-----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, NvMDywMe3ydEonSjmAtW9xspjDe6OIfGBMiTgttlunstr7N5MngrAK/W8KQZ/mGS 5+HUXrfDtgScEDWkY0HleA== 0000910195-99-000422.txt : 19990730 0000910195-99-000422.hdr.sgml : 19990730 ACCESSION NUMBER: 0000910195-99-000422 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19990430 FILED AS OF DATE: 19990729 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MILLER INDUSTRIES INC /TN/ CENTRAL INDEX KEY: 0000924822 STANDARD INDUSTRIAL CLASSIFICATION: TRUCK & BUS BODIES [3713] IRS NUMBER: 621566286 STATE OF INCORPORATION: TN FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-14124 FILM NUMBER: 99673400 BUSINESS ADDRESS: STREET 1: 8503 HILLTOP DR STREET 2: STE 100 CITY: OOLTEWAH STATE: TN ZIP: 37363 BUSINESS PHONE: 4232384171 MAIL ADDRESS: STREET 1: 900 CIRCLE 75 PARKWAY STREET 2: SUITE 1250 CITY: ATLANTA STATE: GA ZIP: 30339 10-K 1 MILLER INDUSTRIES, INC. REPORT ON FORM 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934. For the fiscal year ended April 30, 1999 Commission File No. 0-24298 MILLER INDUSTRIES, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) TENNESSEE ------------------------------------------------------------- (STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) 62-1566286 ------------------------------------ (I.R.S. EMPLOYER IDENTIFICATION NO.) 8503 HILLTOP DRIVE, OOLTEWAH, TENNESSEE 37363 --------------------------------------------------- (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) Registrant's telephone number, including area code: (423) 238-4171 Securities registered pursuant to Section 12(b) of the Act: Common Stock, Par Value $0.01 Per Share. ---------------------------------------- Name of each exchange on which registered: New York Stock Exchange. ------------------------ Securities registered pursuant to Section 12(g) of the Act: None. ----- Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes / x / No / / Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10K. [ ] The aggregate market value of the voting stock held by nonaffiliates of the Registrant as of July 27, 1999 was $133,550,000 based on the closing sale price of the Common Stock as reported by the New York Stock Exchange on such date. See Item 12. At July 27, 1999 there were 46,794,297 shares of Common Stock, par value $0.01 per share, outstanding. DOCUMENTS INCORPORATED BY REFERENCE: Portions of the Registrant's definitive Proxy Statement for the 1999 Annual Meeting of Shareholders are incorporated by reference into Part III. Pursuant to Rule 12b-25, the following Items have been omitted from this Form 10-K: Items 6, 7, 8, 14(a)(1), 14(a)(2), 14(c) and 14(d). TABLE OF CONTENTS FORM 10-K ANNUAL REPORT PART I ITEM 1. BUSINESS............................................................ 1 ITEM 2. PROPERTIES.......................................................... 17 ITEM 3. LEGAL PROCEEDINGS................................................... 17 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................. 18 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS......................................... 18 ITEM 6. SELECTED FINANCIAL DATA............................................. 19 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS................................. 19 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA......................... 19 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE................................. 19 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.................. 20 -i- ITEM 11. EXECUTIVE COMPENSATION.............................................. 21 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT...................................................... 22 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...................... 23 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K......................................................... FINANCIAL STATEMENTS........................................................F-1 FINANCIAL STATEMENT SCHEDULES...............................................S-1 SIGNATURES.................................................................II-1 -ii- PART I ITEM 1. BUSINESS GENERAL Miller Industries, Inc. (the "Company") is the world's leading integrated provider of vehicle towing and recovery equipment and services and has executive offices in Ooltewah, Tennessee and Atlanta, Georgia and manufacturing operations in Tennessee, Pennsylvania, France and England. The Company's business is divided into two segments: (i) manufacturing and distributing towing and recovery equipment and providing financial and related services to the towing and recovery industry and (ii) providing towing and specialized transportation services. The Company markets its towing and recovery equipment under several well-recognized brand names and markets its towing services under the national brand name of RoadOne(R). Since 1990 the Company has developed or acquired several of the most well-recognized brands in the fragmented towing and recovery equipment manufacturing industry. The Company's strategy has been to diversify its line of products and increase its market share in the industry through a combination of internal growth and development and acquisitions of complementary businesses. As a natural extension of its leading market position in manufacturing and strong brand name recognition, the Company has broadened its strategy to include vertical integration, with the goal of achieving operating efficiencies while becoming a leading worldwide manufacturer, distributor and financial services provider in the towing and recovery industry. The Company's owned distributors and its independent distributors form a North American distribution network for towing and recovery equipment as well as other specialty truck equipment and components. In February 1997, the Company formed its towing service division, RoadOne, to begin building a national towing service network. RoadOne offers a broad range of towing and transportation services, including towing, impounding and storing motor vehicles, conducting lien sales and auctions of abandoned vehicles, environmental clean-up services, and transporting new and used vehicles and heavy construction equipment. In fiscal 1999, the Company, through its RoadOne subsidiary, acquired 35 towing service companies with aggregate historical annual revenues of approximately $35.9 million. These acquisitions are part of the Company's plan to establish a national towing service network through owned companies in combination with an extensive group of affiliates. At July 23, 1999, the Company was operating over 200 facilities serving 49 markets in 27 states, and had relationships with over 2,184 RoadOne affiliates. The Company intends to continue its expansion into additional towing service markets. INCLUSION OF FORWARD-LOOKING STATEMENTS Certain statements in this Annual Report, including but not limited to "Management's Discussion and Analysis of Financial Condition and Results of Operations" may be deemed to be forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are made based on management's belief as well as assumptions made by, and information currently available to, management pursuant to "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. The Company's actual results may differ materially from the results anticipated in these forward-looking statements due to, among other things, factors set forth below under the heading "Risk Factors," and in particular, the risks associated with acquisitions, including, without limitation, the risks that acquisitions do not close and the cost or difficulties related to the integration of the acquired businesses. The Company cautions that such factors are not exclusive. The Company does not undertake to update any forward-looking statement that may be made from time to time by, or on behalf of, the Company. RISK FACTORS UNCERTAINTIES IN INTEGRATING OPERATIONS AND ACHIEVING COST SAVINGS. The companies that the Company has recently acquired and that the Company plans to acquire have operations in many different markets. The success of any business combination is in part dependent on management's ability following the transaction to integrate operations, systems and procedures and thereby obtain business efficiencies, economies of scale and related cost savings. The challenges posed to the Company's management may be particularly significant because integrating the recently acquired companies must be addressed contemporaneously. There can be no assurance that future consolidated results will improve as a result of cost savings and efficiencies from any such acquisitions or proposed acquisitions, or as to the timing or extent to which cost savings and efficiencies will be achieved. RISKS ASSOCIATED WITH ACQUISITION STRATEGY. The Company has an aggressive acquisition strategy that has involved, and is expected to continue to involve, the