-----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, TQOmm4pm9tDPxddpZ3cSu4WaQ9VIijV/Dn0li4hXY7XWrHdOrhmMeWo6XXTGPydZ zJX6aXG4DyzD7Sq8L0UuUA== 0000793765-96-000010.txt : 19960329 0000793765-96-000010.hdr.sgml : 19960329 ACCESSION NUMBER: 0000793765-96-000010 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19951229 FILED AS OF DATE: 19960328 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: KLLM TRANSPORT SERVICES INC CENTRAL INDEX KEY: 0000793765 STANDARD INDUSTRIAL CLASSIFICATION: TRUCKING (NO LOCAL) [4213] IRS NUMBER: 640412551 STATE OF INCORPORATION: DE FISCAL YEAR END: 1230 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-14759 FILM NUMBER: 96540185 BUSINESS ADDRESS: STREET 1: 3475 LAKELAND DR CITY: JACKSON STATE: MS ZIP: 39288 BUSINESS PHONE: 6019392545 MAIL ADDRESS: STREET 1: P.O.BOX 6098 CITY: JACKSON STATE: MS ZIP: 39288 10-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year Commission file number 0-14759 ended December 29, 1995 KLLM TRANSPORT SERVICES, INC. (Exact name of registrant as specified in its charter) Delaware 64-0412551 State or other jurisdiction of IRS Employer Identification No.) incorporation or organization) 3475 Lakeland Drive Jackson, Mississippi 39208 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (601) 939-2545 Securities registered pursuant to Section 12(g) of the Act: Common Stock, $1.00 Value Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ____ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Aggregate market value of voting stock held by nonaffiliates of the registrant as of the close of business on February 21, 1996: $34,979,070. The number of shares outstanding of registrant's common stock as of February 21, 1996: 4,358,653. DOCUMENTS INCORPORATED BY REFERENCE Portions of the following documents are incorporated by reference: Document Part Annual Report to Shareholders for year ended December 29, 1995 II Definitive Proxy Statement for Annual Meeting of Shareholders to be held April 16, 1996 filed with the Securities and Exchange Commission pursuant to Regulation 14A III Only the portions of KLLM Transport Services, Inc.'s 1995 Annual Report to Shareholders and Proxy Statement which are expressly incorporated by reference in this Annual Report on Form 10-K are deemed filed as part of this report. KLLM TRANSPORT SERVICES, INC. FORM 10-K TABLE OF CONTENTS PART I PAGE 1. Business............................................4 2. Properties..........................................6 3. Legal Proceedings...................................7 4. Submission of Matters to a Vote of Security Holders....................................7 PART II 5. Market for Registrant's Common Equity and Related Stockholder Matters..............8 6. Selected Financial Data.............................8 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.......8 8. Financial Statements and Supplementary Data.........8 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure..............8 PART III 10. Directors and Executive Officers of the Registrant...................................8 11. Executive Compensation..............................9 12. Security Ownership of Certain Beneficial Owners and Management...............................9 13. Certain Relationships and Related Transactions......9 PART IV 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.........................................10 PART I Item 1. Business. KLLM Transport Services, Inc. (through its wholly-owned subsidiary, KLLM, Inc., and KLLM, Inc.'s wholly-owned subsidiaries, KLLM Maintenance, Inc., Gulf Logistics, Inc., KLLM Contract Logistics, Inc., KLLM Trading Company, and Fresh International Transportation Services, Inc., hereinafter referred to as "the Company") is an irregular-route common carrier that specializes in providing high-quality transportation service in North America. The Company primarily serves the continental United States, Canada and Mexico. The Company, a Delaware corporation, is the successor by merger to KLLM Distributing, Inc. ("KLLM Distributing"), a Mississippi corporation, incorporated in 1964. The Company owns all of the outstanding shares of KLLM, Inc., a Texas corporation, which owns (either in fee or as lessee) and operates substantially all of the Company's tractors and trailers and holds all of the operating rights presently used in the Company's business. The Company offers transportation services for both temperature- controlled and dry commodities. It strives to provide dependable and timely service designed to meet the specialized needs of its customers. The majority of the Company's revenues, approximately 70%, are in the temperature- controlled sector. Protective service is provided on commodities such as food, medical supplies and cosmetics. Service offerings include over-the-road long haul, regional and intermodal transportation. These services are provided via: 1) the traditional over-the-road temperature-controlled freight operations with both Company-operated and owner-operated equipment, 2) the intermodal, or rail services, division, which handles movement of freight in temperature- controlled trailers and containers on flat cars carried by the rail industry, 3) the brokerage services division, which allows the Company to contract with other transporters for the movement of freight, when necessary, allowing the customer to stay within the KLLM family, and 4) the dry-van over-the-road truckload services, which began May 1, 1995 with the acquisition of substantially all of the assets of Vernon Sawyer, Inc., a regional dry-van truckload carrier based in Bastrop, Louisiana. At the end of 1995, the Company discontinued that segment of the international operations aimed at maritime containerized shipments. The Company currently owns (or leases) and operates substantially all of its fleet. On December 29, 1995, the Company's fleet consisted of 1,485 Company-operated tractors and 291 owner-operated tractors, 2,150 temperature- controlled trailers and 384 dry-van trailers, and 202 temperature- controlled rail containers. Capital expenditures, net of proceeds from trade-ins during 1995, were approximately $8,724,000. This was much less significant than in prior years, primarily because KLLM, Inc., in January 1995, entered into an operating lease for the majority of its revenue equipment needs for 1995. The payment terms of the operating lease were more favorable than could have been obtained with financing or capital leasing. Net capital expenditures in 1996 are expected to be approximately $25,921,000 as the Company returns to its traditional method of investing in maintaining a modern fleet. Marketing and Operations Because the Company specializes in temperature-controlled shipments, it constantly seeks to increase the percentage of its revenue derived from freight requiring controlled temperatures because rates on these loads are generally higher than dry freight (non-temperature-controlled) loads and result in higher returns on the Company's more expensive temperature- controlled equipment. For the year ended December 29, 1995, approximately 70% of the Company's revenues resulted from temperature-controlled loads. The remaining 30% resulted from dry freight loads that required special service or that positioned equipment for the next load. The Company seeks customers who need a number of trucks per week committed to long hauls and who require dependable service in meeting scheduling requirements. The Company's full-time staff of ten (10) salespersons, along with each division's executive, is responsible for developing new accounts in assigned areas of the United States. Once a customer relationship is established, the primary Company contact is one of eight (8) area managers. Working from the Company's corporate headquarters in Jackson, Mississippi, the area managers contact existing customers to solicit additional business. The Company has driver terminal operations in Georgia, Texas, Louisiana, California, Pennsylvania, Indiana, Mississippi, Arizona, and North Carolina. Maintenance facilities are located in Mississippi, Georgia, and Texas. The Company also has brokerage service operations in Mississippi, Georgia, Texas, Florida, Pennsylvania, Louisiana, Virginia, and Washington. The Company's largest 25, 10 and 5 customers accounted for approximately 61%, 45%, and 32%, respectively, of its revenue for the year ended December 29, 1995. During 1995, no one customer accounted for more than 10% of the Company's revenues. Maintenance The Company has a comprehensive preventive maintenance program for its tractors and trailers, which is carried out at its Jackson, Mississippi, Dallas, Texas, and Atlanta, Georgia facilities. The Company's policy is to purchase standardized tractors and trailers manufactured to Company specifications. Standardization enables the Company to control the cost of its spare parts inventory and streamline its preventive maintenance program. Manufacturers of tractors are required to certify that new tractors meet federal emissions standards, and the Company receives this certification on each new tractor it acquires. Environmental protection measures require the Company to adhere to a fuel and oil spill prevention plan and to comply with regulations concerning the discharge of waste oil. The Company believes it is in compliance with all applicable provisions relating to the protection of the environment. Management does not anticipate that compliance with these provisions will have a material effect on the Company's capital expenditures, earnings or competitive position. Personnel Drivers are recruited at all driver terminal locations. On December 29, 1995, the Company employed 1,808 drivers and had a total of 2,322 employees. None of the Company's employees is represented by a collective bargaining unit. Competition The freight transportation industry has become highly competitive. The Company competes primarily with other long-haul temperature-controlled truckload carriers and with internal shipping conducted by existing and potential customers. The Company also competes with other irregular-route long-haul truckload carriers, and to a lesser extent, the railroads, for dry freight loads. Although the increased competition resulting from deregulation has created some pressure to reduce rates, the Company competes primarily on the basis of its quality of service and efficiency. Trademark The Company's service mark, the KLLM logo, is registered with the United States Patent and Trademark Office. Seasonality In the freight transportation industry generally, results of operations show a seasonal pattern because customers reduce shipments during and after the winter holiday season with its attendant weather variations. The Company's operating expenses have historically been higher in the winter months primarily due to decreased fuel efficiency and increased maintenance costs in colder weather. Item 2. Properties. The Company's corporate office is situated on approximately seven acres of land and contains approximately 20,600 square feet of office space. Most of the Company's executive and administrative functions, except those that are driver-related, are housed in the corporate office. The corporate office is located in Flowood, Mississippi, a suburb of Jackson. In order to accommodate the growth of the Company, additional space is leased in the general vicinity of the corporate office for various executive and administrative functions. The Company also maintains a facility located in Richland, Mississippi, a suburb of Jackson, which houses all driver related executive and administrative functions, including safety, driver training, maintenance, and driver recruiting. The Company owns a portion of the land on which this facility is located. The remainder is owned by Benjamin C. Lee, Jr. and the Estate of William J. Liles, Jr. The Company owns all of the improvements, consisting of approximately 31,200 square feet of office space and approximately 52,000 square feet of equipment repair and maintenance space. The Company has an option to purchase the Lee and Liles part of the land for $390,257. Mr. Lee and Mr. Liles' estate are principal shareholders of the Company and Mr. Lee is Chairman of the Company's Board of Directors. The Company owns and operates a maintenance and driver terminal facility near Dallas, Texas. This facility, which consists of approximately 8,000 square feet of office space and 13,700 square feet of equipment repair and maintenance space, is located on approximately nine acres of land. The Company also owns and operates a maintenance and driver terminal operation in Atlanta, Georgia. This facility, which includes two buildings containing approximately 5,000 square feet of office space and 20,000 square feet of maintenance space, is located on approximately eighteen acres of land. Additionally, with the purchase of substantially all of the assets of Vernon Sawyer, Inc., effective May 1, 1995, the Company acquired 19.715 acres of land with all improvements thereon. The facilities located thereon include approximately 8,054 square feet of office space and 36,484 square feet of maintenance space. The remaining driver terminal facilities and the Company's brokerage operations facilities are leased by the Company pursuant to various short-term leases. Item 3. Legal Proceedings. The Company is involved in various claims and routine litigation incidental to its business. Although the amount of ultimate liability, if any, with respect to these matters cannot be determined, management believes that these matters will not have a materially adverse effect on the Company's consolidated financial position. Item 4. Submission of Matters to a Vote of Security Holders. Not applicable. PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters. "Market and Dividend Information" on page 5 of the Company's 1995 Annual Report to Shareholders is incorporated herein by reference in response to this item. Item 6. Selected Financial Data. "Selected Financial and Operating Data" on page 4 of the Company's 1995 Annual Report to Shareholders is incorporated herein by reference in response to this item. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. "Management's Discussion and Analysis of Financial Condition and Results of Operations" on pages 6-9 of the Company's 1995 Annual Report to Shareholders is incorporated herein by reference in response to this item. Item 8. Financial Statements and Supplementary Data. The Report of Independent Auditors and the consolidated financial statements included on pages 10-19 of the Company's 1995 Annual Report to Shareholders are incorporated herein by reference in response to this item. "Selected Quarterly Data (Unaudited)" on page 5 of the Company's 31995 Annual Report to Shareholders is incorporated herein by reference in response to this item. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None. PART III Item 10. Directors and Executive Officers of the Registrant. The information under the caption, "Election of Directors--Nominees for Director," of the Company's definitive proxy statement for its scheduled April 16, 1996 Annual Meeting of Shareholders filed with the Securities and Exchange Commission pursuant to Regulation 14A, is incorporated herein by reference in response to this item. The information under the caption, "Election of Directors-- Management," of the Company's definitive proxy statement for its scheduled April 16, 1996 Annual Meeting of Shareholders filed with the Securities and Exchange Commission pursuant to Regulation 14A, is incorporated herein by reference in response to this item. The information under the caption, "Compliance with Section 16(a) of the Securities and Exchange Act of 1934" of the Company's definitive proxy statement for its scheduled April 16, 1996 Annual Meeting of Shareholders filed with the Securities and Exchange Commission pursuant to Regulation 14A, is incorporated herein by reference in response to this item. Item 11. Executive Compensation. The information under the captions, "Executive Compensation; Director Compensation; Compensation Committee Report on Executive Compensation; Compensation Committee Interlocks and Insider Participation; Stock Option Plan; Employee Stock Purchase Plan ("ESPP") and Performance Graph" of the Company's definitive proxy statement for its scheduled April 16, 1996 Annual Meeting of Shareholders filed with the Securities Exchange Commission pursuant to Regulation 14A, is incorporated herein by reference in response to this item. Item 12. Security Ownership of Certain Beneficial Owners and Management. The information under the caption "Election of Directors--Stock Ownership," of the Company's definitive proxy statement for its scheduled April 16, 1996 Annual Meeting of Shareholders filed with the Securities and Exchange Commission pursuant to Regulation 14A, is incorporated herein by reference in response to this item. Item 13. Certain Relationships and Related Transactions. The information contained in the section titled "Certain Transactions" on page 5 of the Company's definitive proxy statement for its scheduled April 16, 1996 Annual Meeting of Shareholders filed with the Securities and Exchange Commission pursuant to Regulation 14A, is incorporated herein by reference in response to this item. PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. a. The following documents are filed, as part of this report or incorporated by reference herein: 1. Financial Statements The following consolidated financial statements of the Company and its subsidiaries, included in the Company's Annual Report, are incorporated by reference in Item 8: Consolidated Balance Sheets--December 30, 1994 and December 29, 1995. Consolidated Statements of Operations--Years ended January 2, 1994, December 30, 1994 and December 29, 1995. Consolidated Statements of Stockholders' Equity--Years ended January 2, 1994, December 30, 1994 and December 29, 1995. Consolidated Statements of Cash Flows--Years ended January 2, 1994, December 30, 1994 and December 29, 1995. Notes to Consolidated Financial Statements 2. Financial Statement Schedules The following consolidated financial statement schedule is included in Item 14(d): Schedule II - Valuation and Qualifying Accounts. All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted. 3. Listing of Exhibits (i) Exhibits filed pursuant to Item 601 of Regulation S-K Exhibit Number Description 3(a) Bylaws of Registrant 3(b) Certificate of Incorporation (as amended) 10(a) Amended and Restated Stock Option Plan 10(c) KLLM, Inc. Retirement Plan and Trust (as amended) 10(g) 1986 Lease with Mr. Lee and Mr. Liles Covering Corporate Headquarters 10(m) Employee Stock Purchase Plan (as amended) 10(r) Options granted to Mr. Young and Dr. Neely 10(z) First Amendment to Options granted to Mr. Young and Dr. Neely 10(aa) KLLM, Inc. Cafeteria Plan 10(bb) KLLM Maintenance, Inc. Retirement Plan and Trust Agreement 10(cc) Option to purchase real property on which terminal facility is located from Messrs. Liles and Lee 10(dd) Stock Purchase Agreement by and between KLLM, Inc. and Fresh International Corp. 10(ee) Revolving Credit Agreement by and among KLLM, Inc., NationsBank of Georgia, National Association, The First National Bank of Chicago, Deposit Guaranty National Bank, and ABN Amro Bank, N.V. 10(ff) Employment Agreement between KLLM Transport Services, Inc. and Steven K. Bevilaqua 10(gg) Options granted to Steven K. Bevilaqua 10(hh) Asset Purchase Agreement by and among Vernon Sawyer, Inc. and Vernon and Nancy Sawyer as Sellers and KLLM, Inc. as Purchaser (schedules furnished upon request) 13 1995 Annual Report (only portions incorporated by reference are deemed filed) 21 List of Subsidiaries of the Registrant 23 Consent of Ernst & Young LLP 27 Financial Data Schedule (b) Reports on Form 8-K filed in the fourth quarter of 1995: None (c) Exhibits--The response to this portion of Item 14 is submitted as a separate section of this report. (d) Financial Statements Schedules--The response to this portion of Item 14 is submitted as a separate section of this report. INFORMATION REGARDING THE COMPANY'S EMPLOYEE STOCK PURCHASE PLAN INCLUDED PURSUANT TO RULE 15d-21. 1. Full title of the Plan: KLLM Transport Services, Inc. Employee Stock Purchase Plan 2. Name of issuer of the securities held pursuant to the Plan and the address of its principal executive office: KLLM Transport Services, Inc. 3475 Lakeland Drive Jackson, Mississippi 39208 3. Financial Statements and Exhibits Not applicable. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this annual report to be signed on its behalf by the undersigned thereunto duly authorized. KLLM TRANSPORT SERVICES, INC. Date: March 28, 1996 By: /s/ Steven K. Bevilaqua Steven K. Bevilaqua President, Chief Executive Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Date: March 28, 1996 /s/ Benjamin C. Lee, Jr. Benjamin C. Lee, Jr. Chairman of the Board of Directors Date: March 28, 1996 /s/ Steven K. Bevilaqua Steven K. Bevilaqua President, Chief Executive Officer and Director Date: March 28, 1996 /s/ James Leon Young James Leon Young Secretary and Director Date: March 28, 1996 /s/ Walter P. Neely Walter P. Neely Director Date: March 28, 1996 /s/ Leland R. Speed Leland R. Speed Director Date: C. Tom Clowe, Jr. Director Date: March 28, 1996 /s/ J. Kirby Lane J. Kirby Lane Executive Vice President and Chief Financial Officer Date: March 28, 1996 /s/ Cindy F. Bailey Cindy F. Bailey Corporate Controller
