the Company's shift toward the purchase of revenue equipment financed with debt rather than leasing such equipment under operating leases, and, to a lesser extent, the Company's use of owner-operators in 1996. The decrease was partially offset by an increase in bad debt expense as a percent of operating revenues from 0.1% in 1995 to 0.4% in 1996. The bad debt expense recognized in 1995 was unusually low due to a higher rate of collection of past due accounts than the Company historically experienced. Purchased transportation increased 92.9% to $10.8 million in 1996 from $5.6 million in 1995. As a percentage of operating revenues, purchased transportation increased to 7.0% in 1996 from 4.5% in 1995. The increase was due to using more outside line-haul transportation and more local cartage transportation for fleet support in the Midwest. In addition, inefficiencies resulting from a difficult freight market and adverse weather conditions in early 1996 were only partially offset by the Company's decision to use owner-operators that year. As a percentage of total purchased transportation expense, owner-operator expense was 21.5% in 1996. Depreciation and amortization expense increased 35.9% to $8.7 million in 1996 from $6.4 million in 1995. As a percentage of operating revenues, depreciation and amortization expense increased to 5.6% in 1996 from 5.1% in 1995. The increase was primarily attributed to the Company's continuing shift toward the purchase of additional and replacement revenue equipment with debt financing rather than leasing such equipment under operating leases. 20 Operating taxes and licenses increased 11.5% to $8.7 million in 1996 from $7.8 million in 1995. As a percentage of operating revenues, operating taxes and licenses decreased to 5.6% in 1996 from 6.2% in 1995. This percentage decrease was primarily attributed to the use of owner-operators in 1996. Insurance and claims increased 26.9% to $3.3 million in 1996 from $2.6 million in 1995. As a percentage of operating revenues, insurance and claims remained flat at 2.1%. Higher cargo losses due to the adverse weather conditions in early 1996 were partially offset by decreased insurance premiums later in 1996. Interest Expense Interest expense increased 66.7% to $3.0 million in 1996 from $1.8 million in 1995. As a percentage of operating revenues, interest expense increased to 1.9% in 1996 from 1.4% in 1995. The increase was due to increased debt levels in 1996 resulting primarily from revenue equipment purchases being financed with debt rather than operating leases, partially offset by slightly lower average interest rates in 1996. YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994 Operating Revenues Operating revenues increased 5.6% in 1995 to $126.0 million from $119.3 million in 1994. The modest nature of the increase in 1995 operating revenues is attributable to increased 1994 operating revenues resulting from a short term surge in business during the 1994 Teamsters strike, coupled with a reduction in the national economic growth rate during the second half of 1995. The Company's average tractor fleet grew 6.0% in 1995, while revenue per tractor per week remained relatively constant at $3,539 in 1995 and $3,553 in 1994. Operating Expenses Operating expenses increased 11.4% to $119.9 million in 1995 from $107.6 million in 1994. As a percentage of operating revenues, operating expenses increased to 95.2% in 1995 from 90.1% in 1994. The increase in operating expenses is primarily due to increased revenues, as the majority of the Company's operating expenses are variable in nature. The percentage increase represented the return to a more normal expense ratio from the unusually high profit margins experienced in 1994 as a result of the 1994 Teamsters strike. Salaries, wages and benefits increased 15.8% to $67.5 million in 1995 from $58.3 million in 1994. As a percentage of operating revenues, salaries, wages and benefits increased to 53.6% in 1995 from 48.8% in 1994. The increase was primarily due to the Company's decision to add personnel in sales, information technology and administrative positions to support the Company's growth plans. The increase was partially offset by a decrease in driver wages resulting from the Company's increased use of purchased transportation in 1995. Supplies and other expenses were relatively flat at $30.3 million in 1995 and $30.6 million in 1994. As a percentage of operating revenues, supplies and other expenses decreased to 24.0% in 1995 from 25.6% in 1994. The decrease was primarily due to the Company's shift in 1995 toward the purchase of revenue equipment financed with debt rather than leasing such equipment under operating leases and to a lesser extent a decrease in bad debt expense as a percentage of operating revenues, to 0.1% in 1995 from 0.6% in 1994. The decrease in bad debt expense was due to a higher rate of collection of past due accounts than the Company historically experienced. Purchased transportation increased 40.0% to $5.6 million in 1995 from $4.0 million in 1994. As a percentage of operating revenues, purchased transportation increased to 4.5% in 1995 from 3.4% in 1994. The increase was due to the Company's decision to use outside carriers in 1995 to supplement the Company's existing fleet, rather than acquiring revenue equipment during a period when slow economic growth was being widely forecast. Depreciation and amortization expense increased 45.5% to $6.4 million in 1995 from $4.4 million in 1994. As a percentage of operating revenues, depreciation and amortization increased to 5.1% in 1995 from 3.7% in 1994. The increase was primarily attributable to the Company's purchases of new revenue equipment to replace the aging portion of its fleet. Operating taxes and licenses increased slightly to $7.8 million in 1995 from $7.4 million in 1994. As a percentage of operating revenues, operating taxes and licenses remained flat at 6.2% as revenues per tractor per week was consistent between years. 21 Insurance and claims decreased 16.1% to $2.6 million in 1995 from $3.1 million in 1994. As a percentage of operating revenues, insurance and claims decreased to 2.1% in 1995 from 2.6% in 1994. The decrease was due to reductions in auto liability insurance premiums as a result of favorable loss experience. Interest Expense Interest expense increased 63.6% to $1.8 million in 1995 from $1.1 million in 1994. As a percentage of operating revenues, interest expense increased to 1.4% in 1995 from 0.9% in 1994. The increase was primarily due to increased debt levels in 1995 resulting from replacement revenue equipment purchases being financed principally with debt, in addition to higher average interest rates in 1995. LIQUIDITY AND CAPITAL RESOURCES The Company's primary sources of liquidity have been funds provided by operations, capital and operating equipment leases and bank borrowings. Net cash provided by operating activities was approximately $13.7 million, $11.8 million, $15.5 million and $6.7 million in 1994, 1995 and 1996 and the six months ended June 30, 1997, respectively. Net cash provided by operating activities is primarily attributable to the Company's income before depreciation and amortization expense. Operating cash flows during the six months ended June 30, 1996 and 1997 were lower than income before depreciation and amortization expense for the periods due to the timing of certain payments, resulting in increased prepaid expenses and decreased accounts payable. Capital expenditures, net of trade-in allowances, totaled approximately $14.6 million, $17.7 million, $20.7 million and $14.2 million during 1994, 1995 and 1996 and the six months ended June 30, 1997, respectively. The majority of the Company's capital expenditures are financed with long-term debt or capital leases. The 1994 capital expenditures of $14.6 million were comprised of $11.4 million of revenue equipment, $1.4 million of facilities and $1.8 million of other equipment. In 1995, the $17.7 million of capital expenditures were comprised of $7.2 million of revenue equipment, $7.4 million of facilities and $3.1 million of other equipment. Of the $20.7 million of capital expenditures in 1996, $17.2 million represented revenue equipment, $1.5 million represented facilities and $2.0 million represented other equipment. For the six months ended June 30, 1997, the $14.2 million of capital expenditures were comprised of $12.2 million of revenue equipment, $700,000 of facilities and $1.3 million of other equipment. The Company has budgeted for total capital expenditures of $13.0 million for the second half of 1997 and $24.0 million in 1998. The Company's capital budget includes $4.0 million to purchase new tractors and $5.0 million to purchase new trailers in the second half of 1997 and $5.0 million to purchase new tractors and $5.0 million to purchase new trailers in 1998. In addition, the Company plans to spend approximately $4.0 million on real estate projects in the second half of 1997 and an additional $11.0 million on such projects in 1998. Projects planned for the second half of 1997 include the Charlotte Purchase, the purchase of land on which to construct a new regional facility in metropolitan Boston and expenditures for certain improvements to the Company's headquarters building. Projects planned for 1998 include the construction of a Boston facility and the purchase of land for and construction of a new regional facility in metropolitan Chicago. The Company also plans to purchase $3.0 million of other equipment, primarily technology, during 1998. A portion of the net proceeds of the offering, combined with cash flow from operations, will be used to fund the Company's planned capital expenditures. The Company generally purchases new line-haul tractors and replaces them after three years. Regional and local tractors are generally replaced after five years, depending on levels of use. The Company generated cash proceeds from sales of used tractors of $750,000, $742,000, $108,000 and $241,000, in 1994, 1995 and 1996 and the six months ended June 30, 1997, respectively. Most of the Company's tractors are covered by agreements under which the Company has the right to resell the tractors to the vendor at a defined price. There is no assurance that the Company will be able to generate consistent cash proceeds on sales of used tractors or obtain favorable trade-in terms in the future. Net cash provided by financing activities was approximately $2.3 million, $3.7 million, $6.3 million and $9.7 million in 1994, 1995 and 1996 and the six months ended June 30, 1997, respectively. At June 30, 1997, total borrowings under long-term debt totaled $49.5 million, maturing through 2007, and obligations relating to operating leases totaled $8.3 million through 2001, of which $1.2 million related to facility leases with the current shareholders. 22 Net distributions to current shareholders, primarily related to income taxes on the Company's S Corporation income, were $956,000, $3.8 million and $1.2 million in 1994 and 1995 and in the first six months of 1997, respectively. In 1996, the shareholders made net contributions to the Company of $390,000, primarily related to excess tax distributions made by the Company in 1995. Subsequent to June 30, 1997, the Company will effect the Distribution and will make a distribution to its current shareholders for their remaining 1997 Federal and state S Corporation tax liabilities, estimated at $500,000 as of June 30, 1997. The Board determined that the Distribution was reasonable and appropriate in light of the shareholders' investment in and ownership risks associated with the Company prior to the Distribution. See "Use of Proceeds" and "Prior S Corporation Status." Jevic is a party to a $25 million credit facility with CoreStates Bank, N.A. The credit facility includes a $7 million working capital revolving line of credit, with borrowings limited to 80% of the Company's eligible accounts receivable, and an $18 million term loan facility used to purchase or refinance revenue equipment. At June 30, 1997, there was $13.4 million outstanding under the credit facility, of which $200,000 represented outstanding standby letters of credit and the remainder of which was outstanding under the term loan facility. The term loans are secured by a first priority, perfected security interest in the revenue equipment purchased or refinanced. The rate of interest on both the term loans and the revolving credit loans is, at the Company's election, either the Bank's prime rate, a rate based on the London Interbank Offered Rate (LIBOR) or a fixed rate quoted by the Bank to Jevic on the date of a borrowing. The revolving line of credit expires in June 1999. Term loans outstanding under the facility vary as to their maturity (from five to eight years from the date of each loan) depending on the type of revenue equipment financed. The maturities of the Company's term loans range from July 2000 to November 2004. The credit facility contains covenants made by the Company which restrict its ability to make business acquisitions and pay dividends on its capital stock, including the Common Stock, among other things. The Company intends to borrow an amount under the revolving line of credit (estimated at $6.0 million) prior to the offering to fund a portion of the Distribution, with the balance of the Distribution to be paid from the Company's available cash. See "Use of Proceeds" and "Prior S Corporation Status." Jevic Transportation Services, Inc. ("JTS"), a freight brokerage company owned by the Muhlschlegels, is expected to be merged into the Company after the offering. JTS had gross revenues of approximately $1.0 million for 1996 and $1.2 million for the six months ended June 30, 1997. JTS had net income of approximately $34,000 for 1996 and $57,000 for the six months ended June 30, 1997. The Muhlschlegels will receive $125,000 from the Company in exchange for their JTS stock in the merger, which is equal to their capital investment in JTS. The merger will be accounted for as a combination of companies under common control. The Company believes that the net proceeds from the offering, funds generated from operations and available borrowings under its current or future credit facilities will be sufficient to fund the Company's activities at least through 1998. See "Use of Proceeds" and "Capitalization." While the Company intends to selectively pursue acquisitions of companies that are complementary with its operations, the Company currently does not have any commitments or agreements for any business acquisition and is not in active negotiations regarding any such acquisition. INFLATION The Company does not believe that inflation has had a material impact on its results of operations for the past three years. SEASONALITY In the trucking industry, revenues generally follow a seasonal pattern as customers reduce shipments during and after the winter holiday season. In addition, highway transportation can be adversely affected depending upon the severity of the weather in various sections of the country during the winter months. The Company's operating expenses have historically been higher in winter months, due primarily to decreased fuel efficiency and increased maintenance costs for revenue equipment in colder weather. Accordingly, the Company's results of operations may fluctuate to reflect such seasonality. 23 INDUSTRY OVERVIEW The trucking portion of the transportation industry is estimated at $350 billion, of which LTL and truckload carriers account for an estimated $80 billion. The trucking industry is highly fragmented and consists of over 360,000 carriers. Motor carriers historically have been classified as either truckload or LTL based on the size of shipment and the manner in which they charge their customers. Most carriers classified as truckload carriers specialize in handling shipments weighing 20,000 lbs. or more and charge a flat rate per mile regardless of how full the trailer is. Truckload carrier systems typically utilize a driver and a trailer picking up a full load at the shipper's dock, delivering the shipment to its destination and traveling to the next shipper to pick up another load. Since truckload carriers are able to deliver freight from point to point and do not operate with the hub and spoke systems used by typical LTL carriers, they have lower fixed costs. The absence of a network of breakbulk terminals, through which all freight is channeled, and destination terminals, from which shipments are reloaded for final delivery to their destinations, provides Jevic with greater operating flexibility than most LTL carriers. Less-than-truckload carriers have traditionally handled large numbers of small shipments, approximately 1,300 pounds on average, for multiple shippers and multiple consignees on a scheduled basis through a series of hub and spoke terminals. Although this method has historically been successful in keeping trucks full, it has the drawback of requiring both multiple cargo rehandlings, which are expensive, and a fixed network of pickup, breakbulk and destination terminals, which is capital intensive, requires a large staff of freight handlers and lacks operating flexibility. At each breakbulk terminal, freight is unloaded and reloaded with other freight destined for locations in the same general direction of another breakbulk terminal, where the truck is sent for further unloading and loading, until the freight arrives at a destination terminal located nearest the region of the consignee. At the destination terminal, freight is then loaded onto a local truck for final delivery. In addition to contributing to high fixed costs, the operation of a network of breakbulk terminals increases transit times and the likelihood of cargo damage. Although some LTL carriers have recently sought to reduce the number of their breakbulk facilities, the Company believes that the use of the breakbulk system will continue to be the standard operating method of most LTL carriers. LTL carriers typically base their rates on the weight of the shipment and the distance shipped. Because of the ability of LTL carriers to transport and charge for multiple shipments in a single trailer, LTL carriers generally have a higher revenue yield, measured in terms of revenue per ton, than truckload carriers. In the early 1980s, federal regulations were eliminated or amended to enable motor carriers to serve customers, transport shipments and set rate structures without significant restriction. Since deregulation, carriers have grappled with issues similar to those which other deregulated industries have faced, including intense price competition, consolidation due to industry over-capacity, lack of knowledge of costs, high fixed costs of inefficient operations, and rigid work rules. Notwithstanding deregulation, most carriers have continued to focus their business and price their services as either truckload carriers or LTL carriers. Traditional truckload and LTL carriers can efficiently handle freight that is compatible with their respective operating systems but typically do not have the flexibility to accommodate a wide range of shipment size, length of haul and delivery options. As many businesses have focused on quality improvement, reduced order cycle times, just-in-time inventory management, and regional assembly and distribution methods, the need for high quality and flexible service providers in the trucking portion of the transportation industry has increased. Additionally, companies are streamlining administrative functions and creating efficiencies by reducing the number of preferred motor carrier vendors or "core carriers," which eliminates administrative duplication and helps create strategic shipper advantages by working with a core carrier on solutions to mutual problems. This trend toward the use of fewer carriers offers significant growth opportunities for Jevic because of its ability to provide a full array of services, its financial stability and its critical mass to support high equipment utilization, commitment to quality service and technological capabilities. Jevic's Breakbulk-Free operating system combines the operating flexibility of typical truckload carriers with the ability to service multiple smaller shipments, previously the principal domain of the typical LTL carriers. The benefits of avoiding breakbulks are a higher level of service to the shipper, particularly improved speed of delivery and reduced cargo damage caused by rehandling. Jevic's rates are based on a combination of the weight of the shipment and the length of haul. The benefits to Jevic are the potential for market share growth, the ability to generate a higher revenue yield as compared to standard truckload carriers and reduced fixed costs as compared to standard LTL carriers. 24 BUSINESS OVERVIEW Jevic is a motor carrier that combines the high revenue yield characteristics of a typical LTL carrier with the operating flexibility and low fixed costs of a truckload carrier. Jevic utilizes a simplified in-route delivery system in which over 70% of the Company's shipments are delivered to their destinations directly from line-haul trailers, eliminating the need for an expensive network of labor-intensive breakbulk terminals, which most LTL carriers use to distribute shipments. Jevic's revenue per terminal for 1996 was approximately $31.0 million. The Company serves shippers throughout the eastern half of the United States and in selected markets in the remainder of the continental United States and Canada through its origination facilities located in the metropolitan areas of Atlanta, Boston, Charlotte, Chicago, Houston and Philadelphia. From 1992 to 1996, the Company's operating revenues and operating income grew at compound annual rates of 26.6% and 29.2%, respectively. Jevic began operations as a motor carrier in 1983, soon after deregulation of the trucking industry. Regulation had caused trucking industry participants to develop as either truckload carriers or as terminal-based LTL carriers. Following deregulation, most carriers continue to focus their operations and price their services as either truckload carriers or LTL carriers. Traditional truckload and LTL carriers can efficiently handle freight that is compatible with their respective operating systems but typically do not have the flexibility to accommodate a wide range of shipment size, length of haul and delivery options. Jevic developed its Breakbulk-Free operating system to provide the capabilities of both truckload and LTL service without the inherent infrastructure requirements and operational limitations of truckload and LTL carriers. Jevic's Breakbulk-Free system utilizes a simplified network of terminals, which serve as regional origination points for initial consolidation of freight on a trailer. The Company strategically combines smaller shipments (typically handled by LTL carriers) with larger shipments (typically handled by truckload carriers) in a sequence which permits direct unloading at each shipment's destination, with no need to rehandle individual shipments at one or more breakbulk terminals. Typical LTL carriers have to reload shipments into local trucks for final delivery, whereas, in most cases, Jevic's operating system avoids further rehandling at the destination facility. This generally results in less damage to freight and faster transit times for less than full truckload shipments. Jevic's flexible operating system minimizes rehandling of freight and provides a broad range of transportation services. MARKETING STRATEGY Jevic targets prospective customers whose logistics needs are not being met, develops solutions for those needs and offers a broad range of transportation services. o Offer Logistics-Based Solutions. The Company utilizes a consultative approach to develop customized logistics-based solutions to meet its customers' transportation and distribution needs. These solutions are designed to reduce the customer's transportation costs, inventory carrying costs, handling costs, loss and damage claims and information processing costs. The Company's customer-focused approach, in which Jevic provides information and problem-solving as well as transportation, helps expand its customer base and forge long-term customer relationships. o Offer a Broad Range of Differentiated Services. By creating a "one-stop-shop" and offering a broad range of transportation services, the Company seeks to become its customers' core carrier. Jevic offers its customers a wide range of shipment size, length of haul and delivery options as well as heated service. By increasing the number of shipments from existing customers, the Company achieves operating efficiencies through higher pick-up and lane density, improved terminal utilization and reduced administrative duplication. As examples, (i) Jevic offers regional service with delivery not just overnight, but before noon so that the shipment can be used in the manufacturing process on the day it is delivered, and (ii) uses insulated trailers with fully integrated heaters to provide heated service for freight that can be damaged by cold weather. The Company offers other specialized services such as partial truckload service, next day service for shipments transported up to 500 miles and interregional service along key lanes. o Focus on Customer Selectivity. The Company targets customers based on disciplined sales criteria designed to identify shippers whose service requirements drive the carrier selection process. This approach has generated significant incremental business in service-sensitive industries, such as the chemical industry, which accounted 25 for approximately 45% of the Company's operating revenues from its top 200 customers in the first half of 1997. o Solicit Optimal Mix of Shipment Sizes. Jevic selectively solicits business from its customers in order to load trailers strategically by integrating larger shipments with smaller shipments and thereby optimizes revenue yields and asset utilization. The Company also integrates regional and interregional shipments in a single trailer in order to increase freight density, which improves asset utilization. OPERATING STRATEGY Jevic seeks to maximize its results of operations by providing flexible and timely service. o Utilize Breakbulk-Free System. Jevic sequences multiple deliveries from a single trailer, eliminating the need for a network of breakbulk terminals and, in most cases, destination terminals, at which typical LTL carriers unload and reload shipments for final delivery. As a result, the Company reduces transit times and freight damage, while avoiding the infrastructure and labor costs associated with a large breakbulk terminal network. o Utilize Technology to Improve Productivity and Customer Service. The Company utilizes technology to improve its customer service and to increase productivity. The Company's tractors are equipped with state-of- the-art QUALCOMM OmniTRACS satellite tracking units to provide real-time customer information and increase fleet utilization. Jevic uses its EDI system to improve customer communications and reduce administrative costs. In 1998, the Company plans to implement a new bar coding system which is designed to enhance the Company's freight tracking capability, reduce cargo claims and improve operational efficiency. o Increase Utilization of Owner-Operator Drivers. Jevic has recently expanded its driver force through the addition of owner-operators, who supply their own tractor and bear all associated expenses in return for a contracted rate. The Company intends to increase its utilization of owner-operator drivers in order to reduce capital expenditure requirements, improve return on equity, reduce direct exposure to fuel price fluctuations and provide access to an additional pool of drivers. o Maintain a Positive Workforce Environment. Through stringent driver selection criteria, a favorable wage and benefit structure and a positive working environment, the Company minimizes driver turnover, maintains a high level of employee satisfaction and motivates employees to provide high quality service. The Company's annual driver turnover rate was 20.1% in 1996. Among drivers who have worked for Jevic for more than one year, the turnover rate through June 30, 1997 was 5.5%. None of Jevic's employees, including drivers, is represented by a collective bargaining unit. GROWTH STRATEGY The Company seeks sustainable growth by increasing the amount of business generated by existing customers, acquiring new customers within existing regions and expanding into new regions. In response to customer demand, Jevic initiates service to a new region by introducing high-yield inbound LTL service to its existing customer base, delivering in-route from line-haul trailers, consistent with the Company's operating strategy. Until a sufficient volume of inbound business is generated, the Company avoids the up-front capital costs of building or purchasing a new facility by soliciting lower-yielding truckload shipments for the backhaul to return the equipment to one of the Company's existing facilities. This results in increased asset utilization and reduced empty miles. Once the Company opens a new facility, it serves as a consolidation point for a wide range of higher yielding shipments originating in the region, replacing the lower yielding truckload shipments. The Company most recently employed these techniques in opening its Houston facility in June 1997. By providing a broad range of services, Jevic has the ability to build volume rapidly in targeted geographic areas. The Company's growth plans include constructing new, substantially larger facilities in metropolitan Boston and Chicago, adding selected regional facilities in new regions and adding new points served in route when supported by customer demand. Jevic also intends to selectively pursue acquisitions of companies that are complementary with the Company's operations. 26 SERVICE Jevic seeks to customize its service offerings to meet its customers' evolving requirements for greater speed and reliability. By regularly expanding the services it provides, the Company increases the types of shipments it can efficiently handle from existing customers and is able to attract and serve new customers. Fast Delivery Times. The Company provides next day and, in many cases, next morning service along regional lanes of up to 500 miles. As an example, Jevic offers freight delivery from metropolitan Philadelphia to metropolitan Boston by noon on the next business day. In addition, Jevic offers delivery from metropolitan Atlanta to New England by the morning of the second day after pickup, and from the Northeast to metropolitan Chicago in two days. Wide Range of Shipment Sizes. Jevic provides its customers with the flexibility to handle shipments of a range of sizes and weights not typically provided by standard LTL or truckload carriers, which enhances the Company's ability to become a core carrier to its customers. Many of the Company's customers require transportation of multiple shipments ranging from as little as 50 pounds to over 40,000 pounds. While a standard truckload carrier would charge a customer the full truckload rate for each shipment weighing over 10,000 pounds even if it does not fill a trailer, the Company can efficiently handle the customer's partial truckload shipments, charging the customer less than a full truckload rate, and then integrating smaller shipments from the same customer or other customers in the same region to fill the rest of the trailer. This allows the customer to save money on the truckload portion of the shipment and the Company to increase freight density and shipments per pickup, thereby minimizing incremental costs and improving operating efficiencies. Specialized Services. Heated Service. The Company offers a heated service for customers whose freight must be protected from freezing during the winter months, principally customers in the chemical industry. Jevic's heated trailers allow the Company to provide significant flexibility to customers, such as pickups and deliveries of heated service shipments on any day of the week. The Company's heated service enables the Company to attract business from new customers and then expand the services it provides for those customers to encompass their regular shipments as well as their heated service shipments. In addition, by providing this heated service, Jevic is able to enhance revenues from mid-October to mid-April, a period in which freight volumes are typically lower than at other times during the year. Jevic believes that there is no significant competition for its heated service in the LTL market and that it purchases more integrated diesel trailer heaters than any LTL carrier. Expedited Service. Jevic offers expedited delivery service at competitive prices on a regional and inter-regional basis by integrating these premium rated deliveries with standard service deliveries, thereby increasing revenue per mile. BREAKBULK-FREE OPERATING MODEL Jevic utilizes a simplified network of terminals, which serve as regional origination points for initial consolidation of freight on a trailer. Shipments of various sizes are typically picked up "same day" from customers and the Company combines smaller shipments (typically handled by LTL carriers) with larger shipments (typically handled by truckload carriers) onto a line-haul trailer in a sequence which permits the direct unloading of each shipment at its final destination. This simplifies the delivery process by reducing the number of facilities needed to effect delivery. The Company's in-route delivery system bypasses intermediate breakbulk terminals and, in most cases, destination terminals. LTL carriers typically rehandle freight at one or more breakbulk terminals and reload the freight at a destination terminal into a local truck for delivery to the final destination. Breakbulk-Free operations, in contrast, do not require an extensive network of "hub and spoke" operating terminals. As a result, Jevic avoids the fixed costs of operating and maintaining a large network of breakbulk terminals and a large staff of freight handlers. Jevic's revenue per terminal for 1996 was $31.0 million. Jevic's Breakbulk-Free system accommodates a wider range of shipment sizes, as determined by weight, than most LTL carriers, and can provide more rapid transit times in many cases. By minimizing rehandling, Jevic's system reduces damage to shipments and associated costs. The Breakbulk-Free system also enhances the Company's asset 27 utilization. To further increase asset utilization and shorten transit times, Jevic has integrated the use of twin 28-foot trailers, or pups, into its existing fleet of 48 foot and 53 foot trailers. The pups are separated without rehandling of freight, and deliveries are made from the two pups to different destinations at the same time. Deliveries via pup trailers can effectively double the number of deliveries per day compared to a single 48 or 53 foot trailer. MARKETING AND CUSTOMERS Jevic's sales force utilizes a consultative approach to develop customized logistics-based solutions to meet its customers' total transportation and distribution needs. These solutions are designed to reduce the customer's total transportation costs, inventory carrying costs, handling costs, loss and damage claims and information processing costs. The Company's customer-focused approach, in which Jevic provides information and problem-solving as well as transportation, helps expand the Company's customer base and forge long-term relationships with customers. The Company targets prospective customers whose logistics needs are not being met and develops solutions for those needs. Once a customer begins to use Jevic for certain of its shipping needs, the Company offers the customer additional transportation services to develop the account while increasing its pickup, lane and delivery density. Jevic develops new geographic markets in existing or new lanes and regions and monitors existing lanes for lane balance in both directions. The Company addresses unbalanced lanes by creating new sales territories in the specific areas that require additional freight as an origination point. Sales territories are designed to minimize the distance between pickups and increase fleet utilization, and seasoned sales personnel are recruited and hired for each territory. Potential customers within the new territory are identified through telephone interviews and a final list of top potential accounts are selected as a starting point for the sales process. At June 30, 1997, the Company had a direct sales staff of 72 employees. The sales force is comprised of experienced motor carrier representatives who have been recruited for territories geographically located to maximize both pickup and lane density. The Company's sales personnel have knowledge of the local market in which they operate and receive specialized training in order to learn the Jevic system, including the disciplined sales criteria used in the customer selection process. Many sales personnel work from their homes, which are typically located in the region of an existing or planned Company facility. The sales force is divided among three regions covering the Northeast, South/Southeast and Midwest. The Company's National Accounts Department coordinates the marketing efforts for customers with multiple shipping locations across the country. At June 30, 1997, the Company's customer base included over 8,000 active accounts. The Company transports general commodities, including chemical commodities used in manufacturing, petroleum, non-durable goods, paper products, rubber and plastics. In 1996, Jevic's largest 20, 10 and five customers accounted for approximately 24.1%, 18.2% and 12.3% of the Company's operating revenues, respectively. During the same year, the Company's largest customer accounted for approximately 4.5% of operating revenues. Because approximately 45% of the Company's revenues from its top 200 customers in the first half of 1997 had standard industrial classification codes in the chemicals industry, the Company believes that a significant amount of its business is generated from transporting chemicals, including various materials which are subject to environmental and safety regulations. REGIONAL FACILITY OPERATIONS Jevic currently operates through six regional facilities. The Company's principal regional facility and headquarters are located in metropolitan Philadelphia, and its other facilities are located in metropolitan Atlanta, Boston, Charlotte, Chicago and Houston. Jevic's regional facilities are strategically located to permit the Company to provide high quality service and minimize freight rehandling to reduce costs. The Company uses its regional facilities as origination points for initial consolidation of freight onto the trailer for delivery in-route to the customer. Jevic does not use regional facilities as breakbulk terminals. Over 70% of the Company's LTL tonnage is routed directly from the originating terminal to the customer's destination. The remaining freight is unloaded at a Company terminal for final local delivery to the destination, typically in a situation where a specific piece of equipment, such as a liftgate, is required in the unloading process but is not available on the trailer or where the customer requires a specific delivery time. 28 Each regional facility is responsible for the pickup and delivery of freight for its own service area. Primary responsibility for customer service resides at the facility level. Facility employees trace freight movement between facilities on the Company's automated tracing system and respond to customer requests for delivery information. Jevic believes that its policy of maintaining primary accountability to customers at the facility level fosters better relationships, results in improved customer service and enhances its ability to meet customers' needs. Jevic's centralized Line-Haul Department is responsible for directing the systemwide movement of revenue equipment from its origin to destination. The Company continuously monitors the usage and location of its revenue equipment and seeks to maximize utilization of all revenue equipment. Dispatchers are responsible for tracking all drivers and revenue equipment until trailers are emptied in order to assure timely delivery of shipments. Dispatchers then direct the reloading of the trailers for deliveries either in the same region or to another region serviced by the Company. On a daily basis, the Company's senior executives and facility management personnel review the prior day's freight shipment and activity reports to monitor the Company's performance. The daily freight shipment report identifies shippers, destinations, shipment size and shipment routing. The daily activity report includes data such as regional bill counts, driver and tractor availability, load counts, freight damage and loss and accidents. The Company uses scheduled runs, and schedules additional runs as necessary, to meet its delivery time schedules. The Company's growth plans include construction of new, substantially larger facilities in metropolitan Boston and Chicago and adding selected regional facilities in new regions when supported by customer demand. TECHNOLOGY The Company believes that its use of proven technologies enhances the Company's efficiency and provides competitive service advantages. Through this technology, the Company provides better and more timely information to its customers, improves its operating efficiency and controls and more effectively leverages its resources. Satellite Communications. In 1994, the Company installed the QUALCOMM OmniTRACS satellite-based communications system ("OmniTRACS System") throughout its fleet. Although more common to the truckload segment, satellite-based communications systems are not used by most LTL carriers. Operating continuously, the OmniTRACS System assists the Company's dispatchers in load planning and enables them to monitor the movement of freight and simplifies the location of equipment. The OmniTRACS System also permits timely and efficient communication of critical operating data, such as shipment orders, loading instructions, routing, safety, maintenance, billing, tracing and delivery information. For example, dispatchers assign loads by entering the required information into the system. Drivers then access the previously-planned pickup from the system and acquire all the necessary customer, order and routing information through their on-board OmniTRACS display unit, thus eliminating waiting time and inefficient dependence on truckstop and roadside telephones. Before installation of the OmniTRACS system, Jevic typically lost one hour or more of productive time per driver per day while the driver stopped to wait for and use a telephone. Enterprise Wide Computing. The Company's NCR 3555 UNIX platform works in conjunction with a Novell/NT network consisting of over a dozen file servers, provides connectivity with all Company facilities and produces operational reports for all end users at the Company's headquarters. In 1998, the Company plans to add a Sequent NUMA-Q 2000 computer architecture in order to provide increased enterprise computing and additional disaster recovery capabilities. Relational database technology (RDBMS) is expected to be employed to provide flexibility and consistency of data. The Company is developing enhancements to its core transportation application with custom-designed software. Document Imaging. The Company uses an optical imaging system to scan documents such as bills of lading and delivery receipts onto compact disks. Images are available across all networks to reduce clerical and management time required to enter and retrieve information. This process enhances the availability and increases the utilization of data, especially that which pertains directly to customer service. The Company is currently adding additional storage and system functionality which will increase image retention, eliminate many manual duties and be expandable to meet future requirements. Bar Coding. In 1998, the Company plans to install a comprehensive freight locator and cross docking system. The bar coding system is designed to enhance the Company's freight tracking capability and reduce cargo claims and 29 also to improve operational efficiency through the placement of a bar code on every shipment which is readable by drivers and facility personnel using a hand-held wireless scanner. DRIVERS A key element contributing to the Company's growth has been its driver force. As a former driver, Harry Muhlschlegel, the Company's co-founder and Chief Executive Officer, has continually emphasized the importance of a stable, high quality driver force. The Company has implemented policies and programs to maintain a high level of driver quality and job satisfaction. In 1996, the average annual total wages paid to drivers who worked full time during the year was over $56,000, not including health insurance and related benefits provided by the Company. Jevic's line-haul drivers are typically able to return home once a week and are provided with late model tractors with modern features to provide driver comfort. See "- Revenue Equipment and Maintenance." Although the industry experiences driver shortages from time to time, Jevic has been successful in maintaining an adequate number of qualified drivers. The Company's annual driver turnover rate was 20.1% in 1996. Among drivers who have worked for the Company for more than one year, the turnover rate through June 30, 1997 was 5.5%. As of June 30, 1997, 72% of the Company's drivers had worked for the Company for more than one year, and 61% of them had worked for the Company for more than two years. At June 30, 1997, Jevic employed 916 Company drivers. In addition, 105 owner-operator drivers provided services to the Company. The Company believes that its proven ability to recruit and retain dedicated, skilled drivers is a key factor in the Company's continued growth and success. The Company's recruiting and selection methods are designed to attract the best drivers, which contributes to customer satisfaction and reduced claims and insurance expense as a percentage or revenues. Using this process, the Company has been able to more effectively recruit, hire and retain a reliable, stable driver workforce. Jevic's policy is to recruit drivers who reside along the Company's primary lanes of traffic, which enables drivers to return home more often and reduces the number of off-route miles. The Company hires drivers based upon driving records and experience, and requires all drivers to be no less than 25 years of age with at least three years of experience. New hires are required to undergo a two-week orientation program designed to introduce them to Jevic's operating strategy. The Company meets with new drivers within the first 90 days of employment and periodically thereafter to carefully evaluate performance, assist with compatibility with Jevic's operating structure and discuss any current concerns. The Company believes that its stringent selection criteria for drivers, and its initial and regular refresher training courses for drivers, have been an important factor in improving the Company's safety record. Drivers are eligible for bonuses ranging from $500 to $2,500 annually for safe and courteous driving, depending on seniority within the Company. OWNER-OPERATORS In 1996, the Company initiated an owner-operator program. At June 30, 1997, the Company had contracts with 105 owner-operators which require the contractor to furnish a tractor and a driver exclusively to transport, load and unload goods carried by the Company. Owner-operators are subject to the same recruitment criteria as employee drivers and undergo the same orientation and training programs. The owner-operators are compensated at a contracted rate per mile and per pickup and delivery made in-route. The owner-operator program provides the Company with an alternative method of obtaining additional revenue equipment with no capital investment, improving return on equity. It also provides access to an additional pool of drivers in response to the intense industry competition for qualified drivers and, to a lesser degree, serves to reduce the Company's direct exposure to fuel price fluctuations. The Company intends to continue to increase its use of owner-operators. REVENUE EQUIPMENT AND MAINTENANCE At June 30, 1997, the Company operated 853 tractors. The Company's policy is to use new road tractors for up to 500,000 miles, after which they are generally traded in or sold. Based on current tractor mileage levels, this translates to approximately three years for tractors used in interregional operations and approximately five years for tractors used in regional or local operations. The major operating systems of the Company's tractors are covered by manufacturers' warranties for between 250,000 to 750,000 miles. Most of the Company's tractors are covered by 30 agreements under which the Company has the right to resell the tractors to the vendor at a defined price. All owner-operators' tractors are required to pass DOT inspection before use in the Company's fleet. At June 30, 1997, the Company operated a fleet of 1,480 trailers. Trailers are generally traded after 10 years. However, in furtherance of its program to add heated services capability to its trailer fleet on an accelerated schedule, the Company intends to trade in certain non-heated trailers which are less than 10 years old by the end of 1997. At June 30, 1997, 53.9% of the Company's trailers were equipped with integrated heating capability. The Company plans to spend $3.6 million and $5.3 million to purchase new tractors and $4.8 million and $5.2 million to purchase new trailers during the second half of 1997 and during 1998, respectively. The Company has rigid specifications for all tractor and engine components and has selected, among others, Freightliner tractors and Cummins engines as its standard equipment. The Cummins electronic diesel engines control speed and decrease fuel consumption. All tractors have modern features designed to enhance performance and provide driver comfort. In order to enhance its Breakbulk-Free operating model, in 1994 Jevic introduced the use of twin 28-foot trailers, or "pups," into its fleet. The Company derives several advantages through the selective use of pup trailers. The use of twin pups permits more freight to be hauled with one tractor than could be hauled if one larger trailer were used. The pups are separated without rehandling of freight, and deliveries are made from the two pups to different destinations at the same time, providing a significant improvement in delivery times. Deliveries via pup trailers can effectively double the number of deliveries per day compared to a single 48 foot or 53 foot trailer. Jevic also uses pups to effect deliveries in regions where the delivery density is high enough to require it, but where pickup density has not developed to the point of opening a new regional facility to originate shipments out of the region. The Company believes that its heated service is better than that offered by other motor carriers in several respects. The Company's trailers have a permanently installed heating system integrated in an insulated trailer body. In addition, the Company's trailers are designed so that the air is heated and circulated inside the trailer by passing over a heat exchanger, with no exposure to any sparks or flame. This provides increased safety for both the driver and the cargo. In contrast, other companies which offer protective service alternatively may preheat the cargo and/or cover it with a blanket or place a portable heater in the trailer, which heats the cargo unevenly and ineffectively and does not provide the same safety features of the Company's heated trailers. In addition, competing carriers generally provide much more restrictive protective services, refusing to transport shipments requiring protection from freezing in extremely cold weather or over a weekend. 31 The following table reflects the model years of the Company's tractors and trailers as of June 30, 1997:
TRACTORS ------------------------------------- MODEL YEAR ROAD REGIONAL LOCAL TOTAL ---------- ---- -------- ----- ----- 1998........................................................ 40 -- 10 50 1997........................................................ 108 24 60 192 1996........................................................ 130 54 66 250 1995........................................................ 208 2 -- 210 1994........................................................ 4 27 -- 31 1993 and prior.............................................. 0 31 89 120(1) --- ----- --- ----- Total..................................................... 490 138 225 853
TRAILERS -------------------------------------- 28-FOOT MODEL YEAR "PUPS" 48-FOOT 53-FOOT TOTAL ---------- ------- ------- ------- ----- 1997...................................................... -- 160 110 270 1996...................................................... 50 199 -- 249 1995...................................................... 70 -- -- 70 1994...................................................... -- 100 -- 100 1993 and prior............................................ 32 703 56 791(2) --- ----- --- ----- Total................................................... 152 1,162 166 1,480(3)
- ------------------ (1) The average age of these tractors is 6.9 years. (2) The average age of these trailers is 6.4 years. (3) Includes 798 heated trailers. The Company's primary maintenance facility is located near its New Jersey headquarters and main regional facility. In addition, routine and preventative maintenance checks and repairs on all revenue equipment are performed at all of the Company's regional facilities. Through regular maintenance of its revenue equipment, Jevic minimizes equipment downtime and enhances the equipment's operating performance. SAFETY AND RISK MANAGEMENT The Company is committed to a high degree of safety in all of its operations, and utilizes a self-directed, team approach to risk management, building in loss control at the earliest stages. Employees are provided with the equipment and training required to do their jobs safely and efficiently. Drivers are retrained for risk management on a periodic basis and are provided with cameras to film accident scenes as soon as an incident occurs. In 1996, claims and insurance as a percentage of operating revenues were 2.1%, which the Company believes is low in comparison to the trucking industry as a whole. This performance is the result of careful driver recruiting, extensive driver training and the emphasis on a safety-conscious culture throughout the Company. The Company is self-insured for cargo claims up to $5,000 per occurrence. The Company self-insures for bodily injury claims for up to $20,000 per occurrence. Since 1993 the Company has self-insured for workers' compensation claims of up to $250,000 per occurrence in order to capitalize on its favorable claims history. During the past four years the Company received only nine claims exceeding $50,000, of which only two exceeded $100,000. This led to an increase in the Company's discount from standard insurance premium rates from 38% in 1992 to 81% in 1997. EMPLOYEES At June 30, 1997, the Company employed 1,754 persons in the following categories: CATEGORY NO. OF EMPLOYEES -------- ---------------- Drivers............................................ 916 Executive and Administrative....................... 503 Dockworkers........................................ 162 Mechanics.......................................... 101 Sales and Marketing................................ 72 None of Jevic's employees is represented by a collective bargaining unit. At June 30, 1997, the Company had 105 owner-operator drivers under contract in addition to its employee drivers, and employed 69 part-time employees. Management believes that relations with its employees and owner-operators are good. 32 PROPERTIES The Company owns its headquarters and main regional facility located in Delanco, New Jersey, near Philadelphia. The Company also owns its Houston regional facility and leases regional facilities in Atlanta, Charlotte, Chicago and New England. Owned Facilities
SQUARE FOOTAGE ---------------------- TERMINAL # OF AND LOCATION ACRES DOORS OFFICE MAINTENANCE -------- ----- ----- -------- ----------- 600 Creek Road, Delanco, NJ (Phila. Metro).................................... 36.0 108 155,900 17,400 700 Creek Road, Delanco, NJ (Phila. Metro)(1)................................. 19.5 -- 24,000 -- Houston..................................... 6.5 44 15,870 3,920
Leased Facilities
SQUARE FOOTAGE ---------------------- TERMINAL # OF AND LEASE LOCATION ACRES DOORS OFFICE MAINTENANCE EXPIRATION -------- ----- ----- -------- ----------- ---------- Atlanta...................................... 18.0 74 34,400 7,056 April 1999 Charlotte(2)................................. 11.7 47 34,750 6,400 April 2000 Chicago...................................... 12.3 82 56,900 11,600 May 1999 New England-1................................ 4.1 22 8,700 -- April 1998 New England-2................................ -- 16 4,000 -- March 1998 Willingboro, NJ.............................. 5.5 -- -- 24,000 December 2013
- ------------------ (1) This facility is an office only. (2) The Company intends to purchase this facility after completion of the offering. See "Use of Proceeds" and "Certain Transactions." FUEL AVAILABILITY AND COST The motor carrier transportation industry is dependent upon the availability of diesel fuel. Increases in fuel prices or fuel taxes, shortages of fuel or rationing of petroleum products could have a material, adverse effect on the operations and profitability of the Company. As a result of its relationships with major fuel suppliers, the Company has not experienced difficulties in maintaining a consistent and ample supply of fuel, but fuel is one of the Company's most substantial operating expenses. In order to reduce the Company's vulnerability to rapid increases in the price of fuel, the Company enters into purchase contracts with fuel suppliers from time to time for a portion of its estimated fuel requirements at guaranteed prices. The Company is a party to agreements with two fuel suppliers to purchase approximately 40% of its estimated fuel needs through March 1998 at guaranteed prices, which are consistent with market prices on the date of this Prospectus. Although this arrangement helps reduce the Company's vulnerability to rapid increases in the price of fuel, the Company will not benefit from a decrease in the price of fuel to the extent of its commitment to purchase fuel under these contracts. COMPETITION The trucking portion of the transportation industry is highly competitive and fragmented. Jevic competes with regional, inter-regional and national LTL carriers of varying sizes and, to a lesser extent, with truckload carriers, air freight carriers and railroads, a number of which have greater financial resources, operate more revenue equipment and have larger freight capacity than the Company. Also, in certain regions, the Company faces competition from local carriers. The Company's principal competitors are Roadway Express, Inc., Yellow Corp., Consolidated Freightways Corp., Con-Way Transportation Services and Arkansas Best Corp. See "Risk Factors - Competition." The Company believes that the principal competitive factors in its business are service, pricing and the availability and configuration of equipment that meets a variety of customers' needs. The Company also competes 33 with other motor carriers for the services of drivers. The Company believes that it is able to compete effectively in its markets by providing consistently high quality and timely-service at competitive prices. The Company believes that there are substantial barriers to entry which restrict the ability of competitors to adopt a Breakbulk-Free operating model. Small LTL carriers typically lack the necessary critical mass, freight density and capital, while large LTL carriers typically have work rules and labor practices that lack the flexibility which a Breakbulk-Free system requires. Truckload carriers lack a system to accommodate both multiple pick-ups and multiple deliveries and would require a substantial capital investment to build the necessary terminals. Additionally, the Breakbulk-Free operating model requires high quality drivers and sophisticated operating systems and management, which the Company has developed internally over an extended period of years. REGULATION Interstate and intrastate motor carriage has been substantially deregulated as a result of the enactment of the Motor Carrier Act of 1980, the Trucking Industry Regulatory Reform Act of 1994, the Federal Aviation Administration Authorization Act of 1994 and the ICC Termination Act of 1995. Carriers can now readily enter the trucking industry and rates and services are largely free of regulatory controls. However, interstate motor carriers remain subject to certain regulatory controls imposed by agencies within the DOT, such as the Federal Highway Administration and the Surface Transportation Board. Interstate motor carrier operations are subject to safety requirements prescribed by the United States Department of Transportation ("DOT"). Such matters as weight and dimension of equipment are also subject to federal and state regulations. Since 1989, DOT regulations have imposed mandatory drug testing of drivers, and more recent DOT regulations have imposed certain tests for alcohol levels in drivers and other safety personnel. To date, the DOT's national commercial driver's license and drug testing and alcohol testing requirements have not adversely affected the availability to the Company of qualified drivers. The Federal Aviation Administration Authorization Act of 1994, which became effective on January 1, 1995, essentially deregulated intrastate transportation by motor carriers. This Act prohibits individual states from regulating entry, pricing or service levels. However, the states retained the right to continue to require certification of carriers, but this certification is based only upon two primary fitness criteria: safety and insurance. The Company's operations are subject to various environmental laws and regulations dealing with, among other things, the transportation, storage, presence, use, disposal and handling of hazardous materials, discharge of stormwater and underground fuel storage tanks. All of the Company's drivers are trained in the handling and transportation of hazardous substances and are required to have a hazardous materials endorsement on their drivers license. The Company believes it is in compliance with applicable environmental laws and regulations. The transportation industry is subject to regulatory and legislative changes that can affect the economics of the industry by requiring changes in operating practices or influencing the demand for and the costs of providing services to shippers. From time to time, various legislative proposals are introduced to increase federal, state, or local taxes, including taxes on motor fuels. The Company cannot predict whether, or in what form, any increase in such taxes applicable to the Company will be enacted. LEGAL PROCEEDINGS The Company is routinely a party to litigation incidental to its business, primarily involving claims for workers' compensation or for personal injury and property damage incurred in the transportation of freight. Management believes that the outcome of such actions will not have a material adverse effect on the Company's financial position or results of operations. The Company maintains insurance which covers liability amounts in excess of retained liabilities from personal injury and property damage claims. 34 MANAGEMENT DIRECTORS AND EXECUTIVE OFFICERS The following table and biographies set forth information concerning the individuals who serve or who will serve upon completion of the offering as directors and executive officers of the Company:
NAME AGE POSITION ---- --- -------- Harry J. Muhlschlegel........................ 50 Chairman of the Board and Chief Executive Officer Karen B. Muhlschlegel........................ 50 Vice President, Secretary and Director Paul J. Karvois.............................. 42 President, Chief Operating Officer and Director Brian J. Fitzpatrick......................... 37 Senior Vice President - Finance and Chief Financial Officer William F. English........................... 45 Senior Vice President - Operations Joseph A. Librizzi........................... 48 Senior Vice President - Marketing and Sales Gordon R. Bowker............................. 70 Director Samuel H. Jones, Jr.......................... 64 Director
Harry J. Muhlschlegel. Mr. Muhlschlegel has over 28 years of experience in the trucking industry. He co-founded Jevic along with his wife, Karen Muhlschlegel, in 1981 and has served as its Chairman of the Board and Chief Executive Officer since its inception. Until March 1997, he also served as the Company's President. Karen B. Muhlschlegel. Ms. Muhlschlegel has over 28 years of experience in the trucking industry. She co-founded Jevic along with her husband, Harry Muhlschlegel, in 1981 and has served as a Vice President, Secretary and a director of the Company since its inception. Paul J. Karvois. Mr. Karvois became Jevic's President and Chief Operating Officer in March 1997 and he was elected as a director in August 1997. He joined the Company in January 1992 as Director of Insurance. Later in 1992, he created the Company's risk management group and became Director of Risk Management. Mr. Karvois was promoted to the position of Senior Vice President - Marketing and Sales in December 1993. Prior to joining the Company, Mr. Karvois had 21 years of marketing, sales and operations experience in the trucking industry, serving in a variety of positions with truckload and LTL carriers. Brian J. Fitzpatrick. Mr. Fitzpatrick joined Jevic in September 1993 as Senior Vice President - Finance, and was elected to the office of Chief Financial Officer in February 1995. Prior to joining the Company, Mr. Fitzpatrick served for seven years with United Jersey Bank/South (now Summit Bank), most recently as a Vice President, responsible for southern New Jersey middle market development. Prior to joining the Company, Mr. Fitzpatrick had twelve years of commercial banking experience. William F. English. Mr. English joined Jevic in August 1988 as Senior Vice President - Operations. Prior to joining the Company, Mr. English had 17 years of operations, financial and marketing experience in the transportation industry, including positions with national LTL and truckload carriers. Joseph A. Librizzi. Mr. Librizzi joined Jevic in April 1997 as Senior Vice President - Marketing and Sales. Prior to joining the Company, Mr. Librizzi had more than 26 years of experience in the transportation industry. From 1996 until he joined the Company, Mr. Librizzi served as a Vice President of G.O.D. responsible for new market development. From 1992 until 1996, he served as an officer of Carretta LTR, Inc., first as Vice President of LTL Sales and later as the company's President. Gordon R. Bowker. Mr. Bowker has agreed to serve as a director of Jevic upon completion of the offering. Mr. Bowker served in various positions with Ryder System, Inc. from 1964 to 1973, most recently as Group Vice President, a senior officer reporting directly to the President. Since 1973, Mr. Bowker has been the owner and President of Bowker, Brown & Co., a management consulting firm serving transportation related companies in the areas of truck renting and leasing, business appraisal and sales and divestitures. Mr. Bowker has served on the 35 Arbitration Panel of the New York Stock Exchange since 1988, and has served on the Arbitration Board of the National Asssociation of Securities Dealers since 1991. Samuel H. Jones, Jr. Mr. Jones has agreed to serve as a director of Jevic upon completion of the offering. Since 1971, Mr. Jones has been the owner and President of S-J Transportation Co., a company specializing in the transportation of industrial waste nationwide and in two Canadian provinces. Since 1991, he has been the owner and President of S-J Venture Capital Company. In addition, Mr. Jones currently serves as a director of MetaCreations, Inc. and Fulton Financial Corporation, as well as a number of privately-held organizations. Mr. Bowker and Mr. Jones have agreed to serve on the Company's Board of Directors upon completion of the offering, at which time the Board will be divided into three classes serving for the terms noted below and thereafter for staggered three-year terms. Mr. Muhlschlegel will be a Class I director with an initial term expiring at the annual meeting of shareholders in 2000; Ms. Muhlschlegel and Mr. Karvois will be Class II directors with an initial term expiring at the annual meeting of shareholders in 1999; and Mr. Bowker and Mr. Jones will be Class III directors with an initial term expiring at the annual meeting of shareholders in 1998. The Restated Certificate does not provide for cumulative voting in the election of directors. The Company's executive officers are elected annually by the Board of Directors and serve at the discretion of the Board. Board Committees. Following completion of this offering, the Board of Directors will have an Audit Committee, composed of Mr. Bowker and Mr. Jones and a Compensation Committee, composed of Mr. Muhlschlegel, Mr. Bowker and Mr. Jones. The principal functions of the Audit Committee will include making recommendations to the Board regarding the selection of independent public accountants to audit annually the books and records of the Company reviewing the proposed scope of each audit and reviewing the recommendations of the independent public accountants as a result of their audit of the Company. The Audit Committee will also periodically review the activities of the Company's accounting staff and the adequacy of the Company's internal controls. The Compensation Committee will be responsible for establishing the salaries of the executive officers of the Company, incentives and other forms of compensation and benefit plans and administering the Company's employee benefit plans. Compensation Committee Interlocks and Insider Participation in Compensation Decisions. In 1996, decisions concerning compensation of executive officers were made by the Company's Board of Directors, consisting, at that time, of Harry and Karen Muhlschlegel. See "Certain Transactions." Compensation of Directors. Prior to this offering, directors of the Company were not compensated for their services as such. Following completion of this offering, the Company will pay each director who is not an employee of Jevic (an "outside director") $500 for each meeting of the Board of Directors and Board Committee attended. The Company will also reimburse such directors for their expenses incurred in connection with their activities as directors. The Company also has an incentive plan which provides for the automatic grant of stock options to outside directors. See "Executive Compensation - Executive Incentive Plans - 1997 Incentive Plan." 36 EXECUTIVE COMPENSATION Summary Compensation. The following table sets forth, with respect to services rendered during 1996, the total compensation paid to or for the account of the Company's Chief Executive Officer and its three other executive officers whose total annual salary and bonus exceeded $100,000 during 1996 (the "named executive officers"). SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION ---------------------- ALL OTHER NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) COMPENSATION(1) - ----------------------------------------------------------- ---- -------- ------- ------- Harry J. Muhlschlegel...................................... 1996 $505,000 $ -- $31,824 Chief Executive Officer and Chairman of the Board (2) Paul J. Karvois............................................ 1996 $123,077 $25,000 $ 8,492 President and Chief Operating Officer (2) Brian J. Fitzpatrick....................................... 1996 $158,703 $25,000 $ 8,901 Senior Vice President and Chief Financial Officer William F. English......................................... 1996 $140,400 $25,000 $ 7,449 Senior Vice President - Operations
- ------------------ (1) These amounts include matching contributions made by the Company under the 401(k) Plan on behalf of the executives in the following amounts: Mr. Muhlschlegel - $950; Mr. Karvois - $1,218 and Mr. Fitzpatrick - $950. The Company is a party to "split dollar" life insurance agreements with Messrs. Muhlschlegel, Karvois, Fitzpatrick and English under which the Company advances all or a portion of the premiums on permanent life insurance policies insuring the lives of the executives and owned by the executives. Upon termination of the executives' employment or the executives' death (or upon the second to die of Mr. and Ms. Muhlschlegel in the case of Mr. Muhlschlegel's agreement), all premiums previously advanced by the Company under the policies are required to be repaid by the executive. The Company retains an interest in the policies' cash values and excess death benefits to secure the executives' repayment obligations. The amounts set forth in the table include the following amounts representing the value of the premium payments by the Company in 1996 projected on an actuarial basis assuming that each executive retires at age 65 and the agreements are then terminated: Mr. Muhlschlegel - $30,874, Mr. Karvois - $7,274, Mr. Fitzpatrick - $7,951 and Mr. English - $7,448. (2) In March 1997, Mr. Muhlschlegel resigned from the office of President, retaining his position as Chief Executive Officer and Chairman of the Board. At that time, Mr. Karvois was promoted from Senior Vice President - Marketing and Sales to President and Chief Operating Officer, at an annual salary of $250,000. Option Holdings. The following table sets forth certain information regarding the number and exercise price of options to purchase Common Stock held by the named executive officers at December 31, 1996. No options were exercised by or granted to the named executive officers in 1996. 37 YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS OPTIONS AT YEAR-END(#) AT YEAR-END($)(1) ------------------------- ------------------------- NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE - ---- ------------------------- ------------------------- Harry J. Muhlschlegel.............................. -- -- Paul J. Karvois.................................... 0/137,164 $ 0/$618,610 Brian J. Fitzpatrick............................... 0/137,164 $ 0/$618,610 William F. English................................. 0/137,164 $ 0/$618,610
- ------------------ (1) Value equals an assumed per share initial public offering price of $13 per share less the per share exercise price. EXECUTIVE INCENTIVE PLANS 1997 Incentive Plan The Company's 1997 Incentive Plan (the "Incentive Plan") authorizes the issuance of up to 1,500,000 shares of its Common Stock to its employees, directors, consultants and other individuals who perform services for the Company pursuant to stock options and other performance-based awards granted under the Incentive Plan. The Compensation Committee of the Board of Directors administers the Incentive Plan. Under the terms of the Incentive Plan, the Compensation Committee is required to be composed of two or more directors. The Compensation Committee has the authority to interpret the Incentive Plan and to determine and designate the persons to whom options or awards shall be made and the terms, conditions and restrictions applicable to each option or award (including, but not limited to, the price, any restriction or limitation, any vesting schedule or acceleration thereof, and any forfeiture restrictions). Pursuant to the Incentive Plan, on the date of this Prospectus, non-qualified options to purchase 12,500 shares of Common Stock will be granted to each of Mr. Bowker and Mr. Jones, and options to purchase an aggregate of approximately 575,000 shares will be granted to Jevic employees (including an aggregate of 95,000 options to be granted to the named executive officers, other than Mr. Muhlschlegel), in each case at an exercise price equal to the initial public offering price set forth on the cover page of this Prospectus. Of these options, 40% will vest on the second anniversary of the date of grant and 20% will vest on each of the three succeeding anniversaries. Upon the initial election of any outside director to the Board after the date of this Prospectus, a non-qualified option to purchase 12,500 shares of Common Stock will be granted to such outside director at an exercise price equal to the fair market price on the date of grant. In addition, upon each election of any outside director to the Board by the shareholders in or after the third year following such director's preceding election to the Board, a non-qualified option to purchase an additional 5,000 shares of Common Stock will be made to such outside director at an exercise price equal to the fair market price on the date of grant, with vesting provisions identical to those noted above. The Incentive Plan contains provisions for granting various performance-based awards, including incentive stock options as defined in Section 422 of the Code, nonqualified stock options, restricted stock, performance shares and performance units (as further described below). The term of the Incentive Plan is ten years, subject to earlier termination or amendment. Except with respect to stock option grants to outside directors, as described above, the Compensation Committee has the power to select award recipients and their allotments and to determine the price, terms and vesting schedule for awards granted. While there are no predetermined performance formulas or measures or other specific criteria used to determine recipients of awards under the Incentive Plan, awards are based generally upon consideration of the grantee's position and responsibilities, the nature of services provided and accomplishments, the value of the services to the Company, the present and potential contribution of the grantee to the success of the Company, the anticipated number of years of service remaining and other factors the Board or the Compensation Committee may deem relevant. Employees covered by a collective bargaining agreement are not eligible to receive awards, exercise outstanding awards, receive shares or cash pursuant to outstanding awards, or have restrictions lapse with respect to outstanding restricted stock awards, unless such collective bargaining agreement, by specific reference to the Incentive Plan, expressly provides for participation in the Incentive Plan. 38 Stock Options. The Incentive Plan provides for the grant of "incentive stock options," as defined in Section 422 of the Code, to employees of the Company. The Incentive Plan also provides for the grant of stock options that do not qualify as incentive stock options under the Code ("nonqualified stock options") to employees of the Company, directors of the Company, and consultants and other individuals who perform services for the Company but are not employed by the Company. The exercise price of any incentive stock option granted under the Incentive Plan may not be less than 100% of the fair market value of the Company's Common Stock on the date of grant. Options granted under the Incentive Plan may be exercised for cash or in exchange for shares of Common Stock owned by the option holder having a fair market value on the date of exercise equal to the option exercise price. The aggregate fair market value, determined on the date of grant, of the shares with respect to which incentive stock options are exercisable for the first time by an employee during any calendar year may not exceed $100,000. Under the Incentive Plan, each option is exercisable for the full amount or for any part thereof at such intervals or in such installments as the Compensation Committee shall determine at the time it grants an option. However, no award shall be exercisable with respect to any shares of Common Stock later than ten years after the date of the grant of such options. Unless otherwise specified by the Compensation Committee with respect to a particular option, all options are non-transferable, except upon death, by the optionee. The shares subject to expired options or terminated options which remain unexercised become available for future grants. If an optionee ceases to be employed by, or to render services to, the Company for any reason other than death, disability or termination for cause, unless otherwise specified by the Compensation Committee with respect to a particular option, any option exercisable on the date of such termination generally may be exercised for a period of 30 days from the date of such termination or until the expiration of the stated term of the option, whichever period is shorter. In the event of termination of employment or service by reason of death, unless otherwise specified by the Compensation Committee with respect to a particular option, any option exercisable at the date of such termination generally may be exercised for a period of one year from the date of termination or until the expiration of the stated term of the option, whichever period is shorter. In the event of termination of employment or service by reason of the participant's disability, unless otherwise specified by the Compensation Committee with respect to a particular option, any option exercisable at the date of such termination generally may be exercised for a period of six months from the date of termination or until the expiration of the stated term of the option, whichever is shorter. If a participant's employment or service is terminated for cause, any option not exercised prior to the date of such termination shall be forfeited. In the event of a change of control of the Company, the Compensation Committee may cause all outstanding options to become immediately fully exercisable. Restricted Stock. "Restricted Stock" are shares of the Company's Common Stock granted to an employee for no cash consideration, which, except in the event of the participant's death or disability, will be forfeited to the Company if the grantee ceases to be an employee of the Company during a restriction period specified by the Compensation Committee at the time it grants the Restricted Stock. In the event of death or disability, the restrictions will lapse with respect to that percentage of Restricted Stock held by the grantee that is equal to the percentage of the restriction period that had elapsed as of the date of death or commencement of disability. In the event of a change of control of the Company, the Compensation Committee may cause all restrictions on shares of Restricted Stock to lapse. Shares of Restricted Stock that are forfeited become available for future grants. Performance Shares. A "Performance Share" is an award of the right to receive stock at the end of a specified period upon the attainment of performance goals specified by the Compensation Committee at the time of grant. Performance Shares generally will be forfeited if the grantee ceases to be an employee of the Company during the performance period for any reason other than death or disability. In the event of death or disability, the participant or his or her estate will be entitled to receive, at the expiration of the performance period, a percentage of his or her Performance Shares equal to the percentage of the performance period that had elapsed at the time of death or commencement of disability, provided that the Compensation Committee determines that the applicable performance goals have been met. In the event of a change of control of the Company, the Compensation Committee may cause all conditions applicable to the Performance Shares to terminate and issue the grantee a certificate or certificates evidencing shares subject to the Performance Share award. Performance Shares that are forfeited or not delivered to the grantee become available for future grants. Performance Units. A "Performance Unit" is an award of the right to receive cash at the end of a specified period upon the attainment of performance goals specified by the Compensation Committee at the time of the grant. 39 The amount payable under a Performance Unit is equal to the increase in value of a Unit from the date of award to the date of attainment of the performance goals. Performance Units generally will be forfeited if the grantee ceases to be an employee of the Company during the performance period for any reason other than death or disability. In the event of death or disability, the grantee or his or her estate will be entitled to receive, at the expiration of the performance period, a percentage of his or her Performance Units equal to the percentage of the performance period that elapsed at the time of death or commencement of disability, provided that the Compensation Committee determines that the applicable performance goals have been met. In the event of a change of control of the Company, the Compensation Committee may cause all conditions applicable to the Performance Units to terminate and a cash payment for the full amount of the Performance Units to be made to the grantee. 1994 Stock Option Plan The Company's 1994 Stock Option Plan (the "Option Plan") provides for the grant of options to purchase up to 685,820 shares of the Common Stock of the Company to employees, not including directors who are not also employees. The options granted under the Option Plan are intended to constitute either incentive stock options within the meaning of Section 422 of the Code, or non-qualified stock options, as determined by the Board of Directors or Compensation Committee, as the case may be, at the time of grant. On December 31, 1994, the Board of Directors granted non-qualified options to purchase all 685,820 shares of Common Stock available for issuance under the Option Plan to executive officers and key employees of the Company at an exercise price of $8.49 per share, which was determined by the Board to be the fair market value of the shares on the date of grant. Of this amount, an option to purchase 137,164 shares was granted to each of Messrs. Karvois, Fitzpatrick and English. No additional option grants will be made under the Option Plan. The Option Plan has been administered by the Board of Directors of the Company but, following the formation thereof, shall be administered by the Compensation Committee of the Board of Directors. The Compensation Committee has the authority to interpret the Option Plan and to determine and designate the persons to whom options shall be granted and the terms, conditions and restrictions applicable to each option (including, but not limited to, the exercise price and the amendment of any option to, for example, accelerate the exercise date or change the termination date of any option). Options granted under the Option Plan, to the extent not earlier vested, will vest on the 10th anniversary of the date of grant and must be exercised within 30 days after the vesting date. In the event the Company completes a Public Offering (defined in the Option Plan), options granted under the Option Plan vest ratably over a five-year period commencing on the first anniversary of the offering. The offering of shares hereunder will constitute a Public Offering pursuant to the terms of the Option Plan and will initiate the vesting of the options granted thereunder. Stock options may be exercised within the earlier of 60 days after the optionee's termination of employment or the expiration of the option term, to the extent exercisable prior to such termination (180 days after the optionee's death or Disability (as defined in the Stock Option Plan)). The Option Plan provides for the automatic acceleration of the exercisability of all outstanding options upon the occurrence of a Sale of the Company (as defined in the Option Plan); provided that options accelerated in this manner must be exercised at or in connection with such Sale of the Company. The Compensation Committee may generally amend, alter or discontinue the Option Plan at any time, but no amendment, alteration or discontinuation will be made which would impair the rights of an optionee with respect to an outstanding stock option. Employee Stock Purchase Plan The Company has adopted an Employee Stock Purchase Plan (the "Purchase Plan"), effective upon completion of this offering, which will allow all full time employees of the Company, subject to certain limitations, to purchase shares of the Company's Common Stock at a discount from the prevailing market price at the time of purchase. Such shares may either be issued by the Company from its authorized and unissued Common Stock or purchased by the Company on the open market. Any employee owning five percent or more of the voting power or value of the Company is not eligible to participate in the Purchase Plan. A maximum of 300,000 shares of the Company's Common Stock will be available for purchase under the Purchase Plan. An eligible employee will be able to specify, before the commencement of each semi-annual period, an amount to be withheld from his or her paycheck and credited to an account established for him or her (the "Participation Account"). Amounts in the Participation Account will be applied to the purchase of shares of the Company's Common Stock on the last day of each semi-annual period. The price of such shares will be equal to 85% of the 40 average of the high and low sales prices per share of the Company's Common Stock on the principal national securities exchange on which the Common Stock is listed or admitted to trading or, if not listed or traded on any such exchange, on the Nasdaq National Market. Only whole shares of Common Stock may be purchased. Amounts withheld from an employee's paycheck and not applied to the purchase of whole shares of Common Stock will, at the election of the employee, either remain credited to the employee's Participation Account or be returned to the employee. Upon termination of an employee's employment for any reason other than death or a leave of absence beyond 90 days, all amounts credited to such employee's Participation Account shall be returned to him or her. Upon termination of an employee's employment because of death, all amounts credited to such employee's Participation Account shall be returned to his or her successor-in-interest. The Purchase Plan will be administered by the Compensation Committee of the Board of Directors. The Board of Directors may amend or terminate the Purchase Plan. The Purchase Plan is intended to comply with the requirements of Section 423 of the Code. 401(k) Plan The Company maintains a 401(k) Profit-Sharing Plan ("401(k) Plan") for the benefit of its eligible employees which consists of a 401(k) component and a profit-sharing component. The 401(k) Plan, which is intended to be qualified under the Code, is a cash or deferred profit-sharing plan covering all of the employees of the Company who have completed at least six consecutive months of service and have attained the age of 20 1/2. Under the 401(k) component, participants may elect to defer between 1% and 15% of their compensation up to a maximum of $9,500 per year, as adjusted for inflation and to deposit such amount in the 401(k) Plan Fund. The Company is also currently matching 25% of all amounts contributed by a participant, up to a deferral contribution of 6% of a participant's compensation. Under the profit-sharing provisions of the 401(k) Plan, the Company may make contributions in amounts to be determined by the Company in its sole discretion. Any such Company profit-sharing contributions will be allocated among all eligible employees, in proportion to that employee's compensation from the Company as integrated with social security. The Company's matching contributions and profit-sharing contributions allocated to each participant vest over seven years, or earlier upon attainment of the appropriate retirement age, upon retirement for disability, upon death and upon termination of the 401(k) Plan. All contributions under the Plan are currently invested, subject to participant-directed elections, in mutual funds managed by Fidelity Investments. Following the offering, the Company intends to amend the Plan to adopt a Company stock investment fund ("Stock Fund"). Plan participants will be entitled to direct the investment of all or a portion of their account balances into the Stock Fund. Shares of Common Stock of the Company will be purchased by the trustee of the Plan either on the open market or from the Company's authorized but unissued shares to provide the required shares to the Stock Fund. Upon a distribution event, participants with account balances invested in the Stock Fund will receive a cash distribution equal to the value of their investment in the Stock Fund. Payment of Plan benefits are generally made in a single lump sum. Distribution of a participant's vested interest in his account generally occurs on the earlier of his termination of employment for any reason (including retirement, death or disability) or by the April 1 following the calendar year the participant reaches age 70 1/2 if he is still employed. Supplemental Executive Retirement Plan Following the offering, the Company intends to adopt a nonqualified deferred compensation plan known as a supplemental executive retirement plan ("SERP"). Only those executives selected by the Board of Directors will be entitled to participate in the SERP. Pursuant to the SERP, participants will be entitled to elect, in advance, to reduce salary or bonus income and have that reduction credited to an account under the SERP. To the extent all or a portion of the participant's deferral relates to amounts that could have been contributed to the 401(k) Plan, but for the application of certain nondiscrimination guidelines, the Company will credit a matching contribution amount equal to what would have been contributed to the 401(k) Plan, in the absence of the guidelines. 41 CERTAIN TRANSACTIONS The Company purchased its principal office and regional facility located in Delanco, New Jersey from Harry and Karen Muhlschlegel in March 1995 for $5.5 million, which reflects an independent appraised value of $7.5 million less the cost of improvements made to the site by the Company in the amount of $2.0 million. As required by generally accepted accounting principles, the Company recorded the purchased facility at the Muhlschlegels' historical carrying value as of the purchase date, with the excess consideration of $681,000 recorded as a dividend. The purchase price was paid by the issuance of a promissory note to the Muhlschlegels in the principal amount of $1.1 million due in March 2000, bearing interest at 8%, and through the assumption of a mortgage loan of approximately $4.4 million. The mortgage loan, which bore interest at 8% per annum and was to mature in December 1998, was refinanced by the Company in November 1995. The $1.1 million note payable to the Muhlschlegels was paid in full in 1996. The Company paid the Muhlschlegels $45,743 in interest on this note in 1995 and $93,761 in 1996. Prior to the purchase, the Company leased the facility from the Muhlschlegels. The aggregate rent paid on the property by the Company to the Muhlschlegels in 1994 and 1995 was $571,200. The Company has leased its regional facility in metropolitan Charlotte, North Carolina from Harry and Karen Muhlschlegel since 1995. Rent expense on the property was $196,065 and $261,420 during 1995 and 1996, respectively, and was $130,710 for the six months ended June 30, 1997. The Company plans to purchase this facility from the Muhlschlegels after the offering, through the repayment of an outstanding bank mortgage loan in the principal amount of $2.0 million. As required by generally accepted accounting principles, the Company will record the purchase at the Muhlschlegels' historical carrying value as of the purchase date, with the excess consideration ($700,000 as of June 30, 1997) recorded as a dividend. The mortgage loan matures in April 2000, bears interest of 9% per annum and requires regular monthly installment payments of principal and interest of $21,875. The mortgage loan will be repaid with a portion of the proceeds of this offering. See "Use of Proceeds." The Company currently leases its primary maintenance facility in Willingboro, New Jersey from Harry and Karen Muhlschlegel. Rent expense on the property was $114,240 for each of 1994, 1995 and 1996, respectively, and was $57,120 for the six months ended June 30, 1997. The Company's lease expires in 2013 and requires aggregate rental payments of $114,240 in each of 1997 and 1998. In April 1997, grantor annuity trusts for Harry and Karen Muhlschlegel borrowed a total of $438,065 from the Company. The loans are collateralized by the shares of Class A Common Stock held by the trusts, are due in October 1998 and bear interest at the short-term applicable federal rate of interest. Interest owed through June 30, 1997 approximated $5,400. Jevic Transportation Services, Inc. ("JTS"), a freight brokerage company owned by the Muhlschlegels, is expected to be merged into the Company after the offering. JTS had gross revenues of approximately $1.0 million for the fiscal year ended December 31, 1996. The Muhlschlegels will receive $125,000 from the Company in exchange for their JTS stock in the merger, which is equal to their capital investment in JTS. In 1996 and the first six months of 1997, the Company recorded sales of $105,000 and $111,000 to JTS and incurred purchased transportation expenses to JTS of $46,000 and $346,000. The Company entered into a one-year agreement with JTS in August 1997, under which the Company provides certain administrative services to JTS in consideration of the reimbursement by JTS of the Company's costs of providing such services. Jevic is a party to two intermediary agreements with Bowker, Brown & Co., pursuant to which Bowker, Brown would receive a 7% commission from the Company if the Company acquires either of two specified trucking companies. In addition, the Company paid Bowker, Brown a total of $10,000 in 1994 and 1995 for a business appraisal. Gordon R. Bowker, who will serve as a director of Jevic upon completion of the offering, is the owner of Bowker, Brown & Co. The Company does not have any commitments or agreements for any business acquisition and is not in active negotiations regarding any such acquisition. The Company considers the terms of its transactions with the Muhlschlegels and Mr. Bowker to be at arms length, reasonably equivalent to terms it could obtain through negotiations with an unaffiliated third party during similar economic conditions. In the future, the Company will not enter into any transactions with officers, directors or other affiliates unless the terms are as favorable to the Company as those generally available from unaffiliated third parties and the transactions are approved by a majority of disinterested directors. 42 PRINCIPAL SHAREHOLDERS The table below sets forth as of September 15, 1997 certain information regarding the beneficial ownership of the Company's Common Stock by each of the Company's directors, each of the named executive officers, each person owning beneficially more than 5% of the Common Stock or Class A Common Stock and all directors and executive officers of the Company as a group both before and after giving effect to this offering. Except as otherwise indicated, the persons named in the table have sole voting and investment power with respect to all Common Stock shown as beneficially owned by them.
