-----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, AVJZwyb2O51casIsGhJ3KOV4xe0tz0V4DvZKqvx0O22c3i47DjkHTtP6n11D85QI lvLAFZpERaRK1NLN4SfaPA== /in/edgar/work/20000626/0000906280-00-000175/0000906280-00-000175.txt : 20000920 0000906280-00-000175.hdr.sgml : 20000920 ACCESSION NUMBER: 0000906280-00-000175 CONFORMED SUBMISSION TYPE: SC TO-T/A PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20000626 GROUP MEMBERS: BERNARD J. EBBERS GROUP MEMBERS: HIGH ROAD ACQUISITION CORP GROUP MEMBERS: HIGH ROAD ACQUISITION SUBSIDIARY CORP. GROUP MEMBERS: WILLIAM J. LILES, III SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: KLLM TRANSPORT SERVICES INC CENTRAL INDEX KEY: 0000793765 STANDARD INDUSTRIAL CLASSIFICATION: [4213 ] IRS NUMBER: 640412551 STATE OF INCORPORATION: DE FISCAL YEAR END: 0103 FILING VALUES: FORM TYPE: SC 13E3/A SEC ACT: SEC FILE NUMBER: 005-38140 FILM NUMBER: 660632 BUSINESS ADDRESS: STREET 1: 135 RIVERVIEW DR CITY: RICHLAND STATE: MS ZIP: 39218 BUSINESS PHONE: 6019392545 MAIL ADDRESS: STREET 1: P.O.BOX 6098 CITY: JACKSON STATE: MS ZIP: 39288 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: KLLM TRANSPORT SERVICES INC CENTRAL INDEX KEY: 0000793765 STANDARD INDUSTRIAL CLASSIFICATION: [4213 ] IRS NUMBER: 640412551 STATE OF INCORPORATION: DE FISCAL YEAR END: 0103 FILING VALUES: FORM TYPE: SC TO-T/A SEC ACT: SEC FILE NUMBER: 005-38140 FILM NUMBER: 660633 BUSINESS ADDRESS: STREET 1: 135 RIVERVIEW DR CITY: RICHLAND STATE: MS ZIP: 39218 BUSINESS PHONE: 6019392545 MAIL ADDRESS: STREET 1: P.O.BOX 6098 CITY: JACKSON STATE: MS ZIP: 39288 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: HIGH ROAD ACQUISITION CORP CENTRAL INDEX KEY: 0001115697 STANDARD INDUSTRIAL CLASSIFICATION: [ ] FILING VALUES: FORM TYPE: SC TO-T/A BUSINESS ADDRESS: STREET 1: 135 RIVERVIEW DR CITY: RICHLAND STATE: MS ZIP: 39218 BUSINESS PHONE: 6019392545 MAIL ADDRESS: STREET 1: 135 RIVERVIEW DR CITY: RICHLAND STATE: MS ZIP: 39218 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: HIGH ROAD ACQUISITION CORP CENTRAL INDEX KEY: 0001115697 STANDARD INDUSTRIAL CLASSIFICATION: [ ] FILING VALUES: FORM TYPE: SC TO-T/A BUSINESS ADDRESS: STREET 1: 135 RIVERVIEW DR CITY: RICHLAND STATE: MS ZIP: 39218 BUSINESS PHONE: 6019392545 MAIL ADDRESS: STREET 1: 135 RIVERVIEW DR CITY: RICHLAND STATE: MS ZIP: 39218 SC TO-T/A 1 0001.txt SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE TO Tender Offer Statement under Section 14(d)(1) or 13(e)(1) of the Securities Exchange Act of 1934 (Amendment No. 2) KLLM TRANSPORT SERVICES, INC. (Name of Subject Company (issuer)) HIGH ROAD ACQUISITION CORP. HIGH ROAD ACQUISITION SUBSIDIARY CORP. WILLIAM J. LILES, III BERNARD J. EBBERS (Names of Filing Persons (offerors)) COMMON STOCK, PAR VALUE $1.00 PER SHARE (Title of Class of Securities) 482498102 (CUSIP Number of Class of Securities) Dionne M. Rousseau Charles P. Adams, Jr. Jones, Walker, Waechter, Poitevent, Adams & Reese, L.L.P. Carrere & Denegre, L.L.P. 111 E. Capitol Street 201 St. Charles Avenue, Floor 51 Suite 350 New Orleans, Louisiana 70170 Jackson, Mississippi 39201 (504) 582-8338 (601) 292-0720 (Name, address, and telephone numbers of persons authorized to receive notices and communications on behalf of filing persons) CALCULATION OF FILING FEE - -------------------------------------------------------------------------- | TRANSACTION VALUATION* | AMOUNT OF FILING FEE | - -------------------------------------------------------------------------- | $27,485,558 | $5,398 | - -------------------------------------------------------------------------- *Estimated for purposes of calculating the amount of the filing fee only. The filing fee calculation assumes the purchase of all the outstanding shares of common stock, par value $1.00 per share, of KLLM Transport Services, Inc. (the "Common Stock"), a Delaware corporation (the "Company"), including the related preferred stock purchase rights (the "Rights" and, together with the Common Stock, the "Shares"), except for 689,123 Shares beneficially owned by William J. Liles, III, at a per Share price of $8.05 in cash, without interest. Based on the Company's representation, as of May 25, 2000, there were 4,103,478 Shares issued and outstanding. Based on the foregoing, the transaction value is equal to the product of 3,414,355 Shares and $8.05 per Share. The amount of the filing fee calculated in accordance with Rule 0-11 of the Securities Exchange Act of 1934, as amended, equals 1/50th of one percent of the value of the transaction. [ ] Check the box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. Amount Previously Paid:___________________ Form or Registration No:___________________ Filing Party:_____________________________ Dated Filed:____________________________ [ ] Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer. Check the appropriate boxes below to designate any transactions to which the statement relates: [X] third-party tender offer subject to Rule 14d-1. [ ] issuer tender offer subject to Rule 13e-4. [X] going-private transaction subject to Rule 13e-3. [ ] amendment to Schedule 13D under Rule 13d-2. Check the following box if a final amendment reporting the results of the tender offer: [ ] This Amendment No. 2 amends and supplements the Tender Offer Statement on Schedule TO filed with the Securities and Exchange Commission (the "SEC") on June 2, 2000, by High Road Acquisition Corp., a Delaware corporation ("Parent"), and High Road Acquisition Subsidiary Corp., a Delaware corporation and wholly-owned subsidiary of Parent ("Purchaser") and the Amendment No. 1 to the Schedule TO filed with the SEC on June 23, 2000, by Parent, Purchaser, William J. Liles, III and Bernard J. Ebbers. The Schedule TO and the Amendment No.1 relate to a tender offer by Purchaser to purchase all outstanding shares of common stock, par value $1.00 per share (the "Common Stock") of KLLM Transport Services, Inc., a Delaware corporation (the "Company"), and the associated preferred stock purchase rights of the Company (the "Rights" and, together with the Common Stock, the "Shares"), issued pursuant to the Stockholder Protection Rights Agreement, dated as of February 13, 1997, by and between the Company and Harris Trust and Savings Bank, as successor Rights Agent, at a price of $8.05 per Share and subject to the conditions set forth in the 2 Offer to Purchase dated June 2, 2000, as amended, and the related Letter of Transmittal (which, together with any supplements or amendments, collectively constitute the "Offer"), copies of which were attached as Exhibits (a)(1)(A) and (a)(1)(B), respectively, to the Schedule TO. ITEM 1. SUMMARY TERM SHEET Q. How long do I have to decide whether to tender in the offer? The information set forth in the Offer to Purchase in the Summary Term Sheet under this question is hereby amended and supplemented by deleting the response corresponding to this question and replacing it with the following: The offer, which was scheduled to expire 12:00 midnight, New York City time, on June 29, 2000, has been extended. As a result, you have until 12:00 midnight, New York City time, on July 6, 2000 to tender your shares in the offer, unless the offer is extended again pursuant to the merger agreement. See Section 1. Q. Can the offer be extended and under what circumstances? The information set forth in the Offer to Purchase in the Summary Term Sheet under this question is hereby amended and supplemented by deleting the response corresponding to this question and replacing it with the following: We have agreed that if we do not close the tender offer on July 6, 2000 due to a failure of a condition to the closing of the tender offer (other than the condition that the Company's board of directors shall have not withdrawn their recommendation of the tender offer), we will extend the offer again until two business days after the condition is met, but no later than August 1, 2000. We will not be required to extend the offer again, however, if the condition is not reasonably capable of being met by August 1, 2000. See Section 1. ITEM 4. TERMS OF THE TRANSACTION (a) The information set forth in the Offer to Purchase is hereby amended by deleting the last sentence of the first paragraph of Section 1 ("Terms of the Offer; Expiration Date") in its entirety and replacing it with the following: Purchaser has extended the period during which the Offer is open from 12:00 Midnight, New York City time, on June 29, 2000, until 12:00 Midnight, New York City time, on July 6, 2000. As a result, the term "Expiration Date" means 12:00 Midnight, New York City time, on July 6, 2000, unless and until Purchaser, in its sole discretion (but subject to the terms and conditions of the Merger Agreement), shall have extended the period during which the Offer is open, in which event the term "Expiration Date" shall mean the latest time and date at which the Offer, as so extended by Purchaser, shall expire. 3 ITEM 13. INFORMATION REQUIRED BY SCHEDULE 13E-3 Item 9. Reports, Opinions, Appraisals and Negotiations. (a), (b) and (c) The information set forth in the Offer to Purchase is hereby amended and supplemented by adding the following section after Section VIII ("Federal Income Tax Consequences"): IX. CERTAIN APPRAISALS. As described in Section IV, the Bank of America, N.A. retained an appraiser, MB Valuation Services, Inc. (the "Appraiser"), to appraise the Company's trucks and trailers in connection with the refinancing of the Company's revolving credit facility. The appraisal indicated an orderly liquidation value (the "Orderly Liquidation Value Appraisal") as of March 30, 2000 of $85.2 million and a fair market value (the "Fair Market Value Appraisal") as of March 30, 2000 of $103.9 million. The Orderly Liquidation Value Appraisal is attached hereto as Exhibit (c)(1), and the Fair Market Value Appraisal is attached hereto as Exhibit (c)(2). The Bank of America, N.A. commissioned the Appraiser to perform the Orderly Liquidation Value Appraisal and the Fair Market Value Appraisal. As a result, Parent, Purchaser, and Messrs. Liles and Ebbers do not know the Bank of America's method of selection of the Appraiser or the qualifications of the Appraiser to perform the appraisals. Each of the appraisals state, however, that the appraisal is in compliance with the Uniform Standards of Professional Appraisal as of January 1, 2000, and prepared in conformity with the Principles of Appraisal Practice and Code of Ethics of the American Society of Appraisers. Parent, Purchaser and Messrs. Liles and Ebbers are not aware of any material relationship that has existed during the past two years or is mutually understood to be contemplated between the Appraiser or any of its affiliates and the Company or any of its affiliates. Parent, Purchaser and Messrs. Liles and Ebbers did not give any instructions to or impose any limitations on the scope of the appraisal. The Orderly Liquidation Value Appraisal states that the Bank of America, N.A. requested that an orderly liquidation value concept be used to appraise the Company's trucks and trailers. The "Orderly Liquidation Value