acquisition of a significant number of additional companies. As a result, the Company's future success is dependent, in part, upon its ability to identify, finance and acquire attractive businesses and then to successfully integrate and/or manage such acquired businesses. Acquisitions involve special risks, including risks associated with unanticipated problems, liabilities and contingencies, diversion of management attention and possible adverse effects on earnings resulting from increased goodwill amortization, increased interest costs, the issuance of additional securities and difficulties related to the integration of the acquired business. Although the Company believes that it can identify and consummate the acquisitions of a sufficient number of businesses to successfully implement its growth strategies, there can be no assurance that such will be the case. Further, there can be no assurance that future acquisitions will not have an adverse effect upon the Company's operating results, particularly during periods in which the operations of acquired businesses are being integrated into the Company's operations. RISKS OF FOREIGN MARKETS. The Company's growth strategy includes the expansion of its operations in foreign markets. In January 1996 the Company acquired S.A. Jige International ("Jige"), a French manufacturer of wreckers and car carriers, and in April 1996 the Company acquired Boniface Engineering Limited ("Boniface"), a British manufacturer of towing and recovery equipment. Prior to these acquisitions, the Company had limited experience with sales and manufacturing operations outside North America. There is no assurance that the Company will be able to successfully integrate and expand its foreign operations. Furthermore, there is no assurance that the Company will be able to successfully expand sales outside of North America or compete in markets in which it is unfamiliar with cultural and business practices. The Company's foreign operations are subject to various political, economic and other uncertainties, including risks of restrictive taxation policies, foreign exchange restrictions and currency translations, changing political conditions and governmental regulations. RISKS OF ENTERING NEW LINES OF BUSINESS. The Company's growth strategy includes vertically integrating within the towing and recovery industry through a combination of acquisitions and internal growth. Implementation of its growth -2- strategy has resulted in the Company's entry into several new lines of business. Historically, the Company's expertise has been in the manufacture of towing equipment and the Company had no prior operating experience in the lines of business it recently entered. During fiscal 1997, the Company entered three new lines of business through the acquisition of towing and recovery equipment distributors and towing service companies, and the establishment of the Company's Financial Services Group. The Company's operation of these businesses will be subject to all of the risks inherent in the establishment of a new business enterprise. Such acquisitions present the additional risk that newly-acquired businesses could be viewed as being in competition with other customers of the Company. Although the new businesses are closely related to the Company's towing equipment manufacturing business, there can be no assurance that the Company will be able to successfully operate these new businesses. CYCLICAL NATURE OF INDUSTRY, GENERAL ECONOMIC CONDITIONS AND WEATHER. The towing and recovery industry is cyclical in nature and has been affected historically by high interest rates and economic conditions in general. Accordingly, a downturn in the economy could have a material adverse effect on the Company's operations. The industry is also influenced by consumer confidence and general credit availability, and by weather conditions. FLUCTUATIONS IN PRICE AND SUPPLY OF MATERIALS AND COMPONENT PARTS. The Company is dependent upon outside suppliers for its raw material needs and other purchased component parts and, therefore, is subject to price increases and delays in receiving supplies of such materials and component parts. There can be no assurance that the Company will be able to pass any price increase on to its customers. Although the Company believes that sources of its materials and component parts will continue to be adequate to meet its requirements and that alternative sources are available, events beyond the Company's control could have an adverse effect on the cost or availability of such materials and component parts. Additionally, demand for the Company's products could be negatively affected by the unavailability of truck chassis, which are manufactured by third parties and are typically purchased separately by the Company's distributors or by towing operators and are sometimes supplied by the Company. COMPETITION. The towing and recovery equipment manufacturing industry is highly competitive. Competition for sales exists at both the distributor and towing-operator levels and is based primarily on product quality and innovation, reputation, technology, customer service, product availability and price. In addition, sales of the Company's products are affected by the market for used towing and recovery equipment. Certain of the Company's competitors may have substantially greater financial and other resources and may provide more attractive dealer and retail customer financing alternatives than the Company. Historically, the towing service industry has been highly fragmented, with an estimated 30,000 professional towing operators in the United States, therefore the Company's towing service operations will face continued competition from many operators across the country. The Company also faces competition in its consolidation of professional towing operators. These operators could be consolidated by other companies, individuals or entities, or they could enter into affiliate relationships with other companies. In addition, the Company's presence in the towing service industry presents the risk that it could be viewed as being in competition with other customers of the Company. The Company may also face significant competition from large competitors as it enters other new lines of business, including equipment distribution and financial services. -3- DEPENDENCE ON PROPRIETARY TECHNOLOGY. Historically, the Company has been able to develop or acquire patented and other proprietary product innovations which have allowed it to produce what management believes to be technologically advanced products relative to most of its competition. Certain of the Company's patents expire in 2004 at which time the Company may not have a continuing competitive advantage through proprietary products and technology. The Company's historical market position has been a result, in part, of its continuous efforts to develop new products. The Company's future success and ability to maintain market share will depend, to an extent, on new product development. LABOR AVAILABILITY. The timely production of the Company's wreckers and car carriers requires an adequate supply of skilled labor. In addition, the operating costs of each manufacturing and towing service facility can be adversely affected by high turnover in skilled positions. Accordingly, the Company's ability to increase sales, productivity and net earnings will be limited to a degree by its ability to employ the skilled laborers necessary to meet the Company's requirements. There can be no assurance that the Company will be able to maintain an adequate skilled labor force necessary to efficiently operate its facilities. DEPENDENCE ON KEY MANAGEMENT. The success of the Company is highly dependent on the continued services of the Company's management team. The loss of services of one or more key members of the Company's senior management team could have a material adverse effect on the Company. Although the Company historically has been successful in retaining the services of its senior management, there can be no assurance that the Company will be able to retain such personnel in the future. PRODUCT LIABILITY AND INSURANCE. The Company is subject to various claims, including product liability claims arising in the ordinary course of business, and may at times be a party to various legal proceedings that constitute ordinary routine litigation incidental to the Company's business. The Company maintains reserves and liability insurance coverage at levels based upon commercial norms and the Company's historical claims experience. A successful product liability or other claim brought against the Company in excess of its insurance coverage or the inability of the Company to acquire insurance at commercially reasonable rates could have a material adverse effect upon the Company's business, operating results and financial condition. VOLATILITY OF MARKET PRICE. From time to time, there may be significant