PERCENT OF BENEFICIAL OWNERSHIP ------------------- NAME AND ADDRESS NUMBER PRIOR TO AFTER OF BENEFICIAL OWNER OF SHARES OFFERING OFFERING ------------------- --------- -------- -------- Harry J. Muhlschlegel (1)................................ 3,051,899(2) 44.5% 28.6%(3) Karen B. Muhlschlegel (1)................................ 3,051,899(4) 44.5% 28.6%(3) Paul J. Karvois.......................................... -- -- -- Brian J. Fitzpatrick..................................... -- -- -- William F. English....................................... -- -- -- Gordon R. Bowker......................................... -- -- -- Samuel H. Jones, Jr...................................... -- -- -- Bruce D. Burdick and George K. Reynolds, III............. 754,402(5) 11.0% 7.1% All directors and executive officers as a group (8 persons)........................ 6,103,798 89.0% 57.3%
- ------------------ (1) Shares of Class A Common Stock are convertible into shares of Common Stock on a 1-for-1 basis. The Class A Common Stock is entitled to two votes per share, while the Common Stock is entitled to one vote per share. The shares owned by Mr. and Ms. Muhlschlegel are shares of Class A Common Stock and are reflected on an as-converted basis. The address of each of the Muhlschlegels is P.O. Box 5157, Delanco, New Jersey 08075. See "Description of Capital Stock." (2) Of these shares, 514,365 are held by Harry J. Muhlschlegel as trustee of a trust under which the Muhlschlegels' children are beneficiaries. (3) If the Underwriters' over-allotment option is exercised in full, the 570,000 shares subject thereto will be sold by Mr. and Ms. Muhlschlegel, as a result of which each of them will beneficially own 2,766,899 shares of Class A Common Stock following the offering, constituting 26.9% of the Common Stock outstanding after the offering, assuming conversion into Common Stock. (4) Of these shares, 514,365 are held by Karen B. Muhlschlegel as trustee of a trust under which the Muhlschlegels' children are beneficiaries. (5) These shares are held by Mr. Burdick and Mr. Reynolds as trustees pursuant to trusts for the benefit of members of the Muhlschlegel Family. The amounts set forth include 548,656 shares of Common Stock and 205,746 shares of Class A Common Stock, which is reflected on an as-converted basis. The address of Mr. Burdick is 148 Catherine Lane, Grass Valley, California 95945 and the address of Mr. Reynolds is Gordon, Feinblatt, Rothman, Hoffberger and Hollander, LLC, The Garrett Building, 233 East Redwood Street, Baltimore, Maryland 21202-3332. 43 DESCRIPTION OF CAPITAL STOCK GENERAL The Company's authorized capital stock consists of 50,000,000 shares of Common Equity, no par value and 10,000,000 shares of preferred stock, no par value. The Common Equity is divided into two series, consisting of 40,000,000 shares of Common Stock, no par value and 10,000,000 shares of Class A Common Stock, no par value. Prior to this offering, 548,656 shares of Common Stock and 6,309,544 shares of Class A Common Stock were issued and outstanding. No shares of preferred stock have ever been issued. Upon completion of this offering, there will be 4,348,656 shares of Common Stock outstanding and 2,485,820 shares of Common Stock will be reserved for issuance under the Company's employee benefit plans, including 1,285,820 shares issuable upon exercise of options which will be outstanding upon the completion of the offering. COMMON EQUITY (COMMON STOCK AND CLASS A COMMON STOCK) Voting. Holders of Common Stock are entitled to one vote per share. Holders of Class A Common Stock are entitled to two votes per share. All actions submitted to a vote of shareholders are voted on by holders of Common Stock and Class A Common Stock voting together as a single class, except as otherwise provided in the Restated Certificate or by law. No holder of Common Equity may cumulate such holder's votes in voting for directors. Limitations on Transfer of Class A Common Stock. No holder of Class A Common Stock may transfer such holder's shares or any interest therein except to certain "permitted transferees," including such holder's spouse, certain other relatives of such holder, certain trusts established for the benefit of, partnerships comprised solely of, or corporations wholly owned by, the holder or such relatives, and charitable organizations controlled by the holder or such holder's family members. Conversion. The Common Stock has no conversion rights. Class A Common Stock may be converted into Common Stock, in whole or in part, at any time and from time to time on the basis of one share of Common Stock for each share of Class A Common Stock. If at any time any shares of Class A Common Stock are transferred or otherwise become beneficially owned by any person other than a permitted transferee (as described above), or upon the occurrence of certain events specified in the Restated Certificate, such shares shall automatically be converted into an equal number of shares of Common Stock. Dividends. Holders of Common Stock and Class A Common Stock are entitled to receive dividends or distributions as may be declared by the Board of Directors of the Company from funds legally available therefor. All such dividends or distributions are to be paid or made in equal amounts, share for share, to holders of Common Stock and Class A Common Stock as if a single class. In the case of any dividend paid in stock, holders of Common Stock and Class A Common Stock are entitled to receive such dividend at the same rate per share, but the dividend payable on shares of Common Stock shall be payable in shares of Common Stock, and the dividend payable on shares of Class A Common Stock shall be payable in shares of Class A Common Stock. Liquidation. Holders of Common Stock and Class A Common Stock share with each other on a ratable basis as a single class in the net assets of the Company available for distribution in respect of Common Stock and Class A Common Stock in the event of liquidation. Other Terms. Neither the Common Stock nor the Class A Common Stock may be subdivided, consolidated, reclassified or otherwise changed unless contemporaneously therewith the other class of shares is subdivided, consolidated, reclassified or otherwise changed in the same proportion and in the same manner. In any distribution of stock of any other corporation or any merger, consolidation or business combination involving the Company, the consideration to be received per share by holders of either Common Stock or Class A Common Stock must be identical to that received by holders of the other class of Common Equity. If the holders of Common Stock are granted options or rights to subscribe for shares of Common Stock or any other security, the holders of Class A Common Stock shall be granted the same options or rights on an as-if-converted basis. 44 The rights, preferences and privileges of holders of both classes of Common Equity are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred stock which the Company may designate and issue in the future. The Company has no present plans to issue any additional shares of Class A Common Stock. PREFERRED STOCK The Board of Directors of the Company is authorized, without further action of the shareholders of the Company, to issue up to 10,000,000 shares of preferred stock in classes or series and to fix the designations, powers, preferences or other rights of the shares of each such class or series and the qualifications, limitations and restrictions thereon. Such preferred stock may rank prior to the Common Stock as to dividend rights, liquidation preferences or both, may have full or limited voting rights, may be redeemable and may be convertible into shares of either class of the Company's Common Equity. The purpose of authorizing the Board of Directors to issue preferred stock is, in part, to eliminate delays associated with a shareholder vote in specific instances. The issuance of preferred stock, for example in connection with a shareholder rights plan, could have the effect of making it more difficult for a third party to acquire, or of discouraging a third party from acquiring, a majority of the outstanding existing stock of the Company. The Company has no present plans to issue any shares of preferred stock. LIMITATION OF DIRECTORS' LIABILITY The Company's Restated Certificate provides that no director shall be liable to the Company or its shareholders for damages for breach of any duty as a director, except for liability based upon an act or omission (i) in breach of the director's duty of loyalty to the Company or its shareholders, (ii) not in good faith or involving a knowing violation of law or (iii) resulting in receipt by the director of an improper personal benefit. The Company believes that this provision will assist it in securing and maintaining the services of qualified directors who are not employees of the Company. CERTAIN PROVISIONS OF RESTATED CERTIFICATE OF INCORPORATION AND BY-LAWS Other than those items previously discussed with respect to the relative rights and preferences of the Common Stock and the Class A Common Stock, Jevic's Restated Certificate of Incorporation (the "Restated Certificate") and By-laws (the "By-laws") contain various other provisions intended to (i) promote stability of Jevic's shareholder base and (ii) render more difficult certain unsolicited or hostile attempts to take over Jevic which could disrupt Jevic, divert the attention of Jevic's directors, officers and employees and adversely affect the independence and integrity of Jevic's business. A summary of these provisions of the Certificate and By-laws is set forth below. Classified Board; Vacancies; Removal of Directors. Pursuant to the Restated Certificate, the number of directors of Jevic will be fixed by the Company's Board of Directors. The directors will be divided into three classes, each class to consist as nearly as possible of one-third of the directors. Directors elected by shareholders at an annual meeting of shareholders will be elected by a plurality of all votes cast at such annual meeting. Initially, the terms of office of the three classes of directors will expire, respectively, at the annual meeting of shareholders in 1998, 1999 and 2000. The term of the successors of each such class of directors expires three years from the year of election. No decrease in the number of directors constituting the Board of Directors of Jevic will shorten the term of any incumbent director. The Restated Certificate provides that except as otherwise provided for or fixed by or pursuant to an amendment to the Restated Certificate setting forth the rights of the holders of any class or series of preferred stock, newly created directorships resulting from any increase in the number of directors and any vacancies on the Board of Directors of Jevic resulting from death, resignation, disqualification, removal or other cause will be filled by the affirmative vote of a majority of the remaining directors then in office, even though less than a quorum of the Board, or by a sole remaining director, and not by the shareholders unless there are no directors remaining on the Board. Any director elected in accordance with the preceding sentence will be a director of the same class in which the new directorship was created or in which the vacancy occurred, and shall hold office until the next annual meeting of shareholders and until such director's successor shall have been duly elected and qualified. Subject to the rights of holders of any preferred stock, any director may be removed from office only for cause by the affirmative vote of the holders of at 45 least 80 percent of the voting power of all the outstanding capital stock of Jevic entitled to vote generally in the election of directors (the "Voting Power"). These provisions of the Restated Certificate would preclude a third party from removing incumbent directors and simultaneously gaining control of the Board of Directors of Jevic by filling the vacancies created by removal with its own nominees. Under the classified board provisions described above, it would take at least two elections of directors for any individual or group to gain control of the Board of Directors of Jevic, unless a sufficient number of vacancies in the Board arise prior to the first election of directors by reason of death, resignation, disqualification, removal or other cause. Accordingly, these provisions could discourage a third party from initiating a proxy contest, making a tender offer or otherwise attempting to gain control of the Company. Special Shareholders' Meetings and Right to Act by Written Consent. The Restated Certificate and the By-laws provide that special meetings of the shareholders may be called only by the Chairman of the Board or the President of the Company or upon a resolution adopted by a majority of the entire Board of Directors. Shareholders are not generally permitted to call, or to require that the Board of Directors call, a special meeting of shareholders. Moreover, the business permitted to be conducted at any special meeting of shareholders is limited to the business brought before the meeting pursuant to the notice of the meeting given by Jevic. In addition, the Restated Certificate provides that any action taken by the shareholders of Jevic must be effected at an annual or special meeting of shareholders or by unanimous written consent, and specifically may not be effected by written consent of less than all shareholders. The provision of the Restated Certificate prohibiting shareholder action by written consent of less than all shareholders may have the effect of delaying consideration of a shareholder proposal until the next annual meeting. This provision would also prevent the holders of a majority of the Voting Power from unilaterally using the written consent procedure to take shareholder action. Moreover, the provisions of the Restated Certificate and By-laws prevent a shareholder from forcing shareholder consideration of a proposal over the opposition of the Board of Directors of Jevic by calling a special meeting of shareholders prior to the time the Board believes such consideration to be appropriate. Procedures for Shareholder Nominations and Proposals. The By-laws establish an advance notice procedure for shareholders to nominate candidates for election as directors or to bring other business before meetings of shareholders of Jevic (the "Shareholder Notice Procedure"). Only those shareholder nominees who are nominated in accordance with the Shareholder Notice Procedure will be eligible for election as directors of Jevic. Under the Shareholder Notice Procedure, notice of shareholder nominations to be made at an annual meeting (or of any other business to be brought before such meeting) must be received by Jevic not less than 60 days nor more than 90 days prior to the first anniversary of the previous year's annual meeting. Moreover, the Shareholder Notice Procedure provides that if the Board of Directors of Jevic has determined that directors will be elected at a special meeting, a shareholder must give written notice to the Secretary of Jevic of any nominations to be brought before a special meeting, not earlier than the 90th day prior to the special meeting and not later than the later of the 60th day prior to the special meeting or the 10th day following the first public announcement by Jevic of the date of the special meeting. The By-laws provide that only such business may be conducted at a special meeting as is specified in the notice of meeting. The Shareholder Notice Procedure provides that at an annual meeting only such business may be conducted as has been brought before the meeting (i) pursuant to the Company's notice of meeting, (ii) by, or at the direction of, the Board of Directors or (iii) by a shareholder who has given timely written notice (as set forth above) to the Secretary of Jevic of such shareholder's intention to bring such business before such meeting. By requiring advance notice of nominations by shareholders, the Shareholder Notice Procedure will afford the Board of Directors an opportunity to consider the qualifications of the proposed nominees and, to the extent deemed necessary or desirable by the Board of Directors, to inform shareholders about such qualifications. By requiring advance notice of other proposed business, the Shareholder Notice Procedure will provide a more orderly procedure for conducting annual meetings of shareholders and, to the extent deemed necessary or desirable by the Board of Directors, will provide the Board of Directors with an opportunity to inform shareholders, prior to such meetings, of any business proposed to be conducted at such meetings, together with the Board of Directors' position regarding action to be taken with respect to such business, so that shareholders can better decide whether to attend such a meeting or to grant a proxy regarding the disposition of any such business. 46 Although the By-laws do not give the Board of Directors any power to approve or disapprove shareholder nominations for the election of directors or proposals for action, they may have the effect of precluding a contest for the election of directors or the consideration of shareholder proposals if the proper procedures are not followed, and of discouraging or deterring a third party from conducting a solicitation of proxies to elect its own slate of directors or to approve its own proposal, without regard to whether consideration of such nominees or proposals might be harmful or beneficial to Jevic and its shareholders. Amendment of Jevic Certificate and By-laws. The Restated Certificate provides that the affirmative vote of at least 80 percent of the Voting Power would be required to (i) amend or repeal the provisions of the Restated Certificate with respect to (A) the election of directors and (B) the right to call a special shareholders' meeting and (C) the right to act by written consent, (ii) adopt any provision inconsistent with such provisions and (iii) amend or repeal the provisions of the Restated Certificate with respect to amendments to the Restated Certificate or the By-laws. In addition, the By-laws provide that the amendment or repeal by shareholders of any By-laws made by the Board of Directors of Jevic would require the affirmative vote of at least 80 percent of the Voting Power. NEW JERSEY SHAREHOLDERS PROTECTION ACT The New Jersey Shareholders Protection Act, NJSA 14:10A-1 et seq. (the "New Jersey Act"), prohibits certain New Jersey corporations, such as the Company following this Offering, from entering into certain "business combinations" with an "interested stockholder" (any person who is the beneficial owner of 10% or more of such corporation's outstanding voting securities) for five years after such person became an interested stockholder, unless the business combination or the interested stockholder's acquisition of stock was approved by the corporation's board of directors prior to such interested stockholder's stock acquisition date. After the five-year waiting period has elapsed, a business combination between such corporation and an interested stockholder will be prohibited unless the business combination is approved by the holders of at least two-thirds of the voting stock not beneficially owned by the interested stockholder, or unless the business combination satisfies the New Jersey Act's fair price provision intended to provide that all stockholders (other than the interested stockholders) receive a fair price for their shares. The New Jersey Act defines "business combination" to include, among other things, (1) a merger or consolidation between certain corporations and an interested stockholder or such interested stockholder's affiliates; (2) any sale, lease, exchange, mortgage, pledge, transfer or other disposition to or with the interested stockholder, which has an aggregate market value equal to 10% or more of the aggregate market value of all of the assets, outstanding stock or income of the corporation or its subsidiaries; (3) the issuance or transfer to the interested stockholder of any stock of the corporation having an aggregate market value equal to or greater than 5% of the corporation's outstanding stock; (4) the adoption of a plan or proposal for the liquidation or dissolution of the corporation proposed by the interested stockholder; (5) any reclassification of securities proposed by the interested stockholder, that has the effect, directly or indirectly, of increasing any class or series of stock that is owned by the interested stockholder; and (6) the receipt by the interested stockholder of any loans or other financial assistance from the corporation. The New Jersey Act does not apply to certain business combinations, including those with persons who acquired 10% or more of the voting power of the corporation prior to the time the corporation was required to file periodic reports pursuant to the Securities Exchange Act of 1934 or prior to the time the corporation's securities began to trade on a national securities exchange. TRANSFER AGENT AND REGISTRAR The transfer agent and registrar for the Company's Common Stock is First Union National Bank, N.A., Charlotte, North Carolina. 47 SHARES ELIGIBLE FOR FUTURE SALE Upon completion of this offering, the Company will have outstanding 4,348,656 shares of Common Stock. All of these shares (plus up to 570,000 additional shares if the Underwriters exercise their over-allotment option) will be freely tradeable without restriction or further registration (except by affiliates of the Company or persons acting as underwriters) under the Securities Act. None of the 548,656 shares of Common Stock or the 6,309,544 shares of Class A Common Stock (collectively, the "Restricted Shares") may be sold until the expiration of the lock-up periods discussed below or thereafter unless they are registered under the Securities Act or are sold pursuant to an exemption from registration, such as the exemption provided by Rule 144 promulgated under the Securities Act. Market sales of a substantial number of shares of Common Stock, or the availability of such shares for sale in the public market, could adversely affect prevailing market prices of the Common Stock. In general, commencing 90 days after the completion of this offering, Rule 144 allows a person who has beneficially owned Restricted Shares for at least one year, including persons who may be deemed affiliates of the Company, to sell, within any three-month period, up to the number of Restricted Shares that does not exceed the greater of (i) one percent of the then outstanding Common Stock (or Common Equity in the case of a sale of Class A Common Stock), and (ii) the average weekly trading volume during the four calendar weeks preceding the date on which notice of the sale is filed with the Securities and Exchange Commission. Shares of Class A Common Stock automatically convert into shares of Common Stock on a share-for-share basis upon disposition to persons outside the Muhlschlegel Family, and Rule 144 would apply to such sales as if they were sales of Common Stock. A person who is not deemed to have been an affiliate of the Company at any time during the 90 days preceding a sale and who has beneficially owned his or her Restricted Shares for at least two years would be entitled to sell such Restricted Shares under Rule 144(k) without regard to the volume limitations described above and the other conditions of Rule 144. Rule 144A under the Securities Act provides a nonexclusive safe harbor exemption from the registration requirements of the Securities Act for specified resales of restricted securities to certain institutional investors. In general, Rule 144A allows unregistered resales of restricted securities to a "qualified institutional buyer," which generally includes an entity, acting for its own account or for the account of other qualified institutional buyers, that in the aggregate owns or invests at least $100 million in securities of unaffiliated issuers. Rule 144A does not extend an exemption to the offer or sale of securities which, when issued, were of the same class as securities listed on a national securities exchange or quoted on Nasdaq. The Common Stock and Class A Common Stock outstanding as of the date of this Prospectus would be eligible for resale under Rule 144A because such shares, when issued, were not of the same class as any listed or quoted securities. The Company, its directors and executive officers and current shareholders have agreed not to directly or indirectly sell, grant any option for the sale of or otherwise dispose of or agree to dispose of any Common Stock or Class A Common Stock or any other securities or rights convertible into or exchangeable or exercisable for Common Stock (except for the shares offered pursuant to this offering or directly by the Company pursuant to any employee benefit plan or as consideration for future acquisitions) without the prior written consent of BT Alex. Brown Incorporated on behalf of the Underwriters for a period of 180 days after the date of this Prospectus. Shares may be sold by such directors, officers and shareholders after expiration of such period subject to the volume limitations of Rule 144 noted above. The Company intends to file a registration statement on Form S-8 to register 2,485,820 shares of Common Stock subject to its stock-based employee benefit plans following the date of this Prospectus. 48 UNDERWRITING Subject to the terms and conditions of the Underwriting Agreement, the Underwriters named below (the "Underwriters"), through their Representatives, BT Alex. Brown Incorporated, William Blair & Company, L.L.C., and Schroder & Co. Inc. (collectively, the "Representatives"), have severally agreed to purchase from the Company the following respective number of shares of Common Stock at the initial public offering price less the underwriting discounts and commissions set forth on the cover page of this Prospectus. NUMBER OF UNDERWRITER SHARES - ----------- --------- BT Alex. Brown Incorporated................................. William Blair & Company, L.L.C.............................. Schroder & Co. Inc.......................................... --------- Total.................................................. 3,800,000 --------- --------- 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 Common Stock offered hereby, if any of such shares are purchased. The Company has been advised by the Representatives that the Underwriters propose to offer the shares of Common Stock to the public at the initial 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 re-allow, a concession not in excess of $ per share to certain other dealers. After commencement of the initial public offering, the offering price and other selling terms may be changed by the Representatives. Each of Harry and Karen Muhlschlegel (the "Option Shareholders") have granted the Underwriters an option, exercisable not later than 30 days after the date of this Prospectus, to purchase up to 285,000 additional shares of Common Stock (for a total of 570,000 shares) at the initial public offering price less the underwriting discounts and commissions set forth on the cover page of this Prospectus. See "Principal Shareholders" and "Certain Transactions." 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 Common Stock to be purchased by it shown in the above table bears to the total number of shares offered by the Company hereunder, and the Option Shareholders 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 Common Stock offered hereby. If purchased, the Underwriters will offer such additional shares on the same terms as those on which the 3,800,000 shares are being offered. To facilitate the offering of the Common Stock, the Underwriters may engage in transactions that stabilize, maintain or otherwise affect the market price of the Common Stock. Specifically, the Underwriters may over-allot shares of the Common Stock in connection with this Offering, thereby creating a short position in the Underwriters' syndicate account. Additionally, to cover such over- allotments or to stabilize the market price of the Common Stock, the Underwriters may bid for, and purchase, shares of the Common Stock in the open market. Any of these activities may maintain the market price of the Common Stock at a level above that which might otherwise prevail in the open market. The Underwriters are not required to engage in these activities, and, if commenced, any such activities may be discontinued at any time. The Representatives, on behalf of the syndicate of Underwriters, also may reclaim selling concessions allowed to an Underwriter or dealer, if the syndicate repurchases shares distributed by that Underwriter or dealer. The Company and the Option Shareholders have agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act. The Company, its directors and executive officers and current shareholders have agreed not to sell, contract to sell or otherwise dispose of any shares of Common Stock for a period of 180 days after the date of this Prospectus, 49 except upon the exercise of currently outstanding stock options, without the prior written consent of BT Alex. Brown Incorporated. See "Shares Eligible for Future Sale." The Representatives have advised the Company that the Underwriters do not intend to confirm sales to any account over which they exercise discretionary authority. Prior to this offering, there has been no public market for the Common Stock of the Company. Consequently, the initial public offering price for the Common Stock will be determined by negotiations between the Company and the Representatives. Among the factors to be considered in such negotiations are prevailing market conditions, the results of operations of the Company in recent periods, the market capitalizations and stages of development of other companies which the Company and the Representatives believe to be comparable to the Company, estimates of the business potential of the Company, the present state of the Company's development and other factors deemed relevant. LEGAL OPINIONS The validity of the issuance of the shares offered hereby will be passed upon for the Company by Pepper, Hamilton & Scheetz LLP. Certain legal matters will be passed upon for the Underwriters by Piper & Marbury L.L.P., Baltimore, Maryland. EXPERTS The Financial Statements and Financial Statement Schedule of the Company as of December 31, 1995 and 1996 and for each of the three years in the period ended December 31, 1996 included in this Prospectus and elsewhere in the Registration Statement have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their reports with respect thereto, and are included herein in reliance upon the authority of said firm as experts in giving said reports. ADDITIONAL INFORMATION The Company has filed a Registration Statement on Form S-1 under the Securities Act with the Securities and Exchange Commission (the "Commission") in Washington D.C. with respect to the shares offered hereby. This Prospectus, which is part of the Registration Statement, does not contain all the information set forth in the Registration Statement and the exhibits and schedules thereto. For further information with respect to the Company and the shares offered hereby, reference is hereby made to the Registration Statement and such exhibits and schedules which may be inspected without charge at the public reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Regional Offices of the Commission at Seven World Trade Center, New York, New York 10048 and Northwestern Atrium Center, 400 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials may be obtained at prescribed rates from the Public Reference Section of the Commission, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. This information is also available from the Commission's Internet web site at http://www.sec.gov. The Registration Statement, including all exhibits thereto and amendments thereof, will be filed with the Commission through EDGAR. Statements contained in this Prospectus as to the contents of any contract or other document referred to herein are not necessarily complete and in each instance reference is made to the copy of such contract or document filed as an exhibit to the Registration Statement, each such statement being qualified in all respects by such reference. 50 JEVIC TRANSPORTATION, INC. INDEX TO FINANCIAL STATEMENTS
PAGE ---- Report of Independent Public Accountants.................... F-2 Balance Sheets.............................................. F-3 Statements of Income........................................ F-4 Statements of Shareholders' Equity.......................... F-5 Statements of Cash Flows.................................... F-6 Notes to Financial Statements............................... F-7
F-1 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Jevic Transportation, Inc.: We have audited the accompanying balance sheets of Jevic Transportation, Inc. (a New Jersey corporation) as of December 31, 1995 and 1996, and the related statements of income, shareholders' equity and cash flows for each of the years in the three-year period ended December 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Jevic Transportation, Inc. as of December 31, 1995 and 1996, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 1996, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Philadelphia, Pa. February 19, 1997 (except with respect to the matters discussed in Note 12, as to which the date is October 6, 1997) F-2 JEVIC TRANSPORTATION, INC. BALANCE SHEETS (IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
DECEMBER 31, JUNE 30, 1997 ----------------- ------------------- 1995 1996 ACTUAL PRO FORMA ASSETS ------- ------- ------- --------- (UNAUDITED) CURRENT ASSETS: Cash and cash equivalents............................ $ 1,146 $ 2,403 $ 4,842 $ 842 Accounts receivable, less allowance for doubtful accounts of $814, $999 and $1,381................. 14,480 17,123 18,693 18,693 Prepaid expenses and other........................... 3,330 2,335 3,421 3,421 Deferred income taxes................................ 94 174 209 1,823 ------- ------- ------- ------- Total current assets.............................. 19,050 22,035 27,165 24,779 PROPERTY AND EQUIPMENT, net............................ 46,958 58,967 67,426 68,726 OTHER ASSETS........................................... 419 1,353 1,456 1,456 ------- ------- ------- ------- $66,427 $82,355 $96,047 $94,961 ======= ======= ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of long-term debt.................... $ 6,893 $ 9,422 $12,613 $20,613 Current portion of capital lease obligations......... 968 1,260 880 880 Accounts payable..................................... 6,644 7,365 4,015 4,015 Accrued salaries, wages and benefits................. 1,465 2,226 4,167 4,167 Other accrued expenses............................... 1,821 2,995 3,878 3,878 Claims and insurance reserves........................ 2,766 3,385 3,431 3,431 State income taxes payable........................... -- 54 114 114 Deferred freight revenues............................ 1,220 1,245 1,409 1,409 ------- ------- ------- ------- Total current liabilities......................... 21,777 27,952 30,507 38,507 ------- ------- ------- ------- LONG-TERM DEBT......................................... 24,484 28,855 36,910 36,910 ------- ------- ------- ------- CAPITAL LEASE OBLIGATIONS.............................. 1,250 -- -- -- ------- ------- ------- ------- DEFERRED INCOME TAXES.................................. 680 984 1,094 10,708 ------- ------- ------- ------- OTHER LIABILITIES...................................... -- 493 308 308 ------- ------- ------- ------- COMMITMENTS AND CONTINGENCIES (Notes 7 and 11) SHAREHOLDERS' EQUITY: Preferred stock, no par value, 10,000,000 shares authorized; none issued and outstanding........... -- -- -- -- Common stock, no par value, 40,000,000 shares authorized; none issued and outstanding........... -- -- -- -- Class A Common Stock, no par value, 10,000,000 shares authorized; 6,858,200 shares issued and outstanding....................................... -- -- -- -- Additional paid-in capital........................... 1,014 1,128 1,128 8,528 Retained earnings.................................... 17,222 22,943 26,100 -- ------- ------- ------- ------- Total shareholders' equity........................ 18,236 24,071 27,228 8,528 ------- ------- ------- ------- $66,427 $82,355 $96,047 $94,961 ======= ======= ======= =======
The accompanying notes are an integral part of these statements. F-3 JEVIC TRANSPORTATION, INC. STATEMENTS OF INCOME (IN THOUSANDS, EXCEPT PER SHARE DATA)
SIX MONTHS YEAR ENDED DECEMBER 31, ENDED JUNE 30, ------------------------------ ----------------- 1994 1995 1996 1996 1997 -------- -------- -------- ------- ------- (UNAUDITED) OPERATING REVENUES.......................... $119,299 $125,973 $154,799 $73,568 $90,417 -------- -------- -------- ------- ------- OPERATING EXPENSES: Salaries, wages and benefits.............. 58,276 67,541 81,215 39,659 46,583 Supplies and other expenses............... 30,553 30,290 32,824 16,231 17,371 Purchased transportation.................. 4,019 5,608 10,761 5,518 8,595 Depreciation and amortization............. 4,395 6,445 8,732 4,031 5,382 Operating taxes and licenses.............. 7,369 7,767 8,722 4,318 4,302 Insurance and claims...................... 3,141 2,612 3,325 1,772 1,975 (Gain) loss on sales of equipment......... (191) (340) (170) (127) 100 -------- -------- -------- ------- ------- 107,562 119,923 145,409 71,402 84,308 -------- -------- -------- ------- ------- Operating income..................... 11,737 6,050 9,390 2,166 6,109 INTEREST EXPENSE, net....................... 1,080 1,773 2,966 1,386 1,629 OTHER, net.................................. (106) (153) (200) (48) (55) -------- -------- -------- ------- ------- Income before state income taxes..... 10,763 4,430 6,624 828 4,535 STATE INCOME TAXES.......................... 351 191 429 80 180 -------- -------- -------- ------- ------- NET INCOME.................................. $ 10,412 $ 4,239 $ 6,195 $ 748 $ 4,355 ======== ======== ======== ======= ======= PRO FORMA DATA (UNAUDITED) (Note 2): Income before income taxes................ $ 6,624 $ 828 $ 4,535 Pro forma income taxes.................... 2,775 347 1,888 -------- ------- ------- Pro forma net income...................... $ 3,849 $ 481 $ 2,647 ======== ======= ======= Pro forma net income per share............ $ 0.49 $ 0.06 $ 0.34 ======== ======= ======= Shares used in computing pro forma net income per share....................... 7,843 7,843 7,843 ======== ======= =======
The accompanying notes are an integral part of these statements. F-4 JEVIC TRANSPORTATION, INC. STATEMENTS OF SHAREHOLDERS' EQUITY (IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
CLASS A COMMON STOCK ------------------ ADDITIONAL RETAINED SHARES AMOUNT PAID-IN CAPITAL EARNINGS TOTAL --------- ------ --------------- -------- ------- Balance, December 31, 1993................. 6,858,200 -- $1,014 $ 7,232 $ 8,246 Net income............................... -- -- -- 10,412 10,412 Net distributions to shareholders........ -- -- -- (956) (956) --------- ------ ------ ------- ------- Balance, December 31, 1994................. 6,858,200 -- 1,014 16,688 17,702 Net income............................... -- -- -- 4,239 4,239 Dividend to shareholders on purchase of facility.............................. -- -- -- (681) (681) Net distributions to shareholders........ -- -- -- (3,024) (3,024) --------- ------ ------ ------- ------- Balance, December 31, 1995................. 6,858,200 -- 1,014 17,222 18,236 Net income............................... -- -- -- 6,195 6,195 Contribution of capital.................. -- -- 114 -- 114 Net distributions to shareholders........ -- -- -- (474) (474) --------- ------ ------ ------- ------- Balance, December 31, 1996................. 6,858,200 -- 1,128 22,943 24,071 Net income (unaudited)................... -- -- -- 4,355 4,355 Net distributions to shareholders (unaudited)........................... -- -- -- (1,198) (1,198) --------- ------ ------ ------- ------- Balance, June 30, 1997 (unaudited)......... 6,858,200 -- $1,128 $26,100 $27,228 ========= ====== ====== ======= =======
The accompanying notes are an integral part of these statements. F-5 JEVIC TRANSPORTATION, INC. STATEMENTS OF CASH FLOWS (IN THOUSANDS)
SIX MONTHS YEAR ENDED DECEMBER 31, ENDED JUNE 30, --------------------------- ----------------- 1994 1995 1996 1996 1997 ------- ------- ------- ------- ------- (UNAUDITED) OPERATING ACTIVITIES: Net income................................... $10,412 $ 4,239 $ 6,195 $ 748 $ 4,355 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization........... 4,395 6,445 8,732 4,031 5,382 (Gain) loss on sales of equipment....... (191) (340) (170) (127) 100 Provision for doubtful accounts......... 758 84 629 184 483 Deferred state income taxes............. (112) 185 224 -- 75 Changes in operating assets and liabilities -- Increase in accounts receivable...... (4,310) (1,735) (3,272) (2,931) (2,053) (Increase) decrease in prepaid expenses and other................. (23) (454) 245 (550) (1,086) (Increase) decrease in other assets............................. 191 (221) (934) (80) (103) Increase (decrease) in accounts payable............................ 1,399 1,749 721 (970) (3,350) Increase in accrued salaries, wages and benefits....................... 25 349 761 1,200 1,941 Increase (decrease) in other accrued expenses........................... (57) 594 1,667 1,674 698 Increase in claims and insurance reserves........................... 888 878 619 479 46 Increase (decrease) in state income taxes payable...................... 138 (138) 54 (21) 60 Increase in deferred freight revenues........................... 150 180 25 152 163 ------- ------- ------- ------- ------- Net cash provided by operating activities...................... 13,663 11,815 15,496 3,789 6,711 ------- ------- ------- ------- ------- INVESTING ACTIVITIES: Proceeds from sales of equipment............. 750 742 108 19 241 Purchases of property and equipment.......... (14,583) (17,740) (20,679) (11,413) (14,180) ------- ------- ------- ------- ------- Net cash used in investing activities...................... (13,833) (16,998) (20,571) (11,394) (13,939) ------- ------- ------- ------- ------- FINANCING ACTIVITIES: Net repayments on line of credit............. (1,250) -- -- -- -- Payments of long-term debt................... (4,771) (6,430) (9,210) (3,363) (4,294) Proceeds from issuance of long-term debt..... 9,889 14,687 16,110 11,675 15,539 Payments of capital lease obligations........ (617) (753) (958) (403) (380) Net contributions from (distributions to) shareholders.............................. (956) (3,774) 390 839 (1,198) ------- ------- ------- ------- ------- Net cash provided by financing activities...................... 2,295 3,730 6,332 8,748 9,667 ------- ------- ------- ------- ------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.................................. 2,125 (1,453) 1,257 1,143 2,439 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD....................................... 474 2,599 1,146 1,146 2,403 ------- ------- ------- ------- ------- CASH AND CASH EQUIVALENTS, END OF PERIOD....... $ 2,599 $ 1,146 $ 2,403 $ 2,289 $ 4,842 ======= ======= ======= ======= =======
The accompanying notes are an integral part of these statements. F-6 JEVIC TRANSPORTATION, INC. NOTES TO FINANCIAL STATEMENTS (INFORMATION AS OF JUNE 30, 1997, AND FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997, IS UNAUDITED) 1. BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BACKGROUND Jevic Transportation, Inc. (the "Company") is a motor carrier engaged in interregional and regional transportation of general commodity freight. INTERIM FINANCIAL STATEMENTS The financial statements as of and for the six months ended June 30, 1996 and 1997 are unaudited. In the opinion of management, this financial information includes all adjustments, consisting of normal recurring adjustments, necessary to fairly present the financial information set forth. The results of operations for the six months ended June 30, 1997 are not necessarily indicative of the results to be expected for the full year. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. CASH AND CASH EQUIVALENTS The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. PROPERTY AND EQUIPMENT Property and equipment are stated at cost. Major additions and improvements are capitalized, while maintenance and repairs that do not improve or extend the life of assets are charged to expense as incurred. Gain or loss on retirement or disposal of assets is included in income. For like-kind exchanges, any excess of the trade-in allowance over the net book value of the traded asset is deferred in the basis of the new asset. Depreciation and amortization are provided using the straight-line method over the following estimated useful lives: Revenue equipment 3 to 10 years (10% to 20% salvage value) Furniture and fixtures and other equipment 5 to 10 years Building 35 years Leasehold improvements lease term