Concept" is defined as "the estimated amount expressed in terms of money which could be typically realized from a sale, given a reasonable period of time to find a purchaser(s), the seller being compelled to sell on an as is- 4 where-is basis." The appraisal states that this concept assumes a "Forced Sale" with only a limited time for market exposure and has no "willing seller" assumptions, and takes into consideration the physical condition, quality, difficulty and cost of removal, and overall psychological appeal of the assets. The appraisal states that in estimating the orderly liquidation value, the Appraiser considered the following approaches in arriving at indicators of value: (1) the cost approach, (2) the market comparison approach, (3) a direct sales comparison and (4) the income approach. The appraisal states that personal inspection of specific assets was made. The Fair Market Value Appraisal states that the purpose of the appraisal is to estimate the fair market value of the Company's trucks and trailers. The appraisal states that the "Fair Market Value Concept" is defined as "the estimated amount expressed in terms of money that may reasonably be expected for an item of property between a willing buyer and a willing seller with equity to both, neither under compulsion to buy or sell and both fully aware of all relevant facts." The appraisal states that in estimating the fair market value, the appraiser considered the following approaches in arriving at indicators of value: (1) the cost approach, (2) the sales comparison approach and (3) the income approach. The appraisal provides that the values reflected therein are based primarily upon one or a combination of the preceding methods with heavier emphasis on the market comparison approach, when sufficient data was available. The appraisal states that personal inspection of specific assets was made. The appraisals were not prepared with a view to public disclosure or reliance by the Company's stockholders in making a decision in connection with the Offer or the Merger or in making any other investment decision. The appraisals state that use of the report by persons other than the Bank of America, N.A. should be done so with the understanding that no guarantees have been made by the Appraiser to the Bank of America, N.A. The inclusion of the appraisals should not be regarded as an indication that Messrs. Liles or Ebbers, Parent or Purchaser considered or consider the appraisals to be a reliable prediction of future events. Therefore, the Company's stockholders are cautioned not to rely upon the appraisals. The appraisals will be made available for inspection and copying at the principal executive offices of Parent during its regular business hours by any interested equity security holder of the Company or representative who has been so designated in writing. 5 Item 16. Exhibits. 99.(a)(1)(A) Press release issued by Parent, Purchaser and Messrs. Liles and Ebbers, dated June 23, 2000. 99.(c)(1) Orderly Liquidation Value Appraisal of the Company's trucks and trailers, dated April 14, 2000. 99.(c)(2) Fair Market Value Appraisal of the Company's trucks and trailers, dated April 17, 2000. 6 SIGNATURE After due inquiry and to the best of their knowledge and belief, the undersigned hereby certify as of June 23, 2000 that the information set forth in this statement is true, complete and correct. William J. Liles, III and Bernard J. Ebbers hereby adopt as their own disclosures the disclosures made by Parent and Purchaser herein and in the Schedule TO filed June 2, 2000 and Amendment No. 1 thereto. HIGH ROAD ACQUISITION SUBSIDIARY CORP. By: /S/ WILLIAM J. LILES, III ---------------------------- Name: William J. Liles, III Title: President HIGH ROAD ACQUISITION CORP. By: /S/ WILLIAM J. LILES, III ---------------------------- Name: William J. Liles, III Title: President /S/ WILLIAM J. LILES, III - ------------------------------- William J. Liles, III /S/ BERNARD J. EBBERS - ------------------------------- Bernard J. Ebbers 7 EX-99.(A)(1)(A) 2 0002.txt Exhibit (a)(1)(A) ----------------- IMMEDIATELY -- June 23, 2000 - ----------- Jack Liles: (601) 933-1240 HIGH ROAD ANNOUNCES EXTENSION OF PENDING TENDER OFFER TO JULY 6, 2000 AND TERMINATION OF HART-SCOTT-RODINO WAITING PERIOD JACKSON, MS -- June 23, 2000 -- High Road Acquisition Corp. announced today that the expiration date of High Road Acquisition Subsidiary Corp.'s pending tender offer for all of the outstanding shares of common stock of KLLM Transport Services, Inc. (Nasdaq National Market-KLLM) for $8.05 per share in cash has been extended to July 6, 2000 in order to give stockholders an opportunity to review materials filed by High Road and KLLM today with the Securities and Exchange Commission. High Road also announced that the Federal Trade Commission has granted early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 with respect to the tender offer. Accordingly, the condition to the offer that the applicable waiting period under Hart-Scott-Rodino be terminated has been satisfied. High Road announced today that the offer, which was scheduled to expire 12:00 midnight, New York City time, on June 29, 2000, has been extended. The offer is currently scheduled to expire 12:00 midnight, New York City time, on July 6, 2000, but may be extended again under certain circumstances. As of the close of business on June 22, 2000, 152,997 shares of common stock of KLLM have been tendered in the offer and not withdrawn. If High Road extends the offer again, a public announcement of the extension will be made no later than 9:00 a.m. New York City time on the business day on which the offer was scheduled to expire. If the initial offering is completed, High Road will provide a subsequent offering period of at least three business days in order to give the stockholders who have not tendered an additional opportunity to tender their shares and receive the $8.05 per share cash consideration. However, High Road may not purchase any shares unless the Minimum Tender Condition is met during the initial offering period now scheduled to expire 12:00 midnight, New York City time on July 6, 2000. The Minimum Tender Condition requires that, during the initial offering period, there be validly tendered and not withdrawn a number of shares that, together with 689,123 shares beneficially owned by Jack Liles, will constitute at least a majority of the shares outstanding on the date of High Road's purchase, on a fully diluted basis. Therefore, stockholders are urged to tender their shares during the initial offering period. Information amending and updating both High Road's Offer to Purchase dated June 2, 2000 pertaining to the tender offer and KLLM's Solicitation/Recommendation Statement on Schedule 14D-9 was filed today with the Securities and Exchange Commission and is being mailed to stockholders. Stockholders may obtain a copy of the information amending and updating the Offer to Purchase and the Schedule 14D-9 and other documents filed with the SEC for free at the SEC's web site at http://www.sec.gov. Georgeson Shareholder Communications, Inc. is the Information Agent with respect to the tender offer, and the information amending and updating the Offer to Purchase and the Schedule 14D-9, along with the Offer to Purchase and the letter of transmittal, may also be obtained from it free of charge by calling 1-800-223-2064. This press release does not constitute an offer to purchase or a solicitation of an offer to sell securities. The complete terms and conditions of the tender offer are set forth in the Offer to Purchase, dated June 2, 2000, as amended, and the related Letter of Transmittal. # # # EX-99.(C)(1) 3 0003.txt EXHIBIT (C)(1) -------------- April 14, 2000 Joe Hardesty Bank of America Business Credit 6060 Poplar Avenue - Suite 400 Memphis, Tennessee 38119 APPRAISAL --------- As requested, an inspection and appraisal of the specific assets of KLLM TRANSPORT SERVICES has been conducted by MB Valuation Services, Inc. We assume that all items listed are owned by and belong to KLLM TRANSPORT SERVICES, although no investigation has been made to verify that ownership. The purpose of this appraisal is to arrive at a conclusion of ORDERLY LIQUIDATION VALUE for these items as of the effective date of inspection; we do not intimate that there could not be any fluctuation of the values in the future. The fee for this report is for our expressed opinion at the time of inspection, with no warranties or guarantees of the outcome if values are tested at any future date. This appraisal sets forth our findings and conclusions which are based upon an investigation of conditions affecting value and which are subject to the Assumptions and Statement of Limiting Conditions and Definition contained in the following report. Without reading the Assumptions and Statement of Limiting Conditions and Definition, the report could be erroneously interpreted. This appraisal is in compliance with the Uniform Standards of Professional Appraisal Practices (USPAP) as of January 1, 2000. This is a Summary Appraisal Report. Thank you for the opportunity to be of service in this matter. If you have any questions regarding the method of appraisal, the value concept, or the indicated values, contact our corporate office in Dallas, Texas. Respectfully submitted, MB VALUATION SERVICES, INC. Robert L. Barber Appraiser RLB/jr TABLE OF CONTENTS R E C A P I T U L A T I O N ......................................... 1 GENERAL COMMENTS, ASSUMPTIONS AND STATEMENT OF LIMITING CONDITIONS .................................... 2 GENERAL INFORMATION - DEFINITIONS ................................... 7 PURPOSE OF APPRAISAL: ............................................... 7 USE AND INTERPRETATION .............................................. 14 CONDITION CODES...................................................... 16 RESEARCH DATA SOURCES 18 PERSONAL PROPERTY LISTING: Code Directory............................................. 18 Asset Directory............................................ 19 Computer Recap............................................. 512 CERTIFICATE OF APPRAISER............................................. 514 QUALIFICATIONS:...................................................... 515 ORDERLY LIQUIDATION VALUE ----------------------------------------------------------- R E C A P I T U L A T I O N KLLM TRANSPORT SERVICES JACKSON, MISSISSIPPI BASTROP, LOUISIANA MARCH 30, 2000 ----------------------------------------------------------- KLLM......................................................$ 62,978,500 VERNON SAWYER............................................. 22,223,200 TOTAL FOR REPORT * * * $ 85,201,700. 