volatility in the market price for the Common Stock. Quarterly operating results of the Company, changes in earnings estimated by analysts, changes in general conditions in the Company's industry or the economy or the financial markets or other developments affecting the Company could cause the market price of the Common Stock to fluctuate substantially. In addition, in recent years the stock market has experienced significant price and volume fluctuations. This volatility has had a significant effect on the market prices of securities issued by many companies for reasons unrelated to their operating performance. POSSIBLE ADVERSE EFFECT OF FUTURE SALES OF COMMON STOCK. The Company has filed a shelf registration statement to register for sale, from time to time on a continuous basis, an aggregate of 5 million shares of Common Stock which the Company has issued and intends to issue in connection with certain of its acquisitions or in other transactions. Such securities may be subject to resale restrictions in accordance with the Securities Act and the regulations promulgated thereunder, as well as resale limitations imposed by tax laws and regulations or by contractual provisions negotiated by the Company. As such -4- restrictions lapse, such securities may be sold to the public. In the event of the issuance and subsequent resale of a substantial number of shares of Common Stock, or a perception that such sales could occur, there could be a material adverse effect on the prevailing market price of Common Stock. CONTROL BY PRINCIPAL SHAREHOLDER. William G. Miller, the Chairman of the Company, beneficially owns approximately 15% of the outstanding shares of Common Stock. Accordingly, Mr. Miller has the ability to exert significant influence over the business affairs of the Company, including the ability to influence the election of directors and the result of voting on all matters requiring shareholder approval. ANTI-TAKEOVER PROVISIONS OF CHARTER AND BYLAWS; PREFERRED STOCK. The Company's Charter and Bylaws contain restrictions that may discourage other persons from attempting to acquire control of the Company, including, without limitation, prohibitions on shareholder action by written consent and advance notice requirements respecting amendments to certain provisions of the Company's Charter and Bylaws. In addition, the Company's Charter authorizes the issuance of up to 5,000,000 shares of preferred stock. The rights and preferences for any series of preferred stock may be set by the Board of Directors, in its sole discretion and without shareholder approval, and the rights and preferences of any such preferred stock may be superior to those of Common Stock and thus may adversely affect the rights of holders of Common Stock. TOWING AND RECOVERY EQUIPMENT The Company offers a broad range of towing and recovery equipment products that meet most customer design, capacity and cost requirements. The Company manufactures the bodies of wreckers and car carriers, which are installed on truck chassis manufactured by third parties. Wreckers generally are used to recover and tow disabled vehicles and other equipment and range in type from the conventional tow truck to large recovery vehicles with rotating hydraulic booms and 60-ton lifting capacities. Car carriers are specialized flat bed vehicles with hydraulic tilt mechanisms that enable a towing operator to drive or winch a vehicle onto the bed for transport. Car carriers transport new or disabled vehicles and other equipment and are particularly effective over longer distances. The Company's products are sold primarily through independent distributors that serve all 50 states, Canada and Mexico, and other foreign markets including Europe, the Pacific Rim and the Middle East. As a result of its ownership of Jige in France and Boniface in the United Kingdom, the Company has substantial distribution capabilities in Europe. While most of the Company's distributor agreements do not contain exclusivity provisions, management believes that approximately 65% of the Company's independent distributors sell the Company's products on an exclusive basis. In addition to selling the Company's products to towing operators, the distributors provide parts and service. The Company also has independent sales representatives that exclusively market the Company's products and provide expertise and sales assistance to distributors. Management believes the strength of the Company's distribution network and the breadth of its product offerings are two key advantages over its competitors. -5- PRODUCT LINE The Company manufactures a broad line of wrecker and car carrier bodies to meet a full range of customer design, capacity and cost requirements. The products are marketed under the Century, Vulcan, Challenger, Holmes, Champion, Chevron, Eagle, Jige, and Boniface brand names. WRECKERS. Wreckers are generally used to recover and tow disabled vehicles and other equipment and range in type from the conventional tow truck to large recovery vehicles with 60-ton lifting capacities. Wreckers are available with specialized features, including underlifts, L-arms and scoops, which lift disabled vehicles by the tires or front axle to minimize front end damage to the towed vehicles. Certain heavy duty wrecker models offer rotating booms, which allow heavy duty wreckers to recover vehicles from any angle, and proprietary remote control devices for operating wreckers. In addition, certain light duty wreckers are equipped with the patented "Eagle Claw" automatic wheellift hookup device that allows operators to engage a disabled or unattended vehicle without leaving the cab of the wrecker. The Company's wreckers range in capacity from 8 to 60 tons, and are characterized as light duty and heavy duty, with wreckers of 16-ton or greater capacity being classified as heavy duty. Light duty wreckers are used to remove vehicles from accident scenes and vehicles illegally parked, abandoned or disabled, and for general recovery. Heavy duty wreckers are used in commercial towing and recovery applications including overturned tractor trailers, buses, motor homes and other vehicles. CAR CARRIERS. Car carriers are specialized flat-bed vehicles with hydraulic tilt mechanisms that enable a towing operator to drive or winch a vehicle onto the bed for transport. Car carriers are used to transport new or disabled vehicles and other equipment and are particularly effective for transporting vehicles or other equipment over longer distances. In addition to transporting vehicles, car carriers may also be used for other purposes, including transportation of industrial equipment. In recent years, professional towing operators have added car carriers to their fleets to complement their towing capabilities. BRAND NAMES The Company manufactures and markets its wreckers and car carriers under nine separate brand names. Although certain of the brands overlap in terms of features, prices and distributors, each brand has its own distinctive image and customer base. CENTURY(R). The Century brand is the Company's "top-of-the-line" brand and represents what management believes to be the broadest product line in the industry. The Century line was started in 1974 and produces wreckers ranging from the 8-ton light duty to the 60-ton heavy duty models and car carriers in lengths from 17 1/2 to 26 feet. Management believes that the Century brand has a reputation as the industry's leading product innovator. VULCAN(R). The Company's Vulcan product line includes a range of premium light and heavy duty wreckers, car carriers and other towing and recovery equipment. The Vulcan line is operated autonomously with its own independent distribution network. -6- CHALLENGER(R). The Company's Challenger products compete with the Century and Vulcan products and constitute a third premium product line. Challenger products consist of light to heavy duty wreckers with capacities ranging from 8 to 60 tons, and car carriers with lengths ranging from 17 1/2 to 26 feet. The Challenger line was started in 1975 and is known for high performance heavy duty wreckers and aesthetic design. HOLMES(R). The Company's Holmes product line includes mid-priced wreckers with 8 to 16 ton capacities and car carriers in 17 1/2 to 21 foot lengths. The Holmes wrecker was first produced in 1916. The Holmes name has been the most well-recognized and leading industry brand both domestically and internationally through most of this century. CHAMPION(R). The Champion brand, which was introduced in 1991, includes car carriers which range in length from 17 1/2 to 21 feet. The Champion product line, which is generally lower-priced, allows the Company to offer a full line of car carriers at various competitive price points. In 1993, the Champion line was expanded to include a line of economy tow trucks with integrated boom and underlift. CHEVRON(TM). The Company's Chevron product line is comprised primarily of premium