Pursuant to the requirements of the Securities Exchange Act of 1934, the Board of Directors, administrators of the KLLM Transport Services, Inc. Employee Stock Purchase Plan, have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized. KLLM TRANSPORT SERVICES, INC. EMPLOYEE STOCK PURCHASE PLAN Date: March 28, 1996 By: /s/ Steven K. Bevilaqua Steven K. Bevilaqua President, Chief Executive Officer and Director
ITEM 14(a)(2) and (c) FINANCIAL STATEMENT SCHEDULES KLLM TRANSPORT SERVICES, INC. and SUBSIDIARIES SCHEDULE II - VALUATION and QUALIFYING ACCOUNTS Years Ended January 2, 1994, December 30, 1994, and December 29, 1995 BALANCE AT CHARGED TO WRITE-OFF BALANCE AT BEGINNING COST AND OF END DESCRIPTION OF PERIOD EXPENSES ACCOUNTS OF PERIOD (In Thousands) Allowance for Claims: Year ended January 2, 1994 $145 $ 426 $426 $145 Year ended December 30, 1994 $145 $ 954 $952 $147 Year ended December 29, 1995 $147 $ 1,239 $907 $479
EXHIBIT INDEX Exhibit Number Description Page 3(a) Bylaws of Registrant 3(b) Certificate of Incorporation (as amended) 10(a) Amended and Restated Stock Option Plan 10(c) KLLM, Inc. Retirement Plan and Trust (as amended) 10(g) 1986 Lease with Mr. Lee and Mr. Liles Covering Corporate Headquarters 10(m) Employee Stock Purchase Plan (as amended) 10(r) Options granted to Mr. Young and Dr. Neely 10(z) First Amendment to Options granted to Mr. Young and Dr. Neely 10(aa KLLM, Inc. Cafeteria Plan 10(bb KLLM Maintenance, Inc. Retirement Plan and Trust Agreement 10(cc Option to purchase real property on which terminal facility is located from Messrs. Liles and Lee 10(dd) Stock Purchase Agreement by and between KLLM, Inc. and Fresh International Corp. 10(ee) Revolving Credit Agreement by and among KLLM, Inc., NationsBank of Georgia, National Association, The First National Bank of Chicago, Deposit Guaranty National Bank, and ABN Amro Bank, N. V. 10(ff) Employment Agreement between KLLM Transport Services, Inc. and Steven K. Bevilaqua 10(gg) Options granted to Steven K. Bevilaqua 10(hh) Asset Purchase Agreement by and among Vernon Sawyer, Inc. and Vernon and Nancy Sawyer as Sellers and KLLM, Inc. as Purchaser (schedules furnished upon request) 13 1995 Annual Report (Only portions incorporated by reference are deemed filed) 21 List of Subsidiaries of the Registrant 23 Consent of Ernst & Young LLP 27 Financial Data Schedule
EX-10.1 2 EMPLOYMENT AGREEMENT WITH BEVILAQUA March 14, 1995 Mr. Steven K. Bevilaqua 2836 Fox Trail Road Fayetteville, AK 72703 Dear Steve: On behalf of the Board of Directors of KLLM Transport Services, Inc., I am pleased to offer you the position of President and Chief Executive Officer. Your background and career accomplishments have clearly demonstrated your ability to successfully lead our company. This letter outlines the terms of our offer which is subject to favorable results from: A complete physical examination at a medical facility of the company's choosing and at our expenses. Comprehensive reference checks to be conducted on your background and work experience/performance. Your compensation package would include the following: Base salary: $225,000 annually to be paid in equal installments monthly. Bonus opportunity: based on the company's new EVA plan, a copy of which you have received. Your 1995 bonus under the plan will be guaranteed at a minimum of $50,000. Stock options: 150,000 shares to be vested 20 percent at your date of employment and in equal amounts of 20 percent each year on your first, seconds, third and fourth anniversaries with the company. These options will be priced at $15.00. You will have 10 years from the date of employment to exercise these options. Relocation: $75,000 to paid in a lump sum the day you begin employment. This sum is to be used to cover your expenses related to moving, temporary living trips to/from Arkansas during the transition, house hunting trips, buying and selling costs for a home and other miscellaneous expenses related to your relocation. This amount will be grossed up to eliminate any income tax burden to you in 1995. Separation agreement: should KLLM deem it necessary to terminate your employment with the company at any time on or before January 1, 1997, you will be paid your annual base salary in 12 equal monthly installments following the date of your termination. The company will be under no obligation to pay you any amount if you are terminated for cause. Other perquisites: as provided by company policy for all KLLM executives. Steve, I am truly excited about the future of KLLM and our partnership together. I believe this financial package reflects our strong commitment to your success. If this offer of employment and the conditions under which it is made are acceptable to you, please sign this letter in appropriate space below and return it to me as soon as possible. Other members of the Board and I are looking forward to hosting you and Penny when you visit Jackson early next week. Sincerely, S/Billy William J. Liles, Jr. Chairman of the Board WJL/cc Accepted by: Date: S/S.K. Bevilaqua 3-22-95 EX-10.2 3 OPTIONS GRANTED TO BEVILAQUA STOCK OPTION KLLM TRANSPORT SERVICES, INC., a Delaware corporation ("Company"), hereby grants this stock option ("Option") to STEVEN K. BEVILAQUA ("Optionee") effective May 31, 1995. WHEREAS, Optionee is a key employee of outstanding ability and the Company considers it desirable and in its best interests that Optionee be given an increased incentive to continue in the service of the Company and to increase his efforts for the Company's welfare by possessing an Incentive Stock Option ("ISO") as defined in Section 422 of the Internal Revenue Code ("Code"), to purchase shares of Voting Common Stock (the "Stock") of the Company in accordance with the KLLM Transport Services, Inc. Stock Option Plan adopted by the directors of the Company on April 18, 1986, approved by the stockholders on April 18, 1986, amended and restated by the directors on December 15, 1986, and amended and restated by the directors on April 18, 1989 (as now in effect and as hereafter amended or restated, the "Plan"); WHEREAS, the Company considers it desirable and in its best interests that Optionee be given a further incentive to continue in the service of the Company and to increase his efforts for the Company's welfare by possessing a non-qualified option ("NQO") to purchase shares of Stock of the Company in accordance with the Plan; NOW, THEREFORE, the parties agree that the Option granted herein is subject to the following conditions: 1. Grant of ISO. In accordance with and under the terms of the Plan, the Company hereby grants to Optionee an ISO, giving him the right, privilege and option to purchase thirty-seven thousand thirty-five (37,035) shares of the Company's Stock at the purchase price of FIFTEEN AND NO/100 U.S. DOLLARS ($15.00) per share, in the manner and subject to the conditions provided below. 2. Time of Exercise of ISO. The ISO is immediately exercisable as to 7,407 shares and becomes exercisable as to the balance of shares on the following schedule: April 3, 1996 7,407 shares April 3, 1997 7,407 shares April 3, 1998 7,407 shares April 3, 1999 7,407 shares On and from the date any part of the ISO becomes exercisable, the ISO may be exercised as to such part at any time, and from time to time, in whole or in part, until the termination thereof as provided in Paragraph 6 below. Further, the aggregate Fair Market Value (as such term is defined in the Plan) of the Stock with respect to which this or any other ISO is exercisable for the first time by Optionee during any calendar year shall not exceed ONE HUNDRED THOUSAND AND NO/100 U.S. DOLLARS ($100,000). 3. Grant of NQO. In accordance with and under the terms of the Plan, the Company hereby grants to Optionee a NQO, giving him the right, privilege and option to purchase one hundred twelve thousand nine hundred sixty-five (112,965) shares of the Company's Stock at the purchase price of FIFTEEN AND NO/100 U.S. DOLLARS ($15.00) per share, in the manner and subject to the conditions provided below. 4. Time of Exercise of NQO. The NQO is immediately exercisable as to twenty-two thousand five hundred ninety-three (22,593) shares and becomes exercisable as to the balance of shares on the following schedule: April 3, 1996 22,593 shares April 3, 1997 22,593 shares April 3, 1998 22,593 shares April 3, 1999 22,593 shares On and from the date any part of the NQO becomes exercisable, the NQO may be exercised as such part at any time, and from time to time, in whole or in part, until the termination thereof as provided in paragraph 6 below. 5. Method of Exercise. The Option shall be exercised by written notice to the Secretary of the Company at the Company's principal executive offices, accompanied by a certified check in payment of the option price for the number of shares specified. The Company shall make immediate delivery of such shares. However, the Company shall not be required to issue or deliver any certificates for shares of Stock prior to (a) the listing of such shares on any stock exchange on which the Stock may then be listed, and (b) the completion of any registration or qualification of such shares under any federal or state law, or any ruling or regulation of any government body which the Company shall, in its sole discretion, deem to be necessary or advisable. 6. Termination of Option. Unless otherwise provided herein, the Option, to the extent not previously exercised, shall terminate upon the first to occur of the following dates: a. The expiration of three (3) months after the date of termination of the Optionee's employment with the Company for any reason other than death or disability; b. The expiration of twelve (12) months after the date on which Optionee's employment by the Company is terminated, if such termination is by reason of Optionee's death or permanent and total disability; or c. May 30, 2005. In the event of exercise of the Option after termination of employment for any reason, Optionee may exercise the Option only with respect to the shares of Stock which could have been purchased by Optionee at the date of termination of employment. 7. Stock Adjustments and Mergers. In the event that the outstanding shares of the Company's Stock is increased or decreased, or changed into or exchanged for a different number or kind of shares or other securities of the Company or of any other corporation by reason of any merger, sale of stock, consolidation, liquidation, recapitalization, reclassification, stock splits, combination of shares, or stock dividend, the total number of shares subject to the Option granted herein shall be proportionately and appropriately adjusted by the Company. If the Company continues in existence, the number and kind of shares that are subject to the Option and the option price per share shall be proportionately and appropriately adjusted without any change in the aggregate price to be paid therefor upon exercise of the Option. If the Company will not remain in existence or substantially all of if Stock will be purchased by a single purchaser or group of purchasers acting together, then the Company may (i) declare that all Options shall terminate 30 days after the Company gives written notice to Optionee of his immediate right to exercise all Options then outstanding (without regard to limitations on exercise otherwise contained herein), or (ii) notify Optionee that all Option's granted herein shall apply with appropriate adjustments as determined by the Company to the securities of the successor corporation to which Optionee, as holder of the number of shares subject to the Option, would have been entitled, or (iii) some combination of the aspects of (i) and (ii). The determination by the Company as to the terms of any of the foregoing adjustments shall be conclusive and binding. Any fractional shares resulting from any of the foregoing adjustments shall be disregarded and eliminated. 8. Rights Prior to Exercise of Option. This Option is nontransferable by Optionee, other than by the laws of descent and distribution, and during his lifetime is exercisable only by him. Optionee shall have no rights as a stockholder with respect to any shares subject to the Option until payment of the option price and delivery to him of a certificate or certificates for such shares as herein provided. 9. Additional Requirements. It is the Company's intent that the ISO granted Optionee herein qualify for the favorable tax treatment accorded options under Sections 421, 422 and 424 of the Code. However, in order to obtain this favorable tax treatment, Optionee must accomplish certain other requirements set forth in the foregoing Code provisions relating to the holding period of the Stock received upon exercise of the ISO and continued employment with the Company. The Company shall not be held liable in any manner for the failure of the Option granted herein to qualify for favorable tax treatment. The NQO is not intended to qualify for the favorable tax treatment accorded ISOs under Sections 421, 422 and 424 of the Code. 10. Binding Effect. The terms of this Option shall inure to the benefit of and be binding upon the Company, the Optionee, their respective heirs, executors, administrators, successors, and assigns. 11. Governing Law. This Option shall be governed and construed in accordance with the laws of the State of Mississippi. IN WITNESS WHEREOF, the parties hereto have caused this Option to be executed June 1, 1995, but effective as of May 31, 1995. COMPANY: KLLM TRANSPORT SERVICES, INC. Attest: BY: S/J. Kirby Lane J. Kirby Lane Executive Vice President and Chief Financial Officer S/ James Leon Young James Leon Young, Secretary OPTIONEE: S/ Steven K. Bevilaqua STEVEN K. BEVILAQUA EX-10.3 4 SAWYER ASSET PURCHASE AGREEMENT AND AMENDMENT ASSET PURCHASE AGREEMENT BY AND AMONG VERNON SAWYER, INC., VERNON SAWYER TRANSPORTATION, INC. AND VERNON AND NANCY SAWYER AS SELLERS AND KLLM, INC. AS PURCHASER TABLE OF CONTENTS* 1. RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 1 2.1. "Accrued Vacation Pay. . . . . . . . . . . . . . . . . . 1 2.2. "Assumed Liabilities . . . . . . . . . . . . . . . . . . 1 2.3. "Closing . . . . . . . . . . . . . . . . . . . . . . . . 1 2.4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2.5. "Escrow Deposit" . . . . . . . . . . . . . . . . . . . . 2 2.6. "Excluded Assets . . . . . . . . . . . . . . . . . . . . 2 2.7. "ICC". . . . . . . . . . . . . . . . . . . . . . . . . . 2 2.8. "Non-competition Covenants". . . . . . . . . . . . . . . 2 2.9. "Permitted Liens . . . . . . . . . . . . . . . . . . . . 2 2.10. "Purchased Assets" . . . . . . . . . . . . . . . . 2 2.11. "Purchase Price" . . . . . . . . . . . . . . . . . 3 2.12. "Purchase Price Deposit". . . . . . . . . . . . . . . . 3 2.13. "Shareholder Real Estate". . . . . . . . . . . . . 4 3. SALE OF PROPERTIES AND ASSETS. . . . . . . . . . . . . . . . . 4 3.1. General. . . . . . . . . . . . . . . . . . . . . . . . . 4 3.2. Receivable Repurchase. . . . . . . . . . . . . . . . . . 4 4. PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . . . . 4 4.1. Purchase Price . . . . . . . . . . . . . . . . . . . . . 4 4.2. Allocation of Purchase Price . . . . . . . . . . . . . . 5 4.3. Payment. . . . . . . . . . . . . . . . . . . . . . . . . 5 4.4. Obligations Not Assumed. . . . . . . . . . . . . . . . . 6 5. CLOSING DOCUMENTS AND REQUIREMENTS; FURTHER ASSURANCES. . . . . . 6 5.1. Pre-Closing Responsibilities.. . . . . . . . . . . . . . 6 5.2. Closing Responsibilities of Seller, Parent and Shareholders . . . . . . . . . . . . . . . . . . . . . . 6 5.3. Closing Responsibilities of Purchaser. . . . . . . . . . 7 5.4. Further Assurances . . . . . . . . . . . . . . . . . . . 8 6. REPRESENTATIONS AND WARRANTIES OF SELLER, PARENT AND SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . 8 6.1. Existence and Good Standing. . . . . . . . . . . . . . . 8 6.2. Corporate Authority and Approvals. . . . . . . . . . . . 8 6.3. Ownership; Exclusivity . . . . . . . . . . . . . . . . . 8 6.4. Information. . . . . . . . . . . . . . . . . . . . . . . 8 6.5. Financial Statements . . . . . . . . . . . . . . . . . . 8 6.6. Litigation . . . . . . . . . . . . . . . . . . . . . . . 9 6.7. Tax Returns and Payments . . . . . . . . . . . . . . . . 9 6.8. Condition of Properties. . . . . . . . . . . . . . . . . 10 6.9. Title to Property; Encumbrances. . . . . . . . . . . . . 10 6.10. Immovable Property . . . . . . . . . . . . . . . . 10 6.11. Leases . . . . . . . . . . . . . . . . . . . . . . 10 6.12. Material Contracts . . . . . . . . . . . . . . . . 11 6.13. Restrictive Documents. . . . . . . . . . . . . . . 11 6.14. Intellectual Properties. . . . . . . . . . . . . . 12 6.15. Compliance with Laws . . . . . . . . . . . . . . . 12 6.16. Restrictive Documents. . . . . . . . . . . . . . . 12 6.17. Subsidiaries . . . . . . . . . . . . . . . . . . . 12 6.18. Inventory. . . . . . . . . . . . . . . . . . . . . 12 6.19. Employment Relations . . . . . . . . . . . . . . . 12 6.20. Employee Benefit Plans . . . . . . . . . . . . . . 13 6.21. Environmental Laws and Regulations . . . . . . . . 14 6.22. Interest in Customers, Suppliers . . . . . . . . . 15 6.23. Insurance. . . . . . . . . . . . . . . . . . . . . 15 6.24. Operating Rights . . . . . . . . . . . . . . . . . 15 6.25. Broker's or Finder's Fee . . . . . . . . . . . . . 15 7. REPRESENTATIONS AND WARRANTIES OF PURCHASER. . . . . . . . . . 16 7.1. Existence and Good Standing of Purchaser; Power and Authority. . . . . . . . . . . . . . . . . . . 16 7.2. Corporate Authority and Approvals . . . . . . . . . . . 16 7.3. Restrictive Documents. . . . . . . . . . . . . . . . . . 16 7.4. Information. . . . . . . . . . . . . . . . . . . . . . . 16 7.5. Litigation . . . . . . . . . . . . . . . . . . . . . . . 16 7.6. Broker's or Finder's Fee . . . . . . . . . . . . . . . . 16 8. USE OF TRANSFERRED ASSETS BY PURCHASER PENDING CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 8.1. Management Period. . . . . . . . . . . . . . . . . . . . 17 8.2. Manage . . . . . . . . . . . . . . . . . . . . . . . . . 17 8.3. No Liens, Dispositions . . . . . . . . . . . . . . . . . 18 8.4. Consideration. . . . . . . . . . . . . . . . . . . . . . 18 8.5. Irrevocability . . . . . . . . . . . . . . . . . . . . . 18 8.6. Liabilities. . . . . . . . . . . . . . . . . . . . . . . 19 8.7. Termination of Management Period . . . . . . . . . . . . 19 9. COVENANTS OF SELLER, PARENT AND SHAREHOLDERS . . . . . . . . . 19 9.1. Cooperation. . . . . . . . . . . . . . . . . . . . . . . 19 9.2. Ordinary Course of Business. . . . . . . . . . . . . . . 19 9.3. Environmental. . . . . . . . . . . . . . . . . . . . . . 19 9.4. Dispositions and Encumbrances on Purchased Assets . . . . . . . . . . . . . . . . . . . . . . . . . 20 10. COVENANTS OF PURCHASER . . . . . . . . . . . . . . . . . . . . 20 10.1. Cooperation. . . . . . . . . . . . . . . . . . . . . . . 20 10.2. Operating Authorities; Temporary Lease . . . . . . . . . 20 11. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER, PARENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 11.1. Representations and Warranties True. . . . . . . . 21 11.2. Performance of Purchaser . . . . . . . . . . . . . 21 12. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PURCHASER. . . . . . . . . . . . . . . . . . . . . . . . . . . 21 12.1. Representations and Warranties True. . . . . . . . 21 12.2. Performance of Seller. . . . . . . . . . . . . . . 21 12.3. Environmental. . . . . . . . . . . . . . . . . . . 21 12.4. Survey . . . . . . . . . . . . . . . . . . . . . . 22 12.5. Title. . . . . . . . . . . . . . . . . . . . . . . 22 13. WORKER'S COMPENSATION MATTERS. . . . . . . . . . . . . . . . . 23 14. NON-COMPETITION COVENANTS. . . . . . . . . . . . . . . . . . 23 14.1. Recitals. . . . . . . . . . . . . . . . . . . . . . . . 23 14.2. Protective Covenants. . . . . . . . . . . . . . . . . . 23 14.3. Exception. . . . . . . . . . . . . . . . . . . . . 25 15. SURVIVAL OF COVENANTS, REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . 25 16. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . 25 16.1. Indemnification by Seller. . . . . . . . . . . . . 25 16.2. Indemnification by Purchaser . . . . . . . . . . . 25 16.3. Indemnification Procedure. . . . . . . . . . . . . 26 17. EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 18. DESTRUCTION OR CONDEMNATION OF PROPERTY. . . . . . . . . . . . 26 18.1. Damage or Destruction. . . . . . . . . . . . . . . 27 18.2. Condemnation . . . . . . . . . . . . . . . . . . . 27 19. TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . 27 19.1. By Mutual Consent or Other Action . . . . . . . . . . . 27 19.2. By Seller . . . . . . . . . . . . . . . . . . . . . . . 27 19.3. By Purchaser. . . . . . . . . . . . . . . . . . . . . . 27 19.4. Effect. . . . . . . . . . . . . . . . . . . 27 20. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . 27 20.1. Notice . . . . . . . . . . . . . . . . . . . . . . 27 20.2. Addresses. . . . . . . . . . . . . . . . . . . . . 28 20.3. Gender . . . . . . . . . . . . . . . . . . . . . . 29 20.4. No Waiver. . . . . . . . . . . . . . . . . . . . . 