0 0 * * * (EIGHTY-FIVE MILLION, TWO HUNDRED ONE THOUSAND, SEVEN HUNDRED DOLLARS) NOTE: IF THIS BUSINESS OR ANY EQUIPMENT IS LATER SOLD, CONTACT YOUR APPRAISER FOR RECOMMENDATIONS OR GENERAL MARKET INFORMATION. Page 1 GENERAL COMMENTS, ASSUMPTIONS AND STATEMENT OF LIMITING CONDITIONS In many instances, these statements include general comments for understanding the study. All facts and data set forth in this report are true and correct to the best of your appraiser's knowledge and belief. All information furnished by company personnel and others, including such things as capacities and production rates of equipment, upon which all or portions of this report are based, is believed to be reliable, but has not been verified in all cases. No warranties are given as to the accuracy of such information nor does the appraiser (or MB) report to be a technical expert on any assets as our expertise is confined to valuation. Personal inspection of specific assets has been made. The fee for this appraisal report is not contingent upon the values reported. There have not been any guarantees associated with this fee and no liability can be intimated or assumed in any manner. As this report has been purchased by the addressee, we assume it is to be used only by the addressee in determination of a value opinion as of the effective date. Use of this report by others should be done so with the understanding that no guarantees have been made by MB VALUATION SERVICES, INC. or the appraiser to the owner of the report nor purchased through the fee paid to the appraiser. The physical condition of the property described herein was based upon visual inspection by the appraiser. No responsibility is assumed for latent defects of ANY nature whatsoever which may affect its value, nor for any expertise required to disclose such conditions. No consideration has been given to liens or encumbrances which may be against the property. No investigation of legal fee or title to the property has been made and the claim to the property has been assumed to be valid. Title to the subject property is assumed to be good and marketable. Neither the appraiser nor any officer or employee of MB VALUATION SERVICES, INC. has any financial interest in the property appraised. Neither MB nor the signatories should be required to give testimony or attend court or be at any governmental hearing with references to the said property unless prior arrangements have been made. However, MB is willing to do so for standard testimony fee and expense rates subject only to scheduling conflicts and/or a litigation subject that is outside the function and purpose of the report which, in the opinion of MB, would be misleading or confusing. Page 2 This appraisal is based upon ORDERLY LIQUIDATION VALUE as defined in the Definition section of this report. All equipment has been considered free and clear of any landlords holds through lease agreements, and all items are listed assuming the removal of same without any restrictions. No additional values or appraisals have been made regarding such intangibles as patents, rights to manufacture, trademarks, goodwill, going concern, product line, customer lists, etc. The values made a pat of this report are for the items listed only and are subject to the Definition of the report itself. An appraisal is an estimate of value. When the amount is considered a reasonable and proper value under the concept of a definition, then it is applied. For this reason the value is, in many cases, a rounded number. As stated in ENGINEERING VALUATION AND DEPRECIATION, a textbook published by Iowa State University Press of Ames, Iowa, "all values are of the nature of forecast of events and are subject to the uncertainties of all prophecies." This appraiser reserves the right to recall all copies of this report to correct any omission or error. The valuation concept used in this report is one accepted by the client. Concept PROBABILITY and/or feasibility is beyond the scope of the appraisal. The user of the report is to determine the probability of occurrence. The appraisal is purchased in order to allow an opinion of value under an assumed set of circumstances, as mutually agreed upon by the client and MB VALUATION SERVICES, INC. The concept is considered reasonable for its intended use as a POSSIBLE value to be received or the project would have been declined. The valuation study has been made by MB VALUATION SERVICES, INC. and will be held confidential. It has been prepared by an experienced appraiser and is based on information, where possible, from contractors, manufacturers, sales comparables, dealers, etc. The analysis and final conclusion is arrived at from many years of experience in the sale and appraisal of industrial properties. The final form for this report is made possible by omitting many details used in estimating, yet not considered essential to the report. Due to the complexities and variables required on the MANY items of fixed assets, itemized values become the guideline for justification rather than individual summaries for each conclusion. The total opinion of value for all assets is based upon values applied for itemized assets of the company. A separate value "out of context" may not be applicable for any other purpose and must not be used with or compared to any other appraisal. However, most personal property reports under the strictest interpretation of Standard 8 of USPAP as of January 1, 2000, would be styled as a "word of art", A SUMMARY APPRAISAL REPORT. Neither all nor any part of the contents of this report (especially any conclusions a to value, the identity of the appraisers, or the firm with which they are connected) shall be disseminated to the public through advertising media, news media, sales media, or any other public means of communication without prior written consent and approval of MB. Page 3 For all areas of this study, the assigned values represent the amount a reputable and qualified appraiser, unaffected by personal interest, bias or prejudice, would recommend to a prospective purchaser as a proper price or cost within the value concept and in light of prevailing conditions. Items indicated in location codes as made a part of this report are as observed on the effective date of the study. Codes should be considered only a guide and not as an accurate indicator of where equipment may be in the future. In addition, this additional feature made a part of this study is accomplished in order to aid the reader in locating items inspected when comparing the study and/or values as they relate to the total of the completed report. In providing this, MB VALUATION SERVICES, INC. does not wish this extra effort to carry with it any liabilities arising from same as it relates to the past, present or if applied some time in the future. Although the coded areas are believed accurate for use in location, recapitulation or graphics analysis, there are always changes, alterations, and unresolved input that could require correction. As a best effort, the coding is believed correct as related to data input and the descriptive assignment. NO RESPONSIBILITY IS TAKEN FOR CHANGES IN MARKET CONDITIONS AND NO OBLIGATION IS ASSUMED TO REVISE THIS REPORT WITHOUT ADEQUATE COMPENSATION, TIME, AND PROCEDURAL REQUIREMENTS THAT ALLOW DUE DILIGENCE TO REFLECT EVENTS OR CONDITIONS WHICH OCCUR SUBSEQUENT TO THE DATE HEREOF. Description of items made a part of this report is believed correct to the best ability of the appraiser. Any errors or omissions in these descriptions were unintentional and should not affect the value assignment. Descriptions are made with the attempt of allowing reasonable identification although they may not allow specific item identification, in all cases, unless company number tagging is utilized. In many cases, an appraiser may indicate that certain equipment was "observed in operation". This qualification is applicable only to specific pieces of equipment and should not be construed as an implication that other equipment was not operable or capable of operation at the time of inspection. This note could become extremely important as a condition comparative in the future but is considered more of note "in passing" at the time of the on-site listing. However, if it is stated "not observed in operation" it would be an indication that the equipment is not installed or wired for operation or that the equipment obviously has not been in use for some time; it would not necessarily mean the equipment was not capable of operation. This appraisal has been prepared in conformity with the Principles of Appraisal Practice and Code of Ethics of the American Society of Appraisers. In this report, codes are not used either for appearance or actual condition, it is understood that the description would suffice the purposes of the appraiser arriving at a conclusion of value and that the equipment, in appearance, would be in average condition. It is understood, for purposes of an appraisal report, actual condition of that other than the obvious, may be an unknown factor for all of the many items listed. It is not practical, nor feasible to operate each and every machine, nor have it demonstrated for tolerance accuracy, mechanical operating functions, proper computer interface Page 4 and/or gauge measurements due to the various limitations. Appraisers are oriented to value and must rely on a certain amount of information by company personnel as it related to condition and/or observations. Company personnel cannot be available for ALL appraisers while listing ALL items within a facility. It is for this reason that the M&E appraiser typically relies on the appearance codes although when proper information is available, adjustments may be made based upon indicated condition by company personnel under an appropriate value concept. The condition coding is used for internal communication and interpretation rather than as an indication to the users of actual condition. It is advisable, if actual condition of equipment is required, to consult with those parties that are independent and qualified to offer such technical advise. Photographs, if included in this report, are taken at random and may or may not include all of those developed. Some photographs may be of poor quality and/or insignificant to the study. Some photographs are used for recall in correlation work. The selected photographs, if used, are an additional effort when included in the formal report and unless otherwise noted, there is no requested criteria for those selected by the MB production department. The lack of photographs, for whatever reason, should not create any liability for MB. SIGNIFICANT CONTRIBUTION: - ------------------------- It is possible that one or more senior appraisers of our firm assisted in the process of preparing or reviewing this appraisal. Our research department gathers additional market information from our sales data base and/or by making appropriate market inquiries. The on-site senior appraiser was responsible for personally inspecting the assets, describing them and making initial estimates of value. He/she also gathered pertinent information about the assets from the subject company's personnel and company records. The on-site senior appraiser is responsible for the final correlation work conducted unless there is more than one signature. A senior appraiser will have reviewed all of the information. MB Valuation Services, Inc. considers that the appraiser(s) making the final