car carriers. Chevron produces a range of premium single-car, multi-car and industrial carriers, light duty wreckers and other towing and recovery equipment. The Chevron line is operated autonomously with its own independent distribution network that focuses on the salvage industry. EAGLE(R). The Company's Eagle products consist of light duty wreckers with a patented "Eagle Claw" hook-up system that allows towing operators to engage a disabled or unattended vehicle without leaving the cab of the tow truck. The "Eagle Claw" hook-up system, which was patented in 1984, was originally developed for the repossession market. Since acquiring Eagle, the Company has upgraded the quality and features of the Eagle product line and expanded its recovery capability. The Eagle line is now gaining increased popularity in the broader towing and recovery vehicle market. JIGE(TM). The Company's Jige product line is comprised of a broad line of light and heavy duty wreckers and car carriers marketed primarily in Europe. Jige is a market leader best known for its innovative designs of car carriers and light wreckers necessary to operate within the narrow confines of European cities. BONIFACE(TM). The Company's Boniface product line is comprised primarily of heavy duty wreckers. Boniface produces a wide range of heavy duty wreckers specializing in the long underlift technology required to tow modern European tour buses. The Company's Holmes and Century brand names are associated with four of the major innovations in the industry: the rapid reverse winch, the tow sling, the hydraulic lifting mechanism, and the underlift with parallel linkage and L-arms. The Company's engineering staff, in consultation with manufacturing personnel, uses computer-aided design and stress analysis systems to test new product designs and to integrate various product improvements. In addition to offering product innovations, the Company focuses on developing or licensing new technology for its products. -7- MANUFACTURING PROCESS The Company manufactures wreckers and car carriers at six manufacturing facilities located in the United States, France and England. The manufacturing process for the Company's products consists primarily of cutting and bending sheet steel or aluminum into parts that are welded together to form the wrecker or car carrier body. Components such as hydraulic cylinders, winches, valves and pumps, which are purchased by the Company from third-party suppliers, are then attached to the frame to form the completed wrecker or car carrier body. The completed body is either installed by the Company or shipped by common carrier to a distributor where it is then installed on a truck chassis. Generally, the wrecker or car carrier bodies are painted by the Company with a primer coat only, so that towing operators can select customized colors to coordinate with chassis colors or fleet colors. To the extent final painting is required before delivery, the Company contracts with independent paint shops for such services. The Company purchases raw materials and component parts from a number of sources. Although the Company has no long-term supply contracts, management believes the Company has good relationships with its primary suppliers. The Company has experienced no significant problems in obtaining adequate supplies of raw materials and component parts to meet the requirements of its production schedules. Management believes that the materials used in the production of the Company's products are available at competitive prices from an adequate number of alternative suppliers. Accordingly, management does not believe that the loss of a single supplier would have a material adverse effect on the Company's business. TOWING AND RECOVERY EQUIPMENT SALES AND DISTRIBUTION Management categorizes the towing and recovery market into three general product types: light duty wreckers, heavy duty wreckers and car carriers. The light duty wrecker market consists primarily of professional wrecker operators, repossession towing services, municipal and federal governmental agencies, and repair shop or salvage company owners. The heavy duty market is dominated by professional wrecker operators serving the needs of commercial vehicle operators. The car carrier market, historically dominated by automobile salvage companies, has expanded to include equipment rental companies that offer delivery service and professional towing operators who desire to complement their existing towing capabilities. Management estimates that there are approximately 30,000 professional towing operators and 80,000 service station, repair shop and salvage operators comprising the overall towing and recovery market. The Company's sales force, which services the Company's distribution network, consists of 40 sales representatives, 34 of whom are Company employees whose responsibilities include providing administrative and sales support to the entire distributor base. The remaining 6 sales representatives are independent contractors who market the Company's products exclusively. Sales representatives receive commissions on direct sales based on product type and brand and generally are assigned specific territories in which to promote sales of the Company's products and to maintain customer relationships. The Company has developed a diverse customer base consisting of approximately 175 distributors in North America, who serve all 50 states, Canada and Mexico, and approximately 50 distributors that serve other foreign markets. During the fiscal year ended April 30, 1999, no single distributor accounted for more than 5% of the Company's sales. Management believes the Company's broad and -8- diverse customer base provides it with the flexibility to adapt to market changes, lessens its dependence on particular distributors and reduces the impact of regional economic factors. To support sales and marketing efforts, the Company produces demonstrator models that are used by the Company's sales representatives and distributors. To increase exposure to its products, the Company also has served as the official recovery team for many automobile racing events, including the Daytona, Talladega, Atlanta and Darlington NASCAR races, the Grand Prix in Miami, the Suzuka in Japan, the IMSA "24 Hours at Daytona" Molson Indy, the Brickyard, and the Indy 500 races, among others. The Company routinely responds to requests for proposals or bid invitations in consultation with its local distributors. The Company has been selected by the United States General Services Administration as an approved source for certain federal and defense agencies. The Company intends to continue to pursue government contracting opportunities. The towing and recovery equipment industry places heavy marketing emphasis on product exhibitions at national and regional trade shows. In order to focus its marketing efforts and to control marketing costs, the Company has reduced its participation in regional trade shows and now concentrates its efforts on five of the major trade shows each year. The Company works with its distributor network to concentrate on various regional shows. TOWING EQUIPMENT DISTRIBUTOR ACQUISITIONS During fiscal years 1997 and 1998, the Company's distribution group acquired 10 towing equipment distributors. These distributors are located in California, Colorado, Florida, Georgia, Illinois, Missouri and Mississippi and in British Columbia and Ontario, Canada. The acquired distributors market the Company's products as well as other specialty transportation equipment, and the Company intends to expand the number and types of products distributed through its distributors. The Company-owned distributors generally do not compete in the same geographic markets as the Company's independent distributors. The Company may acquire additional towing equipment distributors from time to time and anticipates financing such acquisitions with issuances of Common Stock, cash and/or borrowings under lines of credit, but is not currently a party to any agreement to acquire any other distributors. The Company uses an internal acquisition team, supplemented as needed by outside advisors, and its extensive contacts in the towing service industry, to identify, evaluate, acquire and integrate towing equipment distributors. Acquisition candidates are evaluated based on stringent criteria in a comprehensive process which includes operational, legal and financial due diligence reviews. FINANCIAL SERVICES The Company's Financial Services Group commenced operations in September 1996 to provide financial services to towing and recovery equipment distributors and towing service companies. The Company initially offered floor plan financing to distributors and purchase and lease financing to towing service operators. In addition to financing services, the Financial Services Group now provides insurance coverage, extended warranties and related services to purchasers of the