29 20.5. Specific Performance . . . . . . . . . . . . . . . 29 20.6. Cumulative Rights. . . . . . . . . . . . . . . . . 29 20.7. Entire Agreement . . . . . . . . . . . . . . . . . 29 20.8. Headings . . . . . . . . . . . . . . . . . . . . . 29 20.9. Interpretation; No Presumption . . . . . . . . . . 30 INDEX OF DEFINITIONS . . . . . . . . . . . . . . . . . . . . 14 EXHIBITS A - Escrow Agreement B - Purchase Price Deposit Escrow Agreement C - Bill of Sale D - Cash Deed of Shareholders E - Employment Agreement for Vernon G. Sawyer F - Employment Agreement for Nancy Sawyer G - Seller's, Parent's and Shareholders' Counsel's Opinion H - Operating Rights SCHEDULES 2.2 List of Assumed Liabilities 2.10.1 List of tractors, trailers, communication equipment, computers, furniture, fixtures and tools 2.10.2 Inventories 2.13 Shareholder Real Estate 6.6 Litigation 6.8 Condition of Properties 6.9 Permitted Liens 6.11 Leases 6.12 Material Contracts 6.14 Intellectual Property 6.20 Employee Benefit Plans 6.23 Insurance Policies 8.3 Permitted Asset Dispositions * This Table of Contents is for convenience of reference only and does not form a part of the Agreement. ASSET PURCHASE AGREEMENT THIS ASSET PURCHASE AGREEMENT ("Agreement") is entered into on the 1st day of May, 1995 (the "Effective Date"), by and between VERNON SAWYER, INC., tax identification number 72- 1071773, a Louisiana corporation domiciled in Morehouse Parish, Louisiana ("Seller"), represented herein by its duly authorized President, Vernon G. Sawyer, VERNON SAWYER TRANSPORTATION, INC., tax identification Number 72-1007374, a Louisiana Corporation domiciled in Morehouse Parish, Louisiana ("Parent"), VERNON G. SAWYER, and NANCY ANN MARUS SAWYER, in their individual capacities, individual residents of Morehouse Parish, Louisiana (hereafter, Vernon G. Sawyer and Nancy Sawyer may be individually referred to as a "Shareholder" or jointly as the "Shareholders"), and KLLM, INC., tax identification number 64-0577750, a Texas corporation domiciled in Rankin County, Mississippi ("Purchaser"), represented herein by its duly authorized President, Steve Bevilaqua, who declare and agree that: 1. RECITALS. For many years, Seller has engaged in the interstate trucking business throughout the United States (the "Business"). Seller is a wholly-owned subsidiary of Parent. The Business has operated facilities on property owned by the Shareholders. Most of the rolling stock used in the operation of the Business is owned by Parent and leased to Seller. Seller and Parent desire to sell and Purchaser desires to purchase substantially all of the assets of the Business on the terms and conditions and for the consideration described below. Shareholders desire to sell and Purchaser desires to purchase the real property and improvements thereon on which the Business has been operating, all on the terms and conditions and for the consideration described below. 2. DEFINITIONS. As used in this Agreement, the following terms shall have the meanings set forth below: 2.1. "Accrued Vacation Pay" means the sum of $23,160.60 representing the obligation for drivers' vacation pay as of April 30, 1995 assumed by Purchaser under Section 4.3.1. 2.2. "Assumed Liabilities" means Seller's notes payable which relate to Seller's financing of its purchase of tractors, trailers and other transportation equipment set forth on Schedule 2.2 and Accrued Vacation Pay. 2.3. "Closing" shall mean the closing of the transaction contemplated by this Agreement in the offices of Young, Williams, Henderson & Fuselier, P.A., 2000 Deposit Guaranty Plaza, Jackson, Mississippi, on the Closing Date (defined below) or at such other place as may be mutually agreed upon by the parties hereto. 2.4. "Closing Date" shall mean on or before June 20, 1995, or such other date and time as Seller and Purchaser may agree. 2.5. "Escrow Deposit" shall mean the sum of $250,000.00 which shall be held out of the Purchase Price at Closing to secure Seller's obligations to repurchase receivables and Seller's and Shareholders' representations, warranties and covenants set forth herein and deposited in escrow in accordance with the terms of the Escrow Agreement in the form and substance of Exhibit A. 2.6. "Excluded Assets" shall mean the following assets and properties: 2.6.1. Seller's cash on hand on the Closing Date including, but not limited to, bank accounts of Seller and petty cash; 2.6.2. Seller's receivables other than trade receivables; 2.6.3. Seller's rights to claims for refund of taxes of every kind and nature whatsoever; 2.6.4. Seller's corporate minutes and other corporate records. 2.7. "ICC" means the United States Interstate Commerce Commission, or any successor agency. 2.8. "Non-competition Covenants" shall mean those certain covenants of the Seller, Parent and Shareholders set forth in Section 14 of this Agreement. 2.9. "Permitted Liens" shall have the meaning ascribed to it in Section 6.9. 2.10. "Purchased Assets" shall mean the Shareholder Real Estate and all right, title and interest in and to all the properties and assets of every kind (tangible and intangible) belonging to, owned, or otherwise held by Seller used or associated with the Business (other than Excluded Assets) including, but not limited to: 2.10.1. tractors, trailers, communications equipment, computers, computer software, furniture, fixtures, equipment, and tools (whether owned or leased) as listed in Schedule 2.10.1; 2.10.2. Seller's inventories including, but not limited to, those parts, tires, fuel and supplies set forth on Schedule 2.10.2; 2.10.3. Sellers' trade receivables (subject to Sellers' obligation to repurchase as set forth in Section 3.2). 2.10.4. all outstanding purchase orders, bids, and contracts related to the Business and not yet filled or performed at the time of Closing; 2.10.5. all loads in transit; 2.10.6. copies of all of Seller's books and records pertaining to the Business, including, but not limited to, all of its accounting records, financial statements, tax returns, customer lists (including names, addresses, telephone numbers, contact persons, pricing terms, sales records); 2.10.7. vendor contracts 2.10.8. all rights regarding the trademarks, service marks and/or trade names "VERNON SAWYER", "VERNON SAWYER, INC.", "VSI" and any other trademarks, service marks, logos and trade names used in the operation of the Business, and all goodwill associated therewith, for future use by Purchaser; 2.10.9. all of Seller's sales and promotional literature; 2.10.10. all of Seller's telephone numbers and post office boxes; and utility deposits; 2.10.11. Seller's operating rights, permits, motor vehicle licenses and registrations; and 2.10.12. the Non-competition Covenants. 2.11. "Purchase Price" shall have the meaning ascribed to it in Section 4.1. 2.12. "Purchase Price Deposit" means the sum of $6,399,465.75 deposited by Purchaser in accordance with the terms of the Purchase Price Deposit Escrow Agreement being executed by the parties simultaneously herewith in the form and substance as is attached as Exhibit B. 2.13. "Shareholder Real Estate" shall mean that certain immovable property (real estate) and all improvements and fixtures thereon located in Morehouse Parish, Louisiana, more particularly described in Schedule 2.13. 83. SALE OF PROPERTIES AND ASSETS. 3.1. General At the Closing, Seller and Shareholders will sell, transfer, assign, convey and deliver to Purchaser, and Purchaser will purchase, accept and acquire from Seller and Shareholders, all of the Purchased Assets. 3.2. Receivable Repurchase. Seller guarantees the collectability of all receivables which are among the Purchased Assets. If Purchasers has not received full payment of any such receivable within sixty (60) days of its due date Seller shall repurchase such receivable upon the written request of Purchaser. The purchase price for such repurchased receivable shall equal the amount of Purchase Price allocated to such receivable at the Closing. Closing of the repurchase shall be held within five (5) business days of the day Purchaser requests repurchase and the purchase price shall be paid to Purchaser in full at closing by drawing on the Escrow Deposit. At the closing of any repurchase, Purchaser shall assign to Seller all of its right, title and interest in and to any receivable being repurchased, without warranty or recourse. 4. PURCHASE PRICE. 4.1. Purchase Price. The purchase price for the Purchased Assets (the "Purchase Price") shall be the total of the following: 4.1.1. $700,000.00 for the Shareholder Real Estate; 4.1.2. $750,000.00 for the Non-competition Covenants; 4.1.3. $214,485.09 for shop equipment, spare parts, tools, inventories and any other Purchased Assets not specifically referenced elsewhere in this Section 4.1; subject to completed invenotry of the parties to be made. 4.1.4. The book value of trade receivables as of the Closing Date, computed on a basis consistent with that of preceding years or periods; 4.1.5. $7,400,000.00 for tractors, trailers and other transportation equipment; provided, however, this purchase price is subject to adjustment for any additions or dispositions of equipment between March 30, 1995, and the Closing Date (upon disposition, the market value shown opposite such equipment on Schedule 2.10.1 shall be deducted; upon acquisition, the book value shall be added); and 4.1.6. A portion of the net value equal to net revenues less accrued expenses regarding loads in transit as of April 30, 1995, as mutually agreed to and computed by Seller and Purchaser. 4.2. Allocation of Purchase Price. The purchase price shall be allocated among the categories of Purchased Assets as shown in Section 4.1. Allocations of Purchase Price among Purchased Assets within categories shall be made as determined by Purchaser in its sole discretion and in accordance with all applicable tax laws and regulations. At the Closing, Purchaser, Seller and Shareholders shall execute Forms 8594 allocating the Purchase Price as so determined and shall use such form (without amendments other than those that may be agreed upon in writing by all of the parties hereto) in connection with all tax returns filed which may refer to the transactions contemplated by this Agreement. 4.3. Payment. The Purchase Price shall be paid at Closing as follows: 4.3.1. Assumption or Pay-off of Liability. Purchaser shall discharge and perform when due all obligations, responsibilities, covenants and liabilities, accruing in accordance with Schedule 2.2 which arise under the Assumed Liabilities and are due from May 1, 1995, until the Closing or earlier termination of this Agreement in accordance with its terms (subject to Seller remaining liable for any accrued interest with respect to periods prior to May 1, 1995). At or prior to Closing, Purchaser shall either: (i) assume and use its best efforts to cause Seller to be fully and unconditionally released from, the Assumed Liabilities effective upon the Closing and assume and indemnify Seller from Accrued Vacation Pay; or (ii) pay-off Assumed Liabilities other than Accrued Vacation Pay and assume and agree to hold Seller harmless from Accrued Vacation Pay. Purchaser shall indemnify Seller after Closing from any of the Assumed Liabilities as to which releases are not obtainable from creditors of Seller and from Accrued Vacation Pay. 4.3.2. Cash Payment. The cash portion of the Purchase Price due at the Closing shall equal the Purchase Price minus: 4.3.2.1. (i) the balance of the Assumed Liabilities as of April 30, 1995, as confirmed by the lenders thereof, or (ii) if lender confirmations of such amounts cannot be obtained prior to Closing, then the balance of Assumed Liabilities as shown on the balance sheet of Seller as of March 31, 1995, but subject to post-Closing adjustment and indemnification for any difference between such balance sheet amount and the actual amount of such liabilities as of April 30, 1995 confirmed by lenders upon confirmation; 4.3.2.2. Accrued Vacation Pay; and 4.3.2.3. The Escrow Deposit 4.4. Obligations Not Assumed. Purchaser does not assume, accept or agree to pay any indebtedness, obligations or liabilities of Seller, Parent or Shareholders, except those which are expressly required to be assumed, accepted or paid by Purchaser pursuant to this Agreement. 5. CLOSING DOCUMENTS AND REQUIREMENTS; FURTHER ASSURANCES. 5.1. Pre-Closing Responsibilities. On the Effective Date: 5.1.1. Seller, Shareholders and Purchaser shall execute and deliver the Purchase Price Deposit Escrow Agreement in the form and substance as is attached as Exhibit B. 5.1.2. On the Effective Date, Purchaser shall deposit the Purchase Price Deposit pursuant to the terms of the Purchase Price Deposit Agreement. The Purchase Price Deposit represents the parties' estimate of the cash portion of the Purchase Price that will be due at Closing. Upon its release to Seller and Shareholders at Closing, the Purchase Price Deposit, together with any interest earned thereon, shall be credited against the cash portion of the Purchase Price due at Closing. This Purchase Price Deposit shall be refunded to Purchaser only if this Agreement is terminated pursuant to Section 19 or, if there is an excess of funds as compared to what is due at Closing, such excess shall be refunded. 5.1.3. Purchaser shall assume its management responsibilities relating to the Business in accordance with Section 8 of this Agreement. 5.2. Closing Responsibilities of Seller, Parent and Shareholders. At the Closing, Seller, Parent and Shareholders shall deliver to Purchaser: 5.2.1. An Escrow Agreement executed by Seller, Parent and Shareholders in the form and substance as is attached as Exhibit A. 5.2.2. A bill of sale executed by Seller and Parent, conveying the Purchased Assets (other than real estate), free and clear of any liens or encumbrances (other than Permitted Liens), in the form and substance as attached as Exhibit C. 5.2.3. A Cash Deed executed by Shareholders conveying good and marketable title to the Shareholder Real Estate, free and clear of any liens or encumbrances (other than Permitted Liens) in the form and substance as attached as Exhibit D. 5.2.4. Such other instrument or instruments of transfer as shall be reasonably necessary or appropriate to vest in Purchaser good and marketable title to the Purchased Assets. 5.2.5. The Employment Agreements executed by the Shareholders in the form and substance as are attached as Exhibits E and F. 5.2.6. An opinion of Sellers', Parent's and Shareholders' counsel substantially in the form and substance as is attached as Exhibit G. 5.2.7. Joint written instructions to the escrow agent under the Purchase Price Deposit Escrow Agreement to release the escrowed funds to Seller, Parent and Shareholders. 5.3. Closing Responsibilities of Purchaser. At the Closing, Purchaser shall deliver to Seller: 5.3.1. Wire-transferred or certified funds in an amount which when added to the Purchase Price Deposit will equal the cash portion of the Purchase Price due at Closing. 5.3.2. Employment Agreements executed by the Purchaser in the forms as are attached as Exhibits E and F. 5.3.3. A Closing Escrow Agreement executed by Purchaser in the form and substance as is attached as Exhibit A. 5.3.4. Joint written instructions to the escrow agent under the Purchase Price Deposit Escrow Agreement to release the escrowed funds to Seller, Parent and Shareholders. 5.4. Further Assurances. Following the Closing, at the request of Purchaser, Seller, Parent and Shareholders shall deliver any further instruments of transfer and take all reasonable action as may be necessary or appropriate (i) to vest in Purchaser good and marketable title to the Purchased Assets, free and clear of any liens or encumbrances (other than Permitted Liens) and (ii) to transfer to Purchaser all licenses, agreements, contract rights, accounts, premiums, and permits necessary for the operation of the Business. 6. REPRESENTATIONS AND WARRANTIES OF SELLER, PARENT AND SHAREHOLDERS. Seller, Parent and Shareholders, jointly and severally, represent and warrant to Purchaser as follows: 6.1. Existence and Good Standing. Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Louisiana. Seller has the power to own its properties and to carry on its business as now being conducted. Seller is duly qualified to do business in and is in good standing in all jurisdictions in which the character or the location of the properties owned or leased by Seller or the nature of the business conducted by Seller makes such qualification necessary. 6.2. Corporate Authority and Approvals. Seller and Parent have the corporate power and authority to make, execute, deliver and perform this Agreement, and this Agreement has been duly authorized and approved by all required corporate action of Seller and Parent. This Agreement has been duly executed and delivered by Seller, Parent and Shareholders and constitutes a legal, valid and binding obligation enforceable against each of Seller, Parent and Shareholders in accordance with its terms. 6.3. Ownership; Exclusivity. No person other than Purchaser has any right or option to acquire any ownership rights or equity in and to the Purchased Assets. 6.4. Information. None of the schedules, exhibits or other written material required under this Agreement, or any document referred to within this Agreement, contains, nor will it contain, any statement which is false or misleading with respect to any material fact, or omits, nor will it omit, to state a material fact necessary in order to make the statements therein not false or misleading. 6.5. Financial Statements. The financial statements of Seller that have been provided to Purchaser have been prepared on a basis consistent with that of the preceding years or periods and fairly represent in all material respects the financial position of Seller and Parent and the results of its operations as of the dates and for the periods indicated. Since February 28, 1995, there has been (i) no material adverse change in the assets or liabilities, or in the business or condition, financial or otherwise, or in the results of operations or prospects, of the Seller and Parent, whether as a result of any legislative or regulatory change, revocation of any licenses or rights to do business, fire, explosion, accident, casualty, labor trouble, flood, drought, riot, storm, condemnation or act of God or other public force or otherwise, and (ii) no change in the assets or liabilities, or in the business or condition, financial or otherwise, or in the results of operations or prospects, of the Seller and Parent except in the ordinary course of business; and to the best knowledge, information and belief of Seller, Parent and Shareholders, no fact or condition exists or is contemplated or threatened which might cause such change in the future. 6.6. Litigation. Except for those matters described in Schedule 6.6 attached hereto, there is no action, suit, proceeding at law or in equity, arbitration or administrative or other proceeding by or before (or, to the best knowledge, information and belief of Seller, Parent and Shareholders, any investigation by) any governmental or other instrumentality or agency, pending or, to the best knowledge, information and belief of Seller, Parent and Shareholders, threatened, against or affecting the Business, or any of the Purchased Assets, which could materially and adversely affect the right or ability of the Seller or Purchaser to carry on the Business as now being conducted, or which could materially and adversely affect the condition, whether financial or otherwise, or properties of the Business; and the Seller does not know of any valid basis for any such action, proceeding or investigation. Neither the Seller, Parent nor the Business is subject to any judgment, order or decree entered in any lawsuit or proceeding which may have a materially adverse effect on any of their operations, business practices, or on their ability to acquire any property or conduct business in any area. 6.7. Tax Returns and Payments. Seller and Parent have duly filed or shall file all federal, state and local tax returns and reports required to be filed for the period ending as of May 31, 1994, and has, to Seller's, Parent's and Shareholders' knowledge, duly paid or established adequate reserves for the proper payment of all taxes and other governmental charges upon it or its properties, assets, income, franchises, licenses or sales for said period. Such returns and reports reflect accurately all liability for taxes of Seller and Parent for the periods covered thereby. No examination of any tax return of Seller and Parent is currently in progress. There are no outstanding agreements or waivers extending the statutory period of limitation applicable to any tax return of Seller and Parent. All monies required to be withheld have been withheld and either paid to the respective governmental agencies or set aside in accounts for such purpose, or accrued, reserved against, and entered upon the books of Seller and Parent. To Seller's, Parent's and Shareholders' knowledge, there is no basis for the assertion by any governmental agency or authority of any liens or claims against the Purchased Assets for unpaid taxes or other government charges. 