TIRES The cost of original tires on revenue equipment is included in and depreciated as part of the total revenue equipment cost. Replacement tires are charged to expense when placed in service. OTHER ASSETS At December 31, 1995 and 1996 and June 30, 1997, other assets include $350,000, $507,000 and $600,000, respectively, of cash surrender value related primarily to a $3,000,000 life insurance policy on the Company's Chief Executive Officer, net of loans of $121,000. F-7 JEVIC TRANSPORTATION, INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) (INFORMATION AS OF JUNE 30, 1997, AND FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997, IS UNAUDITED) 1. BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED REVENUE RECOGNITION The Company recognizes revenue in accordance with the Emerging Issues Task Force of the Financial Accounting Standards Board Issue 91-9, "Revenue and Expense Recognition in Freight Services in Process." Although the Company moves freight under contractual arrangements with its shippers, revenue is recognized on the delivery date rather than pick-up date. At December 31, 1995 and 1996 and June 30, 1997, the Company had deferred freight revenues of $1,220,000, $1,245,000 and $1,409,000, respectively. CLAIMS AND INSURANCE RESERVES Claims and insurance reserves reflect the estimated cost of claims for cargo loss and damage, bodily injury and property damage, collision, workers' compensation and group health that are less than the Company's insurance deductibles (see Note 11). The related costs are charged to insurance and claims expense except for workers' compensation and group health, which are charged to salaries, wages and benefits. INCOME TAXES Effective January 1, 1990, the Company elected to be taxed pursuant to Subchapter S of the Internal Revenue Code. Under those provisions, the income of the Company is taxed at the shareholder level. The Company has also elected S Corporation status in certain states. The Company does, however, record a provision for state income taxes related to states that do not or only partially recognize S corporations. The Company periodically makes distributions to its shareholders to fund their personal tax liabilities resulting from the Company's taxable income. The Company accounts for certain income and expense items for financial reporting purposes differently than for income tax purposes. The principal differences relate to the use of accelerated tax depreciation for income tax purposes and certain financial statement reserves that are not currently deductible for income tax purposes. At June 30, 1997, net assets for financial reporting purposes exceed those reflected for income tax purposes by approximately $22,130,000. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those assets and liabilities are expected to be recovered or settled. Immediately preceding the Company's proposed initial public offering (see Note 12), the Company will terminate its S Corporation status and will become subject to federal and state income taxes. Upon terminating its S Corporation status, the Company will record a tax provision for an increase in its net deferred tax liability estimated at $8 million as of June 30, 1997 (see Note 2). SUPPLEMENTAL CASH FLOW INFORMATION For the years ended December 31, 1994, 1995 and 1996 and for the six months ended June 30, 1996 and 1997, the Company paid interest of $1,183,000, $1,886,000, $3,120,000, $1,363,000 and $1,722,000, respectively, and state income taxes of $282,000, $425,000, $234,000, $168,000 and $140,000, respectively. The Company financed $1,034,000 of property and equipment purchases with capital leases for the year ended December 31, 1994. In 1994, the Company refinanced $563,000 of installment notes. In March 1995, the Company purchased an operating facility from its shareholders, and in December 1995, the Company recorded a receivable of $750,000 from its shareholders related to income taxes, which was repaid in 1996 (see Note 10). F-8 JEVIC TRANSPORTATION, INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) (INFORMATION AS OF JUNE 30, 1997, AND FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997, IS UNAUDITED) 1. BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED The Company accounts for equipment purchases that involve trade-ins as like-kind exchanges. Accordingly, for the year ended December 31, 1996 and for the six months ended June 30, 1997, purchases of property and equipment are presented net of trade-in allowances of $7,188,000 and $3,638,000, respectively. NEW ACCOUNTING PRONOUNCEMENTS In 1996, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," and SFAS No. 123, "Accounting for Stock-Based Compensation." SFAS No. 121 established accounting standards for the impairment of long-lived assets, certain identifiable intangibles and goodwill. The Company continually evaluates whether later events or circumstances have occurred that would indicate that the remaining estimated useful life of a long-lived asset may warrant revision or that the remaining balance may not be recoverable. When factors indicate that assets should be evaluated for possible impairment, the Company uses an estimate of the related undiscounted cash flows over the remaining life of the asset to measure recoverability. SFAS No. 123 established financial accounting and reporting standards for stock-based employee compensation plans. SFAS No. 123 also applies to transactions in which an entity issues its equity instruments to acquire goods or services from nonemployees. The adoptions did not have an effect on the Company's financial condition or results of operations. In 1997, the Financial Accounting Standards Board issued SFAS No. 128, "Earnings Per Share." This statement is effective for fiscal years ending after December 15, 1997, and, when adopted, will require restatement of prior years' earnings per share. The adoption of SFAS No. 128 will not have a material effect on the pro forma net income per share reported in the accompanying financial statements. 2. PRO FORMA DATA (UNAUDITED) PRO FORMA BALANCE SHEET DATA The pro forma balance sheet of the Company as of June 30, 1997 reflects (i) a $10 million distribution to certain current shareholders of the Company using $4 million of cash and $6 million of borrowings on the Company's line of credit, (ii) the Company's purchase of its Charlotte facility from certain of its current shareholders for $2 million, resulting in a $700,000 deemed distribution and (iii) an increase in the Company's net deferred tax liability (estimated at $8 million as of June 30, 1997) which will be recorded as a non-cash charge result of terminating its S Corporation status shortly before the effective date of the Offering. The net deferred income tax liability represents net tax assets and liabilities as of the termination of the Company's S Corporation status, and will be recorded as an income tax provision in the quarter in which the proposed initial public offering is completed. The actual adjustment to the net deferred tax liability will reflect the effect of the operations from July 1, 1997 through the termination of the S Corporation status. The significant items comprising the Company's pro forma net deferred tax liability as of June 30, 1997, are as follows: Deferred Tax Assets (Liabilities): Allowance for doubtful accounts........................... $ 552 Claims and insurance reserves............................. 1,442 Accrued expenses and other................................ 114 Property and equipment.................................... (10,708) Prepaid licenses and permits.............................. (285) -------- $ (8,885) ======== F-9 JEVIC TRANSPORTATION, INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) (INFORMATION AS OF JUNE 30, 1997, AND FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997, IS UNAUDITED) 2. PRO FORMA DATA (UNAUDITED) -- CONTINUED PRO FORMA STATEMENT OF OPERATIONS DATA Pro forma income before income taxes for the year ended December 31, 1996, and the six months ended June 30, 1996 and 1997 reflects the Company's purchase of its Charlotte facility from certain of its current shareholders, as if the purchase occurred on January 1, 1996, resulting in increased annual depreciation and interest expense of $70,000 and $190,000, respectively and decreased annual rent expense of $260,000. Immediately preceding the proposed initial public offering, the Company will terminate its status as an S Corporation and will be subject to federal and state income taxes. Accordingly, pro forma income taxes for the year ended December 31, 1996 and the six months ended June 30, 1996 and 1997 reflect the income taxes that would have been recorded had the Company been a C Corporation, based on the tax laws in effect during the respective periods. The pro forma provision for income taxes consists of the following: SIX MONTHS ENDED JUNE 30, YEAR ENDED ---------------- DECEMBER 31, 1996 1996 1997 ----------------- ---- ---- Current provision: Federal................................ $ 288 $282 $1,015 State.................................. 40 65 149 Deferred provision....................... 2,447 -- 724 ------ ---- ------ $2,775 $347 $1,888 ====== ==== ====== Pro forma income taxes do not include a one-time, non-cash income tax provision (estimated at $8 million as of June 30, 1997) related to the recognition of an increase in the net deferred tax liability that will be recorded by the Company upon terminating its S Corporation status. The difference between the federal statutory income tax rate and the pro forma effective income tax rate for the year ended December 31, 1996, is as follows: Federal statutory rate...................................... 34.0% State income taxes, net of federal benefit.................. 4.7 Non deductible expenses..................................... 3.2 ---- 41.9% ==== PRO FORMA NET INCOME PER SHARE Pro forma net income per share is computed by dividing pro forma net income by the weighted average number of shares outstanding for the respective periods, adjusted for the effect of dilutive common stock options, and after giving effect to the estimated number of shares that would be required to be sold (assuming an initial public offering price of $13.00 per share, less underwriting discounts and commissions and estimated offering expenses) to fund a $10 million distribution to the current shareholders. 3. RISKS AND UNCERTAINTIES The Company's future results of operations involve a number of risks and uncertainties. Factors that could affect the Company's future operating results and cause actual results to vary materially from expectations include, but are not limited to, general economic factors, availability of employee drivers and owner-operators, capital requirements, competition, acquisition of revenue equipment, unionization, fuel, seasonality, claims exposure and insurance costs, difficulty in managing growth, regulation, environmental hazards and dependence on key personnel. F-10 JEVIC TRANSPORTATION, INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) (INFORMATION AS OF JUNE 30, 1997, AND FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997, IS UNAUDITED) 3. RISKS AND UNCERTAINTIES -- CONTINUED Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of trade accounts receivable. The Company does not require collateral or other securities to support customer receivables. A significant portion of the Company's operating revenues is derived from sales to customers in the chemical industry, and the majority of the Company's operating revenues are derived from sales to customers located in the Northeast. However, no single customer accounts for more than 10% of the Company's operating revenues. 4. PROPERTY AND EQUIPMENT
DECEMBER 31, ------------------ JUNE 30, 1995 1996 1997 ------- -------- -------- (IN THOUSANDS) Revenue equipment....................................... $43,196 $ 60,214 $ 68,938 Furniture and fixtures and other equipment.............. 8,121 9,689 10,831 Land and building....................................... 7,685 9,001 9,583 Leasehold improvements.................................. 2,434 2,531 2,555 Construction in progress................................ 67 104 155 ------- -------- -------- 61,503 81,539 92,062 Less - Accumulated depreciation and amortization........ (14,545) (22,572) (24,636) ------- -------- -------- $46,958 $ 58,967 $ 67,426 ======= ======== ========
At December 31, 1995 and 1996 and June 30, 1997, total property and equipment under capital leases was $4,122,000, with accumulated amortization of $1,961,000, $2,639,000 and $3,242,000, respectively. 5. LINE OF CREDIT The Company has a $7 million unsecured revolving line of credit with a bank. Each draw on the line bears interest at a fixed rate, as defined, or at a rate based on prime or LIBOR, as selected by the Company. Interest on the line is payable monthly, and the line extends through June 1998. There were no borrowings on the line during 1996. At June 30, 1997, $6.8 million was available under the line as $200,000 in stand-by letters of credit were outstanding. In addition, the Company has $575,000 of stand-by letters of credit outstanding with another bank. The line is cross-defaulted with certain long-term debt and the equipment line (see Note 6). The corresponding loan agreement requires the Company to maintain certain financial and nonfinancial covenants, as defined, the most restrictive of which limits the payment of dividends to 50% of the Company's net income, as defined. F-11 JEVIC TRANSPORTATION, INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) (INFORMATION AS OF JUNE 30, 1997, AND FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997, IS UNAUDITED) 6. LONG-TERM DEBT
DECEMBER 31, ----------------- JUNE 30, 1995 1996 1997 ------- ------- -------- (IN THOUSANDS) Various installment notes, monthly principal payments plus interest at rates ranging from 5.6% to 9.0%, collateralized by revenue and other equipment, due through $21,667 $25,090 $30,863 September 2003............................................ Term notes with bank, monthly principal payments plus interest at rates ranging from 5.9% to 8.4%, collateralized by revenue equipment, due through December 2001...................................................... 3,111 7,685 13,194 Mortgage note, monthly payments of principal and interest of $45,000, final balloon payment of $4,628,000 due October 2005, interest at 8.4%, collateralized by the Delanco facility.................................................. 5,573 5,502 5,466 Term note with shareholders, repaid in 1996................. 1,026 -- -- ------- ------- ------- 31,377 38,277 49,523 Less - Current portion...................................... (6,893) (9,422) (12,613) ------- ------- ------- $24,484 $28,855 $36,910 ======= ======= =======
Aggregate maturities of long-term debt at December 31, 1996, are as follows: 1997........................................................ $ 9,422 1998........................................................ 7,316 1999........................................................ 5,818 2000........................................................ 4,276 2001........................................................ 3,740 Thereafter.................................................. 7,705 ------- $38,277 ======= The Company has an $18 million equipment line with a bank for purchases of revenue equipment. Upon the funding of the equipment purchases, the related borrowings under the line are converted to a term note bearing interest at a fixed rate, as defined, or at a rate based on prime or LIBOR, as selected by the Company. At June 30, 1997, $4,806,000 was available under the equipment line. The equipment line and certain term notes are cross-defaulted with the revolving line of credit (see Note 5). 7. LEASE COMMITMENTS The Company leases office space, maintenance facilities and certain revenue equipment under capital and operating leases expiring on various dates through 2000. The Company leases two operating facilities from its shareholders (see Note 10). The lease payments on these facilities are $9,520 per month through December 1998, with three five-year renewal options, and $21,785 per month through March 2000, with two five-year renewal options, respectively. At June 30, 1997, the Company is liable under terms of noncancelable leases for the following future minimum lease commitments: F-12 JEVIC TRANSPORTATION, INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) (INFORMATION AS OF JUNE 30, 1997, AND FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997, IS UNAUDITED) 7. LEASE COMMITMENTS -- CONTINUED
CAPITAL OPERATING RELATED-PARTY LEASES LEASES LEASES ------- --------- ------------- (IN THOUSANDS) 1997 $906 $1,936 $ 188 1998 -- 2,952 376 1999 -- 1,617 376 2000 -- 547 180 2001 -- -- 114 ---- ------ ------ Total minimum lease payments............................ 906 $7,052 $1,234 ====== ====== Less - Amount representing interest..................... (26) ---- Present value of future capital lease payments.......... $880 ====
Rent expense for all operating leases was $8,735,000, $6,873,000, $5,234,000, $3,021,000 and $2,182,000 for the years ended December 31, 1994, 1995 and 1996 and the six months ended June 30, 1996 and 1997, respectively, of which $569,000, $425,000, $376,000, $188,000 and $188,000, respectively, were on related-party leases. 8. EMPLOYEE BENEFIT PLAN The Company maintains a defined contribution 401(k) profit-sharing plan for all eligible employees. Employer contributions to the plan are based on matching employee contributions and an annual discretionary contribution determined by the shareholders. The Company's total contributions for the years ended December 31, 1994, 1995 and 1996, and for the six months ended June 30, 1997, were $343,000, $443,000, $551,000 and $306,000, respectively. 9. STOCK OPTION PLAN In 1994, the Company adopted the 1994 Stock Option Plan (the "Option Plan") that permits the grant of options to purchase shares of the Company's Common Stock. The Option Plan allows the granting of incentive and nonqualified stock options to employees, directors and consultants at exercise prices not less than the fair market value of the Company's Common Stock on the date of grant. The option grants and related vesting periods are determined by the Board of Directors. In December 1994, the Company granted options to purchase 685,820 shares of Common Stock to key employees, under the Option Plan, at an exercise price of $8.49 per share, representing fair market value on the grant date, as determined by the Board of Directors. The options vest at the end of ten years or over a five-year period if there is an initial public offering, as defined (see Note 12). In 1995, 1996 and for the six months ended June 30, 1997, no options were granted, exercised or canceled. As of June 30, 1997, no options were exercisable and no additional shares were available under the Option Plan. In 1997, the Company adopted the 1997 Incentive Plan (the "Incentive Plan") that permits the grant of options to purchase a total of 1,500,000 shares of the Company's Common Stock. The Incentive Plan allows the granting of incentive and nonqualified stock options to employees, directors and consultants at terms determined by the Board of Directors. At June 30, 1997, no options were outstanding under the Incentive Plan. However, in connection with its proposed initial public offering (see Note 12), the Company plans to grant options to purchase approximately 600,000 shares of Common Stock at $13 per share. F-13 JEVIC TRANSPORTATION, INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) (INFORMATION AS OF JUNE 30, 1997, AND FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997, IS UNAUDITED) 10. RELATED-PARTY TRANSACTIONS Through March 1995, the Company leased an operating facility from its shareholders. The lease payment on this facility was $38,080 per month. Effective March 31, 1995, the Company purchased this facility from its shareholders for $5,542,000. The Company assumed the shareholders' mortgage debt of $4,402,000 and issued a note to its shareholders for $1,140,000 in consideration for the facility (see Note 6). As required by generally accepted accounting principles, the Company recorded the purchased facility at the shareholders' historical carrying value as of the purchase date, with the excess consideration of $681,000 recorded as a dividend. The Company continues to lease two facilities from its shareholders (see Note 7). Subsequent to June 30, 1997, the Company intends to purchase one of these facilities from its shareholders in consideration of assuming the related mortgage loan. The shareholders' historical carrying value as of June 30, 1997 was $1,300,000, and the mortgage loan was $1,999,000. The difference, as of the purchase date, will be recorded as a dividend. The Company periodically makes distributions to its shareholders to fund their estimated personal tax liabilities. Due to overpayments in 1995, the Company had a receivable from shareholders of $750,000 in prepaid expenses and other at December 31, 1995. This amount was repaid by the shareholders in 1996. In 1997, the Company loaned $438,000 to two trusts controlled by the Company's shareholders in exchange for 5.83% notes due in October 1998. The notes are collateralized by the Company common stock held by the trusts, and are included in prepaid expenses and other in the accompanying balance sheet at June 30, 1997. In February 1996, Jevic Transportation Services, Inc. ("JTS"), a freight brokerage company owned by certain of the Company's shareholders, began operations. During 1996 and for the six months ended June 30, 1997, the Company recorded sales of $105,000 and $111,000, respectively, to JTS and incurred purchased transportation expenses of $46,000 and $346,000, respectively, with JTS. At December 31, 1996 and June 30, 1997, $43,000 and $71,000, respectively, is included in accounts receivable and $19,000 and $32,000, respectively, is included in accounts payable, related to transactions with JTS. JTS is expected to be merged into the Company after the offering. JTS had gross revenues of approximately $1.0 million for 1996 and $1.2 million for the six months ended June 30, 1997. JTS had net income of approximately $34,000 for 1996 and $57,000 for the six months ended June 30, 1997. Certain current shareholders will receive $125,000 from the Company in exchange for their JTS stock in the merger, which is equal to their capital investment in JTS. The merger will be accounted for as a combination of companies under common control. 11. CONTINGENCIES The Company's risk retention amounts per occurrence are as follows: Workers' compensation....................................... $250,000 Liability - bodily injury and property damage............... 20,000 Employee medical and hospitalization........................ 75,000 Cargo loss and damage....................................... 5,000 Collision................................................... 25,000
The Company has excess primary coverage on a per-claim and aggregate basis beyond the deductible levels and also maintains umbrella policies to supplement the primary liability coverage. The liabilities for self-insured retention are included in claims and insurance reserves based on claims incurred, with liabilities for unsettled claims and claims incurred but not yet reported being estimated based on management's evaluation of the nature and severity of individual claims and the Company's past claims experience. Actual results may vary from management's estimates. The Company has outstanding letters of credit at June 30, 1997 totaled $775,000 to cover workers' compensation insurance claims. F-14 JEVIC TRANSPORTATION, INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) (INFORMATION AS OF JUNE 30, 1997, AND FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997, IS UNAUDITED) 11. CONTINGENCIES -- CONTINUED The Company is involved in certain legal actions arising in the ordinary course of business. Management believes that the outcome of such actions will not have a material adverse effect on the Company's financial position or results of operations. From time to time the Company enters into agreements with fuel suppliers to purchase a portion of its estimated fuel requirements at fixed prices. The Company is a party to agreements with two fuel suppliers to purchase approximately 40% of its estimated fuel needs through March 1998 at fixed prices. 12. RECAPITALIZATION AND RECLASSIFICATION The Company is contemplating an initial public offering of 3,800,000 shares of its Common Stock. In connection therewith, on August 12, 1997, the Company's Certificate of Incorporation was amended to reclassify the Common Stock into two series: Class A Common Stock, no par value, 300 shares authorized, and Common Stock, no par value, 1,200 shares authorized. In addition, all outstanding shares were reclassified as Class A Common Stock. Holders of the Class A Common Stock are entitled to two votes per share and holders of Common Stock are entitled to one vote per share. On October 6, 1997, the Company's Certificate of Incorporation was amended to, among other things, authorize 10,000,000 shares of no par value Preferred Stock, 10,000,000 shares of no par value Class A Common Stock and 40,000,000 shares of no par value Common Stock, and to effect a 34,291-for-one split of its Common Stock. The Common Stock reclassification, increases in authorized shares and stock split have been retroactively reflected in the accompanying financial statements. F-15 ================================================================================ NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, 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, TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER TO SELL OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF. ------------------ TABLE OF CONTENTS PAGE ---- Prospectus Summary.................... 3 Risk Factors.......................... 7 Use of Proceeds....................... 12 Prior S Corporation Status............ 13 Dividend Policy....................... 13 Capitalization........................ 14 Dilution.............................. 15 Selected Financial and Operating Data................................ 16 Management's Discussion and Analysis of Financial Condition and Results of Operations....................... 18 Industry Overview..................... 24 Business.............................. 25 Management............................ 35 Certain Transactions.................. 42 Principal Shareholders................ 43 Description of Capital Stock.......... 44 Shares Eligible for Future Sale....... 48 Underwriting.......................... 49 Legal Opinions........................ 50 Experts............................... 50 Additional Information................ 50 Index to Financial Statements......... F-1 ------------------ UNTIL , 1997 (25 DAYS FROM THE DATE OF THIS PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THE DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. ================================================================================ ================================================================================ 3,800,000 SHARES LOGO COMMON STOCK ------------------ PROSPECTUS ------------------ BT ALEX. BROWN WILLIAM BLAIR & COMPANY SCHRODER & CO. INC. , 1997 ================================================================================ PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The following table sets forth an itemized statement of all estimated expenses, all of which will be paid by the Company, in connection with the issuance and distribution of the securities being registered: NATURE OF EXPENSE AMOUNT ----------------- ------ SEC Registration Fee........................................ $ 18,540 NASD Fee.................................................... 6,618 Nasdaq Listing and Entry Fee................................ 44,146 Printing and engraving fees................................. 120,000 Registrant's counsel fees and expenses...................... 175,000 Accounting fees and expenses................................ 150,000 Transfer agent and registrar fees........................... 5,000 Directors' and officers' liability insurance................ 280,000 Miscellaneous............................................... 696 ---------- TOTAL..................................................... $ 800,000 ========== ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Section 14A:2-7(3) of the New Jersey Business Corporation Act (the "NJBCA") permits New Jersey corporations to eliminate or limit the liability of directors for breach of any duty owed to the Company or its shareholders, except for any breach of duty based upon an act or omission (a) in breach of such director's duty of loyalty to the corporation or its shareholders, (b) not in good faith or involving a knowing violation of law or (c) resulting in receipt by the director of an improper personal benefit. The last paragraph of Article FIFTH of the Company's Restated Certificate of Incorporation and Section 14 of Article III of the Company's By-laws eliminate liability of directors for breach of any duty to the Company or its shareholders to the extent permitted by the NJBCA. Section 14A:3-5 of the NJBCA permits each New Jersey business corporation to indemnify a "corporate agent" against expenses and liability in connection with any proceeding involving the corporate agent by reason of his being or having been such a corporate agent, other than a proceeding by or in the right of the corporation (unless the corporate agent shall have been adjudged not liable to the corporation or shall have been adjudged liable, but in view of all the circumstances in the case, the court in which such proceeding was brought shall determine that such corporate agent is fairly and reasonably entitled to indemnity), if such actions were taken in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the corporation, and with respect to any criminal proceeding, if he or she had no reasonable cause to believe his or her conduct was unlawful. Such indemnification may only be made by the corporation as authorized in a specific case upon a determination (by the board of directors of the corporation, a committee thereof, independent legal counsel via a written opinion or by the shareholders (if the board so directs)) that indemnification is proper because the corporate agent has met the applicable standard of conduct. The NJBCA defines a "corporate agent" as any person who is or was a director, officer, employee or agent of the indemnifying corporation or of any constituent corporation absorbed by the indemnifying corporation in a consolidation or merger and any person who is or was a director, officer, trustee, employee or agent of any other enterprise, serving as such at the request of the indemnifying corporation, or of any such constituent corporation, or the legal representative of any such director, officer, trustee, employee or agent. Article X of the Company's By-laws provides that the Company shall indemnify any director or officer of the Company and may indemnify any other corporate agent to the full extent permitted by Section 14A:3-5 of the NJBCA. To the extent that a corporate agent has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in NJBCA Section 14A:3-5(2) or (3), or in defense of any claim, issue or matter therein, he or she shall be indemnified by the Company against expenses in connection therewith. Such expenses may be paid by the Company in advance of the final disposition of the action, suit or proceeding as authorized by the Board of Directors upon receipt of an undertaking to repay the advance if it is ultimately determined that such person is not entitled to indemnification. The Appendix to Article X of the Company's By-laws prescribes procedures for the submission and determination of claims for indemnification, including procedures regarding the determination of whether a corporate agent has met the applicable standard of conduct. II-1 Section 14A:3-5(9) of the NJBCA permits, and Article X of the Company's By-laws provides, that any corporate agent may be insured by insurance purchased and maintained by the Company against any expenses incurred in any proceeding and any liabilities asserted against him or her in his or her capacity as a corporate agent, whether or not the Company would have the power to indemnify him or her against any such liability. In this regard, the Company maintains a policy insuring it and its directors and officers against certain liabilities, including liabilities under the Securities Act. ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES. During the past three years, the Company has not sold any securities other than the grant of options to purchase a total of 685,820 shares of Common Stock as of December 31, 1994. The Company believes that such stock option grants were exempt from registration under the Securities Act by virtue of the exemption provided by Section 4(2) thereof for transactions not involving a public offering, since such options were granted to a limited number of executive officers of the Company who, in each case, had access to financial and other relevant data concerning the Company, its financial condition, business and assets. In addition, the Company believes that such stock option grants were exempt from registration under the Securities Act by virtue of the exemption provided by Rule 701 under said Act. ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a) EXHIBITS: EXHIBIT NO. DESCRIPTION ------- ----------- 1.1 -- Form of Underwriting Agreement. 3.1 -- Restated Certificate of Incorporation of the Company, effective October 6, 1997. 3.2 -- By-laws of the Company, as amended, effective October 6, 1997. 4 -- Specimen Stock Certificate.** 5 -- Opinion of Pepper, Hamilton & Scheetz LLP.** 10.1 -- 1997 Incentive Plan, as amended.** 10.2 -- 1994 Stock Option Plan.** 10.3 -- Employee Stock Purchase Plan.** 10.4 -- 401(k) Profit Sharing Plan.** 10.6 -- Contract for Sale of Real Estate, dated March 30, 1995, between Harry J. Muhlschlegel and Karen Muhlschlegel and the Company.** 10.7 -- Promissory Note, dated March 31, 1995, made by the Company in favor of Harry J. Muhlschlegel and Karen Muhlschlegel, in the principal amount of $1,140,459.27.** 10.8 -- Promissory Note, dated April 14, 1997, made by Karen B. Muhlschlegel, as Trustee of the Karen B. Muhlschlegel 1996 Grantor Annuity Trust, in favor of the Company in the principal amount of $218,772, as amended.** 10.9 -- Promissory Note, dated April 14, 1997, made by Harry J. Muhlschlegel, as Trustee of the Harry J. Muhlschlegel 1996 Grantor Annuity Trust, in favor of the Company in the principal amount of $219,293, as amended.** 10.10 -- Lease Agreement made and entered into as of April 12, 1995 between Harry J. Muhlschlegel and Karen Muhlschlegel and the Company as amended.** II-2 10.11 -- Amended and Restated Lease Agreement by and between Harry Muhlschlegel and Karen Muhlschlegel and the Company. 10.12 -- Lease Agreement between James F. Lomma, as Landlord, and the Company, as Tenant, dated June 1, 1995.** 10.13 -- Commercial Lease Agreement made and effective March 1, 1997 by and between 864 Realty Trust and the Company.** 10.14 -- Lease Agreement made and entered into the 7th day of March, 1996 by and between Little Brownie Properties Inc. and the Company.** 10.15 -- Agreement of Lease made and entered into between Dongary Investments, Ltd. and the Company dated March 31, 1994.** 10.16 -- Credit Agreement, dated June 28, 1996, between the Company and CoreStates Bank, N.A.** 10.17 -- Security Agreement, dated as of June 28, 1996, by and between the Company and Corestates Bank, N.A.** 10.18 -- Promissory Note, dated October 31, 1995, made by the Company in favor of MetLife Capital Financial Corporation.** 10.19 -- Mortgage Security Agreement, Assignment of Leases and Rents and Fixture Filing, made as of October 31, 1995, by the Company in favor of MetLife Capital Financial Corporation.** 10.20 -- Tax Indemnity Agreement. 10.21 -- Administrative Services Agreement, dated August 12, 1997 between the Company and Jevic Transportation, Services Inc.** 10.22 -- Intermediary Agreement between Bowker, Brown & Co. and the Company dated April 1997.** 10.23 -- Intermediary Agreement between Bowker, Brown & Co. and the Company dated October 1996.** 11.1 -- Statement re: Computation of Per Share Earnings.** 23.1 -- Consent of Arthur Andersen LLP. 23.2 -- Consent of Pepper, Hamilton & Scheetz LLP (included in Exhibit 5).** 23.3 -- Consent of Gordon R. Bowker to be named as a director.** 23.4 -- Consent of Samuel H. Jones, Jr. to be named as a director.** 24.1 -- Power of Attorney (included on page II-5 of this Registration Statement).** 24.2 -- Certified Resolutions of the Board of Directors relating to Powers of Attorney for certain officers of the Company.** 27.1 -- Financial Data Schedule.** - ------------------ ** Previously Filed. II-3 (b) FINANCIAL STATEMENT SCHEDULE: Schedule No. Description - ------------ ----------- II Valuation and Qualifying Accounts All other schedules have been omitted because they are not applicable, not required, or the required information is included in the Financial Statements or the notes thereto. ITEM 17. UNDERTAKINGS. The undersigned Registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreements, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the 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 whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. The undersigned hereby undertakes that: (1) 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. (2) For purposes 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-4 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Amendment No. 4 to Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Delanco, New Jersey, on the 6th day of October, 1997. JEVIC TRANSPORTATION, INC. By: /s/ Harry J. Muhlschlegel ------------------------------------ Harry J. Muhlschlegel, Chief Executive Officer and Chairman of the Board Pursuant to the requirements of the Securities Act of 1933, this Amendment No. 4 to Registration Statement has been signed by the following persons on October 6, 1997 in the capacities indicated:
SIGNATURE TITLE --------- ----- /s/ Harry J. Muhlschlegel Chief Executive Officer and Chairman of - ------------------------------ the Board (principal executive officer) Harry J. Muhlschlegel /s/ Karen B. Muhlschlegel Vice President, Secretary and Director - ------------------------------ Karen B. Muhlschlegel /s/ Paul J. Karvois President, Director and Chief Operating Officer - ------------------------------ Paul J. Karvois /s/ Brian Fitzpatrick Senior Vice President - Finance and Chief Financial - ------------------------------ Officer (principal financial officer and principal Brian Fitzpatrick accounting officer)
II-5 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Jevic Transportation, Inc.: We have audited in accordance with generally accepted auditing standards, the financial statements of Jevic Transportation, Inc. as of December 31, 1995 and 1996 and for each of the years in the three year period ended December 31, 1996 (except with respect to the matters discussed in Note 12 as to which the date is October 6, 1997). Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule of valuation and qualifying accounts is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. ARTHUR ANDERSEN LLP Philadelphia, Pa., February 19, 1997 (except with respect to the matters discussed in Note 12, as to which the date is October 6, 1997) S-1 JEVIC TRANSPORTATION, INC. SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (IN THOUSANDS)
Allowance for Doubtful Accounts CHARGES DEDUCTIONS BEGINNING TO FROM ENDING BALANCE EXPENSE RESERVE BALANCE --------- ------- ----------- ------- Balance, June 30, 1997 (unaudited).................. $ 999 $483 $(101) $1,381 Balance, December 31, 1996.......................... 814 629 (444) 999 Balance, December 31, 1995.......................... 1,153 84 (423) 814 Balance, December 31, 1994.......................... 500 758 (105) 1,153
S-2 EXHIBIT INDEX EXHIBIT NUMBER DESCRIPTION - ------- ----------- 1.1 -- Form of Underwriting Agreement. 3.1 -- Restated Certificate of Incorporation of the Company, effective October 6, 1997. 3.2 -- By-laws of the Company, as amended, effective October 6, 1997. 10.11 -- Amended and Restated Lease Agreement by and between Harry Muhlschlegel and Karen Muhlschlegel and the Company. 10.20 -- Tax Indemnity Agreement. 23.1 -- Consent of Arthur Andersen LLP. EX-1.1 2 UNDERWRITING AGREEMENT 3,800,000 Shares JEVIC TRANSPORTATION, INC. Common Stock (without par value) UNDERWRITING AGREEMENT ---------------------- October 7, 1997 BT Alex. Brown Incorporated William Blair & Company, L.L.C. Schroder & Co. Inc. As Representatives of the Several Underwriters c/o BT Alex. Brown Incorporated One South Street Baltimore, Maryland 21202 Ladies and Gentlemen: Jevic Transportation, Inc., a New Jersey corporation (the "Company"), proposes 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 3,800,000 shares of the Company's Common Stock, without par value (the "Firm Shares"). 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. Certain stockholders of the Company (the "Option Shareholders") also propose to sell at the Underwriters' option an aggregate of up to 570,000 additional shares of the Company's Common Stock (the "Option Shares") as set forth below. As the Representatives, you have advised the Company and the Option 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, PRINCIPAL SHAREHOLDERS AND THE OPTION SHAREHOLDERS. (a) The Company and each of the persons listed on Schedule II hereto (collectively, the "Principal Shareholders") jointly and severally represents and warrants to each of the Underwriters as follows: (i) A registration statement on Form S-1 (File No. 333-33469) 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" or the "Rules and Regulations") of the Securities and Exchange Commission (the "Commission") thereunder and has been filed with the Commission. Copies of such registration statement, including any pre-effective 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, other than any post-effective amendment that may have been filed pursuant to Rule 462(d). "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." (ii) The Company has been duly organized and is validly existing as a corporation in good standing under the laws of the State of New Jersey, with corporate power and authority to own or lease its properties and conduct its business as described in the Registration Statement. The Company is duly qualified to transact business in all jurisdictions in which the conduct of its business requires such qualification, except where the failure to be so qualified would not have a material adverse effect on the business of the Company. (iii) The outstanding shares of Common Stock of the Company, including all shares subject to the option granted by the Option Shareholders pursuant to Section 2(c) hereof, - 2 - have been duly authorized and validly issued and are fully paid and non-assessable; 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 Common Stock or Class A Common Stock, without par value (the "Class A Stock"). (iv) The information set forth under the caption "Capitalization" in the Prospectus is true and correct. All of the Shares conform to the description thereof contained 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 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 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 financial statements of the Company, together with related notes and schedules as set forth in the Registration Statement (collectively, the "Financial Statements"), present fairly the financial position and the results of operations and cash flows of the Company, at the indicated dates and for the indicated periods. Such Financial Statements have been prepared in accordance with generally accepted principles of accounting, consistently applied throughout the periods involved, except as disclosed herein, and all adjustments necessary for a fair presentation of results for such periods have been made. The summary financial and statistical data included in the Registration Statement presents 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. The pro forma financial information included in the - 3 - Registration Statement and the Prospectus present fairly the information shown therein, have been prepared in accordance with the Commission's rules and guidelines with respect to pro forma financial information, have been properly compiled on the pro forma bases described therein, and, in the opinion of the Company, the assumptions used in the preparation thereof are reasonable and the adjustments used therein are appropriate to give effect to the transactions or circumstances referred to therein. (vii) Arthur Andersen & Co. LLP, who have certified certain of the Financial Statements filed with the Commission as part of 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 before any court or administrative agency or otherwise which if determined adversely to the Company 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 or to prevent the consummation of the transactions contemplated hereby, except as set forth in the Registration Statement. (ix) The Company has good and marketable title to all of the properties and assets 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. The Company occupies its leased properties under valid and binding leases conforming in all material respects to the description thereof set forth in the Registration Statement. (x) The Company has 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. All 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, 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, 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 has no material contingent obligations - 4 - which are not disclosed in the Company's Financial Statements which are included in the Registration Statement. (xii) The Company is not and, solely with the giving of notice or lapse of time or both, will not 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, or the business, management, properties, assets, rights, operations, condition (financial or otherwise) or prospects of the Company. 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 material 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 is a party, or of the Charter or By-Laws of the Company or any order, rule or regulation applicable to the Company of any court or of any regulatory body or administrative agency or other governmental body having jurisdiction. (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, the National Association of Securities Dealers, Inc. (the "NASD") or such additional steps as may be necessary to qualify the Shares for public offering by the Underwriters under state securities or Blue Sky laws) has been obtained or made and is in full force and effect. (xiv) The Company holds all material licenses, certificates and permits from governmental authorities which are necessary to the conduct of its business; and the Company has not infringed any patents, patent rights, trade names, trademarks or copyrights, which infringement is material to the business of the Company. The Company knows of no infringement by others of patents, patent rights, trade names, trademarks or copyrights owned by or licensed to the Company, which infringement is material to the business of 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 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 Stock Market in accordance with Rule 103 of Regulation M under the Exchange Act. - 5 - (xvi) The Company is not an "investment company" within the meaning of such term under the Investment Company Act of 1940 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 carries, or is covered by, insurance in such amounts and covering such risks as is adequate for the conduct of its business and the value of its properties and as is customary for companies engaged in similar industries. (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. (xx) The Company confirms as of the date hereof that it is in compliance with all provisions of Section 1 of Laws of Florida, Chapter 92-198, An Act Relating to Disclosure of doing Business with Cuba, and the Company further agrees that if it commences engaging in business with the government of Cuba or with any person or affiliate located in Cuba after the date the Registration Statement becomes or has become effective with the Commission or with the Florida Department of Banking and Finance (the "Department"), whichever date is later, or if the information reported in the Prospectus, if any, concerning the Company's business with Cuba or with any person or affiliate located in Cuba changes in any material way, the Company will provide the Department notice of such business or change, as appropriate, in a form acceptable to the Department. - 6 - (b) Each of the Option Shareholders severally represents and warrants as follows: (i) Such Option Shareholder now has shares of Class A Common Stock convertible into, and at the Option Closing Date (as such date is hereinafter defined) will have good and marketable title to, the Option Shares to be sold by such Option Shareholder, free and clear of any liens, encumbrances, equities and claims, and full right, power and authority to effect the sale and delivery of such Option Shares; and upon the delivery of, against payment for, such Option Shares pursuant to this Agreement, the Underwriters will acquire good and marketable title thereto, free and clear of any liens, encumbrances, equities and claims. (ii) Such Option 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 Option Shareholder of the transactions herein contemplated and the fulfillment by such Option 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, state securities laws or Blue Sky laws) and will not result in a material breach of any of the terms and provisions of, or constitute a default under, organizational documents of such Option Shareholder, if not an individual, or any indenture, mortgage, deed of trust or other agreement or instrument to which such Option Shareholder is a party, or of any order, rule or regulation applicable to such Option Shareholder of any court or of any regulatory body or administrative agency or other governmental body having jurisdiction. (iii) Such Option 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 Common Stock of the Company and, other than as permitted by the Act, the Option Shareholder will not distribute any prospectus or other offering material in connection with the offering of the Shares. (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 Option 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 would reasonably be expected to adversely affect the business of the Company or any of the Subsidiaries; and the sale of the Option Shares by such Option Shareholder pursuant hereto is not prompted by any information concerning the Company which is not set forth in the - 7 - Registration Statement. The information pertaining to such Option Shareholder under the caption "Principal 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 Company agrees 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. (b) 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 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, One 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 are 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 business day prior to the Closing Date. - 8 - (c) In addition, on the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, the Option Shareholders listed on Schedule II hereto hereby grant 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 maximum number of Option Shares to be sold by each of the Option Shareholders is set forth opposite his or her name on Schedule II hereto. 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 Attorney-in-Fact, and the Custodian 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. If the option granted hereby is exercised in part, the respective number of Option Shares to be sold by each of the Option Shareholders listed in Schedule II hereto shall be determined on a pro rata basis in accordance with the percentages set forth opposite their names on Schedule II hereto, adjusted by you in such manner as to avoid fractional shares. 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 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 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 Attorney-in-Fact. To the extent, if any, that the option is exercised, payment for the Option Shares shall be made on the Option Closing Date in same day funds via wire transfer to the order of "Barry Abelson, as Custodian" against delivery of certificates therefor at the offices of BT Alex. Brown Incorporated, One South Street, Baltimore, Maryland. (d) If, on Option Closing Date any Option Shareholder fails to sell the Option Shares which such Option 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 Common Stock to the Underwriters which represents the Option Shares which such Option 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. - 9 - 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 OPTION SHAREHOLDERS. (a) The Company covenants and agrees 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 and (B) not file any amendment to the Registration Statement or supplement to the Prospectus of which the Representatives shall not previously have been advised and furnished with a copy or to which the Representatives shall have promptly and reasonably objected in writing or which is not in compliance with the Rules and Regulations. (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. - 10 - (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, to the extent required under such securities laws, 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), 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 Securities Exchange Act of 1934 (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 and counsel for 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 prepare and file with the Commission an appropriate amendment to the Registration Statement or supplement to 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 - 11 - 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 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 Securities Exchange Act of 1934, as amended. 