Company's products. -9- The Company has entered into business relationships with Associates Commercial Corporation, and others (the "Lenders") to jointly market financing of the Company's products. As part of these relationships, the Company, through its owned and independent distributors, originates lease and loan financing for its end-consumers, and the Lenders provide the financing and servicing of the leases and loans. In return for the Company's marketing activities, the Lenders pay a fee based on amounts financed. The Company expects to capitalize on its strong existing relationships with its distributors and their customers and its reputation for reliable service to develop the Financial Services Group. PRODUCT WARRANTIES AND INSURANCE The Company offers a 12-month limited manufacturer's product and service warranty on its wrecker and car carrier products. The Company's warranty generally provides for repair or replacement of failed parts or components. Warranty service is usually performed by the Company or an authorized distributor. Due to its emphasis on quality production, the Company's warranty expense in fiscal 1999 averaged less than 1% of net sales. Management believes that the Company maintains adequate general liability and product liability insurance. BACKLOG The Company produces virtually all of its products to order. The Company's backlog is based upon customer purchase orders that the Company believes are firm. The level of backlog at any particular time, however, is not an appropriate indicator of the future operating performance of the Company. Certain purchase orders are subject to cancellation by the customer upon notification. Given the Company's production and delivery schedules, as well as the recent plant expansions, management believes that the current backlog represents less than three months of production. COMPETITION The towing and recovery equipment manufacturing industry is highly competitive for sales to distributors and towing operators. Management believes that competition in the towing and recovery equipment industry is a function of product quality and innovation, reputation, technology, customer service, product availability and price. The Company competes on the basis of each of these criteria, with an emphasis on product quality and innovation and customer service. Management also believes that a manufacturer's relationship with distributors is a key component of success in the industry. Accordingly, the Company has invested substantial resources and management time in building and maintaining strong relationships with distributors. Management also believes that the Company's products are regarded as high quality within their particular price points. The Company's marketing strategy is to continue to compete primarily on the basis of quality and reputation rather than solely on the basis of price, and to continue to target the growing group of professional towing operators who as end-users recognize the quality of the Company's products. Traditionally, the capital requirements for entry into the towing and recovery manufacturing industry have been relatively low. Management believes a manufacturer's capital resources and access to technological improvements have become a more integral component of success in recent years. Accordingly, management believes that the Company's ownership of patents on certain of the -10- industry's leading technologies has given it a competitive advantage. Certain of the Company's competitors may have greater financial and other resources and may provide more attractive dealer and retail customer financing alternatives than the Company. EMPLOYEES At April 30, 1999, the Company employed approximately 1,287 people in its towing and recovery equipment manufacturing and distribution operations. None of the Company's employees is covered by a collective bargaining agreement, though its employees in France and England have certain similar rights provided by their respective government's employment regulations. The Company considers its employee relations to be good. TOWING SERVICES - ROADONE In February 1997, the Company formed its towing services division, RoadOne, to begin building a national towing service network. With the acquisition of 112 towing service companies as of July 23, 1999, RoadOne has become a leading towing service company with operations at over 200 locations in 27 states. RoadOne's corporate offices are located in Chattanooga, Tennessee. Historically, the towing service industry has been highly fragmented, with an estimated 30,000 professional towing operators in the United States, many that are undercapitalized local operators with no viable means of independently realizing the economic value they have created for their businesses. As the Company continues to pursue the acquisition of towing service companies, management believes that these owned companies, along with affiliations established with non-owned professional towing operations, will form an organization capable of offering commercial industries, as well as the general public, consistent, high quality service across the nation. The Company's strategy is to build brand loyalty among towing service customers by emphasizing consistently high quality and dependable service from multiple locations throughout a broad geographic area. The Company intends to market these services to organizations with widely dispersed fleets of vehicles that would benefit from a single source provider. SERVICES PROVIDED Services provided by RoadOne include towing and recovery and specialized transportation services. RoadOne's towing and recovery services primarily involve providing road-side assistance to disabled vehicles which allows such vehicles to proceed under their own power, or towing disabled or abandoned vehicles to a location designated by the customer. RoadOne derives revenue from towing and recovery services based on distance, time or fixed charges and from storage services based on daily fees. These services are primarily provided to commercial entities, such as fleet operators, automobile dealers, repair shops, automobile leasing companies, and automobile auction companies; public entities such as municipalities, police, sheriff and highway patrol departments, colleges and universities, and toll-road departments; motor clubs; and individual motorists. RoadOne conducts lien and salvage sales of certain vehicles in conjunction with its towing and recovery services. RoadOne also provides limited environmental clean-up services in some areas. RoadOne's specialized transportation services primarily involve transporting new and used vehicles, construction equipment and industrial equipment. RoadOne derives revenue from transport services based on distance, -11- time or fixed charges. These services are primarily provided to automobile leasing companies, automobile auction companies, automobile dealers, fleet operators, construction companies, and industrial manufacturers. TOWING, RECOVERY AND ROAD SERVICES COMMERCIAL. RoadOne provides commercial road services to a broad range of commercial customers, including automobile dealers and repair shops. RoadOne typically charges a flat fee and a mileage premium for these towing services. Commercial road services also include towing and recovery of heavy-duty trucks, recreational vehicles, buses and other large vehicles, typically for commercial fleet operators. RoadOne charges an hourly rate based on the towing vehicle used for these specialized services. RoadOne also provides private impound towing services to commercial customers, such as shopping centers, retailers and hotels, which engage RoadOne to tow vehicles that are parked illegally on their property. MUNICIPAL. RoadOne also provides towing and recovery services to public entities such as municipalities and police, sheriff and highway patrol departments. In a limited number of markets, RoadOne provides municipal freeway service towing to local transit districts and other transportation agencies through patrolling a preset route on heavily-used freeways and towing or otherwise assisting disabled vehicles. These services are in some cases provided under contracts, typically for terms of five years or less, that are terminable for material breach and are typically subject to competitive bidding upon expiration. In other cases, RoadOne provides these services without a long-term contract. Whether pursuant to a contract or an ongoing relationship, these services are generally provided by RoadOne for a designated geographic area, or shared with one or more other companies on a rotation basis. MOTOR CLUB. RoadOne provides towing and recovery services under contract to national motor clubs for the disabled vehicles of their members. Roadside assistance is provided and, if necessary, vehicles are towed to repair facilities for a flat fee paid by either the individual motorist or the motor club. CONSUMER TOWING