6.8. Condition of Properties. Except as set forth on Schedule 6.8, the Purchased Assets are in good repair and condition and adequate for the ordinary course of operation of Seller's Business as presently conducted and no person other than Seller or Parent owns any Purchased Assets. 6.9. Title to Property; Encumbrances. Seller has good, valid and marketable title to all of its material properties and assets (immovable and movable, tangible and intangible) heretofore used in the operation of the Business, in each case subject to no encumbrance, lien, charge or other restriction of any kind or character, except for (i) liens consisting of zoning or planning restrictions, easements, permits and other restrictions or limitations on the use of immovable property or irregularities in title thereto which do not materially detract from the value of, or impair the use of, such property by Seller and the operation of the Business; (ii) liens described in Schedule 6.9 attached hereto; (iii) liens securing Assumed Liabilities; and (iv) liens for current taxes, assessments or governmental charges or levies on property not yet due and delinquent (liens of the type described in clauses (i) through (iv) above may be hereafter sometimes referred to as "Permitted Liens"). Shareholders have good, valid and marketable title to the Shareholder Real Estate, subject to no encumbrance other than Permitted Liens. 6.10. Immovable Property. Schedule 2.13 attached hereto contains an accurate and complete list of the shareholder Real Estate (hereafter, such immovable property may be referred to as the "Real Property"), and includes the name of the record titleholder(s) thereof. Shareholders have good and marketable title in fee simple to all the Real Property, free and clear of all encumbrances, liens, charges or other restrictions of any kind or character, except for Permitted Liens. All of the buildings, structures and appurtenances situated on the Real Property are in good operating condition and in a state of good maintenance and repair, are adequate and suitable for the purposes to which they are presently being used and, with respect to each, Seller and Shareholders have adequate rights of ingress and egress for the operation of the Business in the ordinary course. None of such buildings, structures or appurtenances (or any equipment therein), nor the operation or maintenance thereof, violates any restrictive covenant or any provision of any federal, state or local law, ordinance, rule or regulation or encroaches on any property owned by others. No condemnation procedure is pending or, to the best knowledge, information and belief of Seller and Shareholders, threatened, which would preclude or impair the use of such property by Seller or Purchaser for the purposes for which it is currently used by the Business. 6.11. Leases. Schedule 6.11 attached hereto contains an accurate and complete list and description of the terms of all leases to which Seller is a party (as lessee or lessor) which relate to the Business. Each lease set forth in Schedule 6.11 (or required to be set forth in Schedule 6.11) is in full force and effect; all rents and additional rents due to date on each such lease have been paid; in each case, the lessee has been in peaceable possession since the commencement of the original term of such lease and is not in default thereunder, and no waiver, indulgence or postponement of the lessee's obligations thereunder has been granted by the lessor, and there exists no event of default or event, occurrence, condition or act (including the sale or transfer of the Purchased Assets hereunder) which, with the giving of notice, lapse of time or the happening of any further event or condition, would become a default under such lease. Seller has not violated any of the terms and conditions under any such lease in any material respect, and, to the best knowledge, information and belief of Seller, all the covenants to be performed by any other party under any such lease have been fully performed. 6.12. Material Contracts. Except as set forth in Schedule 6.12 attached hereto, Seller and Parent are not bound by (a) any agreement, contract or commitment relating to the employment of any person by Seller relating to the Business; (b) any management service, consulting or any other similar type of contract relating to the Business; (c) any agreement, contract or commitment limiting the freedom of Seller to engage in any line of business or to compete with any person; (d) any agreement, contract or commitment not entered into in the ordinary course of business which involves $5,000.00 or more and is not cancelable without penalty within thirty (30) days; or (e) any agreement, contract or commitment which might reasonably be expected to have a potential adverse impact on the Business or operations of the Business. Each contract or agreement set forth in Schedule 6.12 (or required to be set forth in Schedule 6.12) is in full force and effect, and there exists no default or event of default or event, occurrence, condition or act (including the sale or transfer of the Purchased Assets hereunder) which, with the giving of notice, lapse of time or the happening of any other event or condition, would become a default or event of default thereunder. Seller has not violated any of the terms or conditions of any contract or agreement set forth in Schedule 6.12 (or required to be set forth in Schedule 6.12) in any material respect and, to the best knowledge, information and belief of Seller, all of the covenants to be performed by any other party thereto have been fully performed. 6.13. Restrictive Documents. Other than as may be required by the Interstate Commerce Act or equivalent state laws, Seller and Parent are not subject to, or a party to, any charter, bylaw, mortgage, lien, lease, license, permit, agreement, contract, instrument, law, rule, ordinance, regulation, order, judgment, or decree, or any other restriction of any kind or character, which materially and adversely affects the business practices, operations or condition of the Business or any of Seller's, Parent's or Shareholders' assets or properties used in the Business, or which would prevent consummation of the transactions contemplated by this Agreement, compliance by Seller, Parent or Shareholders with the terms, conditions and provisions hereof, or the continued operation of the Business after the Commencement Date on substantially the same basis as heretofore operated, or which would restrict the ability of the Business to acquire any property or conduct business in any area. 6.14. Intellectual Properties. The operation of the Business requires no rights under Intellectual Property (defined below) other than rights under Intellectual Property listed on Schedule 6.14 attached hereto and rights granted to Seller pursuant to agreements listed on Schedule 6.14. Seller owns all right, title and interest in the Intellectual Property listed on Schedule 6.14. Except as set forth on Schedule 6.14, no claim adverse to the interest of Seller and Intellectual Property or agreements listed in Schedule 6.14 has been made in litigation. To the best knowledge, information and belief of Seller, no such claim has been threatened or asserted, no basis exists for any such claim, and no person has infringed or otherwise violated Seller's right in any of the Intellectual Property or agreements listed on Schedule 6.14. Except as set forth on Schedule 6.14, no litigation is pending wherein Seller is accused of infringing or otherwise violating intellectual property rights of another, or breaching a contract conveying rights under Intellectual Property. To the best knowledge, information and belief of Seller, no such claim has been asserted or threatened, nor are there any facts that would give rise to such claim. For purposes of this section 6.14, "Intellectual Property" means domestic and foreign patents, patent applications, registered and unregistered trademarks and service marks, registered and unregistered copyrights, computer programs, databases, trade secrets and proprietary information. 6.15. Compliance with Laws. Seller and the Business are in compliance in all material respects with all applicable laws, regulations, orders, judgments and decrees. 6.16. Restrictive Documents. Seller and Shareholders are not subject to any charter, bylaws, mortgage, lien, lease agreement, instrument, order of law, rule regulation, judgment or decree, or any other restriction of any kind or character, which would prevent consummation of the transactions contemplated by this Agreement. 6.17. Subsidiaries. Seller is a wholly-owned subsidiary of Parent. Shareholders own one-hundred percent (100% of the issued and outstanding stock of Parent. Except as set forth above, Seller has no subsidiaries and no entities affiliated through common ownership or otherwise that conduct any business related to the Business. 6.18. Inventory. Seller's inventories were acquired and have been maintained in accordance with the regular business practice of Seller and consists of items of a quality usable in the ordinary course of Seller's business. 6.19. Employment Relations. 6.19.1. Seller has in place on the date of this Agreement ______ drivers. Except as contemplated by this Agreement, there are no plans or policies which would give rise to any severance, termination, change-in- control, or other similar payment to Seller's employees as a result of the consummation of this Agreement; Seller has taken no action in respect of its employees that would require notice (or if any action requiring notice has occurred, notice has been given) or create liability under the Worker Adjustment and Retraining Notification Act, or any state counterpart; 6.19.3. Seller is in substantial compliance with all federal, state or other applicable laws,domestic or foreign, respecting employment and employment practices, terms and conditions of employment and wages and hours, and has not and is not engaged in any unfair labor practice; 6.19.4. No unfair labor practice complaint against Seller is pending before the National Labor Relations Board; 6.19.5. There is no labor strike, disputes, slow down or stoppage actually pending or threatened against or involving Seller; 6.19.6. No representation question exists respecting the employees of Seller; 6.19.7. No grievance which might have an adverse effect upon Seller for the conduct of the Business exists, no arbitration proceeding arising out of or under any collective bargaining agreement is pending and no claim therefor has been asserted; 6.19.8. Seller is not a party to any collective bargaining agreement and no collective bargaining agreement is currently being negotiated by Seller; and 6.19.9. Seller has not experienced any material labor difficulty during the last three (3) years. There has not been, and to the best knowledge, information and belief of Seller there will not be, any material adverse change in relations with employees of Seller as a result of any announcement of the terms of this Agreement. 6.20. Employee Benefit Plans. Set forth in Schedule 6.20 attached hereto is an accurate and complete list of all employee benefit plans ("Employee Benefit Plans"), within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations thereunder ("ERISA"), whether or not any such Employee Benefit Plans are otherwise exempt from the provisions of ERISA, established, maintained or contributed to by Seller, Parent or any of their affiliates. All Employee Benefit Plans are in substantial compliance with ERISA. Neither the Seller, Parent nor any of their affiliates has incurred any liability to the Pension Benefit Guaranty Corporation in connection with any Employee Benefit Plan covering any employees of Seller. Neither Seller, Parent nor any of their affiliates maintain any group health plan that has not been administered and operated in all respects in compliance with the applicable requirements of ERISA and the Internal Revenue Code. 6.21. Environmental Laws and Regulations. Seller, Parent and Shareholders have previously made available to Purchaser information relating to the following items: (a) the nature and quantities of any Hazardous Materials (defined below) generated, transported or disposed of by Seller, Parent or Shareholders during the past three years, together with a description and the location of each such activity; and (b) a summary of the nature and quantities of any Hazardous Materials that have been disposed of or found at the Shareholder Real Estate or any site or facility owned or operated presently or any previous time by Seller. Seller, Parent and Shareholders are in compliance in all material respects with all applicable federal, state and local laws and regulations relating to product registration, pollution control and environmental contamination including, but not limited to, all laws and regulations governing the generation, use, collection, discharge or disposal of Hazardous Materials and all laws and regulations with regard to record keeping, notification and reporting requirements respecting Hazardous Materials. Seller, Parent or Shareholders have not been alleged to be in violation of, or have been subject to any administrative or judicial proceeding pursuant to such laws or regulations, either now or any time during the past three years. There are no facts or circumstances which Seller, Parent or Shareholders reasonably expect could form the basis for the assertion of any Claim (as defined below) against Seller, Parent or Shareholders relating to environmental matters including, but not limited to, any Claim arising from past or present environmental practices asserted under CERCLA (defined below) and RCRA (defined below) or any other federal, state or local environmental statute, which Seller, Parent or Shareholders believe might have a material adverse effect on the business, results of operations, financial condition or prospects of Seller, Parent or Shareholder. For purposes of this Section 6.21, the following terms shall have the following meanings: (a) "Hazardous Materials" shall mean materials defined as "hazardous substances", "hazardous waste", or "solid waste" in (i) the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. Section 9601-9657, and any amendments thereto ("CERCLA"), (ii) the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901-6987, and any amendments thereto ("RCRA"), and (iii) any similar federal, state or local environmental statute; and (b) "Claim" shall mean any and all claims, demands, causes of action, suits, proceedings, administrative proceedings, losses, judgments, decrees, debts, damages, liabilities, court costs, attorneys fees and any other expenses incurred, assessed or sustained by or against Seller. 6.22. Interest in Customers, Suppliers. Neither Seller, Parent, Shareholders nor any officer, director or shareholder of Seller or Parent possesses, directly or indirectly, any financial interest in, or is a director, officer or employee of, any corporation, firm, association or business organization which is a client, supplier, customer, lessor, lessee or competitor or potential competitor of Seller, the Business or Purchaser. Ownership of securities of a company whose securities are registered under the Securities Exchange Act of 1934 not in excess of one percent (1%) of any class of such security shall not be deemed to be a financial interest for purposes of this Section 6.22. 6.23. Insurance. Set forth in Schedule 6.23 is a complete list of insurance policies which Seller, Parent and Shareholders maintain with respect to the Purchased Assets, Seller's Business, properties, or employees and the Shareholder Real Estate. Such policies are in full force and effect. Such policies, regarding their amounts and types of coverage, are adequate to insure fully against risks to which Seller, Parent and Shareholders are normally exposed in the operation of the Business. Since May 1, 1994, there has not been any materially adverse change in the Seller's, Parent's or Shareholders' relationship with their insurers or in the premiums payable pursuant to such policies. 6.24. Operating Rights. Seller has proper Interstate Commerce Commission and intrastate authority to operate the Business as it is presently being conducted and operated, and copies of such intrastate authorities are attached hereto as Exhibit H. There is no action pending with any regulatory body concerning Seller's operating authorities. 6.25. Broker's or Finder's Fee. No agent, broker, person or firm acting on behalf of Seller, Parent or Shareholders is or will be entitled to any commission or broker's or finder's fee from any of the parties hereto, nor from any person controlling, controlled by, or under common control with any of the parties hereto, in connection with any of the transactions contemplated by this Agreement. 7. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser represents and warrants to Seller, Parent and Shareholders as follows: 7.1. Existence and Good Standing of Purchaser; Power and Authority. Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the State of Texas. Purchaser has the power to own its properties and to carry on its business as now being conducted. Purchaser is duly qualified to do business and is in good standing in all jurisdictions in which the character or the location owned or leased by Purchaser or the nature of the business conducted by Purchaser makes such qualifications necessary. 7.2. Corporate Authority and Approvals. Purchaser has the corporate power and authority to make, execute, deliver and perform this Agreement and this Agreement has been duly authorized and approved by all required corporate action of Purchaser. This Agreement has been duly executed and delivered by Purchaser and constitutes a legal, valid and binding obligation enforceable against Purchaser in accordance with its terms. 7.3. Restrictive Documents. Other than as may be required by the Interstate Commerce Act or equivalent state laws, Purchaser is not subject to any charter, bylaws, mortgage, lien, lease agreement, instrument, order, law, rule regulation, judgment or decree, or any other restriction of any kind or character, which would prevent consummation of the transactions contemplated by this Agreement. 7.4. Information. None of the representations contained in this Section 7 contain, nor will they contain, any statement which is false or misleading with respect to any material fact, or omits, nor will it omit, to state a material fact necessary in order to make the statements therein not false or misleading. 7.5. Litigation. There is no action, suit, proceeding at law or in equity, arbitration or administrative or other proceeding by or before (or to the best knowledge, information and belief of Purchaser, any investigation by) any governmental or other instrumentality or agency, pending or, to the best knowledge, information and belief of Purchaser, threatened, which could materially and adversely affect the right or ability of Purchaser to consummate the transactions which are the subject of this Agreement. 7.6. Broker's or Finder's Fee. No agent, broker, person or firm acting on behalf of Purchaser is, or will be, entitled to any commission or broker's or finder's fee from any of the parties hereto, or from any person controlling or controlled by, or under common control with, any of the parties hereto, in connection with any of the transactions contemplated herein. 8. USE OF TRANSFERRED ASSETS BY PURCHASER PENDING CLOSING. 8.1. Management Period. On and from May 1, 1995, until the earliest of the Closing or the earlier termination of this Agreement in accordance with its terms (the "Management Period"), Seller shall delegate to the Purchaser the irrevocable and exclusive right to Manage (defined below) the Business and the Purchased Assets. Any subsequent agreements entered into by Purchaser on behalf of Seller necessary to operate the Purchased Assets and the Business shall not restrict or obligate, in any way, Seller subsequent to the Management Period. 8.2. Manage. The term "Manage" shall mean the right and responsibility of Purchaser to: 8.2.1. hold, operate, and manage in all respects the Purchased Assets; 8.2.2. repair and maintain the Equipment (and inventory to the extent not used) in the same condition in which they were received, normal wear and tear excepted; 8.2.3. receive and retain all revenues, income, earnings and profits generated by the operation of the Purchased Assets or by the operation of other rolling stock by the drivers; 8.2.4. receive all benefits and discharge all obligations (including principal, interest and other amounts) due on or with respect to the Assumed Liabilities; 8.2.5. manage, oversee, employ and terminate all employees currently or during the Management Period employed by Seller and make such changes in duty assignments as Purchaser shall reasonably deem desirable; 8.2.6. pay to all drivers and other employees of Seller utilized by Purchaser all amounts due and arising from services during the Management Period, whether in the form of wages, per diem, advances, or otherwise, and withhold taxes and make proper deposits; 8.2.7. pay all trade payables and other liabilities arising during the Management Period; 8.2.8. bear all risk of loss with respect to the Purchased Assets, with any insurance proceeds received by Purchaser as a result of loss or damage to any of the Purchased Assets being promptly delivered to Seller to hold as a deposit pending Closing with Seller refunding any such insurance proceeds to Purchaser upon Closing or retaining such deposit in the event the Closing does not occur; 8.2.9. maintain, at Purchaser's expense, either (A) Seller's insurance coverage on the Purchased Assets in the amounts presently carried by Seller, and Seller and Purchaser shall jointly arrange for Purchaser to be named as an additional insured on all such insurance policies, or (B) obtain comparable coverages under Purchaser's insurance policies and arrange for Seller to be named as an additional insured and in either case all such policies shall contain a waiver of subrogation of any Claims that may be brought against Seller; and 8.2.10. take all other action necessary in Purchaser's reasonable discretion to manage and operate the Purchased Assets during the Management Period. 