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 Common Stock of the Company, the Class A Stock of the Company or other securities convertible into or exchangeable or exercisable for shares of Common Stock or the Class A Stock of the Company or derivative of Common Stock or the Class A Stock of the Company (or agreement for such) will be made for a period of 180 days after the date of this Agreement, directly or indirectly, by the Company otherwise than hereunder or with the prior written consent of BT Alex. Brown Incorporated, except in connection with the Company's employee benefit plans described in the Registration Statement. (ix) The Company will use its best efforts to list, subject to notice of issuance, the Shares on The Nasdaq Stock 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 Common Stock or Class A Stock of the Company or other capital stock of the Company, or any other securities convertible, exchangeable or exercisable for Common Stock, Class A Stock or derivative of 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 period of 180 days after the date of this Agreement, directly or indirectly, except with the prior written consent of BT Alex. Brown Incorporated ("Lockup Agreements"); provided, however, that the Lockup Agreements will not prohibit any transfer or disposition (A) to a trust or custodial account for the benefit of the transferor's family members, or (B) by any member of the Muhlschlegel Family (as defined in the Prospectus) to any other member of the Muhlschlegel Family as long as the permitted transferee has executed a Lockup Agreement prior to or simultaneous with the permitted transfer. - 12 - (xi) The Company shall apply the net proceeds of its sale of the Shares as set forth in the Prospectus and shall disclose appropriately in Exchange Act reports filed with the Commission subsequent to the Closing Date the application of the proceeds therefrom as may be required in accordance with Rule 463 under the Act. (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 Investment Company Act of 1940, as amended (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 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 Option Shareholders covenants and agrees with the several Underwriters that: (i) No offering, sale, short sale or other disposition of any shares of Common Stock or Class A Stock of the Company or other capital stock of the Company or other securities convertible, exchangeable or exercisable for Common Stock or Class A Stock or derivative of Common Stock or Class A Stock owned by the Option Shareholder or request the registration for the offer or sale of any of the foregoing (or as to which the Option Shareholder has the right to direct the disposition of) will be made for a period of 180 days after the date of this Agreement, directly or indirectly, by such Option Shareholder otherwise than hereunder or with the prior written consent of BT Alex. Brown Incorporated; provided, however, that the Option Shareholder shall not be prohibited from making any transfer or disposition (A) to a trust or custodial account for the benefit of the transferor's family members, or (B) by any member of the Muhlschlegel Family (as defined in the Prospectus) to any other member of the Muhlschlegel Family as long as the permitted transferee has executed a Lockup Agreement prior to or simultaneous with the permitted transfer. (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 Option Shareholders agrees to deliver to you prior to or at the Option 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). - 13 - (iii) Such Option 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 Company and the Option Shareholders 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 Option Shareholders; the cost of printing and delivering to, or as requested by, the Underwriters copies of the Registration Statement, Preliminary Prospectuses, the Prospectus, this Agreement, the Underwriters' Selling Memorandum, the Underwriters' Invitation Letter, the Listing Application, the Blue Sky Survey and any supplements or amendments thereto; the filing fees of the Commission; the filing fee of the NASD relating to their review and approval of the terms of the sale of the Shares; the Listing Fee of the Nasdaq Stock Market. To the extent, if at all, that any of the Option 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 Option Shareholder. Any transfer taxes imposed on the sale of the Shares to the several Underwriters will be paid by the Company, on the one hand, and the Option Shareholders, on the other hand, pro rata. The Company shall not, however, be required to pay for any of the Underwriter's 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 (other than Section 6(c)) are not satisfied, or because this Agreement is terminated by the Representatives pursuant to Section 11(b) hereof, or by reason of any failure, refusal or inability on the part of the Company or the Option 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 (up to a maximum amount of $100,000 for such fees and disbursements of counsel); but the Company and the Option 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 - 14 - warranties of the Company, the Principal Shareholders and the Option Shareholders contained herein, and to the performance by the Company and the Option 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 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 Option 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 Pepper, Hamilton & Sheetz, counsel for the Company and the Option 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 New Jersey, with corporate power and authority to own or lease its properties and conduct its business as described in the Registration Statement; the Company is duly qualified to transact business in all jurisdictions in which the conduct of its business requires such qualification, or in which the failure to qualify would have a materially adverse effect upon the business of the Company. (ii) The Company has authorized and outstanding capital stock as set forth under the caption "Capitalization" in the Prospectus; the authorized shares of the Company's Common Stock have been duly authorized; the outstanding shares of the Company's Common Stock, including the Shares to be sold by the Option Shareholders, 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 Common Stock, to be sold by the Company pursuant to this Agreement have been duly authorized and will be validly 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. - 15 - (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 require the Company or the Option Shareholders to permit them to underwrite the sale of, any of the Shares or the right to have any Common Stock, Class A 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 Common Stock, Class A Stock or other securities of the Company. (iv) Such counsel has been advised by the Commission that the Registration Statement has become effective under the Act and that 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 comply as to form in all material respects with the requirements of the Act and the applicable rules and regulations thereunder (except that such counsel need express no opinion as to the Financial Statements or any financial or statistical information therein). (vi) The statements under the captions "Management-Executive Incentive Plans," "Business-Properties," "Business-Legal Proceedings," "Description of Capital Stock" and "Shares Eligible for Future Sale" in the Prospectus, insofar as such statements constitute a summary or description of documents referred to therein or matters of law, fairly present in all material respects the information called for with respect to such documents and matters. (vii) Such counsel does not know of any contracts or documents required to be filed as exhibits to the Registration Statement or described in the Registration Statement or the Prospectus which are no so filed or described as required, and such contracts and documents as are described in the Registration Statement or the Prospectus are fairly described in all material respects. (viii) Such counsel knows of no material legal or governmental proceedings pending or threatened against the Company except as set forth in the Prospectus. - 16 - (ix) 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 the terms or provisions of, or constitute a default under, the Charter or By-Laws of the Company, or any agreement or instrument known to such counsel (A) to which the Company is a party or (B) by which the Company is to be bound. (x) This Agreement has been duly authorized, executed and delivered by the Company. (xi) Assuming the accuracy of the advice received from the commission as described in paragraph (iv) above, 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 or as required by State securities and Blue Sky laws as to which such counsel need express no opinion) except such as have been obtained or made, specifying the same (other than effectiveness of the Registration Statement under the Act, which need not be specified). (xii) 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. (xiii) This Agreement and the Custodian Agreements and Power-of-Attorney have been duly authorized, executed and delivered on behalf of the Option Shareholders and represent valid and binding obligations of the Option Shareholders. (xiv) Each Option Shareholder has full legal right, power and authority, and, assuming the accuracy of the advice recieved from the Commission as described in paragraph (iv) above, any approval required by law (other than as required by State securities and Blue Sky laws as to which such counsel need express no opinion), to sell, assign, transfer and deliver the portion of the Option Shares to be sold by such Option Shareholder when and as required pursuant to the terms hereof. - 17 - (xv) 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 Option Shareholder on the Option Closing Date, free and clear of all liens, encumbrances, equities and claims. The opinion set forth in this paragraph (xv) of Section 6(b) is required to be given only on the Option Closing Date. In rendering such opinion Pepper, Hamilton & Sheetz may rely as to matters governed by the laws of states other than New Jersey and Pennsylvania or Federal laws on local counsel in such jurisdictions, provided that in each case Pepper, Hamilton & Sheetz shall state that they believe that they and the Underwriters are justified in relying on such other counsel. In addition, such counsel shall state that, because the primary purpose of such counsel's engagement was not to establish or confirm factual matters or financial, accounting or statistical matters and because of the wholly or partially non-legal character of many of the statements contained in the Registration Statement and the Prospectus, such counsel is not passing upon and does not assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Registration Statement or the Prospectus, and such counsel has not independently verified the accuracy, completeness or fairness of such statements. Without limiting the foregoing, such counsel shall state that such counsel shall assume no responsibility for and has not independently verified the accuracy, completeness or fairness of the Financial Statements and other financial and statistical data included in the Registration Statement and have not examined the accounting, financial or statistical records from which such Financial Statements and related data are derived. Such counsel shall not that, although certain portions of the Registration Statement (including Financial Statements) have been included therein on the authority of "experts" within the meaning of the Act, such counsel are not experts with respect to any portion of the Registration Statement, including, without limitation, such Financial Statement or the other financial or statistical data included therein. However, such counsel shall state that such counsel have participated in conferences with officers and other representatives and legal counsel of the Company, representatives of the independent public accountants of the Company and representatives of and legal counsel for the Underwriters at which the contents of the Registration Statement and the Prospectus were discussed. Based upon such participation and review, and relying as to materiality in part upon the factual statements of officers and other representatives of the Company, such counsel shall advise you that no facts have come to such counsel's attention that has caused such counsel 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 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 - 18 - 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 and statistical information therein). With respect to such statement, Pepper, Hamilton & Sheetz 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), (x) and (xi) 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 New Jersey. 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 Arthur Andersen & Co. LLP 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 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. - 19 - (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 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 or the earnings, business, management, properties, assets, rights, operations, condition (financial or otherwise) or prospects of the Company, whether or not arising in the ordinary course of business. (f) The Company and the Option 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. (g) The Firm Shares and Option Shares, if any, have been approved for designation upon notice of issuance on the Nasdaq Stock Market. - 20 - (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 Option 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 Option 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 COMPANY AND THE OPTION SHAREHOLDERS. The obligations of the Company and the Option Shareholders 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. - 21 - 8. INDEMNIFICATION. (a) The Company and the Option 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 action or proceeding; provided, however, that the Company and the Option 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; provided further that the indemnification contained in this paragraph with respect to, based on or arising out of an untrue statement or omission or alleged untrue statement or omission in a Preliminary Prospectus or Prospectus shall not inure to the benefit of any Underwriter or other person indemnified under this Section 8(a) with respect to a claim made by a third party if (i) a copy of the Prospectus, as amended or supplemented, shall have been provided to the Underwriters, (ii) a copy of the Prospectus, as amended or supplemented, shall not have been delivered or sent to such third party making claims or seeking damages or to impose liabilities or losses within the time required by the Act and the Rules and Regulations, and (iii) the untrue statement or omission or the alleged untrue statement or omission was corrected in the Prospectus, as amended or supplemented. In no event, however, shall the liability of any Option Shareholder for indemnification under this Section 8(a) exceed the proceeds received by such Option Shareholder from the Underwriters in the offering. This indemnity agreement will be in addition to any liability which the Company or the Option 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 and the Option Shareholders, and each person, if any, who controls the Company or the Option - 22 - Shareholders within the meaning of the Act, against any losses, claims, damages or liabilities to which the Company or any such director, officer, Option 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, Option 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 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 - 23 - 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 Option 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, if the Option Shares are purchased hereunder, the Option 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 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 Option 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, if the Option Shares are purchased hereunder, the Option 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 Option 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 - 24 - or the omission or alleged omission to state a material fact relates to information supplied by the Company or the Option 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 Option 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 Option Shareholder shall be required to contribute any amount in excess of the proceeds received by such Option 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 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, the Principal Shareholders and the Option 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, the Option Shareholders or any persons controlling the Company or the Option Shareholders, (ii) acceptance of any Shares and payment therefor hereunder, and (iii) any termination of this Agreement. A successor to any Underwriter, or to the - 25 - 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. (g) The Underwriters agree that the aggregate amounts payable jointly and severally by the Principal Shareholders to the Underwriters for any losses, claims, damages, liabilities or expenses incurred by the Underwriters as a result of a breach of one or more representations or warranties of the Principal Shareholders set forth in this Agreement shall not exceed the aggregate amounts paid by the Company to the Principal Shareholders or their affiliates out of the proceeds from the sale of the Firm Shares hereunder. - 26 - 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 Option 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 Option 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 or the Option Shareholders, as the case may be, 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 Option Shareholders, as the case may be 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 may be, may be postponed for such period, not exceeding seven 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. - 27 - 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, One South Street, Baltimore, Maryland 21202, Attention: William Legg; with a copy to BT Alex. Brown Incorporated, One South Street, Baltimore, Maryland 21202. Attention: General Counsel; if to the Company or the Option Shareholders, to Harry J. Muhlschlegel, Jevic Transportation, Inc., P.O. Box 5157, Delance, New Jersey 08075, with a copy to Barry M. Abelson, Esquire, Pepper, Hamilton & Scheetz LLP, 3000 Two Logan Square, Philadelphia, Pennsylvania 19103. 11. TERMINATION. This Agreement may be terminated by you by notice to the Company and the Option Shareholders 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 or the earnings, business, management, properties, assets, rights, operations, condition (financial or otherwise) or prospects of the Company, 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, the Nasdaq Stock Market, other than program trading automatic shutdowns; (iv) the enactment, publication, decree or other promulgation of any statute, regulation, rule or order of any court or other governmental authority which in your reasonable 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 Common - 28 - Stock on the Nasdaq Stock 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 Option 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 Option Shareholders and the Underwriters acknowledge and agree that the only information furnished or to be furnished by any Underwriter to the Company specifically for use in the preparation of any Preliminary Prospectus, 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 or the Principal Shareholders 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. 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 - 29 - agreement among the Option Shareholders, the Company and the several Underwriters in accordance with its terms. Any person executing and delivering this Agreement as Attorney-in-Fact for an Option Shareholder represents by so doing that he or she has been duly appointed as Attorney-in-Fact by such Option Shareholder pursuant to a validly existing and binding Power of Attorney which authorizes such Attorney-in-Fact to take such action. Very truly yours, JEVIC TRANSPORTATION, INC. By _______________________________________ Harry Muhlschlegel, Chairman and Chief Executive Officer PRINCIPAL SHAREHOLDERS ------------------------------------------ Harry J. Muhlschlegel ------------------------------------------ Karen B. Muhlschlegel OPTION SHAREHOLDERS By _______________________________________ Harry Muhlschlegel, Attorney-in-Fact for Option Shareholders listed on Schedule III - 30 - The foregoing Underwriting Agreement is hereby confirmed and accepted as of the date first above written. BT ALEX. BROWN INCORPORATED WILLIAM BLAIR & COMPANY, L.L.C. SCHRODER & CO. INC. As Representatives of the several Underwriters listed on Schedule I By: BT Alex. Brown Incorporated By:______________________________ ,Authorized Officer - 31 - SCHEDULE I SCHEDULE OF UNDERWRITERS Number of Firm Shares to be Underwriter Purchased - ----------- --------------------- BT Alex. Brown Incorporated William Blair & Company, L.L.C. Schroder & Co. Inc. ---------- Total 3,800,000 ========== - 1 - SCHEDULE II SCHEDULE OF PRINCIPAL SHAREHOLDERS Harry Muhlschlegel Karen Muhlschlegel SCHEDULE OF OPTION SHAREHOLDERS Number of Maximum Percent of Option Shareholder Option Shares to be Sold Total Option Shares - ------------------ ------------------------ ------------------- Harry Muhlschlegel 285,000 50.0% Karen Muhlschlegel 285,000 50.0% ------- ------ Total 570,000 100.0% ======= ====== - 1 - EX-3.1 3 CERTIFICATE OF INCORPORATION RESTATED CERTIFICATE OF INCORPORATION OF JEVIC TRANSPORTATION, INC. (Pursuant to Section 14A:9-5 of the New Jersey Business Corporation Act) FIRST: The name of the Corporation is JEVIC TRANSPORTATION, INC. SECOND: The Corporation's registered office is located at 600 Creek Road, Delanco, NJ 08075. The Corporation's registered agent at such address is Harry J. Muhlschlegel. THIRD: The nature of the business, or objects or purposes to be transacted, promoted or carried on, are: to engage in any lawful act or activity within the purposes for which corporations may be organized under the New Jersey Business Corporation Act, N.J.S. ss.14A:1-1 et seq. (the "New Jersey Act"). FOURTH: The total number of shares of all classes of stock which the Corporation shall have the authority to issue is 60,000,000, of which 50,000,000 shares having no par value are to be of a class designated Common Equity, consisting of 40,000,000 shares of a series designated Common Stock and 10,000,000 shares of a series designated Class A Common Stock, subject to the provisions of paragraph 3.4 below, and 10,000,000 shares having no par value are to be of a class designated Preferred Stock. Immediately upon the acceptance for filing by the Secretary of State of the State of New Jersey of this Restated Certificate of Incorporation, without further action on the part of the Board of Directors or shareholders of the Corporation, each issued and outstanding share of Class A Common Stock of the Corporation shall be automatically reclassified as and converted into 34,291 shares of Class A Common Stock and each issued and outstanding share of Common Stock of the Corporation shall automatically reclassified as and converted into 34,291 shares of Common Stock (the "Reclassification"). The following is a statement of the relative rights, preferences and limitations of the shares of each class of stock of the Corporation. In this Article Fourth, any reference to a section or paragraph, without further attribution, within a provision relating to a particular class of stock is intended to refer solely to the specified section or paragraph of the other provisions relating to the same class of stock. -1- COMMON EQUITY 1. Dividends. 1.1. After the payment or setting apart for payment of any dividends or distributions to be made to holders of any outstanding Preferred Stock, the holders of shares of the Common Stock and Class A Common Stock shall be entitled to receive such dividends and distributions, payable in cash or otherwise, as may be declared thereon by the Board of Directors from time to time out of assets or funds of the Corporation legally available therefor, provided that all such dividends or distributions shall be paid or made in equal amounts, share for share, to the holders of the Common Stock and Class A Common Stock as if a single class, except that (a) in the event that any dividend shall be declared in shares of Common Stock or Class A Common Stock, such dividend shall be declared at the same rate per share on Common Stock and Class A Common Stock, but the dividend payable on shares of Common Stock shall be payable in shares of Common Stock, and the dividend payable on shares of Class A Common Stock shall be payable in shares of Class A Common Stock; and (b) any dividend described in paragraph 1.2 below may be paid as therein described. If the Corporation shall in any manner split, subdivide or combine the outstanding shares of Common Stock or Class A Common Stock, the outstanding shares of the other such class of stock shall be split, subdivided or combined in the same manner proportionately and on the same basis per share. 1.2. In the event the Corporation shall distribute to the holders of the shares of Common Stock and Class A Common Stock the common stock or substantially equivalent equity securities of any subsidiary of the Corporation, the Board of Directors shall have power, but shall not be obligated, to capitalize or recapitalize such subsidiary with classes of common equity having the powers, designations, preferences, and relative, participating, optional, or other special rights and qualifications, limitations, and restrictions thereof, corresponding, respectively, insofar as practicable, to those of the Common Stock and the Class A Common Stock, and the Board of Directors of the Corporation shall have the power, but shall not be obligated, to distribute to the holders of shares of the Common Stock, the shares of the subsidiary with rights corresponding to those of the Common Stock, and to distribute to the holders of shares of the Class A Common Stock, the shares of the subsidiary with rights corresponding to those of the Class A Common Stock; provided, that holders of shares of Common Stock and holders of shares of Class A Common Stock shall respectively receive the same number of shares of such subsidiary per share of Common Stock and per share of Class A Common Stock held. 2. Rights on Liquidation. In the event of any liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary, after the payment or setting apart for payment to the holders of any outstanding Preferred Stock of the full preferential amounts to which such holders are entitled, all of the remaining assets of the Corporation shall belong to and be distributable in equal amounts per share to the holders of the Common Stock and the holders of Class A Common Stock, as if such classes constituted a single class. For purposes of this paragraph 2, a consolidation or merger of the Corporation with any other corporation, or the sale, -2- transfer or lease of all or substantially all its assets shall not constitute or be deemed a liquidation, dissolution or winding-up of the Corporation. 3. Conversion of Class A Common Stock. 3.1. The holders of Class A Common Stock shall have the right, at their option, to convert any or all such shares into shares of Common Stock of the Corporation on the following terms and conditions: (i) Each share of Class A Common Stock shall be convertible, at any time, at the office of any transfer agent for shares of Common Stock of the Corporation, and at such other place or places, if any, as the Board of Directors may determine, into one fully paid and nonassessable share of Common Stock of the Corporation upon surrender at such office or other place of the certificate or certificates representing the shares of Class A Common Stock so to be converted. In no event, upon conversion of any shares of Class A Common Stock into shares of Common Stock, shall any allowance or adjustment be made in respect of dividends on the Class A Common Stock or the Common Stock. (ii) Shares of Class A Common Stock shall be deemed to have been converted and the person converting the same shall become a holder of shares of Common Stock for the purpose of receiving dividends and for all other purposes whatsoever as of the date when the certificate or certificates for the shares of Class A Common Stock to be converted are surrendered to the Corporation as provided in paragraph 3.1(v). (iii) A number of shares of Common Stock sufficient to provide, upon the basis hereinbefore set forth, for the conversion of all shares of the Class A Common Stock outstanding shall at all times be reserved by the Corporation for the exercise of the conversion rights of the holders of shares of the Class A Common Stock. (iv) If the Corporation shall, at any time, be consolidated or merged with, or shall sell its property as an entirety or substantially as an entirety to, any other corporation or corporations, or in the event of any recapitalization or reclassification of its shares after the date hereof, proper provisions shall be made as a part of the terms of each such consolidation, merger, sale, recapitalization or reclassification so that the holder of any shares of the Class A Common Stock outstanding immediately prior to such consolidation, merger, sale, recapitalization or reclassification shall thereafter be entitled to and only entitled to conversion rights upon the terms and with respect to such securities of the consolidated, merged or purchasing corporation, or with respect to such securities issued upon such recapitalization or reclassification, as such holder would have been entitled to receive upon such consolidation, merger, sale, recapitalization or reclassification if such holder had exercised the conversion privilege immediately prior thereto. The provisions of this paragraph 3.1(iv) shall similarly apply to successive consolidations, mergers, sales, recapitalizations or reclassifications. -3- (v) Before any holder of Class A Common Stock shall be entitled to convert the same into Common Stock, such holder shall surrender its certificate or certificates for such Class A Common Stock to the Corporation at the office of a transfer agent for the Common Stock, or at such other place or places, if any, as the Board of Directors may determine, duly endorsed or accompanied if appropriate by duly executed instruments of transfer and shall give written notice to the Corporation at said office or place that he elects so to convert the shares of Class A Common Stock represented by the certificate or certificates so surrendered. Unless the Common Stock is to be issued in the name of the registered owner of the certificates surrendered, the holder shall state in writing the name or names in which it wishes the certificate or certificates for Common Stock to be issued, and shall furnish all requisite stock transfer and stock issuance tax stamps, or funds therefor. The Corporation shall as soon as practicable after such deposit of certificates for Class A Common Stock, accompanied by the written notice above prescribed, issue and deliver, at the office or place at which such certificates were deposited, to the person for whose account Class A Common Stock was so surrendered, or to such person's nominee or nominees, certificates for the number of full shares of Common Stock to which he shall be entitled as aforesaid. 3.2. All outstanding shares of Class A Common Stock shall automatically, without any act or deed on the part of the Corporation or any other person, be converted into shares of Common Stock on a share-for-share basis (i) at any time after the date hereof when the total number of shares of Class A Common Stock outstanding and reserved for issuance upon exercise of options, warrants or other securities convertible into or exchangeable for shares of Class A Common Stock is less than 1,000,000; (ii) if at any time the Board of Directors, in its sole discretion, determines that there has been a material adverse change in the liquidity, marketability, or market value of the outstanding Common Stock due to a delisting of the Common Stock from a national securities exchange or a national over-the-counter listing or due to requirements under applicable state securities laws in any such case attributable to the existence of the Class A Common Stock; or (iii) if the Board of Directors, in its sole discretion, elects to effect a conversion in connection with its approval of any sale or lease of all or substantially all of the Corporation's assets or any merger, consolidation, liquidation or dissolution of the Corporation. In the event of any such automatic conversion, each stock certificate theretofore representing Class A Common Stock will thereafter represent the same number of shares of Common Stock. 3.3. The provisions of this paragraph 3 shall be in addition to the provisions of paragraphs 5.1(i)(A)(3), 5.1(ii) and 5.1(iv), which require automatic conversion of Class A Common Stock in the circumstances provided therein. 3.4. Shares of the Class A Common Stock converted into Common Stock as provided in paragraph 3.1 shall resume the status of authorized but unissued shares of Class A Common Stock. Upon any automatic conversion of Class A Common Stock into Common Stock pursuant to paragraph 3.2 or paragraph 5, the Class A Common Stock shall no longer be authorized for issuance. -4- 4. Voting. 4.1. Except as otherwise provided by the laws of the State of New Jersey or by this Article Fourth, each share of Common Stock shall entitle the holder thereof to one vote. 4.2. Except as otherwise provided by the laws of the State of New Jersey or by this Article Fourth, each share of Class A Common Stock shall entitle the holder thereof to two votes. Except as otherwise provided herein or required by law, holders of Common Stock and Class A Common Stock shall at all times vote on all matters (including the election of directors) together as one class and together with the holders of any other series or class of stock of the Corporation accorded such class voting right. 4.3. The affirmative vote of the holders of a majority of the outstanding shares of Common Stock and of Class A Common Stock, each voting separately as a class, shall be required to: (i) authorize additional shares of Class A Common Stock; or (ii) adopt any other amendment hereof that alters or changes the designations or powers or the preferences, qualifications, limitations, restrictions or the relative or special rights of either the Common Stock or the Class A Common Stock so as to affect holders of shares of such class adversely. 5. Limitations on Transfer and Issuance of Class A Common Stock. 5.1. (i) No person holding any share of Class A Common Stock may transfer, and the Corporation shall not register the transfer of such share of Class A Common Stock or any interest therein, whether by sale, assignment, gift, bequest, appointment or otherwise, except to a "Permitted Transferee" of such person. The term "Permitted Transferee" shall mean only, (A) In the case of a holder of Class A Common Stock (a "Holder") who is a natural person and the holder of record and beneficial owner of shares subject to a proposed transfer, "Permitted Transferee" means: (1) the Holder, the spouse of such Holder, any lineal descendant of a grandparent of such Holder, or any spouse of such lineal descendant (herein collectively referred to as "such Holder's Family Members"); (2) the trustee of a trust solely for the benefit of such Holder or such Holder's Family Members, provided that such trust may also grant a general or special power of appointment to one or more of such Holder's Family Members and may permit trust assets to be used to pay taxes, -5- legacies and other obligations of the trust or of the estates of one or more of such Holder's Family Members payable by reason of the death of any of such Family Members; (3) a corporation if all of the outstanding capital stock of such corporation is beneficially owned by, or a partnership if all of the partners are and all of the partnership interests are beneficially owned by, the Holder and his Permitted Transferees determined under this paragraph 5.1(i)(A), provided that if by reason of any change in the ownership of such stock or partners or partnership interests, such corporation or partnership would no longer qualify as a Permitted Transferee of such Holder or his Permitted Transferees, all shares of Class A Common Stock then held by such corporation or partnership shall immediately and automatically, without further act or deed on the part of the Corporation or any other person, be converted into shares of Common Stock on a share-for-share basis, and stock certificates formerly representing such shares of Class A Common Stock shall thereupon and thereafter be deemed to represent the like number of shares of Common Stock; (4) an organization established by the Holder or such Holder's Family Members, contributions to which are deductible for federal income, estate or gift tax purposes; or (5) the executor, administrator or personal representative of the estate of such Holder or the guardian or conservator of such Holder adjudged disabled by a court of competent jurisdiction, acting in his capacity as such. (B) In the case of a Holder holding the shares subject to a proposed transfer as trustee pursuant to a trust (other than a trust described in paragraph 5.1(i)(C) below), "Permitted Transferee" means (1) the person who established such trust and (2) any Permitted Transferee of such person determined pursuant to paragraph 5.1(i)(A) above. (C) In the case of a Holder holding shares subject to a proposed transfer as trustee pursuant to a trust which was irrevocable on the date hereof, "Permitted Transferee" means (1) any person to whom or for whose benefit principal may be distributed either during or at the end of the term of such trust whether by power of appointment or otherwise (excluding beneficiaries of any employee benefit plan) and (2) any Permitted Transferee of any such person determined pursuant to paragraph 5.1(i)(A) above. (D) In the case of a Holder which is a corporation or partnership, "Permitted Transferee" means (1) any person who transferred to such corporation or partnership the shares that are the subject of the proposed transfer and (2) any Permitted Transferee of any such person determined under paragraph 5.1(i)(A) above. (E) In the case of a Holder who is the executor, administrator or personal representative of the estate of a deceased Holder, guardian or conservator -6- of the estate of a disabled Holder or who is a trustee of the estate of a bankrupt or insolvent Holder, and provided such deceased, disabled, bankrupt or insolvent Holder, as the case may be, was the record and beneficial owner of the shares subject to a proposed transfer, "Permitted Transferee" means a Permitted Transferee of such deceased, disabled, bankrupt or insolvent Holder as determined pursuant to paragraph 5.1(i)(A) or (D) above, as the case may be. (ii) Notwithstanding anything to the contrary set forth herein, any holder of Class A Common Stock may pledge his shares of Class A Common Stock to a pledgee which is not a Permitted Transferee pursuant to a bona fide pledge of such shares as collateral security for indebtedness due to the pledgee, provided that such shares may not be transferred to or registered in the name of the pledgee unless such pledgee is a Permitted Transferee. In the event of foreclosure or other similar action by the pledgee, such pledged shares of Class A Common Stock shall automatically, without any act or deed on the part of the Corporation or any other person, be converted into shares of Common Stock on a share-for-share basis, unless within five business days after such foreclosure or similar event such pledged shares are returned to the pledgor or transferred to a Permitted Transferee of the pledgor. (iii) For purposes of this paragraph 5.1: (A) The relationship of any person that is derived by or through legal adoption shall be considered a natural one. (B) Each joint owner of shares of Class A Common Stock shall be considered a Holder of such shares. (C) A minor for whom shares of Class A Common Stock are held pursuant to a Uniform Gifts to Minors Act or similar law shall be considered a Holder of such shares. (D) Unless otherwise specified, the term "person" means both natural persons and legal entities. (iv) Any purported transfer of Class A Common Stock other than to a Permitted Transferee shall automatically, without any further act or deed on the part of the Corporation or any other person, result in the conversion of such shares into shares of Common Stock on a share-for-share basis, effective on the date of such purported transfer. The Corporation may, as a condition to transfer or registration of transfer of shares of Class A Common Stock to a purported Permitted Transferee, require that the record holder establish to the satisfaction of the Corporation, by filing with the transfer agent an appropriate affidavit or certificate or such other proof as the Corporation shall deem necessary, that such transferee is a Permitted Transferee. -7- 5.2. Anything in this Article Fourth to the contrary notwithstanding, no share of Class A Common Stock may be held of record but not beneficially by a broker or dealer in securities, a bank or voting trustee or a nominee of any such, or otherwise held of record but not beneficially by a nominee of the beneficial owner of such share (any such form of holding being referred to herein as holding in "street" or nominee name). 5.3. The Corporation shall note on the certificates representing the shares of Class A Common Stock that there are restrictions on transfer and registration of transfer imposed by paragraphs 5.1 and 5.2. 5.4. (i) For purposes of this paragraph 5, "beneficial ownership" shall mean possession of the power to vote or to direct the vote and to dispose of or to direct the disposition of the share of Class A Common Stock in question, and a "beneficial owner" of a share of Class A Common Stock shall be the person having beneficial ownership thereof. (ii) The Board of Directors may, from time to time, establish practices and procedures and promulgate rules and regulations, in addition to those set forth in this Article Fourth, and amend or revoke any such, regarding the evidence necessary to establish entitlement of any transferee or purported transferee of Class A Common Stock to be registered as such. Should the transferee or purported transferee of any share wish to contest any decision of the Corporation on the question whether the transferee or purported transferee has established entitlement to be registered as a transferee of Class A Common Stock, then the Board of Directors shall in its sole discretion make the final determination. 6. Other Matters. 6.1. In case the Corporation shall at any time issue to the holders of its shares of Common Stock as such options or rights to subscribe for shares of Common Stock (including shares held in the Corporation's treasury) or any other security (whether of the Corporation or otherwise), the Corporation shall issue such options or rights to the holders of the Class A Common Stock in the respective amounts equal to the amounts that such holders would have been entitled to receive had their respective shares of Class A Common Stock been converted into Common Stock on the day prior to the date for the determination of the holders of Common Stock entitled to receive such options or rights. 6.2. In any distribution of stock of any other corporation or any merger, consolidation, reorganization or other business combination involving the Company, the consideration to be received per share by holders of either Common Stock or Class A Common Stock shall be identical to that received by holders of the other class of Common Equity. PREFERRED STOCK -8- The Preferred Stock may be issued from time to time in one or more series. The Board of Directors is hereby authorized to provide for the issuance of shares of Preferred Stock in series and, by filing a certificate pursuant to the applicable law of the State of New Jersey (hereinafter referred to as a "Preferred Stock Designation"), to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations and restrictions thereof. The authority of the Board of Directors with respect to each series shall include, but not be limited to, determination of the following: (i) the designation of the series, which may be by distinguishing number, letter or title; (ii) the number of shares of the series, which number the Board of Directors may thereafter (except where otherwise provided in the Preferred Stock Designation) increase or decrease (but not below the number of shares thereof then outstanding); (iii) whether dividends, if any, shall be cumulative or noncumulative and the dividend rate of the series; (iv) the dates at which dividends, if any, shall be payable; (v) the redemption rights and price or prices, if any, for shares of the series; (vi) the terms and amount of any sinking fund provided for the purchase or redemption of shares of the series; (vii) the amounts payable on shares of the series in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation; (viii) whether the shares of the series shall be convertible into shares of any other class or series, or any other security, of the Corporation or any other corporation, and, if so, the specification of such other class or series or such other security, the conversion price or prices or rate or rates, any adjustments thereof, the date or dates as of which such shares shall be convertible and all other terms and conditions upon which such conversion may be made; (ix) restrictions on the issuance of shares of the same series or of any other class or series; and (x) the voting rights, if any, of the holders of shares of the series. Except as may be provided in this Certificate of Incorporation or in a Preferred Stock Designation, the Common Stock and the Class A Common Stock shall have the exclusive -9- right to vote for the election of directors and for all other purposes, and holders of Preferred Stock shall not be entitled to receive notice of any meeting of shareholders at which they are not entitled to vote. The number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the votes entitled to be cast by the holders of a majority of the outstanding Common Stock and Class A Common Stock, voting as one class, without a vote of the holders of the Preferred Stock, or of any series thereof, unless a vote of any such holders is required pursuant to any Preferred Stock Designation. The Corporation shall be entitled to treat the person in whose name any share of its stock is registered as the owner thereof for all purposes and shall not be bound to recognize any equitable or other claim to, or interest in, such share on the part of any other person, whether or not the Corporation shall have notice thereof, except as expressly provided by applicable law. FIFTH: Subject to the rights of the holders of any series of Preferred Stock to elect directors under specified circumstances, the number of directors of the Corporation shall be fixed from time to time exclusively by the Board of Directors pursuant to a resolution adopted by a majority of the whole Board, but shall not be less than one or greater than nine. A director need not be a shareholder. The directors, other than those who may be elected by the holders of any series of Preferred Stock or any other series or class of stock, as provided herein or in any Preferred Stock Designation, shall be divided into three classes, as nearly equal in number as possible. One class of directors shall be initially elected for a term expiring at the annual meeting of shareholders to be held in 1998, another class shall be initially elected for a term expiring at the annual meeting of shareholders to be held in 1999, and another class shall be initially elected for a term expiring at the annual meeting of shareholders to be held in 2000. Members of each class shall hold office until their successors are elected and shall have qualified. At each annual meeting of the shareholders of the Corporation, commencing with the 1998 annual meeting, the successors of the class of directors whose term expires at that meeting shall be elected by a plurality vote of all votes cast at such meeting to hold office for a term expiring at the annual meeting of shareholders held in the third year following the year of their election. No decrease in the number of authorized directors constituting the whole Board of Directors shall shorten the term of any incumbent director. Subject to the rights of the holders of any series of Preferred Stock, and unless the Board of Directors otherwise determines, newly created directorships resulting from any increase in the authorized number of directors or any vacancies on the Board of Directors resulting from death, resignation, retirement, disqualification, removal from office or other cause may be filled only by a majority vote of the directors then in office, though less than a quorum, and shall not be filled by the shareholders unless there are no directors remaining on the Board of Directors. Any director so chosen (a "vacancy director") shall be a director of the same class as the director -10- whose vacancy he or she fills. Such vacancy director shall hold office until the next annual meeting of shareholders and until his or her successor shall have been elected and qualified. The shareholders shall thereupon elect a director to fill the vacancy having been temporarily filled by the vacancy director, which individual may include the incumbent vacancy director. The director so elected shall be a director of the same class as the vacancy director and shall serve until the annual meeting of shareholders at which the term of office of such class expires and until such director's successor shall have been duly elected and qualified. Subject to the rights of the holders of any series of Preferred Stock or any other series or class of stock, as provided herein or in any Preferred Stock Designation, to elect additional directors under specific circumstances, any director may be removed from office at any time, but only for cause and only by the affirmative vote of the holders of at least 80 percent (80%) of the voting power of the then outstanding capital stock of the Corporation entitled to vote generally in the election of directors (the "Voting Stock"), voting together as a single class. No director of the Corporation shall be personally liable to the Corporation or its shareholders for damages for breach of any duty owed to the Corporation or its shareholders as a director, except for any breach of duty based on an act or omission (i) in breach of the director's duty of loyalty to the Corporation or its shareholders, (ii) not in good faith or involving a knowing violation of law or (iii) resulting in receipt by such director of an improper personal benefit. As used in this paragraph, an act or omission in breach of a director's duty of loyalty means an act or omission which that person know or believes to be contrary to the best interests of the Corporation or its shareholders in connection with a matter in which he has a material conflict of interest. This paragraph shall not eliminate or limit the liability of a director for any act or omission occurring prior to the effective date of its adoption. No repeal or modification of this paragraph, directly or by adoption of an inconsistent provision of this Certificate of Incorporation, by the shareholders of the Corporation shall be effective with respect to any cause of action, suit, claim or other matter that, but for this paragraph, would accrue or arise prior to such repeal or modification. If the New Jersey Act is amended after the filing of the Restated Certificate of Incorporation of which this Article is a part to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the New Jersey Act as so amended. SIXTH: Election of directors need not be by written ballot unless a shareholder demands election by ballot at the election and before voting begins. SEVENTH: Any action required or permitted to be taken by the shareholders shall be taken only at an annual or special meeting of such shareholders or by unanimous written consent pursuant to ss.14A:5-6(1) of the New Jersey Act (or any successor provision), and specifically -11- shall not be taken upon the written consent of less than all shareholders pursuant to ss.14A:5-6(2) of the New Jersey Act (or any successor provision). Special meetings of the shareholders for any purpose or purposes shall be called only by the Chairman of the Board or the President of the Corporation or upon a resolution adopted by a majority of the entire Board of Directors of the Corporation. EIGHTH: 1. Amendment of Certificate of Incorporation. From time to time any of the provisions of the Certificate of Incorporation may be amended, altered or repealed, and other provisions authorized by the New Jersey Act may be added or inserted, and all rights at any time conferred upon the shareholders of the Corporation by its Certificate of Incorporation are granted subject to the provisions of this Article Eighth. Notwithstanding anything contained in this Certificate of Incorporation to the contrary, the affirmative vote of the holders of at least 80% of the voting power of the then outstanding Voting Stock, voting together as a single class, shall be required to amend or repeal Article Fifth, Article Seventh or this Article Eighth or adopt any provision inconsistent with any of the foregoing articles. 