AND RECOVERY. RoadOne provides towing and recovery services to individual motorists for their disabled vehicles. Roadside assistance is provided and, if necessary, vehicles are towed to repair facilities for a flat fee paid by the individual motorist. LIEN AND SALVAGE SALES. In conjunction with providing towing and recovery services, vehicles may be towed to a Company facility where the vehicle is impounded and placed in storage. Such a vehicle will remain in storage until its owner pays the towing fee, which is typically based on an hourly charge, and any daily storage fees to the Company, as well as any fines due to law enforcement agencies. If the vehicle is not claimed within a period prescribed by law (typically between 30 and 90 days), RoadOne may complete lien proceedings and sell the vehicle at auction or to a scrap metal facility, depending on the value of the vehicle. ENVIRONMENTAL CLEANUP. RoadOne also provides environmental cleanup services to a range of commercial customers in some markets. These services are typically provided when there is a spill of a petroleum product in conjunction with a wrecked vehicle requiring towing and recovery services, but may also involve an isolated spill. RoadOne does not cleanup spills of materials designated as Hazardous Materials by the Environmental Protection Agency. There -12- are fixed and variable components to the fees charged by RoadOne for its environmental cleanup services. SPECIALIZED TRANSPORTATION CONSTRUCTION EQUIPMENT. RoadOne provides construction equipment transport services to construction companies, contractors, municipalities and equipment leasing companies for mobile cargo such as cranes, bulldozers, forklifts and other heavy construction equipment. Service fees are based on the vehicle used and the distance traveled. INDUSTRIAL EQUIPMENT. RoadOne provides industrial equipment transport services to manufacturing companies, construction companies, contractors, municipalities and equipment leasing companies for immobile cargo such as engines, industrial generators and heavy construction materials. Service fees may be based on the vehicle used and the distance traveled or may be determined using an hourly rate based on the towing vehicle used for these specialized services. NEW AND USED AUTOMOBILE. RoadOne provides automobile transport services to leasing companies, automobile dealers, automobile auction companies, long-distance transporters, brokers and individuals. Services typically are provided as needed by particular customers and charged according to pre-set rates based on mileage. RoadOne provides transport services for dealers with used cars coming off lease and who transfer new cars from one region to another based on demand. The Company also provides local collection and delivery support to long-haul automobile transporters. DISPATCH SYSTEMS RoadOne currently dispatches its towing and recovery and specialized transportation services via existing local dispatch systems operated by its individual subsidiaries. Some of these subsidiaries utilize computerized positioning systems which identify and track vehicle location and status in a localized area. RoadOne intends to continue to use these existing dispatch systems, while developing and implementing a national computerized dispatch system that will more efficiently support its national, regional and local customers in allocating and utilizing assets on every level. TOWING SERVICE ACQUISITIONS The Company intends to continue to acquire additional towing service operations. The Company has targeted professional towers, and generally seeks operators who have good reputations in their markets and solid management willing to continue in the employment of the Company after the acquisition. The Company uses an internal acquisition team, supplemented as needed by outside advisors, and its extensive contacts in the towing service industry, to identify, evaluate, acquire and integrate towing operators. Acquisition candidates are evaluated based on criteria in a comprehensive process which includes operational, legal and financial due diligence reviews. The Company expects to utilize Common Stock, cash, or both as consideration for future acquisitions. During fiscal 1999, the Company acquired 35 towing service companies in separate transactions, none of which were individually material to the financial results of the Company. The Company issued an aggregate of approximately 1.2 million shares of Common Stock and paid approximately $22.3 million in cash in such transactions which have been accounted for under the purchase method of -13- accounting. Subsequent to April 30, 1999, the Company has acquired one additional towing service company as of July 23, 1999, paying approximately $1.3 million in cash. This transaction was accounted for under the purchase method of accounting. At July 23, 1999, the Company had entered into letters of intent to acquire six additional towing service companies in transactions expected to close over the following several weeks. These transactions are subject to customary conditions, including completion of due diligence investigations and execution of definitive acquisition agreements, among others. The Company intends to continue to aggressively pursue additional purchases of towing service companies. AFFILIATE PROGRAM In order to offer a nationwide towing service, the Company has established an affiliate program under which independent professional towers who meet the Company's criteria provide towing services under the RoadOne name as "affiliates." RoadOne affiliated companies will be offered many of the benefits of owned companies, such as product rebates, lower costs for financing and insurance, quantity buying advantages, national marketing strength and driver training. The Company's intention is eventually to sign agreements with a large number of RoadOne affiliates across North America. As of July 23, 1999, the Company had signed 2,184 agreements with RoadOne affiliates in all 50 states, Puerto Rico and five provinces in Canada. COMPETITION Historically, the towing service industry has been highly fragmented, with an estimated 30,000 professional towing operators in the United States. The Company believes that its consolidation of a number of these companies will give it brand loyalty among towing service customers through an emphasis on consistently high quality and dependable service from multiple locations over a broad geographic area. The Company expects to market these services to organizations with widely dispersed fleets of vehicles that would benefit from a single source provider. However, the size of the towing service industry will mean that the Company's operations will face continued competition from many operators across the country. The Company also faces competition in its consolidation of professional towing operators. These operators could be consolidated by other companies, individuals or entities, or they could enter into affiliate relationships with other companies. In addition, the Company's presence in the towing service industry presents the risk that it could be viewed as being in competition with other customers of the Company. EMPLOYEES At April 30, 1999, the Company employed approximately 3,022 people at RoadOne. None of the Company's RoadOne employees are covered by a collective bargaining agreement. The Company considers its employee relations to be good. -14- PATENTS AND TRADEMARKS The development of the underlift parallel linkage and L-arms in 1982 is considered one of the most innovative developments in the wrecker industry in the last 25 years. This technology is significant primarily because it allows the damage-free towing of newer aerodynamic vehicles made of lighter weight materials. Patents for this technology were granted to an operating subsidiary of the Company in 1987 and 1989. These patents expire in mid-year 2004. This technology, particularly the L-arms, is used in a majority of the commercial wreckers today. Management believes that utilization of such devices without a license is an infringement of the Company's patents. The Company has successfully litigated infringement lawsuits in which the validity of the Company's patents on this technology was upheld, and successfully settled other lawsuits. The Company also holds a number of other utility and design patents covering other products, including the "Eagle-Claw" hook up system, the Vulcan "scoop" wheel-retainer and the car carrier anti-tilt device. The Company has also obtained the rights to use and develop certain technologies owned or patented by others. The Company's trademarks "Century," "Holmes," "Champion," "Challenger," "Formula I," "Eagle Claw Self-Loading Wheellift," "Pro Star," "Street Runner," "Vulcan," and "RoadOne," among others, are registered with the United States Patent and Trademark Office. Management believes that the Company's trademarks are well-recognized by