decision on value is the individual(s) contributing in a significant way under the interpretation of the standards made a part of the UNIFORM STANDARDS OF PROFESSIONAL APPRAISAL PRACTICE (USPAP). If on the other hand, special consultants or outside expertise are required, and he/she contributes in a significant way to the correlation of this report, this would be noted. Some equipment, due to location and/or quantity, may have differing values assigned with the consideration that even though similar, condition could be better or worse than other identical pieces. The concept of value causes these adjustment to be made. Location requirements can cause differences in removal or installation. This appraisal is based upon the premise and assumption that there is full compliance with all applicable federal, state and local Environmental Protection Agency hazardous waste regulations and laws. Not study, inspection or observation of any kind or nature has been made, nor is any consideration given to the possible presence of hazardous or toxic waste on the property appraised Page 5 unless it has been specifically pointed out by the company or through a supplied report. The value then reports only to the potential effect on value of the item and not other associated costs (i.e., clean up, etc.). This would include any toxic construction material, asbestos, waste or product from any manufacturing process, polychlorinated biphenyls, or any other substance or material which is regulated by law or poses a hazard to health or the environment generally. As the environmental area is beyond the expertise of an appraiser, you are advised to obtain an expert in environmental hazards or emissions. When and if applicable, the indicated value in this report gives no consideration to any loss in value that may be attributed to the type of refrigerant charge utilized in any of the subject's equipment including air conditioning and/or refrigeration equipment. The user of this report is hereby informed that the use of restricted CFC's may, in the future, greatly affect the usefulness and value of equipment that contains any of the EPA-restricted refrigerant gases. During the site visit, we requested identification of any property which may be on site but not owned, leased or rented. Our best effort was made to identify this equipment and relied on information provided by the company. Highest and best use is defined as the reasonably probable and legal use of personal property, which is physically possible, appropriately supported, financially feasible, and results in the highest value in the appropriate marketplace, consistent with the purpose of the appraisal. As generally understood, the highest and best use of the subject equipment is that for which it was designed by the manufacturer. Although a small sampling of vehicles was observed, the values shown in the report are primarily based on information obtained from Excel spreadsheets provided by principals. Descriptions are those contained on the excel disk, and it is assumed that all assets included in this study are as described and MB Valuation Services, Inc. cannot be held responsible for any discrepancies which may be found in the information provided. To the best of our knowledge, no leased assets are considered in the total value, although they may be listed. Other limitations, if any, are clearly defined and individually set out at that point relating to the subject. Page 6 PERSONAL PROPERTY GENERAL INFORMATION AND DEFINITION FAIR MARKET VALUE APPRAISAL PURPOSE OF APPRAISAL: - --------------------- The purpose of this appraisal is to estimate the ORDERLY LIQUIDATION VALUE of the subject's personal property. In estimating this value, it has been necessary to make a physical inspection and listing of the property contained in this report. The results are reported in this study. The property interest (rights) appraised is that of ownership in fee simple, and the subject's assets are appraised as if free and clear, without liens or encumbrances (unless otherwise noted). FUNCTION OF APPRAISAL: - ---------------------- The function of this report is to serve as a value guideline for financing purposes of the subject property. The effective date of valuation is March 30, 2000, which was the date of inspection of the subject property. There are proper uses for various appraisal concepts. However, a particular individual, company or organization may determine that the concept fits a particular need and, therefore, use it in a way that would be typically improper. As the American Society of Appraisers has standard definitions for concepts, each concept, as specifically defined, indicates a conclusion of value that would be the same as performed by this company regardless of the client or its use. It is up to the user to determine if the concept is proper for its purpose, as it is clearly defined and should be understood. Prudent users are not prohibited from investigating value concepts to determine their typical and known common uses. They are also not prohibited after their investigations to choose to adapt any concept to their purpose as they consider reasonable by their standards. The appraisal is performed at the behest of a client based upon a requested concept of value. In many cases, MB Valuation Services, Inc. must perform one or more concepts whose uses may vary. Therefore, the function of this study is the use of the report with the knowledge of the defined concept of value. The reader and/or user is advised to contact the appraiser with ANY questions regarding value, typical uses, or intended uses. SCOPE OF APPRAISAL: - ------------------- Sample inspection was done on March 30, 2000 for the purpose of arriving at Orderly Liquidation Value of the list of assets. INFORMATION ANALYZED: - --------------------- See "Purpose and Method of Appraised" and Research Data Sources. Page 7 HIGHEST AND BEST USE: - --------------------- The equipment was being used for the purpose as designed unless otherwise indicated. The only alternative use, other than that as designed, was salvage or scrap. It is the appraiser's opinion that the equipment was being utilized for the purpose as designed and, therefore, at its highest and best use unless otherwise stated. Therefore, highest and best use has been considered in the valuation of all property listed in the report and is defined as: "The reasonably probable and legal use of personal property that is physically possible, appropriately supported and financially feasible, and results in the highest value in the appropriate marketplace." The appropriate marketplace must be consistent with the concept of value. ORDERLY LIQUIDATION VALUE CONCEPT: - ---------------------------------- "The estimated amount expressed in terms of money which could be typically realized from a sale, given a reasonable period of time to find a purchaser(s), the seller being compelled to sell on an as is-where is basis." This concept assumes "Forced Sale" with only a limited time for market exposure and has no "willing seller" assumptions. It also takes into consideration the physical condition, quality, difficulty and cost of removal, and overall psychological appeal of the assets. This value concept is one requested by the client and should not be considered as a recommendation by the appraiser. The concept is considered fair and reasonable under the assumptions made but could have some risks due to changing conditions and the assumed resale of ALL assets. The overall indicator is the appraiser's opinion of the result of an orderly liquidation based upon averaging. It should not be used as a starting selling point. Fair Market Value is considered to be the proper value to use for pricing. NOTE: It should be understood that any removal concept does not consider product lines or their marketability unless otherwise specified to be included. It is for this reason that product line is not a part of this study nor are special tooling, jigs, fixtures and devices considered other than for parts or adaptable use. CLIENT: Bank of American Business Credit - ------- SUBJECT: KLLM TRANSPORT SERVICES - -------- USER(S): Bank of America Business Credit - -------- PROPERTY: Rolling Stock - --------- Page 8 PROPERTY CHARACTERISTICS: - ------------------------- (1) Physical: Age Life or Observed Condition (2) Functional: Contained in market of comparison to replacement (3) Economic: Industry and/or market derived INTEREST APPRAISED: Fee Simple - ------------------- Page 9 ORDERLY LIQUIDATION VALUE PURPOSE AND METHODS OF APPRAISAL IT IS STANDARD FOR MB VALUATION SERVICES, INC. REPORTS TO BE EXTREMELY DETAILED UNLESS OTHERWISE REQUESTED. FOR THIS REASON, THERE MAY BE SOME ITEMS LISTED WHICH ARE CONSIDERED NOMINAL OR INSIGNIFICANT TO THE READER. HOWEVER, WHEN THE DICTATION METHOD IS EMPLOYED, IT IS FASTER, WITH CERTAIN EXCEPTIONS, TO LIST THESE ITEMS INDIVIDUALLY THAN TO COUNT THEM AND HAVE ONE ENTRY. ALTHOUGH THE FILE MAY CONTAIN MORE DETAIL THAN REQUIRED, IT IS POSSIBLE TO REQUEST THIS SAME STUDY WITH LIMITS FOR VALUE AND/OR DESCRIPTION. WHEN THE DATA IS USED FOR ASSET CONTROL, THERE IS USUALLY AN APPRECIATION FOR THE DETAIL BY THE MAJORITY OF CLIENTS, ALTHOUGH EACH USER MAY HAVE A DIFFERENT REQUIREMENT FROM OTHERS. AS THESE REQUIREMENTS CANNOT BE ANTICIPATED, UNLESS OTHERWISE SPECIFIED, THE FULL DETAIL IS USUALLY SUPPLIED. THE SUBJECT REPORT AFTER USPAP 2000 IS CONSIDERED A SUMMARY REPORT. The purpose of this appraisal is to estimate the ORDERLY LIQUIDATION VALUE of the subject machinery and equipment in terms of United States Dollars. In estimating this value, the Appraisers has considered the following approaches in arriving at indicators of value. COST APPROACH - An estimate of the present replacement cost of the machinery and equipment less accrued depreciation. Depreciation includes loss in value due to physical deterioration as well as functional and economic obsolescence. Functional obsolescence is the decreased capacity of the item to perform the function for which it is intended in terms of current standards and specifications. Functional obsolescence may stem either from a deficiency within the item such as poor design or outmoded style or may result from superadequacy or overdesign. Economic obsolescence represents a loss in value from factors outside the item appraised, such as a depressed market for the end product manufactured by the item of machinery or equipment. These factors generally are characterized as "negative external forces" which have an impact upon the item appraised. The Cost Approach is utilized primarily as a secondary value indicator since it often fails to qualify the inherent loss in value under liquidation conditions. Comparisons are sometimes made to cost when comparable sales are not found under the appraisal concept. MARKET COMPARISON APPROACH - Comparison with similar items that have sold or are currently offered for sale in the marketplace. By comparing the items appraised with similar items which have recently sold or are currently offered for sale, an estimate can be made of the Orderly