| Arnold and Total Stock Purchase Agreements In the fourth quarter of 2004, the Company acquired 49% of the outstanding stock of ATS Acquisition Holding Co., a Delaware corporation ("ATS") and the parent company of Arnold Transportation Services, Inc. ("Arnold"). In the second quarter of 2005, the Company acquired 49% of the outstanding stock of each of Transportation Investments Inc., a Mississippi corporation ("TII") and the parent company of Total Transportation of Mississippi LLC, a Mississippi limited liability company ("Total"), Transportation Assets Leasing Inc., a Mississippi corporation ("TAL"), and Total Logistics Inc., a Mississippi corporation ("TLI," and together with TII and TAL, the "Total Companies"). Certain members of Arnold's current management team controlled the remaining 51% interest as well as a majority of the board of directors of ATS, and certain members of the Total management team controlled the remaining 51% interest and a majority of the boards of directors of each of the Total Companies. We did not guarantee any of ATS' or the Total Companies' debt and did not have any obligation to provide funding, services or assets. We accounted for ATS' and the Total Companies' operating results using the equity method of accounting. On February 28, 2006, the Company entered into and closed a Stock Purchase Agreement (the "Arnold Agreement") with ATS, Xpress Holdings, Inc., a Nevada corporation ("Xpress Holdings") and wholly-owned subsidiary of the Company, and certain members of Arnold's management team. On February 28, 2006, the Company also entered into and closed a Stock Purchase Agreement (the "Total Agreement") with Xpress Holdings, each of the Total Companies, and certain members of Total's management team. Pursuant to the Arnold Agreement and the Total Agreement (the "Purchase Agreements"), the Company, through its wholly-owned subsidiary Xpress Holdings, increased its ownership in ATS and each of the Total Companies to 80% of the outstanding stock of ATS and each of the Total Companies through the purchase of stock owned by the current management teams of Arnold and Total, consummating transactions that had been previously announced on February 13, 2006. The aggregate purchase price for such stock was approximately $7.9 million in cash. The Arnold and Total management teams continue to hold 20% of the outstanding stock of Arnold and each of the Total Companies, respectively. The Arnold management team, led by President and Chief Executive Officer Mike Walters, and the Total management team, led by Co-Chief Executive Officers Rick Kale and John Stomps, continue to manage their respective operations and utilize their existing facilities. In connection with these transactions, the Company also issued an aggregate 40,466 shares of restricted stock to key employees of those companies under the Company's 2002 Stock Incentive Plan. The restricted shares vest over time contingent upon continued employment. The Company expects to record compensation expense in accordance with SFAS 123R in relation to the shares. Commencing March 1, 2006, the Company will account for ATS' and the Total Companies' operating results on a consolidated basis. In the transactions, the Company also obtained the right to elect a majority of the members of the board of directors of ATS. The Company retains options to purchase the remaining 20% of each of ATS and the Total Companies through December 8, 2007 and October 1, 2008, respectively. If the Company fails to exercise such options prior to such dates, the members of the current Arnold and Total management teams will have similar options to repurchase the Company's interests in ATS and the Total Companies. Third Amendment to Revolving Credit and Letter of Credit Loan Agreement In connection with these transactions, the Company entered into a Third Amendment to Revolving Credit and Letter of Credit Loan Agreement, dated February 27, 2006 (the "Credit Facility Amendment"), with SunTrust Bank, Bank of America, N.A., LaSalle Bank, National Association, Branch Banking and Trust Company, National City Bank, and Regions Financial Corporation (the "Lenders"), amending our revolving credit facility. Pursuant to the Credit Facility Amendment, the Lenders consented to the consummation of the Purchase Agreements and made certain amendments to the revolving credit facility to permit existing debt and liens of ATS and the Total Companies. In connection with the Third Amendment and consummation of the Purchase Agreements, ATS and the Total Companies will become parties to and guarantors of the Company's revolving credit facility. The Company has also guaranteed approximately $20 million of ATS' and the Total Companies' debt under their respective credit facilities in order to obtain required consents from their lenders to permit ATS and the Total Companies to guarantee our revolving credit facility. This description of the Purchase Agreements and the Credit Facility Amendment does not purport to be complete and is qualified in its entirety reference to the full text of the Purchase Agreements and the Credit Facility Amendment. |