8.3. No Liens, Dispositions. Except as provided in Schedule 8.3, Purchaser shall not sell, assign, or otherwise dispose of, or permit the imposition of any Lien on the Purchased Assets during the Management Period. Purchaser shall not acquire any capital assets on behalf of Seller during the Management Period. Purchaser may acquire parts, tires, fuel, and other Inventory and non-capital assets of a character required for operation of the Business in the ordinary course, consistent with Seller's prior practices. 8.4. Consideration. In consideration of the rights granted in Section 8 and the earnings and profits, if any, generated by the Purchased Assets and drivers, Purchaser shall pay to Seller $100 per month on the last day of each month during the Management Period or at Purchaser's election, at the Closing. In addition, if the transactions contemplated by this Agreement are not consummated, Purchaser shall reimburse Seller of any after-tax operating loss during the Management Period. Purchaser shall be entitled to withdraw and retain cash or other liquid assets equivalent to all profits generated by the Purchased Assets and Business during the Management Period as its fee, regardless of whether the transactions contemplated by this Agreement are consummated, and shall leave in Seller, if the Closing does not occur, cash or other current assets equivalent to any accounts payable accrued or due and owing upon termination of the Management Period. 8.5. Irrevocability. Seller shall have no right to make commitments or take any action on behalf of Seller that would affect the operation of the Purchased Assets or Business during the Management Period. The rights granted Purchaser during the Management Period are irrevocable and exclusive, and the parties acknowledge that Purchaser would not have entered into this Agreement absent such irrevocable rights. 8.6. Liabilities. Except as otherwise provided in this Agreement, any liability that arises from facts or events that span all or part of the Management Period and a period when Seller operated Seller shall be prorated based upon the relative responsibility of Purchaser and Seller for the liability. As an example, in case of a fuel tax audit that results in liability for a period including the Management Period, Purchaser shall be liable for an amount equal to the ratio of the amount of fuel used in the Management Period bears to the total amount of fuel used in the audit period, and Seller shall be liable for the balance. Purchaser shall indemnify, defend and hold harmless Seller against liabilities for which Purchaser is responsible under this paragraph and Seller shall indemnify, defend and hold harmless Purchaser against liabilities for which Seller is responsible under this paragraph. 8.7. Termination of Management Period. In the event that this Agreement is terminated, the Management Period shall terminate and Purchaser shall return, as of the date of termination of this Agreement (the "Termination Date"), the operation of the Purchased Assets to the control of Seller. 9. COVENANTS OF SELLER, PARENT AND SHAREHOLDERS. Seller, Parent and Shareholders, jointly and severally, covenant and agree that from the Effective Date to the Closing Date: 9.1. Cooperation. Seller, Parent and Shareholders shall use their best efforts to cause the sale contemplated by this Agreement to be consummated and, without limiting the generality of the foregoing, to obtain all consents and authorizations of third parties which may be necessary or reasonably required in order for Seller, Parent and Shareholders to effect the transactions contemplated hereby. 9.2. Ordinary Course of Business. Seller, Parent and Shareholders will use their best efforts to preserve the Business intact and to keep available the services of employees and representatives and to preserve the goodwill of Seller's employees, customers, suppliers and others having business relations with it. Seller and Parent shall conduct its operations only according to their ordinary and usual course of business. 9.3. Environmental. Purchaser, or its engineers, contractors and agents, at all reasonable times prior to the Closing, shall have the right and privilege of going upon the Real Property to inspect, examine or take those steps deemed necessary by Purchaser to determine the physical characteristics of the Real Property and to plan for the development and use of the Real Property, including the right to make soil bearing tests, borings, percolation tests, engineering and environmental studies and tests, and such other tests, studies and analyses as are necessary in the sole discretion of Purchaser to obtain information to determine the surface, subsurface and topographic conditions and characteristics of the Real Property. 9.4. Dispositions and Encumbrances on Purchased Assets. Seller, Parent and Shareholders will not, directly or indirectly, dispose of any of the Purchased Assets or encumber any of the Purchased Assets. 9.5. Exclusive Dealing. During the period from the Effective Date to the Closing date, Seller, Parent and Shareholders shall refrain from taking any action to, directly or indirectly, encourage, initiate or engage in discussions or negotiations with, or provide any information to any person or entity, other than Purchaser, concerning any merger, sale of substantially all the assets, sale of the issued and outstanding stock of Seller or Parent or similar transaction involving Seller or Parent. 9.6. Review of Seller. Purchaser may, prior to the Closing date, through their representatives, review the properties, books and records of Seller and Parent and their financial and legal condition as Purchaser deems necessary or advisable to familiarize itself with such properties and other matters; such review shall not, however, affect the representations and warranties made by Seller, Parent and Shareholders hereunder or the remedies of Purchaser for breaches of those representations and warranties. Seller and Parent shall permit Purchaser and its representatives to have, after the effective date, full access to the premises and to all the books and records of Seller and Parent and to cause the officers of Seller and Parent to furnish Purchaser with such financial and operating data and other information with respect to the business and properties of Seller and Parent as Purchaser shall from time to time reasonably request. 10. COVENANTS OF PURCHASER. Purchaser covenants and agrees that from the Effective Date to the Closing Date: 10.1. Cooperation. Prior to the Closing, Purchaser shall use its best efforts to cause the sale contemplated by this Agreement to be consummated and, without limiting the generality of the foregoing, to obtain all consents and authorizations of third parties which may be necessary or reasonably required in order for Seller, Parent and Shareholders to effect the transactions contemplated hereby. 10.2. Operating Authorities; Temporary Lease. As soon as practicable after the date hereof, Purchaser may petition the ICC to approve or exempt temporary common management and control (and, in its discretion any other governmental agency or authority having jurisdiction, to approve or exempt the permanent transfer of intrastate operating authorities of Seller to Purchaser and to approve or exempt temporary transfer of all intrastate operating authorities pending final determination of the permanent transfer application and of all intrastate operating authorities pending Closing). Seller, Parent and Shareholders shall use their best efforts to assist Purchaser in obtaining any such exemptions or approvals. 11. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER, PARENT AND SHAREHOLDERS. All obligations of Seller, Parent and Shareholders under this Agreement are subject to the fulfillment, at the option of Seller, Parent and Shareholders at or prior to the Closing Date, of each of the following conditions: 11.1. Representations and Warranties True. The representations and warranties of Purchaser herein contained shall be true on and as of the Closing Date with the same force and effect as though made on and as of said date. 11.2. Performance of Purchaser. Purchaser shall have performed all of its obligations and agreements and complied with all of its covenants contained in this Agreement to be performed and complied with by the Purchaser prior to the Closing Date. 12. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PURCHASER. All obligations of Purchaser under this Agreement are subject to the fulfillment, at the option of the Purchaser, at or prior to the Closing Date, of each of the following conditions: 12.1. Representations and Warranties True. The representations and warranties of Seller, Parent and Shareholders herein contained shall be true on and as of the Closing Date with the same force and effect as though made on and as of said date. 12.2. Performance of Seller. Seller, Parent and Shareholders shall have performed all of its obligations and agreements and complied with all of its covenants contained in this Agreement to be performed and complied with by it prior to the Closing Date. 12.3. Environmental. Purchaser must be able to determine to its satisfaction that the Real Property does not contain and is not contaminated with any Hazardous Substance, or asbestos in amounts or to an extent which is unacceptable to Purchaser in Purchaser's reasonable discretion; and that the Real Property is not subject to any federal, state or local "Superfund" lien, thereof, for the clean-up, or removal of any such Hazardous Substance from the Real Property. In the event that the results of Purchaser's tests, inspections or examinations as set forth above reveal that the Real Property is contaminated with any Hazardous Substance, or asbestos, in amounts or to an extent which is unacceptable to Purchaser in Purchaser's reasonable discretion; or that the Real Property is subject to any federal, state or local "Superfund" lien, thereof, for the clean-up, or removal of any such Hazardous Substance from the Real Property, then Purchaser shall not be obligated to purchase the Purchased Assets unless Seller, Parent and Shareholders elect and proceed to remedy the situation to Purchaser's satisfaction. If Seller, Parent and Shareholders do not so elect, this Agreement shall be deemed null, void and of no further force and effect, and Purchaser and Seller, Parent and Shareholders shall have no further rights, obligations or liabilities, one to the other, under this Agreement. 12.4. Survey. Seller shall furnish to Purchaser a current and accurate as built survey of the Real Property prepared and certified by a reputable land surveyor registered under the laws of the State of Louisiana showing: (a) all existing improvements, fences and walls on or affecting the Real Property and their respective dimensions; (b) the total amount of acreage contained in the Real Property; (c) the boundaries and legal description of the Real Property; and (d) all streets providing access to the Real Property (showing dimensions of street). If such survey discloses matters on or applicable to the Real Property which in Purchaser's reasonable business judgment will interfere with the development and use of the Real Property by Purchaser as contemplated by Purchaser, (b) any visible or known encroachment or projection on the Real Property by structures, facilities, or improvements on adjoining property, or (c) any visible or known encroachment or projection on adjoining property by structures, facilities, or improvements located on the Real Property, then within ten (10) days of receipt of survey, at the exclusive election of Purchaser, exercisable in Purchaser's absolute discretion, Purchaser either (i) may complete the purchase of the Real Property in its existing condition subject to such interferences and encroachments or (ii) may declare this Agreement null and void and of no further force and effect, and, except as set forth below, Purchaser and Seller shall have no further rights, obligations or liabilities, one to the other, under this Agreement. 12.5. Title. As soon as practical, Shareholders shall deliver to Purchaser a title opinion sufficient to enable Purchaser to obtain an owner's title insurance policy at standard rates from a title insurance company qualified to and doing business in the State of Louisiana, acceptable to Purchaser ("Title Opinion") for the Real Property. Seller shall bear the cost of the title search and preparation of the Title Opinion. Any title insurance premium shall be paid by Purchaser. Said Title Opinion shall show that Shareholders have good and merchantable title in fee simple to the Real Property free and clear of all liens, assessments, charges, claims, actions and encumbrances, easements, rights-of-way, restrictions and title exceptions of any kind whatsoever, except Permitted Liens. Promptly upon receipt of such Title Opinion, Purchaser shall notify Shareholders of any defects or objections to Shareholders' title not expressly consented to by Purchaser in writing and Shareholders shall have until the Closing Date to cure any such defects or objections, at Shareholders' sole expense. If Shareholders do not cure such objections or defects by the Closing Date, Purchaser, at its sole discretion: (i) may complete the purchase of the Purchased Assets and accept such title thereto as Shareholders are able to convey without reduction of the Purchase Price (unless such title defects are encumbrances or liens for an ascertainable amount not in excess of the remaining purchase price due, in which case that amount may be deducted from the Purchase Price) or (ii) may grant Shareholders, in writing, one or more extensions of the time within which Shareholders must remedy such title defects. If Shareholders fail to remedy any title defects by Closing Date or the expiration date of any extension granted by Purchaser, then Purchaser may declare this Agreement null and void and of no further force and effect, and Purchaser, Seller, Parent and Shareholders shall have no further rights, obligations or liabilities, one to the other, under this Agreement. A policy of title insurance without exceptions in the amount of the purchase price allocated to the Real Property by a title insurance company qualified to do business in the State of Louisiana acceptable to Purchaser would, however, satisfy any objection to such title. 13. WORKER'S COMPENSATION MATTERS. In addition to the Assumed Liabilities, Purchaser agrees to assume certain responsibilities relating to Seller's worker's compensation claims as set forth herein. Seller has insured the first $100,000.00 of worker's compensation liability and expense relating to each claim and maintains excess coverage applicable to such claims which becomes operative at a higher level, over $100,000.00. Commencing on the Effective Date, Purchaser agrees to bear one-half (1/2) of any uninsured expense or liability relating to Seller's worker's compensation claims up to a maximum total collective exposure on all claims in the amount of $50,000.00 after Closing. Further, Purchaser agrees to administer all of Seller's ongoing worker's compensation claims from the Effective Date forward. 14. NON-COMPETITION COVENANTS. 14.1. Recitals. In order to protect the investment of Purchaser in the Business and the goodwill associated therewith Seller, Parent and Shareholders have agreed to certain restrictions on their ability to compete with the Business, confidentiality provisions and other terms which are reasonable and necessary to protect the Business. Purchaser would not have acquired the Business from Seller but for Seller's, Parent's and Shareholders' covenants set forth below and their full compliance with the terms and conditions hereof. 14.2. Protective Covenants. In consideration for the payment of the Purchase Price and other considerations reflected in this Agreement, Seller, Parent and each of the Shareholders, jointly and severally, covenant and agree as follows: 14.2.1. For a period of three (3) years from the Effective Date, Seller, Parent and each of the Shareholders shall not engage in any business or perform any service, directly or indirectly, in competition with the Business of the Purchaser or have any interest, whether as a proprietor, partner, employee, stockholder, principal, agent, consultant, director, officer or in any other capacity or manner whatsoever, in any enterprise that shall be so engaged, in the following geographic area: the continental United States without limiting the scope of the above, (to the extent received by Louisiana law the above geographic area includes all parishes in the Sate of Louisiana). For purposes of this Agreement, the Business of Purchaser shall be deemed to be common carrier transportation services, contract carrier transportation services, rail services, international transportation services, transportation brokerage services and owner-operated transportation services. Notwithstanding the foregoing provisions, nothing contained in this Section 14 shall prohibit Seller or Shareholders, on a collective basis, from acquiring or owning not more than five percent (5%) of the securities of any entity whose securities are traded on a national securities market. 14.2.2. Seller, Parent and the Shareholders shall not use or disclose to any persons, except the Purchaser and its duly authorized officers or employees entitled thereto (including the officers or employees of the Purchaser's affiliates), customer lists or other confidential information acquired by Seller, Parent and Shareholders in the course of their ownership and affiliation with the Business. 14.2.3. If Seller, Parent or either Shareholder violates this Agreement and the Purchaser brings legal action for injunctive or other relief, the Purchaser shall not, as a result of the time involved in obtaining the relief, be deprived of the benefit of the full period of the restrictive covenant. Accordingly, the restrictive covenant shall be deemed to have the duration specified in subparagraph 14.2.1 hereof, computed from the date the relief is granted but reduced by the time between the period when the restriction began to run and the date of the first violation of the covenant. 14.2.4. If any court shall determine that the duration or geographical limit of any restriction contained in this section is unenforceable, it is the intention of the parties that the restrictive covenant set forth herein shall not thereby be terminated but shall be deemed amended to the extent required to render it valid and enforceable, such amendment to apply only with respect to the operation of this section in the jurisdiction of the court that has made the adjudication. 14.2.5. As the former owner and shareholders of the Business and Parent, Seller, Parent and Shareholders have had access to customer lists, records, files, and other confidential information of the Business acquired by Purchaser and has established relationships with valuable customers and suppliers of the Business. Seller, Parent and Shareholders acknowledge that the restrictions contained in Section 14 of this Agreement are reasonable in scope and duration and are necessary to protect the legitimate interests of the Purchaser, that any violation of these restrictions would cause substantial injury to the Purchaser, and that the Purchaser would not have purchased the Purchased Assets of the Business without receiving the additional consideration offered by Seller, Parent and Shareholders in binding themselves to these restrictions. In the event of any violation of these restrictions, the Purchaser shall be entitled to its reasonable attorneys' fees and expenses and preliminary and permanent injunctive relief, in addition to any other remedy. 14.3. Exception. Notwithstanding the above covenants, Shareholders shall have the right to own and operate two (2) tractors. 