Liquidation Value. Within these comparable items there may be pertinent factors of comparison which include capacity, age, location, and date of sale, when applicable. These items may be considered in arriving at an adjusted value for each subject item appraised. Page 10 Marketability of each item of machinery and equipment is also a determinant of value. Marketability, as a measure of demand, is approximated through recent sales under liquidation conditions of comparable items of machinery and equipment. Where actual sales are not available, relationships are often established based upon used equipment prices for comparable items with subsequent adjustments for orderly liquidation conditions. (See Cost Approach). DIRECT SALES COMPARISON of like items of machinery and equipment (where possible) under liquidation conditions is the preferable and most accepted approach in determining Orderly Liquidation Value. INCOME APPROACH not typically applied under the Orderly Liquidation Concept. After consideration, a decision is made as to whether the income approach could be appropriate. If it is used, it is made a separate section to the study where it is thoroughly explained. The assignment for any Liquidation Concept appraisal does not necessarily indicate the scenario as a proper method of disposal if market testing should be required at a future date. These value concepts and their inherent assumptions are requested for various uses or guidelines by the addressee shown on the letter of transmittal. The assumed set of circumstances may not allow the concept to be recommended when and if a liquidation should be required. In certain instances, as in the case of custom machinery and equipment, a market analysis may be undertaken to ascertain current demand/marketability and subsequent assignment value. Market analysis may also be undertaken if functional or economic obsolescence is a key factor in a major machine tool or piece of equipment. A justment call may be required with no comparable backup. That value assignment could be formed by an experienced appraiser having acquired value orientation from years of observations under liquidation concepts. SPECIAL or custom equipment, in most cases, is appraised in this manner. Certain categories of machinery and equipment are subject to routine loss in value as a result of usage (physical deterioration). In other instances, functional obsolescence is determined through a comparison with other items that may have a more efficient and cost effective operation. Note that the summary value indicated in this report represents an "aggregate" value based upon all items noted herein. For this reason, isolation of any single element as a sole basis of comparison may be inaccurate, and subsequent isolation of any single item appraised, or group of items appraised, could result in a variance from the values reported. The Forced Sale requires not only the judgment and ability of the appraiser to evaluate a specific piece of equipment, but also the experience to anticipate what could happen under a given set of circumstances based upon actual sales (held under forced sale conditions) of like or similar machinery and equipment, with Page 11 adjustments made for: 1) conditions at time of inspection 2) quantities and desirability 3) location 4) general appearance 5) psychological appeal 6) cost of similar or like used and new equipment 7) degree of specialization or modification The balance of forces which affects value for particular types of machinery or pieces of equipment is analyzed by the appraiser and the final value assignment on each item is, in part, a reflection of this analysis. Machinery and equipment is described and valued as it would be typically advertised and sold. In some instances, an entire line of related machinery is designed to perform a particular function as an integral unit and should justify greater value application as a unit rather than if it was separated out. It should be understood that the value indicated is not for its replacement in like kind and utility, but rather what the specific equipment observed is worth under the scenario as defined. However, replacement or reproduction cost may be used in the cost approach to arrive at the value indicated for the specific piece. With all things equal, it is possible that an exact piece of equipment, if found, could be obtained for the value indicated under the concept. Comparisons would have to take into account adjustments for exacts such as location, installation, condition, industry, locational economics and possible draw through all "causes and effects" associated with the concept. Realistically, exact comparables are not always possible, therefore, it should be applied to the specific equipment at its location; it is not to be used, nor is it to represented as a valuation that would be applied to replacement or depreciated replacement for insurance purposes. However, the item DESCRIPTION, in most cases, contains the specifics that would be needed for determining replacement in like kind and utility, although values may be different than those indicated by this study. An appraisal has never been considered the product of an exact science, although measurements of accuracy may be employed. Determining the reactions of the public to value an asset at a particular point in time is a valuation process based upon history, whereas the actual test of an appraisal value may vary up or down. for this reason, one sale does not necessarily make a comparable. Although equipment may have been observed selling at higher or lower numbers than its appraised value, it is the appraiser's judgment and responsibility to make adjustments in order to maintain a set of circumstances which might be considered average under a particular value concept. For this reason, the total number indicator is the important measurement on a PROPER future test. Typically, the averaging method adjusts for location, condition, time, and other factors. However, it would not simply indicate some high or low recovery for an asset under some particular past sale. The Page 12 appraiser strives for an average. In a tested sale, one might find that average being exceeded in some cases, yet below the value indicated in others. It is the existence of these variables that requires the use of the averaging method in order to maintain greater accuracy. Page 13 USE AND INTERPRETATION OF COMPUTER PRINTOUT As the enclosed listing is a comprehensive report, certain areas of the print may need clarification. The following example and subsequent explanation should be of assistance. COMPUTER PRINTOUT EXAMPLE ------------------------- MB VALUATION APPRAISAL OF: (HYPOTHETICAL EXAMPLE - NOT SUBJECT) C1 (CODE 1): LOCATION C2 (CODE 2): TYPE - --------------------------------------------------------------------------- ENTRY C1 C2 QTY DESCRIPTION FMV - --------------------------------------------------------------------------- 301 S1 D1 1 FAN, PEDESTAL 10.00 308 S1 D1 1 AIR COMPRESSOR, TWIN STAGE, 15 HP, TANK MOUNTED 2600.00 412 S2 D1 1 PALLET TRUCK, 5500 #CAP. 500.00 513 S2 D1 1 AIR CONDITIONING SYSTEM, CENTRAL HEAT & AIR, *IMPROVEMENTS * 617 S2 D1 LOT TOOLS AND ACCESSORIES, MISC. NOT OTHERWISE LISTED OR CONSIDERED 150.00 - --------------------------------------------------------------------------- EXPLANATION: Reading from left to right, note the far left (ENTRY) column contains an ENTRY NUMBER (such as 301) to reference as appraisal item. Next are code columns if used. Note they are labeled C1 and C2, meaning Code 1 and Code 2. A quick glance to the upper left will reveal that C1 (Code 1) represents LOCATION, and that C2 (Code 2) represents TYPE: therefore, entry number 301, for instance, would be at location S1 and would be categorized as equipment type D1. Codes of this sort are optional, and may not appear on the printout; however, they can be added at a later time. Page 14 The codes S1 and D1 may be interpreted by referring to a code directory (not shown) located immediately before the listing. The directory might show, for example, that location S1 is Building A, and that equipment type D1 is drilling equipment. This code directory also shows the pages on which the first set of codes can be found. If codes are used, the end of the computer printout will have a recapitulation, which also references the codes and their descriptions. It is possible to obtain a printout of all or a portion of the items, sorted by any code, by order of entry (the far left computer generated entry number), ascending or descending values, or by category, which would group the assets alphabetically. The quantity column (QTY) indicates the count of items listed. When the word "Lot" is used in this column, an itemized count was not made. The term "Lot" considers a group as one and is the same to the computer as the quantity of one. Quantities greater than one are automatically extended. To the right of quantify (QTY) is the data description which contains a reasonable description of the item listed. the data description may also contain any special noted considerations, explanations or references. The far right number is the EXTENDED appraisal value for quantities greater than one. If an asterisk (*) is used in the value column, the value is equal to zero. (See Entry No. 513 in the example.) The asterisk (*) is used primarily to reference an explanation found in the item's description when no value is used. In some cases the value, if applicable, could have been considered elsewhere. If the value is actually zero, the number zero is used. If you have not requested your report to be updated or revised yearly, or at some point in the future, and wish to investigate this service, contact us for both an explanation and a fee quote. In any event, you should receive an update reminder letter and quote in approximately eleven months. NOTE: The overall conceptual design of this program, dictation methodology for appraisals and input, and procedural applications of this methodology were originated by the principals of MB Valuation Services, Inc. over many years, with continual upgrading of all applications and technology. These procedures, or similar techniques, can be observed used by others within the sales and appraisal profession. Page 15 CONDITION CODES - --------------------------------------------------------------------------- These are standard condition codes which have been used for years and are generally understood. These codes are defined below for any needed clarification. At the outset, it should be understood that standard condition codes should typically be used for actual rather than assumed conditions. It is for this reason that there should be two forms of condition codes: (1), codes used for actual condition, and (2), codes used for appearance or assumed condition. Through the use of two sets of codes (actual and assumed) there is allowed a better understanding or aid for the following uses: 1. Justification of value judgment and/or any alterations from average return; 2. Testimony or presentation support; future