2. By-laws. The Board of Directors is expressly authorized to make, alter, amend and repeal the by-laws of the Corporation, in any manner not inconsistent with the laws of the State of New Jersey or the Certificate of Incorporation, subject to the power of the holders of the Capital Stock to alter or repeal the by-laws made by the Board of Directors. NINTH: The names and addresses of the directors constituting the current Board of Directors of the Corporation are as follows: Harry J. Muhlschlegel Karen B. Muhlschlegel Paul J. Karvois 4 Stags Leap Court 4 Stags Leap Court 12 Glenforest Drive Tabernacle, NJ 08088 Tabernacle, NJ 08088 Voorhees, NJ 08043 TENTH: The name and address of the incorporator is: Harry J. Muhlschlegel 4 Stags Leap Court Tabernacle, NJ 08088 IN WITNESS WHEREOF, said JEVIC TRANSPORTATION, INC. has caused this instrument to be signed by its Chief Executive Officer and attested to by its Secretary, this 3rd day of October, 1997. JEVIC TRANSPORTATION, INC. By: /s/ Harry J. Muhlschlegel --------------------------------- Harry J. Muhlschlegel Chief Executive Officer ATTEST By: /s/ Karen B. Muhlschlegel ------------------------------------ Karen B. Muhlschlegel Secretary -12- EX-3.2 4 BY-LAWS BY-LAWS OF JEVIC TRANSPORTATION, INC. (AS AMENDED EFFECTIVE OCTOBER 6, 1997) ARTICLE I OFFICES Section 1. REGISTERED OFFICE IN NEW JERSEY; RESIDENT AGENT. The address of the Corporation's registered office in the State of New Jersey and the name and address of its resident agent in charge thereof are as filed with the Secretary of State of the State of New Jersey. Section 2. OTHER OFFICES. The Corporation may also have an office or offices at such other place or places either within or without the state of New Jersey as the Board of Directors may from time to time determine or the business of the Corporation requires. ARTICLE II MEETINGS OF SHAREHOLDERS Section 1. PLACE OF MEETINGS. All meetings of the shareholders of the Corporation shall be held at such place, within or without the State of New Jersey, as may from time to time be designated by resolution passed by the Board of Directors. Section 2. ANNUAL MEETING. An annual meeting of the shareholders for the election of directors and for the transaction of such other proper business, notice of which was given in the notice of meeting, shall beheld on a date and at a time as may from time to time be designated by resolution passed by the Board of Directors. Section 3. SPECIAL MEETINGS. A special meeting of the shareholders for any purpose or purposes shall be called only by the Chairman of the Board or the President of the Corporation or by the Board of Directors pursuant to a resolution adopted by a majority of the whole Board. Section 4. NOTICE OF MEETINGS. Except as otherwise provided by law, written notice of each meeting of the shareholders, whether annual or special, shall be mailed, postage prepaid, not less than ten nor more than sixty days before the date of the meeting, to each shareholder entitled to vote at such meeting, at the shareholder's address as it appears on the records of the Corporation. Every such notice shall state the time, place, and purpose or purposes of the meeting. Except when expressly required by law, notice of any adjourned meeting of the shareholders shall not be required to be given if the time and place to which the -1- meeting is adjourned are announced at the meeting at which the adjournment is taken and at the adjourned meeting only such business is transacted as might have been transacted at the original meeting. Section 5. LIST OF SHAREHOLDERS. The Secretary shall, from information obtained from the transfer agent, prepare and make, at least ten days before every meeting of shareholders, a complete list of the shareholders entitled to vote at the meeting, arranged in alphabetical order within each class, series or group or shareholders, and showing the address of each shareholder and the number of shares registered in the name of each shareholder. Such list shall be open to the examination of any shareholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any shareholder who is present. The list shall be prima facie evidence as to who are the shareholders entitled to examine such list or to vote in person or by proxy at any meeting of shareholders. Section 6. QUORUM. At each meeting of the shareholders, the holders of shares entitled to cast a majority of the votes at a meeting present either in person or by proxy shall constitute a quorum for the transaction of business except where otherwise provided by law or by the Certificate of Incorporation or by these by-laws for a specified action. Except as otherwise provided by law, in the absence of a quorum, a majority in interest of the shareholders of the Corporation present in person or by proxy and entitled to vote shall have the power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until shareholders holding the requisite amount of stock shall be present or represented. At any such adjourned meeting at which a quorum may be present, any business may be transacted which might have been transacted at a meeting as originally called, and only those shareholders entitled to vote at the meeting as originally called shall be entitled to vote at any adjournment or adjournments thereof. The absence from any meeting of the number of shareholders required by law or by the certificate of Incorporation or by these by-laws for action upon any given matter shall not prevent action at such meeting upon any other matter or matters which may properly come before the meeting, if the number of shareholders required in respect of such other matter or matters shall be present. The shareholders present in person or by proxy at a duly organized meeting may continue to do business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum. Section 7. ORGANIZATION. At every meeting of the shareholders the Chairman of the Board, or, in his or her absence, the President, or in the absence of the Chairman and the President, a director or an officer of the Corporation designated by the Board shall act as Chairman. The Secretary, or, in his or her absence, an Assistant secretary, shall act as Secretary at all meetings of the shareholders. In the absence from any such meeting of the -2- Secretary and the Assistant Secretaries, the Chairman may appoint any person to act as Secretary of the meeting. Section 8. NOTICE OF SHAREHOLDER BUSINESS AND NOMINATIONS. (a) Annual Meetings of Shareholders. (i) Nominations of persons for election to the Board of Directors of the Corporation and the proposal of business to be considered by the shareholders may be made at an annual meeting of shareholders (a) pursuant to the Corporation's notice of meeting, (b) by or at the direction of the Board of Directors or (c) by any shareholder of the Corporation who was a shareholder of record at the time of giving of notice provided for in this by-law, who is entitled to vote at the meeting and who complies with the notice procedures set forth in this by-law. (ii) For nominations or other business to be properly brought before an annual meeting by a shareholder pursuant to clause (c) of paragraph (a)(i) of this by-law, the shareholder must have given timely notice thereof in writing to the Secretary of the Corporation and such other business must otherwise be a proper matter for shareholder action. To be timely, a shareholder's notice shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the 60th day nor earlier than the close of business on the 90th day prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the annual meeting is more than 30 days before or more than 60 days after such anniversary date, notice by the shareholder to be timely must be so delivered not earlier than the close of business on the 90th day prior to such annual meeting and not later than the close of business on the later of the 60th day prior to such annual meeting or the 10th day following the day on which public announcement of the date of such meeting is first made by the Corporation. In no event shall the public announcement of an adjournment of an annual meeting commence a new time period for the giving of a shareholder's notice as described above. Such shareholder's notice shall set forth (a) as to each person whom the shareholder proposes to nominate for election or reelection as a director, all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act") and Rule 14a-11 thereunder (including such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected); (b) as to any other business that the shareholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such shareholder and the beneficial owner, if any, on whose behalf the proposal is made; and (c) as to the shareholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (i) the name and address of such shareholder, as they appear on the Corporation's books, and of such beneficial owner and (ii) the -3- class and number of shares of the Corporation which are owned beneficially and of record by such shareholder and such beneficial owner. (iii) Notwithstanding anything in the second sentence of paragraph (a)(ii) of this by-law to the contrary, in the event that the number of directors to be elected to the Board of Directors of the Corporation is increased and there is no public announcement by the Corporation naming all of the nominees for director or specifying the size of the increased Board of Directors at least 70 days prior to the first anniversary of the preceding year's annual meeting, a shareholder's notice required by this by-law shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the 10th day following the day on which such public announcement is first made by the Corporation. (b) Special Meetings of Shareholders. Only such business shall be conducted at a special meeting of shareholders as shall have been brought before the meeting pursuant to the Corporation's notice of meeting. Nominations of persons for election to the Board of Directors may be made at a special meeting of shareholders at which directors are to be elected pursuant to the Corporation's notice of meeting (a) by or at the direction of the Board of Directors or (b) provided that the Board of Directors has determined that directors shall be elected at such meeting, by any shareholder of the Corporation who is a shareholder of record at the time of giving of notice provided for in this by-law, who shall be entitled to vote at the meeting and who complies with the notice procedures set forth in this by-law. In the event the Corporation calls a special meeting of shareholders for the purpose of electing one or more directors to the Board of Directors, any such shareholder may nominate a person or persons (as the case may be), for election to such position(s) as specified in the Corporation's notice of meeting, if the shareholder's notice required by paragraph (a)(ii) of this by-law shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the close of business on the 90th day prior to such special meeting and not later than the close of business on the later of the 60th day prior to such special meeting or the 10th day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. In no event shall the public announcement of an adjournment of a special meeting commence a new time period for the giving of a shareholder's notice as described above. (c) General. (i) Only such persons who are nominated in accordance with the procedures set forth in this by-law shall be eligible to serve as directors and only such business shall be conducted at a meeting of shareholders as shall have been brought before the meeting in accordance with the procedures set forth in this by-law. Except as otherwise provided by law, the Certificate of Incorporation or these by-laws, the Chairman of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought -4- before the meeting was made or proposed, as the case may be, in accordance with the procedures set forth in this by-law and, if any proposed nomination or business is not in compliance with this by-law, to declare that such defective proposal or nomination shall be disregarded. (ii) For purposes of this by-law, "public announcement" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act. (iii) Notwithstanding the foregoing provisions of this by-law, a shareholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this by-law. Nothing in this by-law shall be deemed to affect any rights (i) of shareholders to request inclusion of proposals in the Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act or (ii) of the holders of any series of Preferred Stock to elect directors under specified circumstances. Section 9. BUSINESS AND ORDER OF BUSINESS. At each meeting of the shareholders such business may be transacted as may properly be brought before such meeting, except as otherwise provided by law or in these by-laws. The order of business at all meetings of the shareholders shall be as determined by the Chairman, unless otherwise determined by a majority in interest of the shareholders present in person or by proxy at such meeting and entitled to vote thereat. Section 10. VOTING. Except as otherwise provided by law, the Certificate of Incorporation or these by-laws, each shareholder shall at every meeting of the shareholders be entitled to one vote for each share of stock held by such shareholder. Any vote on stock may be given by the shareholder entitled thereto in person or by proxy appointed by an instrument in writing executed (or transmitted by electronic means which results in a writing) by such shareholder or by the shareholder's attorney thereunto authorized, and delivered to the Secretary; provided, however, that no proxy shall be voted after 11 months from its date unless the proxy provides for a longer period. Except as otherwise provided by law, the Certificate of Incorporation or these by-laws, at all meetings of the shareholders, all matters other than the election of directors shall be decided by a majority of the votes cast at such meeting (which need not be by ballot) by shareholders present in person or by proxy and entitled to vote thereat, a quorum being present. -5- ARTICLE III BOARD OF DIRECTORS Section 1. GENERAL POWERS. The property, affairs and business of the Corporation shall be managed by or under the direction of its Board of Directors. Section 2. ELECTION OF DIRECTORS. At each meeting of the shareholders for the election of directors, at which a quorum is present, directors shall be elected by a plurality of votes cast in such election, which need not be by written ballot unless a shareholder demands election by ballot at the election and before voting begins. Voting shall otherwise be in accordance with the provisions of Section 10 of Article II hereof. Section 3. QUORUM AND MANNER OF ACTING. A majority of the members of the Board of Directors shall constitute a quorum for the transaction of business at any meeting, and the act of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board of Directors unless otherwise provided by law, the Certificate of Incorporation or these by-laws. In the absence of a quorum, a majority of the directors present may adjourn any meeting from time to time until a quorum shall be obtained. Notice of any adjourned meeting need not be given if the time and place are fixed at the meeting adjourning and if the period of adjournment does not exceed ten days in any one adjournment. The directors shall act only as a board and the individual directors shall have no power as such. Section 4. PLACE OF MEETINGS. The Board of Directors may hold its meetings at such place or places within or without the State of New Jersey as the Board may from time to time determine or as shall be specified or fixed in the respective notices or waivers of notice thereof. Section 5. FIRST MEETING. Promptly after each annual election of directors, the Board of Directors shall meet for the purpose of organization, the election of officers and the transaction of other business, at the same place as that at which the annual meeting of shareholders was held or as otherwise determined by the Board. Notice of such meeting need not be given. Such meeting may be held at any other time or place which shall be specified in a notice given as hereinafter provided for special meetings of the Board of Directors. Section 6. REGULAR MEETINGS. Regular meetings of the Board of Directors shall be held at such places and at such times as the Board shall from time to time determine. If any day fixed for a regular meeting shall be a legal holiday at the place where the meeting is to be held, then the meeting which would otherwise be held on that day shall be held at the same hour on the next succeeding business day not a legal holiday. Notice of regular meetings need not be given. Section 7. SPECIAL MEETINGS; NOTICE. Special meetings of the Board of Directors shall be held whenever called by the Chairman of the Board and shall be called by the -6- Chairman of the Board or the Secretary at the written request of three directors. Notice of each such meeting stating the time and place of the meeting shall be given to each director by mail, telephone, other electronic transmission or personally. If by mail, such notice shall be given not less than five days before the meeting; and if by telephone, other electronic transmission or personally, not less than two days before the meeting. A notice mailed at least two weeks before the meeting need not state the purpose thereof except as otherwise provided in these by-laws. In all other cases the notice shall state the principal purpose or purposes of the meeting. Notice of any meeting of the Board need not be given to a director, however, if waived by the director in writing before or after such meeting or if the director shall be present at the meeting without protest prior to the conclusion thereof. Section 8. ORGANIZATION. At each meeting of the Board of Directors, the Chairman of the Board, or, in his absence, the President, or, in the absence of the Chairman and the President, a director or an officer of the Corporation designated by the Board shall act as Chairman. The Secretary, or, in the Secretary's absence, any person appointed by the Chairman, shall act as Secretary of the meeting. Section 9. ORDER OF BUSINESS. At all meetings of the Board of Directors, business shall be transacted in the order determined by the Board. Section 10. RESIGNATIONS. Any director of the Corporation may resign at any time by giving written notice to the Corporation. The resignation of any director shall take effect at the time specified therein, and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 11. COMPENSATION. Each director shall be paid such compensation, if any, as shall be fixed by the Board of Directors. ARTICLE IV COMMITTEES Section 1. APPOINTMENT AND POWERS. The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of two or more directors of the Corporation, which, to the extent provided in said resolution or in these by-laws and not inconsistent with Section 14A:6-9 of the New Jersey Business Corporation Act (the "New Jersey Act"), shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors. The Board of Directors may, by resolution passed by a majority of the whole Board, abolish any such committee. -7- Section 2. TERM OF OFFICE AND VACANCIES. Each member of a committee shall continue in office until a director to succeed him or her shall have been elected and shall have qualified, or until he or she ceases to be a director or until he or she shall have resigned or shall have been removed in the manner hereinafter provided. Any vacancy in a committee shall be filled by the vote of a majority of the whole Board of Directors at any regular or special meeting thereof. Section 3. ALTERNATES. The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more directors as alternate members of any committee, to act in the absence or disability of members of any committee with all the powers of such absent or disabled members. Section 4. ORGANIZATION. Unless otherwise provided by the Board of Directors, each committee shall appoint a chairman. Each committee shall keep a record of its acts and proceedings and report the same from time to time to the Board of Directors. Section 5. RESIGNATIONS. Any regular or alternate member of a committee may resign at any time by giving written notice to the Chairman of the Board, the President or the Secretary of the Corporation. Such resignation shall take effect at the time of the receipt of such notice or at any later time specified therein, and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 6. REMOVAL. Any regular or alternate member of a committee may be removed with or without cause at any time by resolution passed by a majority of the whole Board of Directors at any regular or special meeting. Section 7. MEETINGS. Regular meetings of each committee, of which no notice shall be necessary, shall be held on such days and at such places as the chairman of the committee shall determine or as shall be fixed by a resolution passed by a majority of all the members of such committee. Special meetings of each committee will be called by the Secretary at the request of any two members of such committee, or in such other manner as may be determined by the committee. Notice of each special meeting of a committee shall be mailed to each member thereof at least two days before the meeting or shall be given personally or by telephone or other electronic transmission at least one day before the meeting. Every such notice shall state the time and place, but need not state the purposes of the meeting. No notice of any meeting of a committee shall be required to be given to any alternate. Section 8. QUORUM AND MANNER OF ACTING. Unless otherwise provided by resolution of the Board of Directors, a majority of a committee (including alternates when acting in lieu of regular members of such committee) shall constitute a quorum for the transaction of business and the act of a majority of those present at a meeting at which a quorum is present shall be the act of such committee. The members of each committee shall act only as a committee and the individual members shall have no power as such. Actions taken at a meeting -8- of any committee shall be reported to the Board of Directors at its next meeting following such committee meeting; provided that, when the meeting of the Board is held within 2 days after the committee meeting, such report may be made to the Board at its second meeting following such committee meeting. Section 9. COMPENSATION. Each regular or alternate member of a committee shall be paid such compensation, if any, as shall be fixed by the Board of Directors. ARTICLE V OFFICERS Section 1. OFFICERS. The officers of the Corporation shall be a Chairman of the Board of Directors and a President, each of whom shall chosen by the Board of Directors from among its members, a Chief Financial Officer and one or more Vice Presidents (one or more of whom may be Senior Vice Presidents or otherwise as may be designated by the Board), a Secretary and a Treasurer, all of whom shall be elected by the Board of Directors. Any two or more offices may be held by the same person. The Board of Directors may also from time to time elect such other officers as it deems necessary. Section 2. TERM OF OFFICE. Each officer shall hold office until his or her successor shall have been duly elected and qualified in his or her stead, or until his or her death or until he or she shall have resigned or shall have been removed in the manner hereinafter provided. Section 3. ADDITIONAL OFFICERS; AGENTS. The Chairman of the Board may from time to time appoint and remove such additional officers and agents as may be deemed necessary. Such persons shall hold office for such period, have such authority, and perform such duties as provided in these by-laws or as the Chairman of the Board may from time to time prescribe. The Board of Directors or the Chairman of the Board may from time to time authorize any officer to appoint and remove agents and employees and to prescribe their powers and duties. Section 4. SALARIES. Unless otherwise provided by resolution passed by a majority of the whole Board, the salaries of all officers elected by the Board of Directors shall be fixed by the Board of Directors. Section 5. REMOVAL. Except where otherwise expressly provided in a contract authorized by the Board of Directors, any officer may be removed, either with or without cause, by the vote of a majority of the Board at any regular or special meeting or, except in the case of an officer elected by the Board, by any superior officer upon whom the power of removal may be conferred by the Board or by these by-laws. Section 6. RESIGNATIONS. Any officer may resign at any time by giving written notice to the Corporation. Any such resignation shall take effect at the date of receipt of -9- such notice or at any later time specified therein, and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 7. VACANCIES. A vacancy in any office because of death, resignation, removal, or otherwise, shall be filled for the unexpired portion of the term in the manner provided in these by-laws for regular election or appointment to such office. Section 8. CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of the Board of Directors ("Chairman of the Board") shall be chief executive officer of the Corporation and, subject to the control of the Board of Directors, shall have general and overall charge of the business and affairs of the Corporation and of its officers. He shall keep the Board of Directors appropriately informed on the business and affairs of the Corporation. He shall preside at all meetings of the shareholders and of the Board of Directors and shall enforce the observance of the by-laws of the Corporation and the rules of order for the meetings of the Board and the shareholders. Section 9. PRESIDENT. The President shall be the chief operating officer of the Corporation and, subject to the control of the Chairman of the Board, shall direct and be responsible for the operation of the business and affairs of the Corporation. The President shall keep the Chairman of the Board and the Board of Directors appropriately informed on the business and affairs of the Corporation. In the case of the absence or disability of the Chairman of the Board, the President shall perform all the duties and functions and exercise all the powers of, and be subject to all the restrictions upon, the Chairman of the Board. Section 10. CHIEF FINANCIAL OFFICER. The chief financial officer shall be the chief accounting officer of the corporation and shall arrange for the keeping of adequate records of all assets, liabilities and transactions of the corporation. He shall provide for the establishment of internal controls and see that adequate audits are currently and regularly made. He shall submit to the President, the Chairman of the Board and the Board of Directors timely statements of the accounts of the corporation and the financial results of the operations thereof. Section 11. SENIOR VICE PRESIDENTS. One or more Senior Vice Presidents shall, subject to the control of the Chairman of the Board and the President, have lead accountability for components or functions of the Corporation as and to the extent designated by the Chairman of the Board and the President. Each Senior Vice President shall keep the Chairman of the Board and President appropriately informed on the business and affairs of the designated components or functions of the Corporation. Section 12. VICE PRESIDENTS. The Vice Presidents shall perform such duties as may from time to time be assigned to them or any of them by the Chairman of the Board or the President. Section 13. SECRETARY. The Secretary shall keep or cause to be kept in books provided for the purpose the minutes of the meetings of the shareholders, of the Board of Directors and of any committee constituted pursuant to Article IV of these by-laws. The Secretary shall be custodian of the corporate seal and see that it is affixed to all documents as required and attest the same. The Secretary shall perform all duties incident to the office of Secretary and such other duties as from time to time may be assigned to him or her. -10- Section 14. ASSISTANT SECRETARIES. At the request of the Secretary, or in his or her absence or disability, the Assistant Secretary designated by him or her shall perform all the duties of the Secretary and, when so acting, shall have all the powers of, and be subject to all the restrictions upon, the Secretary. The Assistant Secretaries shall perform such other duties as from time to time may be assigned to them. Section 15. TREASURER. The Treasurer shall have charge of and be responsible for the receipt, disbursement and safekeeping of all funds and securities of the Corporation. The Treasurer shall deposit all such funds in the name of the Corporation in such banks, trust companies or other depositories as shall be selected in accordance with the provisions of these by-laws. From time to time and whenever requested to do so, the Treasurer shall render statements of the condition of the finances of the Corporation to the Board of Directors. The Treasurer shall perform all the duties incident to the office of Treasurer and such other duties as from time to time may be assigned to him or her. Section 16. ASSISTANT TREASURERS. At the request of the Treasurer, or in his or her absence or disability, the Assistant Treasurer designated by him or her shall perform all the duties of the Treasurer and, when so acting, shall have all the powers of, and be subject to all the restrictions upon, the Treasurer. The Assistant Treasurers shall perform such other duties as from time to time may be assigned to them. Section 17. CERTAIN AGREEMENTS. The Board of Directors shall have power to authorize or direct the proper officers of the Corporation, on behalf of the Corporation, to enter into valid and binding agreements in respect of employment, incentive or deferred compensation, stock options, and similar or related matters, notwithstanding the fact that a person with whom the Corporation so contracts may be a member of its Board of Directors. Any such agreement may validly and lawfully bind the Corporation for a term of more than one year, in accordance with its terms, notwithstanding the fact that one of the elements of any such agreement may involve the employment by the Corporation of an officer, as such, for such term. ARTICLE VI AUTHORIZATIONS Section 1. CONTRACTS. The Board of Directors, except as otherwise provided in these by-laws, may authorize any officer, employee or agent of the Corporation to enter into any contract or execute and deliver any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances. Section 2. LOANS. No loan shall be contracted on behalf of the Corporation and no negotiable paper shall be issued in its name, unless authorized by the Board of Directors. Section 3. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the -11- Corporation shall be signed by such officer or officers, employee or employees, of the Corporation as shall from time to time be determined in accordance with authorization of the Board of Directors. Section 4. DEPOSITS. All funds of the Corporation shall be deposited from time to time to the credit of the Corporation in such banks, trust companies or other depositories as the Board of Directors may from time to time designate, or as may be designated by any officer or officers of the Corporation to whom such power may be delegated by the Board, and for the purpose of such deposit the officers and employees who have been authorized to do so in accordance with the determinations of the Board may endorse, assign and deliver checks, drafts, and other orders for the payment of money which are payable to the order of the Corporation. Section 5. PROXIES. Except as otherwise provided in these by-laws or in the Certificate of Incorporation, and unless otherwise provided by resolution of the Board of Directors, the Chairman of the Board, the President or any other officer may from time to time appoint an attorney or attorneys or agent or agents of the Corporation, in the name and on behalf of the Corporation to cast the votes which the Corporation may be entitled to cast as a shareholder or otherwise in any other corporation any of whose stock or other securities may be held by the Corporation, at meetings of the holders of the stock or other securities of such other corporations, or to consent in writing to any action by such other corporation, and may instruct the person or persons so appointed as to the manner of casting such vote or giving such consent, and may execute or cause to be executed in the name and on behalf of the Corporation and under its corporate seal, or otherwise, all such written proxies or other instruments as he may deem necessary or proper in the premises. ARTICLE VII SHARES AND THEIR TRANSFER Section 1. CERTIFICATES OF STOCK. Certificates for shares of the stock of the Corporation shall be in such form as shall be approved by the Board of Directors. They shall be numbered in the order of their issue, by class and series, and shall be signed by the Chairman of the Board, the President or a Vice President, and may be countersigned by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Corporation. Any or all signatures upon a certificate may be a facsimile. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were such officer, transfer agent, or registrar at the date of issue. Section 2. RECORD OWNERSHIP. A record of the name and address of the holder of each certificate, the number, class and series of shares represented thereby and the date of issuance thereof shall be made on the Corporation's books. The Corporation shall be entitled to treat the holder of record of any share of stock as the holder in fact thereof and accordingly -12- shall not be bound to recognize any equitable or other claim to or interest in such share on the part of any other person, whether or not it shall have express or other notice thereof, except as required by law. Section 3. TRANSFER OF STOCK. Shares of stock shall be transferable on the books of the Corporation by the person named in the certificate for such stock in person or by such person's attorney or other duly constituted representative upon surrender of such certificate with an assignment endorsed thereon or attached thereto duly executed and with such guarantee of signature as the Corporation may reasonably require. Section 4. LOST, DESTROYED AND MUTILATED CERTIFICATES. The Corporation may issue a new certificate of stock in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or such person's legal representative, to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate. Section 5. TRANSFER AGENT AND REGISTRAR; REGULATIONS. The Corporation shall, if and whenever the Board of Directors shall so determine, maintain one or more transfer offices or agencies, each in charge of a transfer agent designated by the Board of Directors, where the shares of the stock of the Corporation shall be directly transferable, and also one or more registry offices, each in charge of a registrar designated by the Board of Directors, where such shares of stock shall be registered, and no certificate for shares of the stock of the Corporation, in respect of which a registrar and transfer agent shall have been designated, shall be valid unless countersigned by such transfer agent and registered by such registrar. The Board of Directors may also make such additional rules and regulations as it may deem expedient concerning the issue, transfer and registration of certificates for shares of stock of the Corporation. Section 6. FIXING RECORD DATE. For the purpose of determining the shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. If no record date is fixed (1) the record date for determining shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the day next preceding the day on which notice is given, or, if no notice is given, at the close of business on the day next preceding the day on which the meeting is held and (2) the record date for determining shareholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. A determination of shareholders of record entitled to notice of or to -13- vote at a meeting of shareholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. Section 7. EXAMINATION OF BOOKS BY SHAREHOLDERS. The Board of Directors shall, subject to New Jersey Act and other applicable law, have power to determine from time to time, whether and to what extent and under what conditions and regulations the accounts and books of the Corporation, or any of them, shall be open to the inspection of the shareholders; and no shareholder shall have any right to inspect any book or document of the Corporation, except as conferred the New Jersey Act, unless and until authorized so to do by resolution of the Board of Directors or of the shareholders of the Corporation. ARTICLE VIII SEAL The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the words "Corporate Seal" and "New Jersey". ARTICLE IX FISCAL YEAR The fiscal year of the Corporation shall begin on the first day of January in each year. ARTICLE X INDEMNIFICATION Section 1. DEFINITIONS. As used in this section, (a) "corporate agent" means any person who is or was a director, officer, employee or agent of the Corporation or of any constituent corporation absorbed by the Corporation in a consolidation or merger and any person who is or was a director, officer, trustee, employee or agent of any other enterprise, serving as such at the request of the Corporation, or of any such constituent corporation, or the legal representative of any such director, officer, trustee, employee or agent; (b) "other enterprise" means any domestic or foreign corporation, other than the Corporation, and any partnership, joint venture, sole proprietorship, trust or other enterprise, whether or not for profit, served by a corporate agent; (c) "expenses" means reasonable costs, disbursements and counsel fees; -14- (d) "independent legal counsel" means a law firm, or a member of a law firm, that (i) is experienced in matters of corporation law; (ii) neither presently is, nor in the past five years has been, retained to represent the Corporation or the corporate agent claiming indemnification or any other party to the action, suit, or proceeding giving rise to a claim for indemnification, in any matter material to the Corporation, the claimant or any such other party; and (iii) would not, under applicable standards of professional conduct then prevailing, have a conflict of interest in representing either the Corporation or such corporate agent in an action to determine the Corporation's or such person's rights under this section; (e) "liabilities" means amounts paid or incurred in satisfaction of settlements, judgments, fines and penalties; (f) "proceedings" means any pending, threatened or completed civil, criminal, administrative or arbitrative action, suit or proceeding, and any appeal therein and any inquiry or investigation which could lead to such action, suit or proceeding; and (g) references to "other enterprises" include employee benefit plans; references to "fines" include any excise taxes assessed on a person with respect to an employee benefit plan; and references to "serving at the request of the Corporation" include any service as a corporate agent which imposes duties on, or involves services by, the corporate agent with respect to an employee benefit plan, its participants, or beneficiaries; and a person who acted in good faith and in a manner the person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the Corporation" as referred to in this section. Section 2. INDEMNIFICATION. (a) The Corporation shall indemnify any director or officer and may indemnify any other corporate agent against his or her expenses and liabilities in connection with any proceeding involving the corporate agent by reason of his being or having been such a corporate agent, other than a proceeding by or in the right of the corporation if (i) such corporate agent acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation; and (ii) with respect to any criminal proceeding, such corporate agent had no reasonable cause to believe his or her conduct was unlawful. The termination of any proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, shall not of itself create a presumption that such corporate agent did not meet the applicable standards of conduct set forth in this section. -15- (b) The Corporation shall indemnify any director or officer and may indemnify any other corporate agent against his or her expenses in connection with any proceeding by or in the right of the Corporation to procure a judgment in its favor which involves the corporate agent by reason of his or her being or having been such corporate agent, if he or she acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation. However, in such a proceeding no indemnification shall be provided in respect of any claim, issue or matter as to which such corporate agent shall have been adjudged to be liable to the corporation, unless and only to the extent that the Superior Court or the court in which such proceeding was brought shall determine upon application that despite the adjudication of liability, but in view of all circumstances of the case, such corporate agent is fairly and reasonably entitled to indemnity for such expenses as the Superior Court or such other court shall deem proper. (c) The Corporation shall indemnify any director or officer and may indemnify any other corporate agent against expenses to the extent that such corporate agent has been successful on the merits or otherwise in any proceeding referred to in subsections (a) and (b) or in defense of any claim, issue or matter therein. (d) Any indemnification under subsection (a) and, unless ordered by a court, under subsection (b) may be made by the corporation only as authorized in a specific case upon a determination that indemnification is proper in the circumstances because the corporate agent met the applicable standard of conduct set forth in subsection (a) or subsection (b). Such determination shall be made, in accordance with the procedures set forth in the appendix to these by-laws, (i) by the board of directors or a committee thereof, acting by a majority vote of a quorum consisting of directors who were not parties to or otherwise involved in the proceeding; or (ii) if such a quorum is not obtainable, or, even if obtainable and such quorum of the board of directors or committee by a majority vote of the disinterested directors so directs, by independent legal counsel, in a written opinion, such counsel to be designated by the board of directors; or (iii) by the shareholders if the certificate of incorporation or bylaws or a resolution of the board of directors or of the shareholders so directs. (e) Expenses incurred by a corporate agent in connection with a proceeding may be paid by the corporation in advance of the final disposition of the proceeding as authorized by the Board of Directors upon receipt of an undertaking by or on behalf of the corporate agent to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified as provided in this section. -16- (f) The indemnification and advancement of expenses provided by or granted pursuant to the other subsections of this section shall not exclude any other rights, including the right to be indemnified against liabilities and expenses incurred in proceedings by or in the right of the corporation, to which a corporate agent may be entitled under the Certificate of Incorporation, any agreement, a vote of the shareholders, or otherwise; provided that no indemnification shall be made to or on behalf of a corporate agent if a judgment or other final adjudication adverse to the corporate agent establishes that his acts or omissions (i) were in breach of his duty of loyalty to the corporation or its shareholders, as defined in subsection (3) of Section 14A:2-7 of the New Jersey Act, (ii) were not in good faith or involved a knowing violation of law or (c) resulted in receipt by the corporate agent of an improper personal benefit. (g) The Corporation may purchase and maintain insurance on behalf of any corporate agent against any expenses incurred in any proceeding and any liabilities asserted against him by reason of his being or having been a corporate agent, whether or not the Corpora tion would have the obligation or the authority to indemnify him or her against such expenses and liabilities under the provisions of this section. The Corporation may purchase such insurance from, or such insurance may be reinsured in whole or in part by, an insurer owned by or otherwise affiliated with the Corporation, whether or not such insurer does business with other insureds. (h) The Corporation shall pay or reimburse expenses incurred by any director or officer and may pay or reimburse expenses incurred by any other corporate agent in connection with the corporate agent's appearance as a witness in a proceeding at a time when the corporate agent has not been made a party to the proceeding. ARTICLE XI AMENDMENT OF BY-LAWS The Board of Directors is expressly authorized to make, alter, amend and repeal the by-laws of the Corporation, in any manner not inconsistent with the laws of the State of New Jersey or the Certificate of Incorporation, subject to the power of the holders of the then outstanding capital stock of the Corporation to alter or repeal the by-laws made by the Board of Directors; provided, that any such amendment or repeal by shareholders shall require the affirmative vote of the holders of at least 80 percent (80%) of the voting power of such capital stock entitled to vote generally in the election