15. SURVIVAL OF COVENANTS, REPRESENTATIONS AND WARRANTIES. The respective representations and warranties set forth in or incorporated by reference into this Agreement shall survive the Closing and thereafter be fully effective and enforceable. The respective representations and warranties set forth in this Agreement shall not be affected by any investigation, verification or approval by any party hereto or by anyone on behalf of such party. The respective covenants and agreements set forth in this Agreement, except those covenants and agreements that are required by this Agreement to be fully kept, performed and discharged on or before the Closing, shall survive the Closing and thereafter be fully effective and enforceable. 16. INDEMNIFICATION. 16.1. Indemnification by Seller, Parent and Shareholders. Seller, Parent and Shareholders, jointly and severally, will protect, defend, indemnify and hold harmless Purchaser with respect to any losses, claims, damages, liabilities or related expenses (including, but not limited to, reasonable attorney's fees and expenses) to which Purchaser may become subject as a result of: (i) the breach of any of the representations, warranties, covenants or agreements made by Seller, Parent or Shareholders in and under this Agreement; (ii) non-compliance by Purchaser and Seller with any bulk sales act law which may apply to the transactions contemplated by this Agreement; and (iii) any third party claim or claims made or threatened against Purchaser to the extent such claim or claims are based upon any occurrence prior to the Closing with respect to any of the Purchased Assets unless such claim or claims are based on: (a) the operation and use of the Purchased Assets by Purchaser during the Management Period; or (b) workers compensation claims to the extent liability has been assumed by Purchaser under Section 13 of this Agreement. 16.2. Indemnification by Purchaser. Purchaser will protect, defend, indemnify and hold harmless Seller, Parent and Shareholders with respect to any losses, claims, damages, liabilities or related expenses (including, but not limited to, reasonable attorney's fees and expenses) to which Seller, Parent or Shareholders, or their officers or employees, may become subject as a result of: (i) the breach of any of the representations, warranties, covenants or agreements made by Purchaser in and under this Agreement, (ii) any third party claim or claims made or threatened against Seller, Parent or Shareholders arising out of any loss, injury or damage due to an act or omission of Purchaser or, as to worker's compensation and tort liability claims, an event which happened or arose, during the Management Period and subsequent to the Closing with respect to any of the Purchased Assets, and (iii) any claim for damages to personal property arising from Purchaser's entry upon Seller's place of business prior to Closing. 16.3. Indemnification Procedure. The party or parties seeking indemnification under this section (the "Indemnitee") shall notify the party or parties against whom such indemnification is being sought (the "Indemnitor") of any such breach or claim, with reasonable promptness, but not later than fifteen (15) calendar days after receipt of notice of such claim, and solely in the case of third party claims, the Indemnitor or its legal representative shall have, at its election, the right to settle or defend any such matter involving any such asserted liability through counsel of Indemnitor's choosing and at its expense. Such notice and opportunity to settle or defend, if applicable, shall be a condition precedent to any liability of Indemnitor for third party claims under this section. In the event that the Indemnitor undertakes to settle or defend any third party claims under this section, it shall notify the Indemnitee in writing promptly of its intention to do so, and Indemnitee shall fully cooperate with Indemnitor and its counsel in the settlement or defense thereof. In the Indemnitor elects to settle such third party claim, and the Indemnitee shall reject the terms of such settlement, the Indemnitee shall be responsible for defending such claim, including, without limitation, selecting legal counsel and negotiating terms of settlement. The Indemnitee shall be responsible for the payment of all fees of legal counsel so selected by it. In such event, the Indemnitor shall be responsible hereunder for the loss, liability or judgment incurred in such third party claim only to the extent of the amount of settlement theretofore approved by the Indemnitor and rejected by the Indemnitee. 16.4. Effect of Escrow. The establishment of the Escrow Deposit shall not be deemed a limitation of liability or a restriction on any party's rights and remedies under this Agreement or at law or in equity. 17. EXPENSES. Seller, Parent Shareholders and Purchaser shall each pay their own expenses including, without limitation, fees and expenses of agents, representatives, counsel, accountants and other experts, incidental to the preparation and consummation of this Agreement. Seller shall bear the costs associated with furnishing the survey and title opinion. Seller and Purchaser shall each bear one-half (1/2) of the expense relating to the environmental site assessment. 18. DESTRUCTION OR CONDEMNATION OF PROPERTY. 18.1. Damage or Destruction. In the event any of the tangible Purchased Assets are destroyed by fire, flood or other casualty prior to the Closing, Purchaser shall have the option to: (i) cancel this Agreement, or (ii) proceed with the Closing, and accept the Purchased Assets subject to the damage. In such latter event, Seller, Parent and Shareholders shall assign to Purchaser all of its rights to insurance proceeds payable due to such destruction, subject to any prior rights of any mortgagee or lienholder. In such case, the Purchase Price shall be adjusted to reflect any deficiency in insurance proceeds. 18.2. Condemnation. In the event any portion of the Purchased Assets has been condemned or sold in lieu of condemnation or is the subject of a condemnation proceeding, Purchaser shall have the option to: (i) cancel this Agreement (ii) purchase the Purchased Assets (or any remaining portion thereof), and receive from Seller, Parent and Shareholders an assignment of all payments and/or awards arising from such condemnation. In such case, the Purchase Price shall be adjusted to reflect any deficiency in condemnation proceeds. 19. TERMINATION. 19.1. By Mutual Consent or Other Action. Notwithstanding anything contained in this Agreement to the contrary, this Agreement may be terminated (i) by mutual consent of all parties hereto, (ii) by either party if the Closing shall not have occurred by August 1, 1995. 19.2. By Seller. Seller, Parent and Shareholders may terminate this Agreement if any of the conditions to Closing contained in Section 11 shall not have been satisfied or waived prior to the Closing. 19.3. By Purchaser. Purchaser may terminate this Agreement if any of the conditions to Closing contained in Section 12 shall not have been satisfied or waived prior to the Closing. 19.4. Effect. In the event of a termination of this Agreement as provided above, this Agreement shall thereupon become void and there shall be no liability on the part of any party hereto, provided, however, nothing in this Section 19 shall relieve any party from liability for any breach of this Agreement. 20. MISCELLANEOUS. The following shall also apply to this Agreement: 20.1. Notice. Any notice, permission, approval, demand, or request affecting any obligations or terms must be in writing and shall be deemed to be given on the date: (i) delivered by hand, or (ii) two (2) business days after being mailed by certified mail. 20.2. Addresses. All mailings shall be to the address of the party shown or to any subsequent address in the United States of America requested: SELLER: Vernon Sawyer, Inc. P.O. Drawer B Bastrop, LA 71220 Attn: Vernon G. Sawyer PARENT: Vernon Sawyer Transportation, Inc. P.O. Drawer B Bastrop, LA 71220 Attn: Vernon G. Sawyer SHAREHOLDERS: Vernon G. Sawyer and Nancy Sawyer P.O. Drawer B Bastrop, LA 71220 With a copy of any Notice to Seller, Parent or Shareholders to: Stephen J. Katz Rankin, Yeldell, Herring & Katz 411 South Washington Bastrop, LA 71220 PURCHASER: KLLM, Inc. P.O. Box 6098 Jackson, MS 39288 Attn: J. Kirby Lane With a copy of any Notice to Purchaser to: James H. Neeld, IV, Esq. Young, Williams, Henderson & Fuselier, P.A. Post Office Box 23059 Jackson, Mississippi 39225-3059 20.3. Gender. The singular and plural and any gender shall include the other. 20.4. No Waiver. No waiver of any condition, obligation, or term shall constitute a waiver of any other, or a waiver of a subsequent right to demand strict compliance with all conditions, obligations, and terms. 20.5. Specific Performance. Purchaser may enforce this Agreement by specific performance. 20.6. Cumulative Rights. The rights and remedies herein reserved by or granted to the parties are distinct, separate and cumulative, and the exercise of any one of them shall not be deemed to preclude, waive or prejudice the parties' right to exercise any or all others. Whether or not specifically enumerated in this Agreement, the parties reserve all rights and remedies at law and in equity, and nothing contained in this Agreement shall be construed as a limitation of any rights or remedies. 20.7. Entire Agreement. This Agreement, including the documents and instruments referred to herein: 20.7.1. constitutes the entire agreement and supersedes all other prior agreements and understandings, both written and oral, between the parties with respect to the subject matter of this Agreement; 20.7.2. is not intended to confer upon any other person any rights or remedies; 20.7.3. may be executed in two or more counterparts which together shall constitute a single agreement; 20.7.4. shall inure to the benefit of, be binding upon and enforceable against the heirs, legal representatives, successors, transferees, and assigns of the parties hereto; and 20.7.5. may be amended or terminated only by mutual agreement of the parties hereto in writing. 20.8. Headings. The headings and table of contents contained in this Agreement are for reference purposes only and do not affect in any way the meaning or interpretation of this Agreement. 20.9. Interpretation; No Presumption. All parties acknowledge that this Agreement has been reviewed and negotiated by all parties and their attorneys and other representatives and, therefore, no presumption shall arise favoring any party by virtue of the authorship of any of its provisions. IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective Date. SELLER: Vernon Sawyer, Inc., a Louisiana corporation By:S/Vernon G. Sawyer Its: President SHAREHOLDERS: S/ Vernon G.Sawyer Vernon G. Sawyer, Individually S/ Nancy Ann Marus Sawyer Nancy Ann Marus Sawyer, Individually PARENT: Vernon Sawyer Transportation, Inc., a Louisiana Corporation By:S/ Vernon G.Sawyer Its: president PURCHASER: KLLM, Inc., a Texas corporation BY:S/ Steve Bevilaqua President FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT This First Amendment to Asset Purchase Agreement (the "Agreement") is made and entered into this the 26th day of July, 1995, by and between VERNON SAWYER, INC., Tax Identification No. 72-1071773, a Louisiana corporation domiciled in Morehouse Parish, Louisiana ("Seller"), represented herein by its duly authorized President, Vernon G. Sawyer, VERNON SAWYER TRANSPORTATION, INC., Tax Identification No. 72-1007374, a Louisiana corporation domiciled in Morehouse Parish, Louisiana ("Parent"), VERNON G. SAWYER and NANCY ANN MARUS SAWYER, in their individual capacities, individual residents of Morehouse Parish, Louisiana (hereafter, Vernon G. Sawyer and Nancy Ann Marus Sawyer may be individually referred to as "Shareholder" or jointly as "Shareholders") and KLLM, INC., Tax Identification No. 64-0577750, a Texas corporation domiciled in Rankin County, Mississippi ("Purchaser"), represented herein by its duly authorized President, Steven K. Bevilaqua, who declare and agree that: Recitals. Seller, Parent, Shareholders and Purchaser entered into that certain Asset Purchase Agreement effective May 1, 1995 (the "Asset Purchase Agreement"), pursuant to which Seller, Parent and Shareholders agreed to sell and Purchaser agreed to purchase substantially all of the operating assets and business of Seller and Parent and related real estate owned by Shareholders. Certain of the transactions which are the subject of the Asset Purchase Agreement require the approval of various federal and state regulatory agencies and the related approval process has taken longer than the parties originally anticipated. Therefore, Seller, Parent, Shareholders and Purchaser desire to amend the Asset Purchase Agreement as set forth in this Agreement. All capitalized terms used and not otherwise defined herein (including, without limitation, the language amendatory to the Asset Purchase Agreement contained herein) shall have the respective meanings given such terms in the Asset Purchase Agreement. References to sections herein shall refer to sections of the Asset Purchase Agreement. The Asset Purchase Agreement is amended by deleting the definition of "Closing Date" found in Section 2.4 and by substituting in its place the following definition: "Closing Date" shall mean on or before August 8, 1995, or such other date and time as Seller and Purchaser may agree. The Closing Date is subject to extension as a result of any delays attributable to receiving necessary approvals or exemptions from the ICC or state agencies having jurisdiction over the transactions contemplated by the Asset Purchase Agreement. The Asset Purchase Agreement is amended by deleting the first sentence of Section 6.19.1 and by substituting in its place the following: Seller has in place on the date of this Agreement 109 drivers. The Asset Purchase Agreement is amended by deleting the date "August 1, 1995" from Section 19.1 and by substituting in its place the date "September 15, 1995". The Asset Purchase Agreement, as herein amended, remains in full force and effect in accordance with its terms and Seller, Parent, Shareholders and Purchaser hereby ratify and confirm the same. IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first written above. SELLER: VERNON SAWYER, INC., a Louisiana corporation By:S/Vernon g. Sawyer Its: President PARENT: VERNON SAWYER TRANSPORTATION, INC., a Louisiana Corporation By:S/ Vernon G. Sawyer Its: President SHAREHOLDERS: S/Vernon G. Sawyer VERNON G. SAWYER, Individually S/Nancy Ann Marus Sawyer NANCY ANN MARUS SAWYER, Individually PURCHASER: KLLM, INC., a Texas corporation BY:S/Steven K. Bevilaqua STEVEN K. BEVILAQUA Its: President EX-13 5 ANNUAL REPORT KLLM TRANSPORT SERVICES 1995 Annual Report Company Profile KLLM Transport Services, Inc., through its wholly-owned subsidiary, KLLM, Inc., specializes in providing high-quality transportation services in North America. KLLM Inc.'s operating divisions haul both temperature-controlled and dry commodities. The majority of the Company's revenues, approximately 70%, are in the temperature-controlled sector. Protective service is provided on commodities such as food, medical supplies and cosmetics. Service offerings include over-the-road long haul, regional, and intermodal transportation. The shares of KLLM Transport Services, Inc. trade on The Nasdaq Stock Market (National Market) under the symbol KLLM. Financial And Operating Highlights (In thousands, except per share and operating data) 1995 1994 STATEMENT OF OPERATIONS DATA: Operating revenue $239,685 $210,276 Operating income from continuing operations 6,513 14,301 Net earnings from continuing operations 518 5,774 Earnings per share from continuing operations 0.12 1.28 Weighted average shares outstanding 4,479 4,536 BALANCE SHEET DATA: Total assets 164,248 $166,077 Long-term debt, less current maturities 59,594 66,531 Stockholders' equity 65,968 67,843 OPERATING DATA: Operating ratio 97.3% 93.2% Total miles travelled (000s) 175,967 161,584 Average miles per tractor 112,645 115,650 Average revenue per total mile 1.14 1.16 Equipment at year-end: Company-operated tractors 1,485 1,290 Owner-operated tractors 291 242 Total tractors 1,776 1,532 Refrigerated trailers 2,150 2,115 Dry-van trailers 384 ----- Total trailers 2,534 2,115 Refrigerated rail containers 202 150
Selected Financial And Operating Data (In thousands, except per share and operating data) 1995 1994 1993 1992 1991 STATEMENTS OF OPERATIONS DATA: Operating revenue $239,685 $210,276 $165,259 $143,451 $129,571 Operating expenses 233,172 195,975 152,503 131,655 120,707 ------- ------- ------- ------- ------- Operating income from continuing operations 6,513 14,301 12,756 11,796 8,864 Interest and other income 32 17 11 4 18 Interest expense (5,554) (5,014) (4,384) (4,521) (4,037) ------ ------- ------- ------- ------- Earnings from continuing operations before income taxes 991 9,304 8,383 7,279 4,845 Income taxes 473 3,530 3,436 3,050 2,025 ---- ----- ----- ----- ----- Net earnings from continuing operations 518 5,774 4,947 4,229 2,820 Loss from operations of discontinued division, net of tax benefits (624) (580) (195) ------- ------- Loss on disposal of discontinued division, net of tax benefit (441) ------- -------- ------- ------- ------ ------- ------ ------- ------- Net Earnings (Loss) $(547) $5,194 $4,752 $4,229 $ 2,820 ====== ======= ====== ======= ======= Earnings (Loss) per share: From continuing operations $ 0.12 $ 1.28 $ 1.14 $ 1.23 $ 0.82 From operations of discontinued division (0.14) (0.13) (0.05) ----- ----- From disposal of discontinued division (0.10) ----- ----- ----- ----- ------- ----- ----- ----- ----- Net earnings (loss) per common share $(0.12) $ 1.15 $ 1.09 $ 1.23 $ 0.82 ======= ===== ====== ====== ====== Weighted average common shares outstanding 4,479 4,536 4,357 3,449 3,432 ====== ===== ===== ====== ======
BALANCE SHEET DATA (AT YEAR-END): Net property and equipment $122,264 $126,756 $117,322 $98,638 $74,722 Total assets 164,248 166,077 150,094 123,142 96,595 Total liabilities 98,280 98,234 86,403 84,035 62,024 Long-term debt, less current maturities 59,594 66,531 58,514 61,256 40,592 Stockholders' equity 65,968 67,843 63,691 39,107 34,571 OPERATING DATA: Operating ratio 97.3% 93.2% 92.3% 91.8% 93.2% Average number of truckloads per week 3,176 2,871 2,420 2,001 1,790 Average miles per trip 1,065 1,082 1,087 1,228 1,253 Total miles travelled (000s) 175,967 161,584 136,777 130,206 116,624 Average revenue per total mile $ 1.14 $ 1.16 $ 1.13 $ 1.10 $ 1.10 Empty mile percentage 11.58% 9.8% 10.3% 10.6% 9.6% Equipment at year-end: Company-operated tractors 1,485 1,290 1,240 1,063 939 Owner-operated tractors 291 242 85 ----- ----- ----- ----- ----- ----- ----- Total tractors 1,776 1,532 1,325 1,063 939 Refrigerated trailers 2,150 2,115 1,955 1,694 1,370 Dry-van trailers 384 ----- ----- ----- ----- ----- ----- ----- ----- ----- Total trailers 2,534 2,115 1,955 1,694 1,370 Refrigerated rail containers 202 150 ----- ----- ------- Ratio of tractors to non-driver employees at year-end 3.7 2.9 2.9 2.7 2.5 Miles per gallon of fuel 6.3 6.4 6.3 6.2 6.1
Selected Quarterly Data (Unaudited) First Second Third Fourth Quarter Quarter Quarter Quarter (In Thousands, except per share amounts) - ------------------------------------------------------------------------------- 1995 Operating revenue $53,423 $60,971 $63,158 $62,133 Operating income from continuing operations 2,352 2,747 697 717 Net earnings (loss) from continuing operations 619 810 (474) (437) Net earnings (loss) 430 681 (515) (1,143) Earnings (Loss) per share $ 0.10 $ 0.15 $ (0.11) $(0.26)
1994 Operating revenue $46,543 $56,701 $ 55,413 $51,619 Operating income from continuing operations 1,965 5,087 4,082 3,167 Net earnings from continuing operations 521 2,362 1,747 1,144 Net earnings 337 2,167 1,568 1,122 Earnings per share $ 0.07 $ 0.48 $ 0.35 $ 0.25
Market And Dividend Information The Company's common stock is traded on The Nasdaq Stock Market (National Market) under the symbol KLLM. The number of stockholders, including beneficial owners holding shares in nominee or "street" name, as of February 21,1996, was approximately 1,665. The Company has never declared or paid a cash dividend on its common stock. The current policy of the Board of Directors is to continue to retain earnings to finance the continued growth of the Company's business. The following table shows quarterly high and low prices for the common stock for each quarter of 1995 and 1994: FISCAL YEAR 1995 High Low - ---------------------------------------------------------------------------- First Quarter $16 $12.75 econd Quarter $14.5 $12 Third Quarter $13.25 $ 9 Fourth Quarter $11.5 $ 9.75 FISCAL YEAR 1994 High Low - ---------------------------------------------------------------------------- First Quarter $18.75 $14.25 Second Quarter $17 $14 Third Quarter $20 $15.5 Fourth Quarter $20 $14