court testimony; 3. Indicators of or lack of preventative maintenance; 4. Like equipment - different return justification; 5. Potential use for residual forecasting; 6. Contribution to overall observations (aid to notes); 7. Later sale recovery - differences from original study; 8. Quicker references than notes for value correlation; 9. Better item interpretation by outside users of report; 10. Aid to value credibility contained within the report; 11. In-house training aid; 12. Future comparable interpretation (when applied by reporter of actual sales); 13. Upward or downward adjustments in fine tuning the more questionable value application; 14. Quicker verbal communication to others having an understanding of codes; 15. Additional indicator of having completed an on-site inspection; 16. Component differences on individual entry (see EXAMPLE at the end of this section); 17. Support in value controversy within the same concept; 18. Better interpretation of photographs, drawings, or facsimile reproduction not necessarily representative of subject; 19. Special considerations more readily understood; 20. Indicator of special effort for client appreciation; 21. Aids in future revision to other value concepts or updating. Below are COMMON CONDITION CODES as should be applied for ACTUAL condition: N - New and has not been used E - Excellent and in like new condition VG - VERY GOOD, excellent condition with no requirement for repairs and usually considered above average, longer time than average before any required maintenance. Page 16 G - GOOD CONDITION, usually considered average to that which would be expected for an item of like age and utility; would require standard continued maintenance. F - FAIR CONDITION, generally considered below average but operable; could use repairs or improvement; questionable continued or extended use. P - POOR CONDITION, may or may not work and in all likelihood requires maintenance for even the most limited use; needs immediate attention. X OR S - SCRAP CONDITION, considered parts only or less and cannot be operated for original intended use; 100% depreciated by physical condition and/or some form of obsolescence. NOTE: Standard condition codes can be variable such as G-F or F-G. G-F would indicate more good than fair, whereastheh reverse would be more fair than good. Variable condition codes are helpful in averaging in such areas as tires in which many variable conditions placement apply to the item(s) under appraisement. Following are codes used for ASSUMED derived condition from observation. NOTE: The codes listed below are commonly referred as bracket codes by those who use them. These codes are SPECIAL CODES that were developed and initiated many years ago by the principal of MB Valuation Services, Inc. and are becoming more widely used after an article on the use of "appearance codes" was previously published in the M&E Newsletter of the American Society of Appraisers. [A] = new [B] = new or late model appearance, yet obviously used somewhat [C] = average condition for age [D] = below average but operable [E] = below average; may or may not work; condition questionable; repairs obviously needed [F] = inoperable and undetermined whether repairs will allow use; usually considered parts and repair doubtful [G] = scrap or salvage [O] = older - that equipment which would exhibit great difficulty in remarketing due to age; not necessarily to be confused with obsolescence but rather the appearance of age Page 17 [S] = special - a specialized piece of equipment usually proprietary or shop built or having a very narrow or limited market - could be a highly adapted standard piece of equipment [Q] = condition questionable [L] = late model In all cases for code applications, there may be some variation of a code in which the appraiser would not wish to use the higher or lower reference. An example of this could be a machine that the appraiser considered average [C], although slightly lower than others observed yet not so low as the indicator for below average [D]. For this reason, an appraiser would use a plus (+) or minus (-); in the above example the indicator would possibly be shown as [C-]. NOTE: The above codes could be used in combination within a bracket or used several times within a description for component indicators, i.e. [SC+] indicates a SPECIAL item just SLIGHTLY ABOVE AVERAGE in condition; [SQD] would mean a SPECIAL piece of equipment that appears BELOW AVERAGE, but operational, however, the appraiser is still QUESTIONING whether the equipment is, in fact, operable. An example of such an item would be a watchband link machine that was in storage, greasy, and there being no way to ascertain whether it was operable when it was placed in storage. For purposes of clarification, the following is a hypothetical example for using some of the various codes referred to above: EXAMPLE: FORKLIFT, CLARK, MDL. C500. YS80, S/N Y685-0299-921S, W/DUAL FRONT TIRES, OVERHEAD GUARD, TRIPLEX MAST, PNEU. TIRES, GAS ENGINE, [C] Page 18 RESEARCH DATA SOURCES - -------------------------------------------------------------------------- MB Data Base The Last Bid - Trucks & Trailers Truck Blue Book Various Truck & Trailer Price Guides Page 19 EX-99.(C)(2) 4 0004.txt EXHIBIT (C)(2) -------------- April 17, 2000 Joe Hardesty Bank of America Business Credit 6060 Poplar Avenue - Suite 400 Memphis, Tennessee 38119 APPRAISAL --------- As requested, an inspection and appraisal of specific assets of KLLM TRANSPORT SERVICES has been conducted by MB Valuation Services, Inc. We assume that all items listed are owned by and belong to KLLM TRANSPORT SERVICES, although no investigation has been made to verify that ownership. The purpose of this appraisal is to arrive at a conclusion of FAIR MARKET VALUE for these items as of the effective date of inspection; we do not intimate that there could not be any fluctuation of the values in the future. The fee for this report is for our expressed opinion at the time of inspection, with no warranties or guarantees of the outcome if values are tested at any future date. This appraisal sets forth our findings and conclusions which are based upon an investigation of conditions affecting value and which are subject to the Assumptions and Statement of Limiting Conditions and Definition contained in the following report. Without reading the Assumptions and Statement of Limiting Conditions and Definition, the report could be erroneously interpreted. This appraisal is in compliance with the Uniform Standards of Professional Appraisal Practices (USPAP) as of January 1, 2000. This is a Summary Appraisal Report. Thank you for the opportunity to be of service in this matter. If you have any questions regarding the method of appraisal, the value concept, or the indicated values, contact our corporate office in Dallas, Texas. Respectfully submitted, MB VALUATION SERVICES, INC. Robert L. Barber Appraiser RLB/jr FAIR MARKET VALUE - -------------------------------------------------------------------------- R E C A P I T U L A T I O N KLLM TRANSPORT SERVICES JACKSON, MISSISSIPPI BASTROP, LOUISIANA MARCH 30, 2000 - -------------------------------------------------------------------------- KLLM.................................................$ 76,761,500 VERNON SAWYER........................................ 27,103,600 TOTAL FOR REPORT * * * $ 1 0 3, 8 6 5, 1 0 0. 0 0 * * * (ONE HUNDRED THREE MILLION, EIGHT HUNDRED SIXTY-FIVE THOUSAND, ONE HUNDRED DOLLARS) NOTE: IF THIS BUSINESS OR ANY EQUIPMENT IS LATER SOLD, CONTACT YOUR APPRAISER FOR RECOMMENDATIONS OR GENERAL MARKET INFORMATION. Page 1 GENERAL COMMENTS, ASSUMPTIONS AND STATEMENT OF LIMITING CONDITIONS In many instances, these statements include general comments for understanding the study. All facts and data set forth in this report are true and correct to the best of your appraiser's knowledge and belief. All information furnished by company personnel and others, including such things as capacities and production rates of equipment, upon which all or portions of this report are based, is believed to be reliable but has not been verified in all cases. No warranties are given as to the accuracy of such information nor does the appraiser (or MB) report to be a technical expert on any assets as our expertise is confined to valuation. Personal inspection of specific assets has been made. The fee for this appraisal report is not contingent upon the values reported. There have not been any guarantees associated with this fee and no liability can be intimated or assumed in any manner. As this report has been purchased by the addressee, we assume it is to be used only by the addressee in determination of a value opinion as of the effective date. Use of this report by others should be done so with the understanding that no guarantees have been made by MB VALUATION SERVICES, INC. or the appraiser to the owner of the report nor purchased through the fee paid to the appraiser. The physical condition of the property described herein was based upon visual inspection by the appraiser. No responsibility is assumed for latent defects of ANY nature whatsoever which may affect its value, nor for any expertise required to disclose such conditions. No consideration has been given to liens or encumbrances which may be against the property. No investigation of legal fee or title to the property has been made and the claim to the property has been assumed to be valid. Title to the subject property is assumed to be good and marketable. Neither the appraiser nor any officer or employee of MB VALUATION SERVICES, INC. has any financial interest in the property appraised. Neither MB nor the signatories should be required to give testimony or attend court or be at any governmental hearing with references to the said property unless prior arrangements have been made. However, MB is willing to do so for standard testimony fee and expense rates subject only to scheduling conflicts and/or a litigation subject that is outside the function and purpose of the report which, in the opinion of MB, would be misleading or confusing. Page 2 This appraisal is based upon FAIR MARKET VALUE as defined in the Definition section of this report. All equipment has been considered free and clear of any landlords holds through lease agreements, and all items are listed assuming the removal of same without any restrictions. No additional values or appraisals have been made regarding such intangibles as patents, rights to manufacture, trademarks, goodwill, going concern, product line, customer lists, etc. The values made a pat of this report are for the items listed only and are subject to the Definition of the report itself. An appraisal is an estimate of value. When the amount is considered a reasonable and proper value under the concept of a definition, then it is applied. For this reason the value is, in many cases, a rounded number. As stated in ENGINEERING VALUATION AND DEPRECIATION, a textbook published by Iowa State University Press of Ames, Iowa, "all values are of the nature of forecast of events and are subject to the