dealers, distributors and end-users in their respective markets and are associated with a high level of quality and value. GOVERNMENT REGULATIONS AND ENVIRONMENTAL MATTERS The Company's operations are subject to federal, state and local laws and regulations relating to the generation, storage, handling, emission, transportation and discharge of materials into the environment. Management believes that the Company is in substantial compliance with all applicable federal, state and local provisions relating to the protection of the environment. The costs of complying with environmental protection laws and regulations has not had a material adverse impact on the Company's financial condition or results of operations in the past and is not expected to have a material adverse impact in the future. The Company is also subject to the Magnuson-Moss Warranty Federal Trade Commission Improvement Act which regulates the description of warranties on products. The description and substance of the Company's warranties are also subject to a variety of federal and state laws and regulations applicable to the manufacturing of vehicle components. Management believes that continued compliance with various government regulations will not materially affect the operations of the Company. The Financial Services Group is subject to regulation under various federal, state and local laws which limit the interest rates, fees and other charges that may be charged by it or prescribe certain other terms of the financing documents that it enters into with its customers. Management believes that the additional administrative costs of complying with these regulations will not materially affect the operations of the Company. -15- EXECUTIVE OFFICERS OF THE REGISTRANT
NAME AGE POSITION WITH THE COMPANY ---- --- ------------------------- William G. Miller...................... 52 Chairman of the Board Jeffrey I. Badgley..................... 48 President, Chief Executive Officer and Director James A. McKinney...................... 54 Chief Executive Officer - RoadOne, Inc. and Director Frank Madonia.......................... 50 Executive Vice President, Secretary and General Counsel J. Vincent Mish........................ 48 Vice President, Chief Financial Officer and President of Financial Services Group Daniel N. Sebastian.................... 56 Vice President
WILLIAM G. MILLER has served as Chairman of the Board since April 1994. Mr. Miller served as Chief Executive Officer of the Company from April 1994 to June 1997, as Co-Chief Executive Officer of the Company from June 1997 to November 1997, and as President of the Company from April 1994 to June 1996. He served as Chairman of Miller Group, Inc., from August 1990 through May 1994, as its President from August 1990 to March 1993, and as its Chief Executive Officer from March 1993 until May 1994. Prior to 1987, Mr. Miller served in various management positions for Bendix Corporation, Neptune International Corporation, Wheelabrator-Frye Inc. and The Signal Companies, Inc. JEFFREY I. BADGLEY has served as Chief Executive Officer of the Company since November 1997, as President since June 1996, and as a director since January 1996. Mr. Badgley served as Co-Chief Executive Officer of the Company from June 1997 to November 1997, as Chief Operating Officer of the Company from June 1996 to June 1997 and as Vice-President of the Company from April 1994 to June 1996. In addition, Mr. Badgley serves as President of Miller Industries Towing Equipment Inc. Mr. Badgley served as Vice President - Sales of Miller Industries Towing Equipment Inc. from 1988 to 1996. Mr. Badgley served as Vice President - Sales and Marketing of Challenger Wrecker Manufacturing, Inc., from 1982 until joining Miller Industries Towing Equipment Inc. JAMES A. MCKINNEY has served as Chief Executive Officer of RoadOne, Inc. since June 1999, and as a director of the Company since June 1999. From August 1998 through June 1999, Mr. McKinney served as Executive Vice President of Rollins, Inc.. From January 1997 through May 1998, Mr. McKinney served as the Chief Executive Officer of Skywire. From 1993 to 1997 he served as Senior Vice President for Federal Express. FRANK MADONIA has served as Executive Vice President, General Counsel and Secretary of the Company since September 1998. From April 1994 to September 1998 Mr. Madonia served as Vice President, General Counsel and Secretary of the Company. Mr. Madonia served as Secretary and General Counsel to Miller Industries Towing Equipment Inc. since its acquisition by Miller Group in 1990. From July 1987 through April 1994, Mr. Madonia served as Vice President, General Counsel and Secretary of Flow Measurement. Prior to 1987, Mr. Madonia served in various legal and management positions for United States Steel Corporation, Neptune International Corporation, Wheelabrator-Frye Inc., The Signal Companies, Inc. and Allied-Signal Inc. In addition, Mr. Madonia is registered to practice before the United States Patent and Trademark Office. J. VINCENT MISH is a certified public accountant and has served as President of the Financial Services Group since September 1996 and as a Vice President of the Company since April 1994. From April 1994 through September 1996, Mr. Mish served as Chief Financial Officer and Treasurer of the Company, a -16- position he reassumed in June, 1999. Mr. Mish served as Vice President and Treasurer of Miller Industries Towing Equipment Inc. since its acquisition by Miller Group in 1990. From February 1987 through April 1994, Mr. Mish served as Vice President and Treasurer of Flow Measurement. Mr. Mish worked with Touche Ross & Company (now Deloitte and Touche) for over ten years before serving as Treasurer and Chief Financial Officer of DNE Corporation from 1982 to 1987. Mr. Mish is a member of the American Institute of Certified Public Accountants and the Tennessee, Georgia and Michigan Certified Public Accountant societies. DANIEL N. SEBASTIAN has served as Vice President of the Company since April 1994. Mr. Sebastian has also served as President of Champion Carrier Corporation ("Champion"), a wholly owned subsidiary of the Company, since July 1993. Mr. Sebastian served as Vice President of SAFEREC, Inc., a towing and recovery distributorship, from 1987 until 1988, at which time he became the operating manager of Champion. Mr. Sebastian has over 25 years of experience in the towing and recovery industry. ITEM 2. PROPERTIES The Company operates four manufacturing facilities in the United States. The facilities are located in (i) Ooltewah, Tennessee, (ii) Hermitage, Pennsylvania, (iii) Mercer, Pennsylvania, and (iv) Greeneville, Tennessee. The Ooltewah plant, containing approximately 208,000 square feet, produces light and heavy duty wreckers; the Hermitage plant, containing approximately 95,000 square feet, produces car carriers; the Mercer plant, which was acquired in December 1997, contains approximately 100,000 square feet, produces car carriers and light duty wreckers; and the Greeneville plant, containing approximately 100,000 square feet, primarily produces car carriers. The Company operates two foreign manufacturing facilities located in the Lorraine region of France, which contain, in the aggregate, approximately 100,000 square feet, and one in Norfolk, England, which contains approximately 22,500 square feet. Management believes that its existing manufacturing facilities will allow the Company to meet anticipated demand for its products. In connection with its acquisition of over 112 towing service companies, the Company has acquired or entered into leases for property at over 200 locations in 27 states. These facilities are utilized as offices for administrative and dispatch operations, garages for repair and upkeep of towing vehicles, and lots for storage and impounding of towed cars. RoadOne's corporate offices are housed in 10,000 square feet of leased space in Chattanooga, Tennessee. ITEM 3. LEGAL PROCEEDINGS In January 1998, the Company received a letter from the Antitrust Division of the Department of Justice (the "Division") stating that it was conducting a civil investigation covering "competition in the tow truck industry." The letter asked that the Company preserve its records related to the tow truck industry, particularly documents related to sales and prices of products and parts, acquisition of other companies in the industry, distributor relations, patent matters, competition in the industry generally, and activities of other companies in the industry. In March 1998, the Company received a Civil Investigation Demand ("CID") issued by the Division as part of its continuing investigation of whether there are, have been or may be violations of the -17- federal antitrust statutes in the tow truck industry. Under this CID, the Company has produced information and documents to assist in the investigation, has corresponded and met with the Division concerning the investigation, and