Management's Discussion And Analysis Of Financial Condition And Results Of Operations LIQUIDITY AND CAPITAL RESOURCES KLLM Transport Services, Inc.'s primary sources of liquidity are its cash flow from operations and existing credit agreements of KLLM, Inc., a wholly-owned subsidiary. During each of the years ended December 29, 1995 and December 30, 1994, the Company generated $23.9 million in net cash provided from operating activities. Capital resources required by the Company during 1995 were much less significant than in prior years, primarily because KLLM, Inc., in January 1995, entered into an operating lease for the majority of its revenue equipment needs for 1995. The payment terms of the operating lease were more favorable than could have been obtained with financing or capital leasing. In 1995, the Company-operated fleet increased by 195 tractors, 419 trailers, and 52 rail containers, net of replacements. Of the net increase in tractors, 400 were added under the operating lease noted above. Capital expenditures, net of proceeds from trade-ins during 1995, were approximately $8,724,000. Net capital expenditures in 1994 were $29,586,000. Net capital expenditures in 1996 are expected to be approximately $25,921,000 as the Company returns to it's traditional method of investing in maintaining a modern fleet. During late 1994, the Company began an internal restructuring of its operating divisions into separate operating units in order to achieve greater accountability within those units. In 1995, the Company continued to fine-tune the new structure to meet the changing demands of the marketplace. The Company has continued growth of the less capital intensive owner-operator division and contract logistics operations. Both of these operating units have served as a favorable medium for increasing revenues with minimal capital outlays, while maintaining positive earnings. Due to the weakened economic conditions in 1995, the intermodal, or rail services, division was forced to refocus on securing annual, consistent intermodal market share. While this operating unit hasn't yet achieved profitability, the Company feels there is a viable market for intermodal temperature-controlled services. As such, development of the intermodal customer base is ongoing, and, at the same time, the Company is guardedly evaluating continued participation in intermodal operations. At the end of 1995, the Company discontinued that segment of the international operations aimed at maritime containerized shipments. This division proved to be unprofitable and difficult to manage; thus, in an effort to minimize exposure on future earnings, the Company recognized a one-time after-tax charge to 1995 earnings of $441,000, or $0.10 per share, on the disposal of that unit. The traditional over-the-road temperature- controlled freight operations have also made adjustments in response to changing market conditions, including curtailed growth of the fleet. Through a variety of measures invoked during 1995, the Company has refocused attention on improving utilization and profitability in the core trucking business. The more notable measures instituted in the restructuring include consolidation of certain driver terminals, reducing the number from thirteen at the end of 1994 to ten at the end of 1995, and reduction in the nondriver work force of approximately 85 employees which, on an annualized basis, will cut total annual payroll costs by approximately $2.6 million. In addition to fine-tuning the existing structure, effective May 1, 1995, the Company's wholly-owned subsidiary, KLLM, Inc., acquired substantially all of the assets of Vernon Sawyer, Inc., a regional dry-van truckload carrier based in Bastrop, Louisiana. The assets acquired include 126 tractors and 288 dry-van trailers, which are a part of the overall increase in fleet size noted above. The acquisition was financed with capital resources from operating activities in the amount of $6,758,000 and the assumption of revenue equipment debt in the amount of $3,795,000 for a total cost of $10,553,000. In order to more appropriately match the terms of its revolver debt facility with the nature of the Company's capital investments and the expansion of divisional operations, on April 7, 1994, KLLM restructured its revolving line of credit. The Company has a $50,000,000 unsecured revolving line of credit with a syndication of banks. Borrowings of $35,000,000 were outstanding at year-end. At December 29, 1995, the weighted average interest rate on the revolving line of credit was 6.32%. Under the terms of the agreement, borrowings bear interest at (i) the higher of prime rate or a rate based upon the Federal Funds Effective Rate, (ii) a rate based upon the Eurodollar rates, or (iii) an absolute interest rate as determined by each lender in the syndication under a competitive bid process at the Company's option. Facilities fees from 1/4% to 3/8% per annum are charged on the unused portion of this line. The Company entered into an interest rate swap arrangement with a bank that effectively established a fixed interest rate of 5.23% for two and one-half years beginning April 1, 1993 on approximately 14%, or $5,000,000, of the Company's outstanding revolving line of credit at December 30, 1994. The agreement expired September 29, 1995. At December 30, 1994, the weighted average interest rate on the remaining $31,000,000 of the revolving line of credit was 6.52%. Working capital needs have generally been met from net cash provided from operating activities. On April 5, 1994, in conjunction with restructuring the revolver debt facility, the working capital line of credit was renegotiated. The Company has $4,150,000 in unsecured working capital lines of credit with a bank, of which $651,000 was used at December 29, 1995, and $4,000,000 was used at December 30, 1994. Interest is at a rate based upon the Eurodollar rates with facility fees at 1/4% per annum on the unused portion of the line. At December 29, 1995, the aggregate principal amount of the Company's outstanding long-term indebtedness was approximately $66.0 million. Of this total outstanding, $4.0 million was in the form of 10.2% notes due July 15, 1998, $20.0 million in the form of 9.11% senior notes due June 15, 2002, $35.0 million consisted of the revolving line of credit due April 7, 1997, and $7.0 million principal was relative to capital leases with varying maturities. The required principal payments on all indebtedness are anticipated to be $5.9 million in 1996, $39.8 million in 1997, $4.9 million in 1998, $6.3 million in 1999, $2.9 million in 2000, and $5.7 million thereafter. In March 1993, the Company completed an offering to the public of 1,150,000 shares of the Company's common stock, 100,000 shares of which were sold by stockholders. The net proceeds of the offering, approximately $19,551,000 were used to reduce the Company's borrowings under the revolving line of credit, various capital leases and a mortgage note. The Company anticipates that its existing credit facilities along with cash flow from operations will be sufficient to fund operating expenses, capital expenditures, and debt service. RESULTS OF OPERATIONS The following table sets forth the percentage of revenue and expense items to operating revenue for the periods indicated. Percentage of Operating Revenue -------------------- For the Year 1995 1994 1993 - ------------------------------------------------------------------------ Operating revenue 100.0% 100.0% 100.0% Operating expenses Salaries, wages and fringe benefits 29.1 28.8 30.6 Operating supplies and expenses 27.7 28.9 34.4 Insurance, claims, taxes and licenses 4.9 4.7 5.4 Depreciation and amortization 9.6 10.0 11.2 Purchased transportation and equipment rent 22.3 16.7 6.4 Other 4.4 4.5 4.8 Gain on sale of revenue equipment (.7) (.4) (.5) ------ ----- ----- Total operating expenses 97.3 93.2 92.3 ------ ----- ----- Operating income from continuing operations 2.7 6.8 7.7 Interest expense 2.3 2.4 2.6 ----- ---- ----- Earnings from continuing operations before income taxes 0.4 4.4 5.1 Income taxes 0.2 1.6 2.1 ------ ----- ----- Net earnings from continuing operations 0.2% 2.8% 3.0% ====== ====== =====
Year Ended December 29, 1995 Compared to Year Ended December 29, 1994 Operating revenue for the year ended December 29, 1995 increased by $29,409,000 or 14% when compared to the year ended December 30, 1994. The net revenue increase consisted of a 5% increase in the Company's traditional over-the-road temperature-controlled freight services, of which a 7% increase came from the owner-operator division, 1% decrease from rail services, 4% increase from transportation brokerage services, and 6% increase from the operation of the dry-van over-the-road truckload services. The basis for the net revenue increase consists primarily of a 2% increase in available Company-owned equipment, 6% increase in available owner-operated equipment, and a 6% increase from the new dry-van operation. The average revenue per mile decreased $0.02 to $1.14 for the year ended December 29, 1995 when compared to the year ended December 30, 1994. The operating ratio increased from 93.2% to 97.3% for the year ended December 29, 1995 when compared to the year ended December 30, 1994. The operating ratio for the traditional over-the-road truckload services increased from 92.5% to 97.5% primarily due to increases in certain variable and fixed operational costs: driver pay increased approximately $2.6 million, liability and workers' compensation insurance provision increased approximately $1.0 million, fuel increased approximately $1.2 million, and revenue equipment rent increased approximately $0.8 million. These increased costs accounted for 1.9%, 0.8%, 0.9% and 0.6%, respectively, of the increase in the operating ratio. Additionally, the increased operating ratio resulted from a significant increase in purchased transportation and equipment rental costs associated with the newer operations. As previously noted, these divisions are low margin which increases the operating ratio overall; however, they are not as capital intensive as the traditional over-the-road freight operation. At December 29, 1995, the Company had 3.7 tractors per nondriver employee which was higher than the prior year ratio of 2.9, and consistent with the previously noted reduction in the nondriver work force during 1995. Interest expense from continuing operations for the year ended December 29, 1995 was $5,554,000, with an additional $303,000 from discontinued operations, for a total of $5,857,000. It was approximately $748,000 greater than the year ended December 30, 1994. Interest expense increased due to a higher amount of outstanding debt on the revolving line of credit throughout the first 11 months of the year ended December 29, 1995 than was outstanding the year before and higher weighted average interest rate on the revolving line of credit throughout the majority of the year ended December 29, 1995 as compared to the previous year. The provision for income taxes for the year ended December 29, 1995 was $473,000 on continuing operations, based on a combined effective federal and state tax rate of 48%. This reflects an increase in the effective tax rate from 38% for the year ended December 30, 1994 as a result of an increase in nondeductible expenses as a percentage of pretax income. As a result of the foregoing, net earnings from continuing operations decreased $5,256,000 or 91% for the year ended December 29, 1995 when compared to the year ended December 30, 1994. Year Ended December 30, 1994 Compared to Year Ended January 2, 1994 Operating revenue for the year ended December 30, 1994 increased by $45,017,000, or 27%, when compared to the year ended January 2, 1994. The net revenue increase consisted of 19% from the Company's traditional over-the-road temperature-controlled freight services, of which an 8% increase came from the owner-operator division, 6% from rail services, and 2% from transportation brokerage services. Excluding the newer divisions, the basis for the net revenue increase consisted of 8% from an increase in available Company-owned equipment, 7% from an increase in available owner-operated equipment, 2% from improvements in freight rates, and 2% from an increase in the average miles per week per Company-owned tractor. The average revenue per mile increased $0.03 to $1.16 for the year ended December 30, 1994 when compared to the year ended January 2, 1994. The operating ratio increased from 92.3% to 93.2% for the year ended December 30, 1994 when compared to the year ended January 2, 1994. The operating ratio for the traditional over-the-road truckload services remained steady at 92.5% even though operating expenses increased approximately 0.3% due to a change in the treatment of certain previously non-deductible reimbursable expenses to the drivers. The impact of this change was to recognize these costs as wages to the drivers, along with the associated Company payroll taxes; thus resulting in an increase in operating expenses, additionally allowing for a reduction in the effective tax rate due to the change in the status of these costs as a deductible expense for tax purposes. Overall, the increased operating ratio resulted from a significant increase in purchased transportation and equipment rental costs associated with the newer operations. As previously noted, these divisions are low margin which increases the operating ratio overall; however, they are not as capital intensive as the traditional over-the-road freight operation. At December 30, 1994, the Company had 2.9 tractors per nondriver employee which was consistent with the prior year. Interest expense from continuing operations for the year ended December 30, 1994 was $5,014,000, with an additional $95,000 from discontinued operations, for a total of $5,109,000. It was approximately $725,000 greater than the year ended January 2, 1994. Interest expense increased due to a higher amount of outstanding debt during the year ended December 30, 1994 than was outstanding the year before. The provision for income taxes for the year ended December 30, 1994 was $3,530,000 on continuing operations, based on a combined effective federal and state tax rate of 38%. This reflects a decrease in the effective tax rate from 41% for the year ended January 2, 1994 as a result of a decrease in nondeductible expenses as a percentage of pretax income as previously noted. As a result of the foregoing, net earnings from continuing operations increased by $827,000 or 17% for the year ended December 30, 1994 when compared to the year ended January 2, 1994. SEASONALITY In the transportation industry, results of operations generally show a seasonal pattern because customers reduce shipments during and after the winter holiday season with its attendant weather variations. The Company's operating expenses have historically been higher in the winter months primarily due to decreased fuel efficiency and increased maintenance costs in colder weather. Consolidated Balance Sheets At Year-End 1995 1994 - ---------------------------------------------------------------------------- ASSETS (In thousands) CURRENT ASSETS Cash and cash equivalents $0 $ 1,397 Accounts receivable: Customers (net of allowances of $479,000 in 1995 and $147,000 in 1994) 26,709 23,325 Other 1,078 738 ------ ------ 27,787 24,063 Inventories--at cost 1,315 1,191 Prepaid expenses: Tires 4,096 5,314 Taxes, licenses and permits 3,254 2,812 Other 555 952 ------- ------- 7,905 9,078 Deferred income taxes---Note C 1,940 1,450 ------- ------- TOTAL CURRENT ASSETS 38,947 37,179 PROPERTY AND EQUIPMENT---NOTE B Revenue equipment and capital leases 158,710 162,677 Land, structures and improvements 12,664 11,123 Other equipment 8,194 8,947 ------- ------- 179,568 182,747 Accumulated depreciation (57,304) (55,991) ------- ------- 122,264 126,756 ------- ------- INTANGIBLE ASSETS, Net of accumulated amortization of $407,600 in 1995 and $120,000 in 1994---Note D 2,626 2,142 OTHER ASSETS 411 ------ TOTAL ASSETS $164,248 $166,077 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Notes payable to banks---Note B $2,758 $4,000 Accounts payable 1,247 1,356 Accrued expenses---Note I 11,829 7,314 Current maturities of long-term debt and capital leases 5,937 2,483 ------- ------ TOTAL CURRENT LIABILITIES 21,771 15,153 LONG-TERM DEBT AND CAPITAL LEASES, Less current maturities---Note B 59,594 66,531 DEFERRED INCOME TAXES---Note C 16,915 16,550 STOCKHOLDERS' EQUITY--Notes E and G Preferred stock, $0.01 par value; authorized shares---5,000,000; none issued Common stock, $1 par value; authorized shares---10,000,000; issued shares---4,552,219 in 1995 and 1994; outstanding shares--- 4,358,653 in 1995 and 4,481,251 in 1994 4,552 4,552 Additional paid-in capital 32,815 33,121 Retained earnings 30,687 31,234 ------- ------- 68,054 68,907 Less Common Stock in Treasury, 193,566 shares in 1995 and 70,968 shares in 1994, at cost (2,086) (1,064) ------- ------- TOTAL STOCKHOLDERS' EQUITY 65,968 67,843 ------- ------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $164,248 $166,077 ======= =========
See accompanying notes. Consolidated Statements of Operations For The Year (In thousands, except share and per share amounts) 1995 1994 1993 - --------------------------------------------------------------------------- OPERATING REVENUE $239,685 $210,27 $165,259 OPERATING EXPENSES: Salaries, wages and fringe benefits 69,706 60,572 50,574 Operating supplies and expenses 66,414 60,867 56,770 Insurance, claims, taxes and licenses 11,773 9,960 8,977 Depreciation and amortization--- Note A 23,017 20,962 18,514 Purchased transportation and equipment rent 53,370 35,073 10,557 Other 10,481 9,357 7,864 Gain on sale of revenue equipment (1,589) (816) (753) ------- -------- ------- TOTAL OPERATING EXPENSES 233,172 195,975 152,503 -------- -------- -------- OPERATING INCOME FROM CONTINUING OPERATIONS 6,513 14,301 12,756 OTHER INCOME AND EXPENSES: Interest and other income 32 17 11 Interest expense (5,554) (5,014) (4,384) --------- -------- ------- (5,522) (4,997) (4,373) --------- -------- ------- EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 991 9,304 8,383 Income taxes---Note C 473 3,530 3,436 --------- -------- ------- NET EARNINGS FROM CONTINUING OPERATIONS 518 5,774 4,947 LOSS FROM OPERATIONS OF DISCONTINUED DIVISION (Net of tax benefits of $351, $355 and $136 respectively)--Note H (624) (580) (195) LOSS ON DISPOSAL OF DISCONTINUED DIVISION (Net of tax benefit of $247)--Note H (441) 0 0 ---------- --------- ------- NET EARNINGS (LOSS) ($547) $5,194 $4,752 ========== ========= ========= EARNINGS (LOSS) PER SHARE: From continuing operations $0.12 $1.28 $1.14 From operations of discontinued division (0.14) (0.13) (0.05) From disposal of discontinued division (0.10) 0.00 0.00 --------- --------- ------- NET EARNINGS (LOSS) PER COMMON SHARE ($0.12) $1.15 $1.09 ========== ========= ======= WEIGHTED AVERAGE NUMBER of COMMON SHARES OUTSTANDING 4,478,827 4,536,144 4,357,200 ========== ========== =========
See accompanying notes. Consolidated Statements of Stockholders' Equity Common Stock Additional Total ------------- Treasury Stock Paid-in Retained Stock -------------- holders' (In thousands) Shares Amount Shares Amount Capital Earnings Equity - -------------- ----------------------------------------------------------- BALANCE AT JANUARY 3, 1993 3,468 $3,468 $14,351 $21,288 $39,107 Common stock issued upon exercise of stock options 33 33 248 281 Offering of common stock--- Note E 1,050 1,050 18,501 19,551 Net earnings 4,752 4,752 --------------------------------------------------------------- BALANCE AT JANUARY 2, 1994 4,551 4,551 33,100 26,040 63,691 Purchase of treasury shares, at cost (78) 1,158) (1,158) Sale of common stock---Note G 7 94 9 103 Common stock issued upon exercise of stock options 1 1 12 13 Net earnings 5,194 5,194 --------------------------------------------------------------- BALANCE AT DECEMBER 30, 1994 4,552 4,552 (71)(1,064) 33,121 31,234 67,843 Purchase of treasury shares, at cost (172)(1,763) (1,763) Sale of common stock - ---Note G 5 74 (22) 52 Common stock issued upon exercise of stock options 44 667 (284) 383 Net loss (547) (547) ---------------------------------------------------------------- BALANCE AT DECEMBER 29, 1995 4,552 $4,552 (194)($2,086) $32,815 $30,687 $65,968 ================================================================
See accompanying notes. Consolidated Statements of Cash Flows For The Year (In thousands) 1995 1994 1993 - ----------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers $248,165 $215,150 $160,169 Interest and other income received 59 17 11 Cash paid to suppliers and employees (217,523) (185,072) (135,349) Interest paid (5,999) (5,250) (4,401) Income taxes refunded 87 391 41 Income taxes paid (856) (1,349) (1,640) --------- --------- ------ NET CASH PROVIDED FROM OPERATING ACTIVITIES 23,933 23,887 18,831 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of Vernon Sawyer Assets---Note D (6,758) Purchase of Fresh International Transportation, Inc.---Note D (2,566) Purchases of property and equipment (19,890) (36,108) (41,807) Proceeds from disposition of equipment 11,166 6,522 5,184 -------- ------- ------ NET CASH FLOWS USED IN INVESTING ACTIVITIES (15,482) (32,152) (36,623) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from sale of common stock 52 103 19,551 Proceeds from exercise of stock options 383 13 281 Purchase of Common Stock for Treasury (1,763) (1,158) Net increase (decrease) in borrowing under revolving line of credit (1,000) 10,500 1,500 Repayment of long-term debt and capital leases (4,171) (2,665) (4,781) Net change in borrowing under working capital line of credit (3,349) 2,000 2,000 ----------- ----------- -------- NET CASH FLOWS (USED IN) PROVIDED BY FINANCING ACTIVITIES (9,848) 8,793 18,551 ----------- ------------ -------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1,397) 528 759 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 1,397 869 110 ----------- ------------ -------- CASH AND CASH EQUIVALENTS AT END OF YEAR $0 $1,397 $869 =========== ============= ======== RECONCILIATION OF NET EARNINGS (LOSS) TO NET CASH PROVIDED FROM OPERATIONS Net income (loss) ($547) $5,194 $4,752 Noncash expenses and gain included in income: Depreciation and amortization 23,141 20,962 18,514 Deferred income taxes (125) 2,850 2,460 Book value of equipment written off in accidents 375 241 178 (Increase) in accounts receivable 2,287) (1,995) (5,947) (Increase) decrease in inventory and prepaid expenses 1,069 (1,375) (1,962) (Increase) in other assets (411) ----- ----- Increase (decrease) in accounts payable and accrued expenses 4,382 (1,174) 1,589 Gain on sale of equipment (1,664) (816) (753) ---------- ---------- -------- NET CASH PROVIDED FROM OPERATIONS $23,933 $23,887 $18,831 ========== =========== ========