of directors, voting together as a single class. -17- APPENDIX PROCEDURES FOR SUBMISSION AND DETERMINATION OF CLAIMS FOR INDEMNIFICATION PURSUANT TO ARTICLE X OF THE BY-LAWS. Section 1. PURPOSE. The Procedures for Submission and Determination of Claims for Indemnification Pursuant to Article X of the by-laws (the "Procedures") are to implement the provisions of Section 2 of Article X of the by-laws of the Corporation (the "by-laws") in compliance with the requirement of subsection (d) thereof. Section 2. DEFINITIONS. For purposes of these Procedures: (a) All terms that are defined in Section 1 of Article X of the by-laws shall have the meanings ascribed to them therein when used in these Procedures unless otherwise defined herein. (b) "Change of Control" means: (i) the acquisition in one or more transactions by any "Person" (as the term person is used for purposes of Sections 13(d) or 14(d) of the Exchange Act) of "Beneficial ownership" (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of twenty-five percent (25%) or more of the combined voting power of the Company's then outstanding voting securities (the "Voting Securities"), provided that for purposes of this clause (i) Voting Securities acquired directly from the Company by any Person shall be excluded from the determination of such Person's Beneficial ownership of Voting Securities (but such Voting Securities shall be included in the calculation of the total number of Voting Securities then outstanding); or (ii) approval by shareholders of the Company of: (A) a merger, reorganization or consolidation involving the Company if the shareholders of the Company immediately before such merger, reorganization or consolidation do not or will not own directly or indirectly immediately following such merger, reorganization or consolidation, more than fifty percent (50%) of the combined voting power of the outstanding voting securities of the company resulting from or surviving such merger, reorganization or consolidation in substantially the same proportion as their ownership of the Voting Securities outstanding immediately before such merger, reorganization or consolidation; or (B) a complete liquidation or dissolution of the Company; (C) an agreement for the sale or other disposition of all or substantially all of the assets of the Company; or (iii) acceptance by shareholders of the Company of shares in a share exchange if the shareholders of the Company immediately before such share exchange do not or will not own directly or indirectly immediately following such share exchange more than fifty percent (50%) of the combined voting power of the outstanding voting securities of the entity resulting from or surviving such share exchange in substantially the same proportion as their ownership of the Voting Securities outstanding immediately before such share exchange. Section 3. SUBMISSION AND DETERMINATION OF CLAIMS. (a) To obtain indemnification or advancement of expenses under Article X, Section 2 of the by-laws, a corporate agent shall submit to the Secretary of the Corporation a written request therefor, including therein or therewith such documentation and information as is reasonably available to the corporate agent and is reasonably necessary to -18- permit a determination as to whether and what extent the Corporate agent is entitled to indemnification or advancement of expenses, as the case may be. The Secretary shall, promptly upon receipt of a request for indemnification, advise the Board of Directors thereof in writing if a determination in accordance with Article X, Section 2(d) of the by-laws is required. (b) Upon written request by an corporate agent for indemnification pursuant to Section 3(a) hereof, a determination with respect to the corporate agent's entitlement thereto in the specific case, if required by the by-laws, shall be made in accordance with Article X, Section 2(d) of the by-laws, and, if it is so determined that the corporate agent is entitled to indemnification, payment to the corporate agent shall be made within ten days after such determination. The corporate agent shall cooperate with the person, persons or entity making such determination, with respect to the corporate agent's entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to the corporate agent and reasonably necessary to such determination. (c) If entitlement to indemnification is to be made by independent legal counsel pursuant to Article X, Section 2(d)(ii) of the by-laws, such counsel shall be selected as provided in this Section 3(c). If a change of control shall not have occurred, the independent legal counsel shall be selected by the Board of Directors, and the Corporation shall give written notice to the corporate agent advising the corporate agent of the identity of the independent legal counsel so selected. If a change of control shall have occurred, the independent legal counsel shall be selected by the corporate agent (unless the corporate agent shall request that such selection be made by the Board of Directors, in which event the immediately preceding sentence shall apply), and the corporate agent shall give written notice to the Corporation advising it of the identity of the independent legal counsel so selected. In either event, the corporate agent or the Corporation, as the case may be, may, within seven days after such written notice of selection shall have been given, deliver to the Corporation or to the corporate agent, as the case may be, a written objection to such selection. Such objection may be asserted only on the ground that the independent legal counsel so selected does not meet the requirements of "independent legal counsel" as defined in Article X, Section 1 of the by-laws, and the objection shall set forth with particularity the factual basis of such assertion. If such written objection is made, the independent legal counsel so selected may not serve as independent legal counsel unless and until a court has determined that such objection is without merit. If, within twenty days after the next regularly scheduled Board of Directors meeting following submission by the corporate agent of a written request for indemnification pursuant to Section 3(a) hereof, no independent legal counsel shall have been selected and not objected to, either the Corporation or the corporate agent may petition the Superior Court of the State of New Jersey or other court of competent jurisdiction for resolution of any objection which shall have been made by the Corporation or the corporate agent to the other's selection of independent legal counsel and/or for the appointment as independent legal counsel of a person selected by the Court or by such other person as the Court shall designate, and the person with respect to whom an objection is favorably resolved or the person -19- so appointed shall act as independent legal counsel under Article X, Section 2(d)(ii) of the by-laws. The Corporation shall pay any and all reasonable fees and expenses (including without limitation any advance retainers reasonably required by counsel) of independent legal counsel incurred by such independent legal counsel in connection with acting pursuant to Article X, Section 2(d)(ii) of the by-laws, and the Corporation shall pay all reasonable fees and expenses (including without limitation any advance retainers reasonably required by counsel) incident to the procedures of Article X, Section 2(d)(ii) of the by-laws and this Section 3(c), regardless of the manner in which independent legal counsel was selected or appointed. Upon the delivery of its opinion pursuant to Article X, Section 2(d)(ii) of the by-laws or, if earlier, the due commencement of any judicial proceeding or arbitration pursuant to Section 4(a)(3) of these Procedures, independent legal counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing). (d) If a change of control shall have occurred, in making a determination with respect to entitlement to indemnification under the by-laws, the person, persons or entity making such determination shall presume that an corporate agent is entitled to indemnification under the by-laws if the corporate agent has submitted a request for indemnification in accordance with Section 3(a) hereof, and the Corporation shall have the burden of proof to overcome that presumption in connection with the making by any person, persons or entity of any determination contrary to that presumption. Section 4. REVIEW AND ENFORCEMENT OF DETERMINATION. (a) In the event that (1) advancement of expenses is not timely made pursuant to Article X, Section 2(b) or (c) of the by-laws, (2) payment of indemnification is not made pursuant to Article X, Section 2(a) or (b) of the by-laws within ten days after receipt by the Corporation of written request therefor, (3) a determination is made pursuant to Article X, Section 2(d) of the by-laws that a corporate agent is not entitled to indemnification under the by-laws, (4) the determination of entitlement to indemnification is to be made by independent legal counsel pursuant to Article X, Section 2(d)(ii) of the by-laws and such determination shall not have been made and delivered in a written opinion within ninety days after receipt by the Corporation of the written request for indemnification, or (5) payment of indemnification is not made within ten days after a determination has been made pursuant to Article X, Section 2(d) of the by-laws that a corporate agent is entitled to indemnification, the corporate agent shall be entitled to an adjudication in an appropriate court of the State of New Jersey, or in any other court of competent jurisdiction, of the corporate agent's entitlement to such indemnification or advancement of Expenses. Alternatively, the corporate agent, at his or her option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the rules of the American Arbitration Association. The corporate agent shall commence such proceeding seeking an adjudication or an award in arbitration within one year following the date on which the corporate agent first has the right to commence such proceeding pursuant to this Section 4(a). The -20- Corporation shall not oppose the corporate agent's right to seek any such adjudication or award in arbitration. (b) In the event that a determination shall have been made pursuant to Article X, Section 2(d) of the by-laws that a corporate agent is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 4 shall be conducted in all respects as a de novo trial, or arbitration, on the merits and the corporate agent shall not be prejudiced by reason of that adverse determination. If a change of control shall have occurred, the Corporation shall have the burden of proving in any judicial proceeding or arbitration commenced pursuant to this Section 4 that the corporate agent is not entitled to indemnification or advancement of expenses, as the case may be. (c) If a determination shall have been made or deemed to have been made pursuant to Article X, Section 2(d) or of the by-laws that a corporate agent is entitled to indemnification, the Corporation shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 4, absent (1) a misstatement or omission of a material fact in connection with the corporate agent's request for indemnification, or (2) a prohibition of such indemnification under applicable law. (d) The Corporation shall be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 4 that the procedures and presumptions of these Procedures are not valid, binding and enforceable, and shall stipulate in any such judicial proceeding or arbitration that the Corporation is bound by all the provisions of these Procedures. (e) In the event that a corporate agent, pursuant to this Section 4, seeks to enforce the corporate agent's rights under, or to recover damages for breach of, Article X of the by-laws or these Procedures in a judicial proceeding or arbitration, the Corporate agent shall be entitled to recover from the Corporation, and shall be indemnified by the Corporation against, any and all expenses (of the types described in the definition of Expenses in Section 2 of these Procedures) actually and reasonably incurred in such judicial proceeding or arbitration, but only if the corporate agent prevails therein. If it shall be determined in such judicial proceeding or arbitration that the corporate agent is entitled to receive part but not all of the indemnification or advancement of expenses sought, the expenses incurred by the corporate agent in connection with such judicial proceeding or arbitration shall be appropriately prorated. Section 5. AMENDMENTS. These Procedures may be amended at any time and from time to time in the same manner as any by-law of the Corporation in accordance with the Certificate of Incorporation and by-laws; provided, however, that notwithstanding any amendment, alteration or repeal of these Procedures or any provision hereof, any corporate agent shall be entitled to utilize these Procedures with respect to any claim for indemnification arising out of any action taken or omitted prior to such amendment, alteration or repeal except to the extent otherwise required by law. -21- EX-10.11 5 LEASE AGREEMENT AMENDED AND RESTATED LEASE AGREEMENT This Amended and Restated Lease Agreement ("Lease") is made and executed this 1st day of October, 1997, by and between HARRY MUHLSCHLEGEL and KAREN MUHLSCHLEGEL (together, "Landlord") and JEVIC TRANSPORTATION, INC. ("Tenant"). Background Landlord and Tenant are parties to a certain Business Lease dated December 23, 1993 ("Original Lease"), pursuant to which Landlord leased to Tenant and Tenant leased from Landlord the premises herein described. Landlord and Tenant are entering into this Lease to clarify and restated their respective obligations as Landlord and Tenant and intend for this Lease to replace the Original Lease in its entirety. NOW, THEREFORE, in consideration of the mutual undertaking set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, Landlord and Tenant agree as follows: 1. LEASE OF PREMISES. Landlord hereby leases to Tenant, and Tenant accepts from Landlord, under the terms and conditions set forth in this Lease, the real property located at Ironside Court in Willingboro, New Jersey which is designated on the current Willingboro tax map as Lots 8-12, 8-15, 8-16 and 8-17 in Block 13, together with all improvements thereon and all of Landlord's rights thereto ("Premises"). 2. CONDITION OF PREMISES. The Premises have been delivered by Landlord to Tenant, and accepted by Tenant, in an "AS-IS" "WHERE IS" condition. Tenant acknowledges that Landlord has no unperformed obligation to alter, improve, decorate or otherwise prepare the Premises for Tenant's occupancy or which remain unsatisfied under the Original Lease. Tenant further acknowledges that neither Landlord nor any agents of Landlord have made any representations, warranties or covenants, either express or implied, with respect to the Premises or the condition thereof. 3. TERM. Tenant shall have and hold the Premises for the term ("Term") hereafter provided. Landlord and Tenant acknowledge that the Term commenced on January 1, 1994 ("Commencement Date") and shall end at 11:59 p.m. on December 31, 2013 ("Expiration Date"). 4. RENT. 4.1 Base Rent. The annual base rent ("Base Rent") for the Premises shall be $114,240. Tenant shall pay Base Rent in monthly installments of $9,520, in advance, on the first day of each calendar month during the Term. 4.2 Additional Rent. In addition to Base Rent, Tenant shall pay all sums of money or other charges required to be paid by Tenant under this Lease as additional rent ("Additional Rent"), whether or not same are expressly designated in this Lease as Additional -1- Rent. All Additional Rent shall be due and payable with each monthly installment of Base Rent unless otherwise provided herein. 4.3 Manner of Payment. Base Rent and Additional Rent (together, "Rent") payable under this Lease shall be paid in lawful money of the United States of America without prior notice or demand therefor, and without deduction, defense, counterclaim, setoff or abatement whatsoever. Rent shall be paid to Landlord at the address designated by Landlord for notice or such other address as Landlord may notify Tenant in accordance with the procedure for notice set forth in this Lease. 4.4 Interest on Delinquent Payments. If any payment of Base Rent is not paid in full within ten (10) business days after its due date or any payment of Additional Rent is not paid in full when due , Tenant shall pay interest on such delinquent payment, from the original due date of such delinquent payment until paid in full, at an interest rate ("Interest Rate") equal to the lesser of (a) one and one-half percent (1.5%) per month, or (b) the maximum rate permitted by applicable law. This Section shall not relieve Tenant from its obligation to pay Rent at the times and in the manners herein specified. Acceptance by Landlord of interest shall not constitute a waiver of Tenant's default with respect to said delinquent payment, nor prevent Landlord from exercising any other rights or remedies available to Landlord. Interest at the Interest Rate also shall accrue on any judgment obtained in connection with enforcement of this Lease. 5. NET LEASE - TAXES AND UTILITY CHARGES. 5.1 Net Lease. This Lease is a triple net lease between Landlord and Tenant, and it is the intent of the parties that all costs of owning and operating the Premises during the Term hereof shall be paid by Tenant as Additional Rent hereunder, including without limitation the costs and expenses expressly set forth in this Lease but excluding any payments now or hereafter due on account of any indebtedness of Landlord secured by a mortgage on the Premises. 5.2 Real Estate Taxes and Utilities Charges. (a) Obligation. Without limiting the foregoing, the parties agree that Tenant shall pay as Additional Rent all "Real Estate Taxes" and "Utility Charges" defined as follows: (1) For purposes herein, "Real Estate Taxes" shall consist of (A) all real estate taxes relating to the Premises; (B) all charges which may be levied in lieu of real estate taxes; (C) all assessments for municipal improvements and other governmental charges of any kind and nature for public improvements, services, benefits, or any other purpose; and (D) all assessments against the Premises pursuant to any covenants, restrictions or easement agreements affecting the Premises which become payable during the Term (or which become payable after the expiration or earlier termination hereof and are attributable in whole or in part to any period during the Term hereof), together with all costs and expenses incurred by Landlord in good faith in contesting, resisting, or appealing any such taxes or assessments, including, -2- without limitation, legal fees. Real Estate Taxes shall not include any interest or penalties arising as a result of Landlord's late payment thereof. (2) "Utility Charges" shall mean all electricity, water, sewer, cable, telephone or other similar utility charges, and all excises, taxes and fees with respect thereto, including without limitation license, permit, inspection, authorization and similar fees of utility providers for utility services rendered or furnished to the Premises during the Lease Term. Utility Charges shall not include any interest or penalties arising as a result of Landlord's late payment thereof. (b) Payment. Tenant shall pay all Real Estate Taxes and Utility Charges for the Premises within twenty (20) business days after Tenant's receipt of Landlord's invoice therefor. Landlord's invoice shall be accompanied by reasonable evidence documenting and supporting the amount of Real Estate Taxes or Utility Charges for which such assessment of Additional Rent is being made. Landlord agrees to make payment of Real Estate Taxes and Utility Charges in a timely manner. Tenant's obligation hereunder for amounts falling due during the Term of this Lease shall survive termination of this Lease. (c) Direct Billing to Tenant. At Landlord's option, Landlord may cause Real Estate Taxes and Utilities Charges, or portions thereof, to be billed directly to Tenant. In such case, Tenant agrees to pay all of such amounts promptly when due and shall be responsible for any interest or penalty as a result of the delinquent payment thereof as well as any loss suffered by Landlord as a result of such delinquency. Within ten (10) business days after Landlord's request made from time to time at Landlord's discretion, Tenant shall provide evidence reasonably satisfactory to Landlord (such as in the form of receipts marked as paid) that all of such Real Estate Taxes and Utility Charges separately billed to Tenant are current without delinquency. 5.3 Availability of Utilities and Services. Tenant acknowledges that Landlord is not responsible to Tenant for any disruption or inadequacy of utilities services during the Term except to the extent caused solely by the gross negligence or wilful misconduct of Landlord, its employees or agents. In this regard, Landlord does not warrant that any services supplied to the Premises will not be interrupted. Services may be interrupted because of accidents, repairs, alterations, improvements, or any reason beyond the reasonable control of Landlord. Any such interruption shall not make Landlord liable to Tenant for damages, nor constitute a constructive eviction or entitle Tenant to a rent abatement unless same shall have been caused solely by the gross negligence or wilful misconduct of Landlord, its employees or agents. 6. REPAIRS AND MAINTENANCE OF THE PREMISES. 6.1 Structural and System Repairs and Replacements. Tenant, at Tenant's expense, shall perform all replacements and repairs necessary to maintain the roof, load bearing walls and foundations of any building located on the Premises during the Term of this Lease in good repair and proper working order ("Structural Work"). Unless an emergency exists in Tenant's reasonable commercial judgment (in which case Tenant, without Landlord's prior consent, is authorized to undertake such "temporary" corrective action as is necessary to abate the -3- emergency until Landlord's consent to the "permanent" corrective action can be obtained), Tenant will obtain Landlord's prior approval to the scope and necessity of any Structural Work, the estimated cost thereof, and the contractor to perform such Structural Work. Landlord's approval to the foregoing shall not be unreasonably withheld, but Landlord may impose such conditions as part of its consent as Landlord deems appropriate taking into consideration the nature of the proposed Structural Work, including, without limitation, requiring Tenant to furnish Landlord with security for the payment of all costs to be incurred in connection with such work, insurance, and copies of the plans, specification, permits and approval necessary therefor. 6.2 Tenant's General Obligations. In addition to Tenant's obligations under subsections (a) above, Tenant, at Tenant's expense, shall perform all repairs, maintenance and replacements necessary to maintain the Premises and every part thereof in good repair and proper working condition. Without limiting the foregoing, Tenant's obligations hereunder shall include repairs, maintenance and replacements of windows, doors, overhead doors, floors, private roadways and parking areas, electric and HVAC equipment and systems, waste disposal and plumbing systems, and all other structural and mechanical elements and systems serving the Premises. Tenant also shall perform responsible leaf, snow and ice clearing and removal. 6.3 Clean Condition. Tenant, at Tenant's expense, shall keep the Premises in a clean, sanitary, orderly and safe condition to the reasonable satisfaction of Landlord and in accordance with any rules and regulations from time to time in effect during the Term of this Lease. Tenant shall provide such reasonable pest extermination measures as is necessary to maintain the Premises free from insects, vermin and any other pests. 7. ALTERATIONS. 7.1 Consent Required. Except as hereafter provided or as required pursuant to Section 6 above, Tenant shall make no alterations, additions or improvements ("Tenant Alterations" or "Tenant Alteration") to the Premises without the consent of Landlord, which consent shall not be unreasonably withheld. At the time of Landlord's consent, Landlord shall designate whether Tenant shall be required to remove the proposed Tenant Alteration upon termination of this Lease, and if Landlord's written consent fails to state that such Tenant Alteration is required to be removed, Landlord shall be deemed to have agreed that Tenant shall not be obligated to remove such Tenant Alteration upon the termination of this Lease. Landlord may impose such conditions as part of its consent as Landlord deems appropriate taking into consideration the nature of the proposed Tenant Alteration, including, without limitation, requiring Tenant to furnish Landlord with security for the payment of all costs to be incurred in connection with such work, insurance, and copies of the plans, specifications, permits and approvals necessary therefor. 7.2 Permitted Tenant Alterations. Landlord's consent shall not be required for Tenant Alterations ("Permitted Tenant Alterations") which: (i) do not adversely impact the structural integrity of the Premises or the systems serving the Premises or their operation, (ii) are not visible from the exterior of the Premises and (iii) cost $5,000 or less in the aggregate to complete. Unless, however, Landlord's prior written consent was obtained to a Permitted Tenant Alteration, Landlord may require the removal of any Permitted Tenant Alteration upon the -4- termination of this Lease. Notwithstanding the foregoing, with respect to Permitted Tenant Alterations for which a building permit is required, no work shall be performed until Tenant provides notice to Landlord that Tenant will be undertaking such Permitted Tenant Alteration, which notice describes in reasonable detail the scope of the Permitted Tenant Alteration. Tenant's delivery to Landlord of a copy of Tenant's application for a building permit shall be deemed to satisfy the foregoing description of the scope of the Permitted Tenant Alteration. 7.3 Removal at Lease Termination. If removal of a Tenant Alteration (including Permitted Tenant Alterations) is required at termination of this Lease, Tenant shall promptly remove such Tenant Alterations and repair any damage occasioned by such removal to Landlord's reasonable satisfaction. In default thereof, Landlord may effect said removal and repairs at Tenant's expense and treat Tenant as a holdover tenant until such removal and restoration is completed. With respect to any Tenant Alterations which Tenant is not obligated to remove hereunder, such Tenant Alterations, if not removed by Tenant upon the termination of this Lease, shall be deemed abandoned by Tenant and deemed a part of Landlord's property. 8. GENERAL CONSTRUCTION/MAINTENANCE PROCEDURES. 8.1 Quality of Performance. All undertakings under Sections 6, 7 and 10 hereof which are furnished by or upon the direction of Tenant ("Tenant's Work") shall be performed in a good and workmanlike manner, using only materials of at least the same quality and integrity as that being repaired, replaced or altered, and performed and furnished in compliance with all applicable laws, regulations, ordinances and requirements of all duly constituted authorities or governmental bodies having jurisdiction over the Premises and of the requirements of any board of underwriters having jurisdiction thereof. 8.2 Prior Plan Approval. With respect to Structural Work and Tenant Alterations other than the Permitted Tenant Alterations, no work shall be performed until the plans and specifications therefor have been approved by Landlord, which approval shall not be unreasonably withheld. Where applicable given the nature of the Tenant's Work, Tenant shall provide copies of as-built plans and specifications for all Tenant's Work to Landlord within a reasonable time of completion of the Tenant's Work. 8.3 Contractors. Any contractors employed by Tenant to construct or perform Tenant's Work shall be approved by Landlord in writing, which approval shall not be unreasonably withheld. Each contractor shall carry contractor's liability insurance which covers Landlord as additional insured, covering bodily injury in such amounts as may be customary and appropriate for the Tenant's Work undertaken, as reasonably determined by Landlord. Tenant shall provide proof of such insurance acceptable to Landlord prior to commencement of any Tenant's Work on the Premises. 8.4 Mechanic's Liens. Prior to commencement of any Tenant's Work, Tenant shall procure waivers of mechanics liens from all contractors and copies of said waivers shall be delivered to Landlord prior to construction commencement. Tenant shall promptly pay and discharge all claims for labor done or supplies furnished. -5- 8.5 Landlord's Approval and Review Reimbursement. By approving any request for Tenant's Work (or any plans therefor), Landlord does not expressly or implicitly covenant or warrant that the Tenant's Work or the plans and specifications therefor are accurate, safe or sufficient, or that the same comply with any applicable laws, ordinances, building codes, zoning requirements and like regulations, nor shall Landlord's approval of any contractor be deemed any endorsement of the qualifications of such contractor. Tenant shall be solely responsible for determining the adequacy and sufficiency of the foregoing and for obtaining all necessary permits and governmental approvals, including a Certificate of Occupancy upon completion of the Tenant's Work, if and when required by the municipality in which the Premises are located. Tenant shall reimburse Landlord for Landlord's expenses incurred (including any engineering, architectural or legal fees) in connection with reviewing any request for consent to Tenant's Work. 9. SIGNS AND APPEARANCE OF PREMISES. 9.1 Signs. Subject to applicable zoning requirements, Tenant, at its expense, may install and maintain one outside identification sign, which shall be of an appearance and at a location that is mutually acceptable to Landlord and Tenant. Tenant shall obtain at its expense all necessary permits or governmental approvals for such sign. 9.2 Exterior. Tenant shall not place or cause to be placed on the exterior of the Premises or upon the roof, or otherwise visible from the exterior of the Premises, any sign, awning, canopy, marquee, advertising matter, decoration, lettering, antennae, satellite dish or any other thing of any kind without the prior written consent of Landlord. 10. USE AND COMPLIANCE WITH LAWS. 10.1 Permitted Use. Tenant shall use the Premises only as a truck terminal and office space incidental thereto ("Permitted Use"). Tenant shall not permit the Premises to be vacant nor shall Tenant permit the Premises to be used for any illegal purpose or in any manner which would tend to damage any portion thereof. 10.2 Insurance Risks. Tenant shall not conduct any activity or permit any activity to be conducted or place any equipment in or about the Premises which would in any way increase the rate of fire insurance or other insurance on the Premises. 10.3 Compliance with Applicable Laws. Tenant shall comply with all applicable laws, regulations, ordinances, and directives of the Federal Government, state and municipality in which the Premises are located as well as all judicial orders and the requirements of any Board of Fire Underwriters (or any other body exercising similar functions) as are in effect during the Term of this Lease, including without limitation, those relating to Hazardous Materials (hereafter defined), those otherwise relating to occupational safety and health, and the Americans With Disabilities Act of 1990, as amended from time to time, and all regulations or judicial interpretations of the requirements thereof. Tenant, at Tenant's sole expense, shall perform any act or obligation arising from or as is necessary to achieve such compliance. At all times during this Lease, Tenant shall maintain and comply with all permits, licenses or other -6- authorizations required by any governmental authority or agency for Tenant's occupancy or operations at the Premises. 10.4 Notice of Violations. Tenant shall promptly notify Landlord of violation of any applicable law which is alleged to have been committed at the Premises and shall forward to Landlord copies of any written communications, complaints, citations or other notices relating to the condition of the Premises or compliance with applicable laws ("Action Notice"). Tenant promptly shall respond to any Action Notice, cure any violation of applicable laws and have dismissed any legal action commenced against Tenant or the Premises to the satisfaction of Landlord. Prior to undertaking same, however, Tenant shall propose to Landlord its intended course of action and proceed only with Landlord's approval of same, which shall not be deemed to be Landlord's guarantee that such action is appropriate nor impose any liability for same on Landlord. 10.5 Landlord's Inquiries and Inspection. Tenant shall promptly and accurately respond in writing to all inquiries made by Landlord (including without limitation requests for documents) pertaining to Tenant's obligations under this Lease or use of the Premises. Landlord and any authorized agent or contractor hired by Landlord may enter the Premises at any time and from time to time for purposes of inspecting same and conducting tests and sampling thereupon as Landlord deems reasonably necessary to determine that Tenant is in compliance with this Lease, but Landlord shall not be obligated to do so. Unless an emergency exists, as determined by Landlord in its sole discretion, Landlord shall notify Tenant at least one (1) day in advance of any such inspection or testing and, to the extent practicable, shall conduct any such inspection or testing in such manner so as to minimize unreasonable interference with Tenant's operations. The costs of such investigation and inspection shall be paid by Landlord unless it is determined that Tenant is in noncompliance with this Lease, in which case such costs shall be paid solely by Tenant as Additional Rent within ten (10) business days after Landlord's demand therefor. 10.6 Environmental Laws and Hazardous Materials. In amplification of Tenant's obligations under Section 10.3 above and not in limitation thereof, the following shall apply: (a) Environmental Laws. Tenant shall comply with all applicable environmental laws, orders, regulations, ordinances and directives now existing or hereafter enacted, and all judicial interpretations thereof (collectively, "Environmental Laws"), including without limitation the Industrial Site Recovery Act, N.J.S.A. 13: IK-6 et seq. ("ISRA"). Tenant, at Tenant's expense, shall perform any act or obligation arising from or as is necessary to achieve compliance with the Environmental Laws, including, without limitation, investigation of alleged or actual violations, performance of necessary testing and sampling, provision of financial assurances or remediation funding sources, and compliance with all directives of the governmental authority or agency ("Authority") have jurisdiction thereof. Tenant further agrees to cooperate with Landlord as is necessary for Landlord to satisfy lenders or investors that the Premises are in compliance with Environmental Laws, including without limitation by providing ISRA Clearance (defined below). -7- (b) Hazardous Materials. Tenant shall not cause or permit any portion of the Premises to be used for the production, storage, deposit or disposal of Hazardous Materials, nor shall Tenant permit Hazardous Materials ever to be placed or located upon the Premises except in such de minimis quantities of the types commonly used in office and cleaning supplies, provided that same are at all times used, kept and stored in full compliance with the Environmental Laws. As used herein, "Hazardous Materials" means all substances or pollutants which are declared to be or regulated as hazardous, toxic, dangerous or polluting substances under the Environmental Laws at any time during the Term of this Lease and shall include, without limitation, asbestos, polychlorinated biphenyles (PCBs), urea formaldehyde, foam insulation, and petroleum products and by-products. (c) Liens. Tenant shall promptly notify Landlord of any actual or threatened lien against the Premises of which Tenant becomes aware pursuant to any of the Environmental Laws. Tenant, at Tenant's sole cost and expense, shall promptly discharge and remove any lien arising from Tenant's violation of any of the Environmental Laws, such action to be completed within thirty (30) days after Tenant first receives notice of such lien or violation or such shorter period of time if required (1) by the governmental agency enforcing the correction of such violation, or (2) to prevent the holder of any such lien from forcing the sale of the Premises. (d) Tanks. Tenant shall not bury nor place any underground or above- ground storage tanks at the Premises or the land on which same is located. (e) Industrial Establishment. Tenant shall not permit all or any portion of the Premises to be occupied or used by an "Industrial Establishment" as defined under ISRA (defined below); provided, however, that if the definition of "Industrial Establishment" is amended or reinterpreted after the commencement of a permitted occupation or use in such a way that such occupation or use falls within the new definition of "Industrial Establishment," Tenant shall be permitted to continue the occupation or use and shall not for that reason be in breach of this Lease. (f) ISRA at Lease Termination. In addition to Tenant's general obligation to comply with ISRA, and irrespective of whether ISRA is applicable to Tenant's use of the Premises, Tenant, at Tenant's expense, shall obtain in connection with any termination of this Lease either: (A) a nonapplicability letter; (B) a de minimis quantity exemption; (C) an unconditional approval of Tenant's negative declaration; or (D) a no further action letter with respect to Tenant's remediation work plan (collectively "ISRA Clearance") from the Authority having jurisdiction over ISRA compliance. If Tenant fails to deliver ISRA Clearance which is satisfactory to Landlord upon the termination of this Lease, Landlord shall have the right, in addition to Landlord's remedies for breach of this Section, to treat Tenant as a holdover tenant in possession of the Premises in accordance with the terms of this Lease. If, however, Tenant has timely and in good faith attempted to discharge its ISRA obligations prior to the termination of this Lease and Tenant demonstrates to Landlord's reasonable satisfaction that Tenant's failure to obtain an ISRA Clearance is due solely to the failure of the Authority to respond to Tenant's submissions and/or the failure of Landlord to make any submissions or provide any cooperation that is necessary for Tenant to have obtained the ISRA Clearance, such failure shall not constitute a breach of this Lease nor entitle Landlord to treat Tenant as a holdover Tenant. -8- (g) Remedial Action. Should an Authority determine that remediation be undertaken at the Premises because Hazardous Materials have been Released (hereafter defined) in, on, under or about the Premises during the Term, Tenant, at Tenant's expense, shall promptly prepare and submit a remedial action work plan and establish a remediation funding source which are satisfactory to the applicable Authority and diligently complete its obligations thereunder. "Release" means any release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching, or migration into the indoor or outdoor environment, including the movement of any Hazardous Materials through or in the air, soil, surface water, groundwater, at, on, in under or from the Premises; the term "Released" shall have a corresponding meaning. Landlord agrees to cooperate with Tenant as is necessary for Tenant to obtain approval of such remedial action workplan, but Landlord shall not be obligated to, and nothing in this Lease shall be construed to require Landlord to, cooperate with or consent to: (1) any remediation or cleanup which does not strictly comply with the applicable Authority's most stringent relevant criteria for protection of human health, the environment or groundwater quality; (2) any Declaration of Environmental Restrictions or any similar recorded notice or institutional control, or any Classification Exception Area (as such terms are defined in ISRA); or (3) any remediation or clean-up which involves the use of engineering controls that allow contamination to remain at the Premises at levels in excess of the applicable Authority's most stringent relevant criteria for protection of human health, the environment or groundwater quality; provided, however, that Tenant will not be obligated to remediate or clean-up the Premises or its environs beyond the condition of the Premises or its environs as they existed as of the commencement of this Lease. (h) Sharing of Environmental Documents. Each party shall notify the other in advance of all meetings scheduled with any Authority concerning compliance of the Premises with ISRA and all other Environmental Laws, and the other party, either directly or through representatives, shall have the right, without the obligation, to attend and participate in all such meetings. The parties shall make reasonable efforts to share Environmental Documents (hereafter defined) to insure that any party trying to comply with ISRA and the other Environmental Laws has all Environmental Documents reasonably available to the other party. "Environmental Documents" means all environmental documentation concerning the Premises or its environs, in the possession or under the control of a party, including without limitation all preliminary assessment reports, site investigation reports, remedial action plans or reports or the equivalent, sampling results reports, data, diagrams, charts, maps, analyses, conclusions, correspondence to or from the Authority, submissions to the Authority and directives, orders, approvals and disapprovals issued by the Authority. Each party shall deliver to the other party all Environmental Documents concerning the Premises; provided, however, that nothing herein shall require the disclosure of privileged information. 10.7 Indemnification. In amplification of Tenant's obligations under Section 14 and not in limitation thereof, Tenant shall indemnify, defend (with legal counsel selected by Landlord) and hold harmless Landlord from and against any and all claims, legal or equitable, damages for personal injury (including death) or harm to property (real or personal), liabilities, penalties, fines and costs (including without limitation, investigation and remediation costs, sums paid in private rights of action or in settlement of claims, legal fees, consultant fees and expert fees) and damages in the nature of loss of use of the Premises, or loss of a sale of the Premises, -9- arising out of or in any way connected to any condition caused or created by Tenant's failure to comply with its obligations under this Section 10. 10.8 Survival. The provisions of this Section 10 shall survive the scheduled expiration or earlier termination of this Lease, and, in addition to performance of the obligations hereby required, Tenant shall continue to pay rent, even though this Lease may have been terminated, until Tenant has completed the performance of all of its obligations hereunder. 11. INSURANCE. 11.1 Tenant's Required Coverage. (a) Type of Insurance. Tenant, at Tenant's sole cost and expense, shall carry and maintain during the Term of this Lease the following types of insurance, in the amounts and form hereinafter provided: (1) All Risk Insurance. Loss or damage to the Premises by fire, vandalism and malicious mischief, extended coverage perils commonly known as "All Risk" and all physical loss perils, including but not limited to sprinkler leakage, in an amount not less than one hundred percent (100%) of the then full replacement cost thereof as reasonably determined by Landlord from time to time; (2) Boiler Insurance. Loss or damage by explosion of steam boilers, pressure vessels or similar apparatus, now or hereafter installed in the Premises, in such limits with respect to any one accident as reasonably determined by Landlord from time to time; and (3) Public Liability and Premises Damage. Comprehensive public liability insurance with a combined single limit of not less than one million dollars ($1,000,000) (with inflation endorsement) per occurrence or such larger amount as reasonably determined by Landlord from time to time, insuring against any and all liability with respect to the Premises or arising out of Tenant's maintenance, use or occupancy thereof. (b) Tenant's Property and Improvements. Tenant acknowledges that Landlord shall have no liability or responsibility whatsoever with respect to any loss or damage however caused (including without limitation by fire or other casualty, sprinkler leakage, theft or vandalism), to Tenant's personal property located at the Premises and all personal property of others in Tenant's possession. Tenant agrees to carry such casualty insurance with respect thereto as is customarily carried by tenants of similar properties. 11.2 Policy Form. All policies of insurance required to be carried by Tenant hereunder shall be issued by insurance companies with general policyholders' rating of not less than A and a financial rating of AAA or better as rated in the most current available "Best's Insurance Guide" and qualified to do business in the state in which the Premises is located. All policies shall be in form and content acceptable to Landlord and shall name Landlord and such other persons or entities as Landlord specifies from time to time as additional insureds. Each -10- policy shall provide (a) that Landlord, although named as additional insured, shall nevertheless be entitled to recovery under said policy for any loss occasioned by reason of the acts or negligence of Tenant or Tenant's officers, employees or agents, and (b) the company writing said policy shall give to Landlord written notice not less than thirty (30) days in advance of any modification, cancellation or nonrenewal of such insurance coverage. All policies shall be written as primary policies, not contributing with, and not in excess of coverage which Landlord may carry. 11.3 No Separate Insurance. Tenant shall not, on Tenant's own initiative or pursuant to the request or requirement of any third party, take out separate insurance concurrent in form or contributing in the event of loss with the insurance required in this Section 11 to be furnished by Tenant if the effect of such insurance would invalidate or reduce the primary coverage which Tenant is required by this Lease to maintain. 11.4 Failure to Maintain Insurance. Tenant shall pay all of the premiums for insurance required hereunder. Certified copies of such insurance policies or certificates thereof shall be delivered to Landlord prior to Tenant's possession of the Premises, and thereafter no later than thirty (30) days prior to the expiration of the term of such policy. As often as any such policy shall expire or terminate, renewal or replacement policies shall be procured and maintained by Tenant which satisfy the requirements of this Lease. Tenant shall permit Landlord at all reasonable times to inspect the policies of insurance required to be maintained by Tenant hereunder. If Tenant shall fail to deliver evidence to Landlord that Tenant has in force the insurance required hereunder to be maintained by Tenant within the time period provided herein and does not thereafter deliver evidence of same to Landlord within twenty-four (24) hours of Landlord's demand (verbal or written) therefor, Landlord may treat such failure as an Event of Default and, in addition thereto, Landlord may obtain the required insurance on Tenant's behalf (but shall not be obligated to do so). If Landlord obtains the required coverage on behalf of Tenant, Tenant shall reimburse the actual premium amounts paid by Landlord within ten (10) business days after Landlord's written demand therefor. 11.5 Waiver of Subrogation. (a) Tenant, for itself and any party claiming through or under Tenant by way of subrogation or otherwise, hereby waives any claims against Landlord, and Landlord's employees and agents, for loss or damage to Premises covered by insurance maintained by Tenant or any party making its claim through or under Tenant, even if such loss or damage shall have been caused by the fault or negligence of Landlord or anyone for whom they may be responsible. (b) Landlord, for itself and any party claiming through or under Landlord by way of subrogation or otherwise, hereby waives any claim against Tenant, and Tenant's employees and agents, for loss or damage to Premises covered by insurance maintained by Landlord or any party making its claim through or under Landlord, even if such loss or damage shall have been caused by the fault or negligence of Tenant or anyone for whom Tenant may be responsible. Such waiver shall not, however, be deemed to prevent Landlord from -11- declaring Tenant in default of this Lease if the action or omission giving rise to the loss or damage also shall constitute a default under this Lease. (c) The waivers made pursuant to this Section shall be effective, however, only of and with respect to any loss or damage occurring during such time as the insured party's policy or policies of insurance covering said loss or damage shall contain a waiver of the insurer's right of subrogation and a provision to the effect that such waiver shall not adversely affect or impair said insurance or prejudice the right of the insured to recover thereunder ("Validation Provision"). Landlord and Tenant shall cause their respective insurers to include in their respective policies a Validation Provision which has the same effect as the foregoing. If the waivers created by this Section shall be determined to contravene any law with respect to exculpatory agreements and are thereby rendered unenforceable, the liability of the party in question shall be deemed not released but shall be secondary to the other's insurer. 