uncertainties of all prophecies." This appraiser reserves the right to recall all copies of this report to correct any omission or error. The valuation concept used in this report is one accepted by the client. Concept PROBABILITY and/or feasibility is beyond the scope of the appraisal. The user of the report is to determine the probability of occurrence. The appraisal is purchased in order to allow an opinion of value under an assumed set of circumstances, as mutually agreed upon by the client and MB VALUATION SERVICES, INC. The concept is considered reasonable for its intended use as a POSSIBLE value to be received or the project would have been declined. The valuation study has been made by MB VALUATION SERVICES, INC. and will be held confidential. It has been prepared by an experienced appraiser and is based on information, where possible, from contractors, manufacturers, sales comparables, dealers, etc. The analysis and final conclusion is arrived at from many years of experience in the sale and appraisal of industrial properties. The final form for this report is made possible by omitting many details used in estimating, yet not considered essential to the report. Due to the complexities and variables required on the MANY items of fixed assets, itemized values become the guidelines for justification rather than individual summaries for each conclusion. The total opinion of value for all assets is based upon values applied for itemized assets of the company. A separate value "out of context" may not be applicable for any other purpose and must not be used with or compared to any other appraisal. However, most personal property reports under the strictest interpretation of Standard 8 of USPAP as of January 1, 2000, would be styled as a "word of art", A SUMMARY APPRAISAL REPORT. Neither all nor any part of the contents of this report (especially any conclusions a to value, the identity of the appraisers, or the firm with which they are connected) shall be disseminated to the public through advertising media, news media, sales media, or any other public means of communication without prior written consent and approval of MB. Page 3 For all areas of this study, the assigned values represent the amount a reputable and qualified appraiser, unaffected by personal interest, bias or prejudice, would recommend to a prospective purchaser as a proper price or cost within the value concept and in light of prevailing conditions. Items indicated in location codes as made a part of this report are as observed on the effective date of the study. Codes should be considered only a guide and not as an accurate indicator of where equipment may be in the future. In addition, this additional feature made a part of this study is accomplished in order to aid the reader in locating items inspected when comparing the study and/or values as they relate to the total of the completed report. In providing this, MB VALUATION SERVICES, INC. does not wish this extra effort to carry with it any liabilities arising from same as it relates to the past, present or if applied some time in the future. Although the coded areas are believed accurate for use in location, recapitulation or graphics analysis, there are always changes, alterations, and unresolved input that could require correction. As a best effort, the coding is believed correct as related to data input and the descriptive assignment. NO RESPONSIBILITY IS TAKEN FOR CHANGES IN MARKET CONDITIONS AND NO OBLIGATION IS ASSUMED TO REVISE THIS REPORT WITHOUT ADEQUATE COMPENSATION, TIME, AND PROCEDURAL REQUIREMENTS THAT ALLOW DUE DILIGENCE TO REFLECT EVENTS OR CONDITIONS WHICH OCCUR SUBSEQUENT TO THE DATE HEREOF. Description of items made a part of this report is believed correct to the best ability of the appraiser. Any errors or omissions in these descriptions were unintentional and should not affect the value assignment. Descriptions are made with the attempt of allowing reasonable identification although they may not allow specific item identification, in all cases, unless company number tagging is utilized. In many cases, an appraiser may indicate that certain equipment was "observed in operation". This qualification is applicable only to specific pieces of equipment and should not be construed as an implication that other equipment was not operable or capable of operation at the time of inspection. This note could become extremely important as a condition comparative in the future but is considered more of note "in passing" at the time of the on-site listing. However, if it is stated "not observed in operation" it would be an indication that the equipment is not installed or wired for operation or that the equipment obviously has not been in use for some time; it would not necessarily mean the equipment was not capable of operation. This appraisal has been prepared in conformity with the Principles of Appraisal Practice and Code of Ethics of the American Society of Appraisers. In this report, codes are not used either for appearance or actual condition, it is understood that the description would suffice the purposes of the appraiser arriving at a conclusion of value and that the equipment, in appearance, would be in average condition. It is understood, for purposes of an appraisal report, actual condition of that other than the obvious, may be an unknown factor for all of the many items listed. It is not practical, nor feasible to operate each and every machine, nor have it demonstrated for tolerance accuracy, mechanical operating functions, proper computer interface Page 4 and/or gauge measurements due to the various limitations. Appraisers are oriented to value and must rely on a certain amount of information by company personnel as it related to condition and/or observations. Company personnel cannot be available for ALL appraisers while listing ALL items within a facility. It is for this reason that the M&E appraiser typically relies on the appearance codes although when proper information is available, adjustments may be made based upon indicated condition by company personnel under an appropriate value concept. The condition coding is used for internal communication and interpretation rather than as an indication to the users of actual condition. It is advisable, if actual condition of equipment is required, to consult with those parties that are independent and qualified to offer such technical advise. Photographs, if included in this report, are taken at random and may or may not include all of those developed. Some photographs may be of poor quality and/or insignificant to the study. Some photographs are used for recall in correlation work. The selected photographs, if used, are an additional effort when included in the formal report and unless otherwise noted, there is no requested criteria for those selected by the MB production department. The lack of photographs, for whatever reason, should not create any liability for MB. SIGNIFICANT CONTRIBUTION: It is possible that one or more senior appraisers of our firm assisted in the process of preparing or reviewing this appraisal. Our research department gathers additional market information from our sales data base and/or by making appropriate market inquiries. The on-site senior appraiser was responsible for personally inspecting the assets, describing them and making initial estimates of value. He/she also gathered pertinent information about the assets from the subject company's personnel and company records. The on-site senior appraiser is responsible for the final correlation work conducted unless there is more than one signature. A senior appraiser will have reviewed all of the information. MB Valuation Services, Inc. considers that the appraiser(s) making the final decision on value is the individual(s) contributing in a significant way under the interpretation of the standards made a part of the UNIFORM STANDARDS OF PROFESSIONAL APPRAISAL PRACTICE (USPAP). If on the other hand, special consultants or outside expertise are required, and he/she contributes in a significant way to the correlation of this report, this would be noted. Some equipment, due to location and/or quantity, may have differing values assigned with the consideration that even though similar, condition could be better or worse than other identical pieces. The concept of value causes these adjustment to be made. Location requirements can cause differences in removal or installation. This appraisal is based upon the premise and assumption that there is full compliance with all applicable federal, state and local Environmental Protection Agency hazardous waste regulations and laws. Not study, inspection or observation of any kind or nature has been made, nor is any consideration given to the possible presence of hazardous or toxic waste on the property appraised Page 5 unless it has been specifically pointed out by the company or through a supplied report. The value then reports only to the potential effect on value of the item and not other associated costs (i.e., clean up, etc.). This would include any toxic construction material, asbestos, waste or product from any manufacturing process, polychlorinated biphenyls, or any other substance or material which is regulated by law or poses a hazard to health or the environment generally. As the environmental area is beyond the expertise of an appraiser, you are advised to obtain an expert in environmental hazards or emissions. When and if applicable, the indicated value in this report gives no consideration to any loss in value that may be attributed to the type of refrigerant charge utilized in any of the subject's equipment including air conditioning and/or refrigeration equipment. The user of this report is hereby informed that the use of restricted CFC's may, in the future, greatly affect the usefulness and value of equipment that contains any of the EPA-restricted refrigerant gases. During the site visit, we requested identification of any property which may be on site but not owned, leased or rented. Our best effort was made to identify this equipment and relied on information provided by the company. Highest and best use is defined as the reasonably probable and legal use of personal property, which is physically possible, appropriately supported, financially feasible, and results in the highest value in the appropriate marketplace, consistent with the purpose of the appraisal. As generally understood, the highest and best use of the subject equipment is that for which it was designed by the manufacturer. Although a small sampling of vehicles was observed, the values shown in the report are primarily based on information obtained from Excel spreadsheets provided by principals. Descriptions are those contained on the excel disk, and it is assumed that all assets included in this study are as described and MB Valuation Services, Inc. cannot be held responsible for any discrepancies which may be found in the information provided. To the best of our knowledge, no leased assets are considered in the total value, although they may be listed. Other