See accompanying notes. Notes to Consolidated Financial Statements NOTE A---SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business. The Company, through its wholly-owned subsidiary, KLLM, Inc., provides transportation services in North America for both temperature- controlled and dry commodities. Services provided include over-the-road long haul, regional, and intermodal transportation. The demand for transportation services is affected by general economic conditions and is subject to seasonal demand for certain commodities and severe weather conditions. Principles of Consolidation. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Certain reclassifications have been made to conform with current year presentation. Cash Equivalents. Cash equivalents are stated at cost which approximates market. Tires in Service. The cost of original equipment and replacement tires placed in service is capitalized and amortized over the estimated useful life of the tires. The cost of recapping tires is expensed as incurred. Property and Equipment. Property and equipment is stated at cost. Depreciation of property and equipment is provided by the straight-line method over the estimated useful lives. Gains and losses on sales or exchanges of property and equipment are included in operations in the year of disposition. The Company changed the estimated salvage value of certain revenue equipment as of January 4, 1993 to reflect increases in the prices for used equipment. The change resulted in an increase to the net loss of $281,000, or $0.06 per share, for the year ended December 29, 1995, resulting from a decrease to the gain on sale of revenue equipment partially offset by lower depreciation expense, and a decrease in depreciation expense of $716,000 and an increase in net earnings of $415,000, or $0.09 per share, for each of the years ended December 30, 1994 and January 2, 1994. Use of estimates. The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Revenue Recognition. Revenue is recognized on the date the freight is received for shipment. Estimated costs of delivery of shipments in transit are accrued. The Company's method of revenue recognition is not materially different from the method of recognizing revenues based on relative transit time incurred which is considered an acceptable method of accounting for freight-in-transit by the Emerging Issues Task Force of the Financial Accounting Standards Board. Earnings Per Common Share. Earnings per common share is based on the weighted average number of common shares outstanding during each year. Fiscal Year. The Company's fiscal year-end is the Friday nearest D ecember 31, which was December 29, 1995 and December 30, 1994 for the past two fiscal year ends. Prior to this, the Company's fiscal year-end was the Sunday nearest December 31, which was January 2, 1994 for the prior year. The change in fiscal year-end cut-off did not have a significant effect on the Company's results of operations or financial condition for fiscal years ended December 29, 1995 and December 30, 1994. Impact of Recently Issued Accounting Standards. In March 1995, the FASB issued Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, which requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. Statement 121 also addresses the accounting for long-lived assets that are expected to be disposed of. The Company will adopt Statement 121 in the first quarter of 1996 and, based on current circumstances, does not believe the effect of adoption will be material. Notes To Consolidated Financial Statements (Continued) NOTE B---CREDIT FACILITIES, DEBT AND CAPITAL LEASES Long-term debt and capital leases consisted of the following: 1995 1994 - ------------------------------------------------------------------------- (In thousands) 9.11% unsecured notes payable to insurance companies with semi-annual interest payments and annual principal payments of $2,857,000 from 1996 through 2002 $20,000 $20,000 10.2% unsecured notes payable to insurance company with semi-annual interest payments and annual principal payments of $1,250,000 through July 1998 3,750 5,000 Revolving line of credit with banks, with floating interest(6.32% weighted average rate at December 29, 1995) 35,000 36,000 Capital lease obligations with interest rates from 6.2% to 6.68% and monthly payments of $144,000 through June 1999 6,781 8,014 ------------- ---------- 65,531 69,014 Less current maturities (5,937) (2,483) ------------- ---------- $59,594 $66,531 ============= ==========
Capital lease obligations represent leased revenue equipment capitalized for $10,938,000 with accumulated amortization of ation of $4,443,000 and $3,228,000 at year-end 1995 and 1994, respectively. The Company has a $50,000,000 unsecured revolving line of credit. In accordance with the agreement, the Company has agreed to limit assets pledged on any other borrowing. At December 29, 1995, $15,000,000 was available to the Company under the revolving line of credit. Under the terms of the agreement, borrowings bear interest at (i) the higher of prime rate or a rate based upon the Federal Funds Effective Rate, (ii) a rate based upon the Eurodollar rates, or (iii) an absolute interest rate as determined by each lender under a competitive bid process at the Company's option. Facilities fees from 1/4% to 3/8% per annum are charged on the unused portion of this line. The aggregate annual maturities of long-term debt and capital leases at December 29, 1995 are as follows: Long-term Capital (In thousands) Debt Leases Total - -------------------------------------------------------------------------- 1996 $ 4,107 $ 2,204 $ 6,311 1997 39,107 1,045 40,152 1998 4,107 1,045 5,152 1999 2,857 3,498 6,355 2000 2,857 ------- 2,857 Thereafter 5,715 ------- 5,715 ------------ -------- ------ 58,750 7,792 66,542 Less amount representing interest ------- (1,011) (1,011) ---------- ----------- ------- $ 58,750 $ 6,781 $65,531 ========== =========== ========
The Company also has $4,150,000 in unsecured working capital lines of credit, of which $651,000 was used at December 29, 1995. Interest is at a rate based upon London Interbank Offered Rate (LIBOR) on borrowings on the working capital lines with facility fees at 1/4% per annum on the unused portion of the line. Under the terms of the lines of credit and notes payable agreements, the Company agreed to maintain minimum levels of consolidated tangible net worth and cash flows, to limit additional borrowing based on a debt-to- consolidated tangible net worth ratio, and to restrict assets that can be pledged on any other borrowings. The agreements also establish limits on dividends, stock repurchases, and new investments. The Company is in compliance with these provisions at year-end 1995 and 1994, as amended subsequent to year end December 29, 1995. Notes To Consolidated Financial Statements (Continued) NOTE C---INCOME TAXES The Company adopted the Financial Accounting Standards Board Statement No. 109, "Accounting for Income Taxes" effective January 1, 1993. The adoption of Statement 109 had no material effect on the Company's accounting for income taxes. Prior to the adoption of Statement 109, income tax expense and the classification of deferred income taxes were determined using the method prescribed by Statement 96, which is superseded by Statement 109. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The components of deferred tax assets and liabilities are as follows: (In thousands) 1995 1994 - -------------------------------------------------------------------------- Deferred Tax Assets: Allowance for doubtful accounts $ 173 $ 57 Accrued expenses 1,767 1,393 ------- ------ $1,940 $1,450 ======= ======= Deferred Tax Liabilities: Property and equipment $19,305 $17,465 Intangibles (40) ----- Net Operating Loss Carryforward (1,414) ----- Alternative minimum tax carry forward (936) (915) --------- -------- $16,915 $16,550 ========= ========
Income tax expense (benefit) consist of the following: (In thousands) 1995 1994 1993 - ----------------------------------------------------------------------- Current: Federal $ ---- $ 230 $ 550 State ---- 95 290 -------- ------- -------- ---- 325 840 Deferred: Federal $ (115) 2,600 2,150 State (10) 250 310 -------- ------- -------- (125) 2,850 2,460 Total income tax expense (benefit) $ (125) $3,175 $3,300 Less: Income tax benefit allocated to discontinued operations (351) (355) (136) Income tax benefit allocated to loss on disposal of discontinued operations (247) ----- ----- -------- -------- -------- Income Tax Expense attributable to continuing operations $ 473 $3,530 $ 3,436 ========= ========= ========
The reconciliation of income tax computed at the federal statutory tax rate to income tax expense is as follows: (In thousands) 1995 1994 1993 - ----------------------------------------------------------------------------- Statutory federal income tax rate $ (228) $ 2,845 $ 2,738 Nondeductible driver related expenses ------ ----- 294 State income taxes, net (7) 232 396 Other 110 98 (128) ------ ------ -------- $ (125) $ 3,175 $ 3,300 ========= ======== =========
The Company has a net operating loss carryforward for income tax purposes of approximately $3,725,000, which expires in the year 2010. Notes to Consolidated Financial Statements (Continued) NOTE D---ACQUISITIONS Effective May 1, 1995, the Company acquired substantially all of the assets of Vernon Sawyer, Inc., a regional dry-van truckload carrier based in Bastrop, Louisiana. Results from operations of the Company include operations of the net assets acquired since May 1, 1995. Acquisition cost includes $772,000 of intangibles, a three year non-compete agreement. The non-compete agreement is being amortized by the straight-line method over the life of the agreement. Pro forma unaudited revenues, net income (loss) and net income (loss) per share for the years ended December 29, 1995 and December 30, 1994, assuming the purchase of substantially all of the assets of Vernon Sawyer, Inc. had occurred on January 3, 1994, would have been $245,193,000, ($406,000), and ($0.09), and $226,094,000, $5,355,000, and $1.18, respectively. Effective March 1, 1994, the Company acquired all of the outstanding stock of Fresh International Transportation, Inc., a company which provides temperature controlled transportation via double-stack containers on railroads. Results from, operations of the Company include operations of Fresh International Transportation, Inc. since March 1, 1994. The excess purchase price over the fair value of the assets acquired is classified as goodwill and is included in intangibles in the accompanying balance sheet. Goodwill is being amortized by the straight-line method over fifteen years. Prior operations of Fresh International Transportation, Inc. are immaterial to the Company's revenues, net earnings and earnings per sha3. NOTE E---OFFERING OF COMMON STOCK In March 1993, the Company completed an offering of 1,150,000 shares of the Company's common stock, 100,000 shares of which were sold by stockholders, with net proceeds to the Company of approximately $19,551,000. Proceeds from the offering were used to reduce the Company's borrowing under the revolving line of credit, capital leases and a mortgage note. NOTE F---CONCENTRATIONS OF CREDIT RISK The Company had one customer which accounted for operating revenues of $23,311,000 in 1995, $29,353,000 in 1994, and $24,915,000 in 1993. Trade accounts receivable are the principal financial instruments that potentially subject the Company to significant concentrations of credit risk. The Company performs periodic credit evaluations of its customers and credit losses have been insignificant and within management's expectations. NOTE G---EMPLOYEE BENEFIT PLANS The Company sponsors a defined contribution plan covering substantially all of its employees. Contributions to the plan are 200% of the employee contribution up to 4% of each covered employee's salary. Contributions under the plan approximated $653,000, $486,000, and $345,000 in 1995, 1994, and 1993, respectively. The Company grants stock options for a fixed number of shares to employees with an exercise price equal to the fair value of the shares at the date of grant. The Company accounts for stock option grants in accordance with APB Opinion No. 25, Accounting for Stock Issued to Employees, and, accordingly, recognizes no compensation expense for the stock options granted. Notes to Consolidated Financial Statements (Continued) Under the Company's Incentive Stock Option Plan 533,333 shares of Common Stock have been reserved for grant to key employees and directors. Options to purchase an aggregate of 332,000 shares at prices ranging from $7.125 to $21.00 per share are outstanding at December 29, 1995. At December 29, 1995, options for 203,000 shares were exercisable. In April 1987, the stockholders approved an employee stock purchase plan reserving 133,333 shares of Common Stock for the plan. Substantially all employees are eligible to participate and may subscribe for 10 to 300 shares each. During 1995, 4,902 shares were purchased and in 1994, 6,532 shares were issued pursuant to the plan. Subsequent to December 29, 1995, an additional 17,489 shares have been subscribed for by employees. NOTE H---DISCONTINUED OPERATIONS The Company's management reached the decision to discontinue its international division which primarily provided maritime transportation services. Cessation of operations began on November 30, 1995, and are expected to be completed by June 30, 1996, after certain contractual obligations are completed. Sales of the international division were $10,651,000, $6,869,000, and $222,000 in 1995, 1994, and 1993, respectively. The loss on disposal of discontinued operations includes approximately $62,000 (net of $35,000 tax benefit) of operational losses from November 30, 1995 through December 29, 1995. No additional loss from operations of the discontinued division through the disposal date are anticipated by the Company. Interest expense of $303,000, $95,000, and $0 was allocated to discontinued operations in 1995, 1994 and 1993, respectively, based on the relative net assets of the discontinued operations compared to total net assets. At December 29, 1995, the assets of the division consisted primarily of trade accounts receivable of $1,658,000 and liabilities of $1,010,000, which include estimated costs to close the division. NOTE I---COMMITMENTS AND CONTINGENCIES The Company self-insures for losses related to liability and workers' compensation claims with excess coverage by underwriters on a per incident basis. Accrued expenses include $3,827,000 at December 29, 1995 and $2,640,000 at December 30, 1994 applicable to claims payable. The ultimate cost for outstanding claims may vary significantly from current estimates. The Company leases certain revenue equipment and data processing equipment under operating leases that expire over the next six years. The leases require the Company to pay the maintenance, insurance, taxes and other expenses in addition to the minimum monthly rentals. Future minimum payments under the leases at December 29, 1995 are $7,590,000 in 1996, $7,356,000 in 1997, $6,601,000 in 1998, $4,348,000 in 1999, and $952,000 in 2000. Rental expense applicable to noncancelable operating leases totaled $7,042,000 in 1995, $2,769,000 in 1994, and $2,288,000 in 1993. The Company has entered into heating oil (diesel fuel) swap agreements in order to hedge its exposure to price fluctuations on approximately 12% of its 1996 anticipated fuel requirements and less than 1% of its 1997 anticipated fuel requirements. Gains and losses on hedging contracts are recognized in operating expenses as part of the fuel cost over the hedge period. Also, the Company establishes prices for a portion of its anticipated fuel purchases over specified periods of time through various fuel purchase agreements. The Company is also involved in various claims and routine litigation incidental to its business. Management is of the opinion that the outcome of these other matters will not have a material adverse effect on the consolidated financial position or operations of the Company. Report of Independent Auditors The Board of Directors and Stockholders KLLM Transport Services, Inc. We have audited the accompanying consolidated balance sheets of KLLM Transport Services, Inc. and subsidiaries as of December 29, 1995 and December 30, 1994, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended December 29, 1995. 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 consolidated financial position of KLLM Transport Services, Inc. and subsidiaries at December 29, 1995 and December 30, 1994, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 29, 1995, in conformity with generally accepted accounting principles. Jackson, Mississippi January 29, 1996, except for Note B as to which the date is March 13, 1996 Directors And Officers BOARD OF DIRECTORS OFFICERS (Continued) BENJAMIN C. LEE, JR.. IRENE C. HOWARD Chairman of the Board Corporate Group KLLM Transport Services, Inc. Vice President--Human Resources and Risk Management STEVEN K. BEVILAQUA President and Chief Executive Officer C. ALAN CLARK KLLM Transport Services, Inc. Corporate Group Vice President--Information Systems WALTER P. NEELY, PH. D. J. Army Brown Chair of Business JAMES T. MERRITT Administration Transport Group Professor of Finance Senior Vice President-- Sales and Marketing Else School of Management, Millsaps College STEVEN L. DUTRO JAMES L. YOUNG Transport Group Attorney Vice President--Finance Young, Williams, Henderson and Fuselier, P.A. WILLIAM M. CREEL LELAND R. SPEED Transport Group Chairman of the Board and Vice President-- Chief Executive Officer Field Operations The Parkway Company JOSEPH. M. STIANCHE C. TOM CLOWE, JR. Transport Group President and Chief Operating Officer Vice President--Maintenance Missouri Gas Energy VINCENT A. SCHOTT Transport Group OFFICERS Vice President-- Information Systems BENJAMIN C. LEE, JR. JAMES M. RICHARDS, JR. Chairman of the Board Transport Group Vice President--Customer Service STEVEN K. BEVILAQUA President and Chief Executive Officer THOMAS J. SHEPHERD Transport Group J. KIRBY LANE Vice President--Dedicated Logistics Executive Vice President and Chief Financial Officer JAMES P. SORRELS President--Express Systems and Contract Logistics WILLIAM J. LILES III President--Rail Services KENNETH O. ANDERS President--International Operations NANCY M. SAWYER President--Vernon Sawyer Stockholder Information CORPORATE OFFICES KLLM Transport Services, Inc. 3475 Lakeland Drive Jackson, Mississippi 39208 (601) 939-2545 TRANSFER AGENT Society National Bank Corporate Trust Division P. O. Box 6477 Cleveland, Ohio 44101 (800) 542-7792 INDEPENDENT AUDITORS Ernst & Young LLP Jackson, Mississippi FORM 10-K Information about KLLM Transport Services, Inc., including the Form 10-K, may be obtained without charge by writing to Mr. J. Kirby Lane, Executive Vice President, at the Company's corporate offices. ANNUAL MEETING 10:00 a.m. April 16, 1996 KLLM Corporate Offices 3475 Lakeland Drive Jackson, Mississippi EX-23 6 CONSENT OF ERNST & YOUNG, LLP Consent of Independent Auditors We consent to the incorporation by reference in this Annual Report (Form 10-K) of KLLM Transport Services, Inc. of our report dat4ed January 29, 1996, except for Note B as to which the date is March 13, 1996, included in the 1995 Annual Report to Shareholders of KLLM Transport Services, Inc. Our audits also included the financial statement schedule of KLLM Transport Services, Inc. listed in Item 14(a)(2). This schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information as set forth therein. We also consent to the incorporation by reference in the Registration Statement (Post-effective Amendment No. 6, form S08, No. 33-14545) pertaining to the KLLM Transport Services, Inc. Employee Stock Purchase Plan and in the related Prospectus of our report dated January 29, 1996, except for Note B as to which the date is March 13, 1996, with respect to the consolidated financial statements incorporated herein by reference and our report included in the preceding paragraph with respect to the financial statement schedule included in the Annual Report (Form 10-K) of KLLM Transport Services, Inc. Ernst & Young LLP Jackson, Mississippi March 26, 1996 -----END PRIVACY-ENHANCED MESSAGE-----