12. FIRE OR CASUALTY. 12.1 Insured Casualty. (a) In case of damage to the Premises by a risk insured against pursuant to Section 11 hereof, Landlord, unless it shall otherwise elect as hereinafter provided, shall repair the Premises to substantially the condition which existed prior to such damage, with reasonable dispatch after receiving from Tenant written notice that damage has occurred, but without obligation to do so until Landlord has received confirmation from the insurance carrier and all mortgagees holding mortgages on the Premises that adequate insurance proceeds will be available for repair or reconstruction. Landlord's restoration, however, shall be of only those portions of the Premises which were provided at Landlord's expense, and restoration of items within the Premises which were not provided at Landlord's expense shall be Tenant's obligation. (b) If damage to the Premises exceeds fifty percent (50%) of its fair market value prior to such damage, as determined by a reputable fire adjuster or contractor selected by Landlord or the obligated insurer ("Damage Estimate"), then either party may terminate this Lease in the manner herein provided, in which event all Rent shall abate and this Lease terminate as of the date said damage occurred. Tenant shall notify Landlord in writing of its decision to terminate this Lease within thirty (30) days after delivery of the Damage Estimate to Tenant ("Tenant's Notice Period"). Tenant's failure to terminate this Lease by written notice of termination delivered to Landlord within Tenant's Notice Period shall be conclusively construed as Tenant's agreement for this Lease to continue; subject, however, to Landlord's right to terminate this Lease by written notice delivered to Tenant within thirty (30) days after the expiration of Tenant's Notice Period. If neither party terminates this Lease, then Landlord shall commence restoration, and Rent shall abate to the extent described in Subsection (c) below. (c) If the damages are such as to render the Premises or a portion thereof uninhabitable, as reasonably determined by Landlord, Rent shall abate in proportion to the portion of the Premises affected by such damage or of which Tenant has been deprived use as a result of such damage or reconstruction, as reasonably determined by Landlord. Such abatement shall commence as of the date of such damage and end when restoration of the -12- Premises is substantially completed or Tenant's operations are totally or partially resumed, whichever is earlier. 12.2 Uninsured Casualty. If damage or destruction of all or any portion of the Premises is not fully covered by insurance proceeds received by Landlord, Landlord shall have the right to terminate this Lease by written notice of termination delivered to Tenant within thirty (30) days after Landlord has been notified in writing that said damage or destruction is not covered by insurance. In such case, this Lease shall terminate as of the date specified in Landlord's notice to Tenant. 12.3 Mortgagee's Right. If the holder of any indebtedness secured by a mortgage covering the Premises requires that the insurance proceeds be applied to such indebtedness, then Landlord shall have the right to terminate this Lease by written notice of termination delivered to Tenant within thirty (30) days after such requirement has been made in writing upon Landlord. In such case, this Lease shall terminate as of the date specified in Landlord's notice to Tenant. 12.4 Damage Near End of Term. Notwithstanding any provision of this Lease to the contrary, Landlord shall not have any obligation whatsoever to repair, reconstruct or restore the Premises when the damage or destruction occurs during the last year of the Term of this Lease. In such event, Landlord shall have the option to terminate this Lease in which case Rent shall abate as of the date said damage occurred. 12.5 Tenant's Compensation/Liability. In no case shall Tenant be compensated by Landlord for damages or loss in the use of the Premises or for any inconvenience occasioned by such damage or restoration or for any theft, vandalism, or malicious mischief suffered in or at the Premises. Notwithstanding Section 11.5, if any damage is caused by the negligence or improper conduct of Tenant or any of Tenant's employees, agents, contractors, licensees or invitees, Tenant shall be responsible for all damages not covered by insurance, including without limitation, any deductible paid by Landlord and Rent through the Term hereof, even if this Lease shall have been terminated. 13. EMINENT DOMAIN. 13.1 Termination Rights. If through the exercise of the power of eminent domain, all or such portion of the Premises is taken as, in the reasonable determination of Landlord, substantially impairs Tenant's use of the Premises ("Substantial Taking"), then either party shall have the right to terminate this Lease effective as of the date that possession is required to be surrendered to said authority. Such termination right shall be exercised by written notice delivered to the other party within thirty (30) days after delivery of Landlord's notice to Tenant of a Substantial Taking. The failure of Tenant or Landlord to deliver termination notice within the time limit set forth above shall be conclusively construed as such party's agreement for this Lease to continue. 13.2 Repair and Rent Adjustment. If a Substantial Taking is not deemed to have occurred or if neither party terminates this Lease under subsection 13.1 above, Landlord -13- shall promptly restore the Premises to substantially the same condition prior to such condemnation (less the portion thereof lost in such condemnation), but without obligation to do so until Landlord receives the compensation awarded to Landlord on account of such taking and confirmation from all holders of mortgages on the Premises that the award shall be made available to Landlord for restoration. If the compensation awarded to Landlord is inadequate to fully cover the cost of necessary repairs or restorations, Landlord may terminate this Lease. If this Lease is not terminated by Landlord, then Base Rent shall be proportionately reduced by the portion of the Premises taken by the exercise of eminent domain, as reasonably determined by Landlord. Such adjustment shall be effective as of the date possession is required to be surrendered to the eminent domain authority. 13.3 Condemnation Awards. Tenant shall not be entitled to receive any part of any award or awards that may be made to or received by Landlord relating to loss of the Premises or any part thereof, and Tenant hereby assigns to Landlord any share of such award as may be granted to Tenant. Notwithstanding the foregoing, Tenant, at its sole cost and expense, may pursue independent proceedings against the authority exercising the power of eminent domain to prove and establish any damage Tenant may have sustained relating to Tenant's business and relocation expenses, provided any such compensation does not diminish Landlord's award. 13.4 Mortgagee's Rights. If the holder of any indebtedness secured by a mortgage covering the Premises requires that the condemnation award be applied to such indebtedness, then Landlord shall have the right to terminate this Lease by written notice of termination delivered to Tenant within thirty (30) days after such requirement has been made in writing upon Landlord. In such case, this Lease shall terminate as of the date specified in Landlord's notice to Tenant. 14. NONLIABILITY AND INDEMNIFICATION OF LANDLORD. 14.1 Release. Tenant hereby agrees that Landlord shall not be liable to Tenant and hereby releases Landlord for all liability to Tenant for injury to any person (including bodily damage or death) or damage to any property (including real or personal property), happening in any manner in, on or about the Premises from any cause whatsoever, unless caused solely by the gross negligence or willful misconduct of Landlord, but Landlord shall not be liable to Tenant for any such damage or loss to the extent that Tenant is compensated therefor by Tenant's insurance or would have been compensated therefor under policies which Tenant is required to carry under this Lease. In no event, however, shall Landlord be liable for consequential damages. Tenant agrees to the foregoing and makes the foregoing release on behalf of Tenant and any party claiming a right or interest through Tenant, including without limitation Tenant's agents, contractors, subcontractors, employees, licensees, or invitees (collectively, "Tenant's Agents"). 14.2 Indemnification. Tenant shall indemnify, defend (with legal counsel selected by Landlord), and hold harmless Landlord, and Landlord's employees and agents, from and against liability whatsoever which may be imposed upon, incurred by, or asserted against Landlord, or Landlord's employees or agents, by reason of any of the following which shall occur during the Term of this Lease: (a) use of the Premises by Tenant or Tenant's Agents; (b) any Tenant's Work done in, on or about the Premises (including without limitation as a result of -14- defect in design, material or workmanship) made by, or at the direction of Tenant or Tenant's Agents; (c) any accident, injury or damage to persons (including bodily injury and death) or property (real or personal) occurring in, or about the Premises, but not if caused solely by the gross negligence or willful misconduct of Landlord, or Landlord's employees or agents; and (d) any failure on the part of Tenant to perform or comply with any provision of this Lease. Without limiting the generality of the foregoing, Tenant's obligations hereunder shall include all damages, obligations, penalties, fines, liens, claims, reasonable fees for legal counsel selected by Landlord, investigation costs, remediation costs and all other reasonable costs and expenses incurred by Landlord, or Landlord's employees or agents. Tenant shall not settle or compromise any such liability for which indemnification is sought hereunder without first obtaining Landlord's prior written consent, which Landlord may withhold in its sole discretion. 14.3 Limitation on Landlord's Liability. The liability of Landlord to Tenant or anyone claiming by or through Tenant shall be limited to Landlord's interest in the Premises. The foregoing shall be absolute and without exception whatsoever. 14.4 Survival. This Section 14 shall survive the termination of this Lease with respect to any damage, injury, death or claim occurring before such termination, irrespective of when such claim is presented. 15. ASSIGNMENT AND SUBLEASING. 15.1 General Provisions. (a) Tenant shall not sell, assign, mortgage, pledge or otherwise transfer this Lease or Tenant's interest in the Premises (or any part thereof) nor shall Tenant sublease or permit occupancy of the Premises (or any part thereof) by any party other than Tenant, without Landlord's prior written consent which Landlord may withhold in its sole discretion. For purposes of this Lease, any merger, consolidation, or sale or transfer of a controlling interest in Tenant (being 51% or more, whether accomplished in a single transaction or in a series of transactions) or a sale of substantially all of the assets of Tenant shall be deemed an assignment of this Lease. All of the foregoing events described in this Section shall be deemed to be a "Transfer," and any purported Transfer undertaken without Landlord's consent shall be void at Landlord's option and constitute an Event of Default hereunder. (b) Each request for Landlord's consent shall be in writing and shall identify in reasonable detail (1) the identity, business and financial condition of the proposed subtenant or assignee, (2) the terms and conditions of the proposed Transfer, and (3) the nature of the use of the Premises proposed by such assignee or subtenant. Tenant shall deliver such further information as Landlord may request to make its decision. (c) If Landlord consents to any Transfer, Landlord shall be provided with a written agreement which is acceptable in form and content to Landlord and by which the transferee assumes all obligations of Tenant hereunder. No Transfer shall relieve Tenant of any obligation under this Lease unless otherwise agreed in writing signed by Landlord, and any purported Transfer undertaken without Landlord's consent shall be void at Landlord's option and -15- constitute an Event of Default hereunder. Landlord's consent to any Transfer shall not constitute a waiver of the necessity of such consent to any subsequent Transfer. (d) The prohibitions in this Lease against Transfers shall be construed to include assignments by operation of law or by voluntary assignment or for the benefit of creditors or which might otherwise be affected or accomplished by bankruptcy, receivership, attachment, execution or other judicial process or proceeding. If any such assignment shall be made or deemed made by Tenant, then Landlord shall have the option to immediately terminate this Lease by written notice to Tenant. (e) Tenant shall pay all of Landlord's expenses (including reasonable fees for legal counsel) incurred in connection with any request for Landlord's consent to a Transfer. 16. DEFAULT OF TENANT. 16.1 Events of Default. In addition to Events of Default specified in other sections of this Lease, the occurrence of any of the following shall be a default by Tenant, and each shall constitute an "Event of Default" hereunder without notice from Landlord unless expressly required herein: (a) Tenant shall fail to pay Rent on its due date or shall fail to make any other payment when required pursuant to this Lease (regardless of whether or not any legal or formal demand has been made therefor); (b) Tenant shall violate or fail to perform any of the terms, conditions, covenants or agreements herein made by Tenant (other than those set forth in subsections 16.l(a) and (c)-(g) inclusive or where expressly declared to be an immediate default in other sections of this Lease) within thirty (30) days after written notice thereof from Landlord; (c) Tenant shall abandon or vacate any substantial portion of the Premises, whether or not Tenant is in default of the payments of Rent hereunder, and such abandonment or vacation shall continue for a period of five (5) business days after written notice thereof to Tenant by Landlord, which may be accomplished by sending notice to last known address of Tenant and posting notice on the door of the Premises: (d) Tenant shall be adjudicated a bankrupt or file a voluntary petition in any bankruptcy or insolvency proceeding, or if any involuntary petition in any bankruptcy or insolvency proceeding shall be filed against Tenant and not discharged by Tenant within sixty (60) days from the date of filing; (e) Tenant shall make or consent to an assignment for the benefit of creditors or a common law composition of creditors, without the prior written consent of Landlord; -16- (f) A receiver or trustee shall be appointed for all or substantially all of Tenant's assets; and/or (g) Tenant shall make a transfer in fraud of creditors. 16.2 Remedies. Upon the occurrence of any Event of Default, Landlord shall have the option to pursue any and all rights and remedies available herein or at law or in equity, without any notice or demand whatsoever, including without limitation: Upon the occurrence of any Event of Default, Landlord shall have the following rights and remedies which shall be cumulative and are in addition to any other remedies available by law or equity: (a) Lease Termination. Landlord shall have the right to immediately terminate this Lease and all rights of Tenant hereunder, in which event Tenant shall immediately surrender the Premises to Landlord. If Tenant fails to do so, Landlord may, without notice and without prejudice to any other remedy Landlord may have, enter upon and take possession of the Premises and expel or remove Tenant and its effects without being liable to prosecution or any claim for damages therefor and Tenant shall indemnify Landlord for all loss and damages which Landlord may suffer by reason of such termination, whether through inability to relet the Premises or otherwise, including loss of Rent for the remainder of the Term and any exercised renewals. (b) Rent Acceleration. Landlord shall have the right to declare Rent for the unexpired portion of the Term (without regard to any early termination of the Term by virtue of an Event of Default) immediately due and payable. Rent so accelerated shall include Landlord's good faith estimate of all amounts due as Additional Rent for the unexpired Term of this Lease which Landlord may base on the highest monthly rate or amount in effect during the twelve (12) months immediately preceding the Event of Default. Accelerated Rent shall accrue interest at the Interest Rate from the date of Landlord's acceleration until paid in full. (c) Option to Rent. Landlord, with or without terminating this Lease, shall have the right (but not the obligation) to relet the Premises or any part thereof for such Rent and upon such terms as Landlord deems appropriate. Tenant shall remain liable for any deficiency between the Rent collected by Landlord on account of such reletting and the Rent due hereunder, along with all expenses incurred by Landlord in connection with such reletting, including without limitation, costs of cleaning, painting, repairing or refitting the Premises, advertising, broker fees, municipal fees, and legal fees for preparation and negotiation of the replacement lease. Landlord shall have the right to bring suit for collection of such deficiency on a monthly basis or delay such collection action until the expiration of the Term of this Lease, in which event Tenant hereby agrees that the cause of action shall not be deemed to have accrued until the date originally scheduled for expiration of the Term of this Lease. In no event, however, shall Tenant be entitled to any rent received by Landlord in excess of amounts due hereunder. (d) Dispossession. The provisions of this Section 16 shall automatically operate as a notice to quit (any notice to quit, or of Landlord's intention to re-enter, -17- being hereby expressly waived), and Landlord may proceed to recover possession under and by virtue of the laws of the jurisdiction where the Premises are located. (e) Waiver of Redemption Rights. Tenant hereby expressly waives any and all rights of redemption granted by or under any present or future law in the event this Lease is terminated or Tenant is evicted or dispossessed following an Event of Default. (f) Removal of Contents by Landlord. Landlord shall have the right, with or without terminating this Lease, to re-enter the Premises and remove all persons and property from the Premises. All property removed by Landlord may be stored in a public warehouse or elsewhere at the cost of and for the account of Tenant, without service of notice or resort to legal process (all of which Tenant expressly waives), and Landlord shall have no liability whatsoever to Tenant therefor, including without limitation liability for trespass or conversion. 16.3 No Waiver or Adverse Interpretation of Actions. No waiver by Landlord of any breach of any covenant, condition or agreement herein contained shall operate as a waiver of such covenant, condition, or agreement, or of any subsequent breach thereof. No payment by Tenant or receipt by Landlord of a lesser amount than the Rent herein stipulated shall be deemed to be other than on account of Rent, nor shall any endorsement or statement on any check or letter accompanying a check for payment of Rent be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord's right to recover the balance of such Rent or to pursue any other remedy provided in this Lease. Payment received by Landlord when Tenant is in arrears shall be applied as Landlord determines. No re-entry, re- letting or taking of possession of the Premises by Landlord, and no acceptance by Landlord of keys from Tenant shall be considered Landlord's acceptance of a surrender of this Lease nor Landlord's election to terminate this Lease unless written notice signed by Landlord which expressly states such intention is given to Tenant or unless the termination thereof is decreed by a court of competent jurisdiction, and Tenant's liability under this Lease shall continue until the Term would have expired had such termination not occurred. No action shall be construed to impose upon Landlord a duty to mitigate damages, and Landlord and Tenant agree that Landlord has no duty to mitigate damages following Tenant's default. 16.4 Right of Landlord to Cure Tenant's Default. Whenever Tenant defaults in the making of any payment required hereunder or in the doing of any act herein required to be made or done by Tenant, then Landlord, without prior notice to Tenant, may make such payment or do such act on Tenant's behalf but shall not be required to do so. All costs incurred by Landlord to satisfy Tenant's obligations, including without limitation payment of any penalty or fine which may be imposed as a result of Tenant's failure or violation, shall be paid by Tenant as Additional Rent within ten (10) business days after Landlord's demand therefor. The making of such payment or the taking of such action by Landlord shall not operate to cure or waive such default by Tenant nor prevent Landlord from exercising any other remedy available to Landlord. 16.5 Collection Expenses. If Landlord consults an attorney or collection agency for the collection of any sums due from Tenant or otherwise to enforce Tenant's performance hereunder, Tenant, whether or not proceedings are instituted, shall reimburse Landlord for the -18- reasonable fees for legal counsel, collection fees and court costs, if any, incurred by Landlord within ten (10) business days after Landlord's demand therefor. 17. SURRENDER AT LEASE TERMINATION. Upon the scheduled expiration or earlier termination of this Lease, Tenant shall promptly surrender to Landlord the Premises, together with all building apparatus, machinery, replacements to mechanical and other systems serving the Premises, Tenant's Work performed during the Term and any fixtures installed by Tenant other than Tenant's trade fixtures, except for items which Landlord, in writing, may have permitted or required Tenant to remove at the termination of this Lease. Tenant shall return the Premises in substantially the same condition as the Premises were delivered to Tenant at the commencement of this Lease, reasonable wear and tear accepted. 18. HOLDING OVER. If Tenant shall not immediately surrender the Premises on the scheduled expiration or earlier termination of this Lease, then, in addition to all remedies available to Landlord for Tenant's default, Tenant, as a result of such holding over, shall become a tenant at will, at twice (2x) the monthly installment of Base Rent due for the last month of the Term of this Lease together with all Additional Rent due hereunder, and otherwise upon the terms, conditions, covenants and agreements of this Lease. Tenant also shall be liable to Landlord for all damages which Landlord suffers because of any holding over by Tenant, and Tenant shall indemnify Landlord against all claims made by any other tenant or prospective tenant against Landlord resulting from delay in delivering or inability to deliver possession of the Premises to such other tenant or prospective tenant. 19. SUBORDINATION, NONDISTURBANCE AND ATTORNMENT. 19.1 Estoppel Certificate. Within ten (10) business days after Landlord's request, Tenant shall provide an estoppel certificate in recordable form certifying (if such be the case) that this Lease is in full force and effect and that there are no defenses or offsets thereto, or stating those claimed by Tenant, along with such other information as Landlord reasonably may request. Tenant's failure to deliver such statement within the time required shall be conclusive evidence of Tenant's certification that this Lease is in full force and effect, that there are no defenses or offsets thereto, and of such other information as Landlord has reasonably requested. 19.2 Attornment. Tenant shall attorn to any mortgagee or purchaser of the Premises. 19.3 Subordination. Tenant's rights hereunder are subordinate to the lien of any mortgage or mortgages, or to the lien resulting from any other method of financing or refinancing, or to any ground lease, now or hereafter in force against the land of which the Premises are a part, to all advances made upon the security thereof, and to all renewals, extensions or modifications thereof. Regardless of the self-operating provision of this Section, if a prospective mortgagee or ground lessee requests Tenant to sign a subordination agreement, Tenant shall do so promptly. 19.4 Rights of Mortgagee. If any act or omission of Landlord hereunder which would give Tenant the right to cancel or terminate this Lease, or to claim a total or partial -19- eviction, Tenant shall not exercise such right (a) until it has given written notice of such act or omission to the holder if each mortgage and ground lessee whose name and address shall have been furnished previously to Tenant in writing, and (b) until a reasonable period for remedying such default shall have elapsed following the giving of such notice. 20. SUBDIVISION, EASEMENTS AND LICENSES. Tenant's use of the Premises shall be subject to all covenants, conditions, easements and restrictions now or hereafter affecting or encumbering the land on which same are located. Landlord reserves the right to (a) subdivide the land on which the Premises are located, (b) alter the boundaries of the land on which the Premises are located, (c) grant easements on the land on which the Premises are located and dedicate for public use portions thereof and (d) grant licenses creating rights to use the rooftop of the Premises and utility lines serving the Premises; provided, however, that no such action shall materially interfere with Tenant's Permitted use of the Premises. Tenant hereby consents, and subordinates this Lease, to such subdivision, boundary revision, and/or grant or dedication of easements and agrees from time to time, at Landlord's request, to execute, acknowledge and deliver to Landlord, in accordance with Landlord's instructions, all documents or instruments necessary to effectuate Tenant's consent thereto. 21. LIMITED ATTORNEY-IN-FACT. If Tenant shall fail to execute any such instruments or certificates to carry out the intent of Sections 19 or 20 within ten (10) business days after Landlord's written request for Tenant to execute such instruments or certificates, then Tenant hereby irrevocably appoints Landlord as attorney-in-fact for Tenant with full power and authority to execute and deliver in the name of Tenant any such instruments or certificates. 22. LANDLORD'S COVENANT OF QUIET ENJOYMENT. Landlord covenants that Tenant, and all those claiming through Tenant and permitted hereunder, shall have quiet and peaceable enjoyment of the Premises by and through Landlord provided Tenant, and all those claiming through Tenant and permitted hereunder, are not in default of this Lease. 23. LANDLORD RIGHT OF ENTRY. Landlord shall have the right to place on any portion of the Premises signs or billboards indicating that the Premises are "For Sale" or "For Rent," but such signs shall be of such size and so placed as not to materially interfere with Tenant's Permitted Use of the Premises. At all times during this Lease, Landlord, and Landlord's agents, upon reasonable notice to Tenant, shall be admitted to the Premises at reasonable hours of the day to view the Premises, including without limitation, the right to show the Premises to prospective purchasers, mortgagees, tenants or contractors. 24. RULES AND REGULATIONS. At all times during the Term, Tenant shall comply with, and cause Tenant's Agents to comply with, all rules and regulations set forth in Exhibit A attached hereto and made a part hereof, together with such amendments and supplements thereto as Landlord may from time to time reasonably adopt. 25. FINANCIAL STATEMENTS. Tenants shall, at the request of the Landlord, furnish its current financial statements certified by Tenant's chief financial officer and, if applicable, such annual or quarterly reports as Tenant may file with the Securities and Exchange -20- Commission or any other government agency. Such financial statements shall be prepared in accordance with generally accepted accounting principles. 26. CORPORATE AUTHORITY. Tenant represents that the person who executed this Lease on Tenant's behalf has been duly authorized to enter into this Lease and that the execution and consummation of this Lease by Tenant does not and shall not violate any provision of any by-laws, certificate of incorporation, or other agreement, order, judgment, governmental regulation or any other obligations to which Tenant is a party or is subject. 27. CHANGE IN OWNERSHIP. If the Premises are sold, or in the event of any change of legal title or equitable ownership thereof, all obligations and rights of Landlord hereunder shall be transferred to such purchaser or transferee, and Landlord's obligations shall terminate and Landlord shall be released and relieved from all liability and responsibility to Tenant. Tenant shall look solely to such purchaser or transferee for the performance of said obligations or for the enforcement thereof. Each purchaser of assignee shall in turn have like privileges of sale, assignment and release. 28. SUCCESSORS AND ASSIGNS. This Lease shall inure to the benefit of and shall bind the parties hereto and their respective heirs, successors and permitted assigns to the extent that such rights hereunder may succeed and be assigned according to the terms hereof. 29. NOTICE. All notices, demands and communications required or permitted by this Lease shall be effective only if in writing (unless otherwise provided herein) and shall be sent by United States certified mail, return receipt requested or overnight mail deposited with a nationally recognized carrier with a receipt therefor, postage prepaid in each case and using the address for such recipient designated below or such other address as either party may have furnished to the other in accordance with this Section. Any notice so provided shall be deemed to have been delivered upon the earlier of (a) actual receipt, or (b) two (2) business days after mailing by certified mail, return receipt requested, or (c) one (1) business day after depositing with a nationally recognized carrier. Initial notice addresses for Landlord and Tenant are as follows: If to Landlord: Harry and Karen Muhlschlegel 4 Stag Leap Court Tabernacle, NJ 08088 If to Tenant: Jevic Transportation, Inc. ___ Ironside Court Willingboro, NJ 08080 30. SEVERABILITY. If any term, covenant, condition of provision of this Lease, or the application thereof to any person or circumstance, shall to any extent be held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, covenants, conditions or provisions of this Lease, or the application thereof to any person or circumstance, shall remain in full force and effect and shall in no way be affected, impaired or invalidated. -21- 31. ENTIRE AGREEMENT AND GOVERNING LAW. This Lease is the entire agreement of Landlord and Tenant and shall be governed and construed in accordance with the laws of the state in which the Premises are located. This Lease shall not be amended or supplemented unless by written agreement signed by Landlord and Tenant. 32. WAIVER OF TRIAL BY JURY. LANDLORD AND TENANT EACH WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES AGAINST THE OTHER ON ANY MATTER WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS LEASE, THE RELATIONSHIP OF LANDLORD AND TENANT, TENANT'S USE AND OCCUPANCY OF THE PREMISES, AND/OR ANY CLAIM OF INJURY OR DAMAGE. IN WITNESS WHEREOF, and intending to be legally bound, Landlord and Tenant have caused this Lease to be duly executed under seal, as of the day and year first above written. LANDLORD October 1, 1997 /s/ Harry Muhlschlegel - ---------------------- --------------------------------- Date Harry Muhlschlegel October 1, 1997 /s/ Karen Muhlschlegel - ---------------------- --------------------------------- Date Karen Muhlschlegel TENANT Jevic Transportation, Inc. October 1, 1997 By: /s/ Paul J. Karvois - --------------------- ----------------------------- Date Print Name: Paul J. Karvois Title: President -22- EXHIBIT A RULES AND REGULATIONS --------------------- Unless otherwise provided herein, capitalized terms shall have the definition provided in the Lease. 1. The water, bathroom, and other plumbing fixtures shall not be used for any purposes other than those for which they were constructed, and no sweepings, rubbish, rags, or other substances shall be thrown therein. 2. No animals of any kind (other than guide dogs for the visually impaired) shall be brought into or kept about the Premises. 3. Tenant shall immediately notify Landlord of any serious breakage, fire or disorder which comes to its attention in the Premises. 4. Tenant shall not re-key the Premises or add additional locks or security to the Premises without the prior written consent of Landlord and provision to Landlord of the new keys and security codes. EX-10.20 6 TAX INDEMNITY AGREEMENT TAX INDEMNITY AGREEMENT THIS TAX INDEMNITY AGREEMENT is made this 3rd day of October, 1997, by and among JEVIC TRANSPORTATION, INC., a New Jersey corporation (the "Company"), and each of the Company's shareholders (collectively, the "Shareholders" and each individually a "Shareholder"). W I T N E S S E T H: WHEREAS, the Company filed an election prior to March 15, 1990, with the Internal Revenue Service to be taxed as an "S" corporation under Subchapter S of the Internal Revenue Code of 1986, as amended (the "Code") and under similar provisions of state and local tax laws; WHEREAS, for the period (the "S Corporation Period") commencing on January 1, 1990 until the close of business on the Termination Date (as hereinafter defined), the Company will have been taxed as an "S" corporation under Subchapter S of the Code and under similar provisions of applicable state and local tax laws; WHEREAS, for Federal and certain state and local income tax purposes, the Company's items of income, loss and deductions were passed through to and reported on the individual tax returns of the Shareholders; WHEREAS, as a result of the initial public offering ("Public Offering") of the Company's common stock, no par value per share ("Common Stock"), the Company will no longer be eligible to be taxed as an S corporation for Federal and certain state and local income tax purposes; and -1- WHEREAS, the parties to this Agreement recognize that the election of the Company to be taxed under Subchapter S of the Code will terminate automatically at the close of business on the day (the "Termination Date") immediately preceding the closing ("Closing") of the Public Offering; and WHEREAS, the parties to this Agreement desire to set forth their agreement with respect to certain taxes (and related liabilities) which may be imposed upon the Shareholders or the Company as a result of the invalidity or termination of the Company's S corporation election or the conduct of the Company's business during the S Corporation Period; NOW, THEREFORE, in consideration of the foregoing and of the mutual promises, covenants and conditions hereinafter contained, the parties hereto, intending to be legally bound hereby, agree as follows: 1. Prior to consummation of the Public Offering, the Company will distribute to the Shareholders the sum of $10,000,000 to shareholders of record as of August 11, 1997. In addition, the Company will make additional distributions to the Shareholders for the purpose of providing the Shareholders with sufficient funds to pay their estimated income tax liabilities attributable to the Company's taxable income earned in 1997 prior to the Closing. Such distributions (collectively, the "Distributions") were made on a pro rata basis in accordance with the number of shares of Common Stock owned by each Shareholder on the respective record date or date of distribution, as the case may be. 2. a. The Company agrees to indemnify, defend and hold harmless each Shareholder, from and against any and all losses, liabilities, obligations, damages, impositions, assessments, fines, deficiencies, costs and expenses, including without limitation, attorneys' and -2- accountants' fees and expenses (collectively, a "Loss") with respect to all Federal, state, city, or municipal taxes of any kind whatsoever including interest, penalties, and additions to taxes (collectively, "Taxes") imposed upon a Shareholder as a result of an adjustment or change, including any increase in items of income or gain or any decrease in items of loss, deduction, or credit reported to such Shareholder by the Company with respect to the Company's S Corporation Period, but only to the extent that such adjustment or change consists of: (i) an increase in an item of the Company's income or gain with respect to one or more of the taxable years of the Company (including short taxable years) failing within the Company's S Corporation Period ("S Years") and a corresponding decrease in an item of income or gain with respect to one or more of the taxable years of the Company (including short taxable years) falling outside of the Company's S Corporation Period ("C Years"); or (ii) a decrease in an item of loss, deduction, or credit reported to a Shareholder by the company with respect to one or more of the Company's S Years and a corresponding increase in an item of loss, deduction, or credit with respect to one or more of the Company's C Years. Any payment with respect to a Loss for Taxes shall be paid in cash by the Company no later than ten days prior to the due date of any payment required to be made by the Shareholder with respect to such Taxes. b. In the event any Taxes as to which an amount shall have been paid to a Shareholder by the Company pursuant to Section 2(a) are subsequently refunded or repaid to such Shareholder, such Shareholder agrees to repay to the Company such refund or repayment, less any net tax cost incurred by the Shareholder with respect to such amounts. c. Each Shareholder agrees to prepare his income tax returns with respect to the calendar year in which the Termination Date occurs consistent with the manner in -3- which each item of income, loss, deduction and credit of the Company is reported by the Company to each such Shareholder. 3. a. The Shareholders, individually on a pro rata basis in accordance with the number of shares of Common Stock owned by each Shareholder on the Termination Date, agree to indemnify, defend and hold harmless the Company, from and against any and all Losses with respect to Taxes imposed upon the Company as a result of an adjustment or change, including any increase in items of income or gain or any decrease in items of loss, deduction or credit of the Company, whether before, during or after the Company's S Corporation Period, but only to the extent that such adjustment or change (i) results from the invalidity or termination of the Company's S corporation election for any reason other than the Public Offering, or (ii) consists of: (A) an increase in an item of the Company's income or gain in any C Year and a corresponding decrease in an item of income or gain reported to the Shareholders by the Company with respect to an S Year; or (B) a decrease in an item of loss, deduction, or credit reported by the Company in any C Year and a corresponding increase in an item of loss, deduction, or credit with respect to an S Year. Any payment with respect to a Loss for Taxes shall be paid in cash by the Shareholders no later than ten days prior to the due date of any payment required to be made by the Company with respect to such Taxes. b. The obligation of the Shareholders to indemnify the Company under Section 3(a)(i) shall be limited in amount to the refund of Taxes received (or increases in net operating losses incurred multiplied by the federal income tax rate applicable for the shareholder) by such Shareholder as a result of the termination or invalidity of the S corporation election. Each Shareholder agrees that if the Company does or is to realize a Loss with respect to -4- Taxes because of the termination or invalidity of the S corporation election, such Shareholder will use his or her best efforts to file all necessary amended tax returns to claim all available refunds (or to achieve an increase in net operating loss carry forward). c. In the event any Taxes as to which an amount shall have been paid to the Company by the Shareholders pursuant to Section 3(a) are subsequently refunded or repaid to the Company, the Company agrees to repay to the Shareholders such refund or repayment, less any net tax cost incurred by the Company with respect to such amounts. d. In the event that the S corporation election of the Company is terminated during the S Corporation Period for any reason other than the Public offering, each of the Shareholders and the Company agrees to take such steps as are reasonably necessary to obtain relief from the effects of such termination pursuant to Section 1362(f) of the Code and the regulations thereunder. 4. a. Any Shareholder receiving notice of an intention by a taxing authority to audit any return of the Shareholder or the Company which includes any item of income, gain, deduction, loss, or credit reported by the Company with respect to any S Year shall inform the Company, in writing, of the intended audit within 15 days after receipt of such notice. Should the Company receive notice of an intention by a taxing authority to audit any return of the Company which includes any item of income, gain, deduction, loss, or credit reported by the Company with respect to any S Year shall inform the Shareholders, in writing, of the intended audit within 15 days after receipt of such notice. b. On behalf of all Shareholders, the Shareholder with the largest percentage interest in the outstanding stock of the Company on the Termination Date shall be -5- responsible for management and supervision of such audit of the Company (the "Managing Shareholder"). The Company shall cooperate with such audit by, without limitation, organizing and making available all books and records of the Company and participating, on a reasonable basis, in meetings and correspondence with the taxing authority. The cost of professional assistance, including independent accountants and attorneys hired by any or all of the Shareholders in the course of the audit shall be borne by such Shareholder or Shareholders. The Company shall have the right to participate in the audit, directly or through its representatives, at its expense, and the Managing Shareholder shall keep the Company informed of all meetings, correspondence and other procedural aspects of the audit. c. Any Shareholder (a "Notified Shareholder") receiving notice from a taxing authority of any proposed adjustment for which the Company may be required to indemnify the Notified Shareholder for any Loss for Taxes under Section 2(a) (a "Proposed Adjustment") must give notice to the Company of the Proposed Adjustment within 15 days after receipt of such notice from a taxing authority. A failure on the part of a Notified Shareholder to provide such notice to the Company on a timely basis shall not relieve the Company of its obligation of indemnification under Section 2(a) unless such failure materially prejudices the ability of the Company to cause the Proposed Adjustment to be contested. The Company may, based on the procedural rules then in effect either contest such Proposed Adjustment or upon giving written notice to the Notified Shareholder, request that the Notified Shareholder contest such Proposed Adjustment. If the Company shall contest such Proposed Adjustment itself, the Company shall bear all associated costs. If the Company shall request that any Proposed Adjustment be contested by the Notified Shareholder, then the Notified Shareholder shall, at the Company's -6- expense, contest (or engage representatives to contest) the Proposed Adjustment or permit the Company and, its representatives, at the Company's request, to contest the Proposed Adjustment (including pursuing all administrative and judicial appeals and processes). The Company shall pay to the Shareholders on demand all costs and expenses (including attorneys' and accountants' fees) that the Shareholders may incur in contesting such Proposed Adjustments. d. Without regard to any other provisions of this Agreement, the Shareholders shall not make, accept or enter into a settlement or other compromise with respect to any Taxes of the Company, which could be the subject of indemnification (whether by the Shareholders or the Company), or forego or terminate any proceeding relating to a proposed adjustment without the consent of the Company, which shall not be unreasonably withheld or delayed. e. Procedures similar to those set forth in Section 4(c) shall apply to any Proposed Adjustment with respect to which the Shareholders may be obligated to indemnify the Company with respect to any Loss for Taxes under Section 3; provided, however, that the Company shall have the right to require the Shareholders, at the Shareholders' expense, to contest any proposed adjustment that results from an assertion that there was a termination of the S corporation election or that it was invalid during any time in the S Corporation Period until a final judicial determination is reached as to the status of the S corporation election for the relevant time period. The Company shall not exercise such right if, in the judgment of the Company, there is no reasonable basis for contesting the assertion that the S election terminated or was invalid. Should the validity or termination of the S corporation election be raised in any audit with respect to Taxes, each Shareholder shall take all necessary steps to extend the time period for which such -7- Shareholder could file an amended tax return relating to the period for which the S corporation election is in question. f. Nothing in this Section 4 shall limit the Company's or the Shareholders' obligation to indemnify the other party pursuant to Sections 2 or 3 hereof if the indemnifying party decides not to contest, or abandons its prior decision to contest, a Proposed Adjustment. 5. The Company shall elect and the Shareholders shall consent, pursuant to Section 1362(e)(3) of the Code, to allocate tax items to its short taxable year ending on the Termination Date and its short taxable year beginning after the Termination Date pursuant to as if the tax year had ended on the Termination Date (the "closing of the books method"). 6. The covenants and agreements of the parties set forth in this Agreement shall survive indefinitely. 7. All notices, requests, demands and other communications which are required or which may be given under this Agreement shall be in writing. 8. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral and written, between the parties hereto with respect to the subject matter hereof. 9. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and assigns. 10. No provision of this Agreement may be amended, waived or otherwise modified without the prior written consent of each of the parties hereto. -8- 11. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument. This Agreement shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all of the parties reflected hereon as the signatories. 12. This Agreement shall be effective upon the Termination Date. 13. This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of New Jersey, without reference to the principles of conflicts of law. IN WITNESS WHEREOF, this Agreement has been duly executed as of the day and year first above written. JEVIC TRANSPORTATION, INC. By: /s/ Paul J. Karvois --------------------------------- Paul J. Karvois /s/ Harry J. Muhlschlegel -------------------------------------- Harry J. Muhlschlegel /s/ Karen B. Muhlschlegel -------------------------------------- Karen B. Muhlschlegel KAREN B. MUHLSCHLEGEL 1996 GRANTOR ANNUITY TRUST DATED OCTOBER 24, 1996 By: /s/ Karen B. Muhlschlegel -------------------------------- Karen B. Muhlschlegel, Trustee -9- HARRY J. MUHLSCHLEGEL 1996 GRANTOR ANNUITY TRUST DATED OCTOBER 24, 1996 By: /s/ Harry J. Muhlschlegel --------------------------------- Harry J. Muhlschlegel, Trustee JEFFREY MUHLSCHLEGEL INCOME TRUST DATED DECEMBER 31, 1994 By: By: /s/ George K. Reynolds III --------------------------------- George K. Reynolds III, Trustee JENNIFER B. MUHLSCHLEGEL INCOME TRUST DATED DECEMBER 31, 1994 By: By: /s/ George K. Reynolds III --------------------------------- George K. Reynolds III, Trustee VICKI L. WHITEHALL INCOME TRUST DATED DECEMBER 31, 1994 By: /s/ George K. Reynolds III --------------------------------- George K. Reynolds III, Trustee -10- HARRY J. MUHLSCHLEGEL 1997 FAMILY TRUST By: /s/ George K. Reynolds III --------------------------------- George K. Reynolds III, Trustee KAREN B. MUHLSCHLEGEL 1997 FAMILY TRUST By: /s/ George K. Reynolds III --------------------------------- George K. Reynolds III, Trustee -11- EX-23.1 7 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the use of our reports and to all references to our firm included in or made a part of this registration statement. ARTHUR ANDERSEN LLP Philadelphia, Pa. October 6, 1997 -----END PRIVACY-ENHANCED MESSAGE-----