limitations, if any, are clearly defined and individually set out at that point relating to the subject. Page 6 PERSONAL PROPERTY GENERAL INFORMATION AND DEFINITION FAIR MARKET VALUE APPRAISAL PURPOSE OF APPRAISAL: - --------------------- The purpose of this appraisal is to estimate the FAIR MARKET VALUE of the subject's personal property. In estimating this value, it has been necessary to make a physical inspection and listing of the property contained in this report. The results are reported in this study. The property interest (rights) appraised is that of ownership in fee simple, and the subject's assets are appraised as if free and clear, without liens or encumbrances (unless otherwise noted). FUNCTION OF APPRAISAL: - ---------------------- The function of this report is to serve as a value guideline for financing purposes of the subject property. The effective date of valuation is March 30, 2000, which was the date of inspection of the subject property. There are proper uses for various appraisal concepts. However, a particular individual, company or organization may determine that the concept fits a particular need and, therefore, use it in a way that would be typically improper. As the American Society of Appraisers has standard definitions for concepts, each concept, as specifically defined, indicates a conclusion of value that would be the same as performed by this company regardless of the client or its use. It is up to the user to determine if the concept is proper for its purpose, as it is clearly defined and should be understood. Prudent users are not prohibited from investigating value concepts to determine their typical and known common uses. They are also not prohibited after their investigations to choose to adapt any concept to their purpose as they consider reasonable by their standards. The appraisal is performed at the behest of a client based upon a requested concept of value. In many cases, MB Valuation Services, Inc. must perform one or more concepts whose uses may vary. Therefore, the function of this study is the use of the report with the knowledge of the defined concept of value. The reader and/or user is advised to contact the appraiser with ANY questions regarding value, typical uses, or intended uses. SCOPE OF APPRAISAL: - ------------------- Sample inspection was done on March 30, 2000 for the purpose of arriving at Orderly Liquidation Value of the list of assets. INFORMATION ANALYZED: - --------------------- See "Purpose and Method of Appraised" and Research Data Sources. Page 7 HIGHEST AND BEST USE: - --------------------- The equipment was being used for the purpose as designed unless otherwise indicated. The only alternative use, other than that as designed, was salvage or scrap. It is the appraiser's opinion that the equipment was being utilized for the purpose as designed and, therefore, at its highest and best use unless otherwise stated. Therefore, highest and best use has been considered in the valuation of all property listed in the report and is defined as: "The reasonably probable and legal use of personal property that is physically possible, appropriately supported and financially feasible, and results in the highest value in the appropriate marketplace." The appropriate marketplace must be consistent with the concept of value. FAIR MARKET VALUE CONCEPT: - -------------------------- "The estimated amount expressed in terms of money that may reasonably be expected for an item of property between a willing buyer and a willing seller with equity to both, neither under compulsion to buy or sell and both fully aware of all relevant facts." NOTE: It should be understood that any removal concept does not consider product lines or their marketability unless otherwise specified to be included. It is for this reason that product line is not a part of this study nor are special tooling, jigs, fixtures and devices considered other than for parts or adaptable use. CLIENT: Bank of American Business Credit - ------- SUBJECT: KLLM TRANSPORT SERVICES - -------- USER(S): Bank of America Business Credit - -------- PROPERTY: Rolling Stock - --------- PROPERTY CHARACTERISTICS: - ------------------------- (1) Physical: Age Life or Observed Condition (2) Functional: Contained in market of comparison to replacement (3) Economic: Industry and/or market derived INTEREST APPRAISED: Fee Simple - ------------------- Page 8 FAIR MARKET VALUE PURPOSE AND METHODS OF APPRAISAL IT IS STANDARD FOR MB VALUATION SERVICES, INC. REPORTS TO BE EXTREMELY DETAILED UNLESS OTHERWISE REQUESTED. FOR THIS REASON, THERE MAY BE SOME ITEMS LISTED WHICH ARE CONSIDERED NOMINAL OR INSIGNIFICANT TO THE READER. HOWEVER, WHEN THE DICTATION METHOD IS EMPLOYED, IT IS FASTER, WITH CERTAIN EXCEPTIONS, TO LIST THESE ITEMS INDIVIDUALLY THAN TO COUNT THEM AND HAVE ONE ENTRY. ALTHOUGH THE FILE MAY CONTAIN MORE DETAIL THAN REQUIRED, IT IS POSSIBLE TO REQUEST THIS SAME STUDY WITH LIMITS FOR VALUE AND/OR DESCRIPTION. WHEN THE DATA IS USED FOR ASSET CONTROL, THERE IS USUALLY AN APPRECIATION FOR THE DETAIL BY THE MAJORITY OF CLIENTS, ALTHOUGH EACH USER MAY HAVE A DIFFERENT REQUIREMENT FROM OTHERS. AS THESE REQUIREMENTS CANNOT BE ANTICIPATED, UNLESS OTHERWISE SPECIFIED, THE FULL DETAIL IS USUALLY SUPPLIED. THE SUBJECT REPORT AFTER USPAP 2000 IS CONSIDERED A SUMMARY REPORT. The purpose of this appraisal is to estimate the FAIR MARKET VALUE of the subject machinery and equipment in terms of United States Dollars. In estimating this value, the appraisers has considered the following approaches in arriving at indicators of value. COST APPROACH - An estimate of the present replacement cost of the machinery and equipment less accrued depreciation. Depreciation includes loss in value due to physical deterioration as well as functional and economic obsolescence. Functional obsolescence is the decreased capacity of the item to perform the function for which it is intended in terms of current standards and specifications. Functional obsolescence may stem either from a deficiency within the item such as poor design or outmoded style or may result from superadequacy or overdesign. Economic obsolescence represents a loss in value from factors outside the item appraised, such as a depressed market for the end product manufactured by the item of machinery or equipment. These factors generally are characterized as "negative external forces" which have an impact upon the item appraised. SALES COMPARISON APPROACH - Comparison with similar items that have sold or are currently offered for sale in the marketplace. By comparing the items appraised with similar items which have recently sold or are currently offered for sale, an estimate can be made of the Fair Market Value. Within these comparable items there may be pertinent factors of comparison which include capacity, age, location, and date of sale, when applicable. These items may be considered in arriving at an adjusted value for each subject item appraised. Marketability of each item of machinery and equipment is also a detriment of value. Marketability, as a measure of demand, is approximated through recent sales in the marketplace of comparable items of machinery and equipment. Where actual sales are not available, Page 9 relationships are often established based upon dealer "asking price" for comparable items. INCOME APPROACH - Capitalization of the net income that the item can produce. This approach, of course, is used in special cases when no sales comparison is available for adjustment to the subject. It would be used only on significant items and detail is not usually made a part of the report. Values reflected in this report are based primarily upon one or a combination of the preceding methods with heavier emphasis on the Market Comparison Approach, when sufficient data is available. In certain instances, as in the case of custom machinery and equipment, a market analysis may be undertaken to ascertain current demand/marketability and subsequent value. Market analysis may also be undertaken if functional or economic obsolescence is a key factor in a major machine tool or piece of equipment. Certain categories of machinery and equipment are subject to routine loss in value as a result of usage (physical deterioration). In other instances, functional obsolescence is determined through a comparison with other items that may have a more efficient and cost effective operation. It should be understood that the value shown does not indicate its replacement in like kind and utility, but rather what the specific equipment observed is worth under the scenario as defined. With all things equal, it is possible that an exact piece of equipment, if found, could be obtained for the value indicated under the concept. Comparison would have to take into account adjustments for exacts such as location, installation, condition, industry, locational economics and possible draw through all "causes and effects" associated with the concept. Realistically, exact comparables are not always possible, therefore, it should be applied to the specific equipment at its location; it is not to be used, nor is it to represented as a valuation that would be applied to replacement or depreciated replacement for insurance purposes. However, the item DESCRIPTION, in most cases, contains the specifics that would be needed for determining replacement in like kind and utility, although values may be different than those indicated by this study. It is not probable that if ALL equipment were to be replaced within a plant, that every item would be found; therefore, some items would be replaced at used prices higher or lower than the value indicated, whereas others would have a requirement for replacement or reproduction cost new due to the inability to locate this item in the market. An appraisal has never been considered the product of an exact science, although measurements of accuracy may be employed. Determining the reactions of the public to value an asset at a particular point in time is a valuation process based upon history, whereas the actual test of an appraisal value may vary up or down. For this reason, one sale does not necessarily make a comparable. Although equipment may have been observed selling at higher or lower numbers than its appraised value, it is the appraiser's judgment and responsibility to make adjustments in order to maintain a set of circumstances which might be considered average under a particular value concept. For this reason, the total number indicator is the important measurement on a PROPER future test. Typically, the averaging method adjusts for location, condition, time, and other factors. However, it would not Page 10 simply indicate some high or low recovery for an asset under some particular past sale. The appraiser strives for an average. In a tested sale, one might find that average being exceeded in some cases, yet below the value indicated in others. It is the existence of these variables that requires the use of the averaging method in order to maintain greater accuracy. Page 11 -----END PRIVACY-ENHANCED MESSAGE-----