is continuing to cooperate with the Division. It is unknown at this time what the eventual outcome of the investigation will be. During September, October and November 1997, five lawsuits were filed by certain persons who seek to represent a class of shareholders who purchased shares of the Company's common stock during the period from either October 15 or November 6, 1996 to September 11, 1997. Four of the suits were filed in the United States District Court for the Northern District of Georgia. The remaining suit was filed in the Chancery Court of Hamilton County, Tennessee. In general, the individual plaintiffs in all of the cases allege that they were induced to purchase the Company's common stock on the basis of allegedly actionable misrepresentations or omissions about the Company and its business and, as a result were thereby damaged. Four of the complaints assert claims under Sections 10(b) and 20 of the Securities Act of 1934. The complaints name as the defendants the Company and various of its present and former directors and officers. The plaintiffs in the four actions which involved claims in Federal Court under the Securities Exchange Act of 1934 have consolidated those actions. The Company filed a motion to dismiss in the consolidated case which was granted in part and denied in part. The proposed class was certified by order dated May 27, 1999. The Company filed a motion to dismiss in the Tennessee case which was granted in its entirety. The plaintiffs in that case, with permission from the Court, amended and refiled their complaint, which was dismissed with prejudice by order of the Court dated March 11, 1999. On April 5, 1999 counsel for plaintiffs filed a notice of appeal. In both these actions, the Company has denied liability and will continue to vigorously defend itself. In addition to the shareholder litigation described above, the Company is, from time to time, a party to litigation arising in the normal course of its business. Management believes that none of these actions, individually or in the aggregate, will have a material adverse effect on the financial position or results of operations of the Company. ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders of the Registrant during the fourth quarter of the fiscal year covered by this Report. PART II ITEM 5 MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Registrant's Common Stock is traded on the New York Stock Exchange ("NYSE") under the symbol "MLR." The following table sets forth the quarterly range of high and low sales prices for the Common Stock for the period from May 1, 1997 through April 30, 1999. -18-
HIGH LOW ---- ---- FISCAL YEAR ENDED APRIL 30, 1998 First Quarter $17.63 $11.88 Second Quarter $18.25 $ 9.00 Third Quarter $12.00 $ 9.06 Fourth Quarter $11.44 $ 6.19 FISCAL YEAR ENDED APRIL 30, 1999 First Quarter $ 8.88 $ 6.19 Second Quarter $ 7.44 $ 3.75 Third Quarter $ 7.00 $ 4.00 Fourth Quarter $ 6.31 $ 4.19
The approximate number of holders of record and beneficial owners of Common Stock as of July 27, 1999 was 1,874 and 10,000, respectively. The Company has never declared cash dividends on the Common Stock. The Company intends to retain its earnings to finance the expansion of its business and does not anticipate paying cash dividends in the foreseeable future. Any future determination as to the payment of cash dividends will depend upon such factors as earnings, capital requirements, the Company's financial condition, restrictions in financing agreements and other factors deemed relevant by the Board of Directors. The payment of dividends by the Company is restricted by its revolving credit facility. ITEM 6. SELECTED FINANCIAL DATA Pursuant to Rule 12b-25, this item has been omitted from this Form 10-K and will be filed by subsequent amendment. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT OF OPERATIONS Pursuant to Rule 12b-25, this item has been omitted from this Form 10-K and will be filed by subsequent amendment. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Pursuant to Rule 12b-25, this item has been omitted from this Form 10-K and will be filed by subsequent amendment. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. -19- PART III ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT DIRECTORS NAME OF DIRECTOR BACKGROUND INFORMATION Jeffrey I. Badgley Mr. Badgley, 48, has served as Chief Executive Officer of the Company since November 1997, as President of the Company since June 1996 and as a director since January 1996. In June 1997, he was named Co-Chief Executive Officer of the Company, a title he shared with Mr. Miller until November 1997. Mr. Badgley served as Vice President of the Company from 1994 to 1996, and as Chief Operating Officer of the Company from June 1996 to June 1997. In addition, Mr. Badgley has served as President of Miller Industries Towing Equipment Inc. since 1996. Mr. Badgley served as Vice President - Sales of Miller Industries Towing Equipment Inc. from 1988 to 1996. He previously served as Vice President - Sales and Marketing of Challenger Wrecker Corporation ("Challenger Wrecker"), from 1982 until joining Miller Industries Towing Equipment Inc. A. Russell Chandler, III Mr. Chandler, 54, has served as a director of the Company since April 1994. He currently serves as Chairman of Amplified.Com, an internet music provider, and is founder and Chairman of Whitehall Group Ltd., a private investment firm based in Atlanta, Georgia. Mr. Chandler served as the Mayor of the Olympic Village for the Atlanta Committee for the Olympic Games from 1990 through August 1996. From 1987 to 1993, he served as Chairman of United Plastic Films, Inc., a manufacturer and distributor of plastic bags. He founded Qualicare, -20- Inc., a hospital management company, in 1972 and served as President and Chief Executive Officer until its sale in 1983. In addition, Mr. Chandler serves on a number of community advisory boards, including the Wharton Graduate Advisory Board and the Georgia Tech Foundation Board of Trustees. Paul E. Drack Mr. Drack, 70, has served as a director of the Company since April 1994. Mr. Drack is also a director of Euramax International PLC. Mr. Drack retired in December 1993 as President and Chief Operating Officer of AMAX Inc., positions he held since August 1991. From 1985 to 1991, Mr. Drack served in various capacities for operating subsidiaries of AMAX Inc. including Chairman, President and Chief Executive Officer of Alumax Inc. and President of Kawneer Company. He was a director of AMAX Inc. from 1988 to 1993. Prior to its acquisition by another entity in November 1993, AMAX Inc. was a producer of aluminum and manufactured aluminum products with interests in domestic energy and gold production. James A. McKinney Mr. McKinney, 54, has served as Chief Executive Officer of RoadOne, Inc. since June 1999, and as a director of the Company since June 1999. From August 1998 through June 1999, Mr. McKinney served as Executive Vice President of Rollins, Inc.. From January 1997 through May 1998, Mr. McKinney served as the Chief Executive Officer of Skywire. From 1993 to 1997 he served as Senior Vice President for Federal Express. William G. Miller Mr. Miller, 52, has served as Chairman of the Board since April 1994. He served as Chief Executive Officer of the Company from April 1994 until June 1997. In June 1997, he was named Co-Chief Executive Officer, a title he shared with the Company's President, Jeffrey I. Badgley until November 1997. Mr. Miller also served as President of the Company from April 1994 to June 1996. He served as Chairman of Miller Group, Inc., from August 1990 through May 1994, as its President from August 1990 to March 1993, and as its Chief Executive Officer from March 1993 until May 1994. Prior to 1987, Mr. Miller served in various management positions for Bendix Corporation, Neptune International Corporation, Wheelabrator-Frye Inc. and The Signal Companies, Inc. Richard H. Roberts Mr. Roberts, 45, has served as a director of the Company since April 1994. Mr. Roberts currently serves as Senior Vice President, Secretary and General Counsel of Forward Corporation. Mr. Roberts has also served as Senior Vice President, Secretary and General Counsel of Landair Corporation, a position he has held since September 1998. Mr. Roberts was partner in the law firm of Baker, Worthington, Crossley & Stansberry from January 1991 to August 1994 and prior thereto was an associate of the firm. Mr. Roberts has served as a director of Forward Air Corporation and Laindair Corporation. EXECUTIVE OFFICERS Information relating to the executive officers of the Registrant is included in Item 1 of this Report. ITEM 11. EXECUTIVE COMPENSATION The information contained under the heading "EXECUTIVE COMPENSATION" in the definitive Proxy Statement used in connection with the solicitation of proxies for the Registrant's Annual Meeting of Shareholders to be filed with the Commission, is hereby incorporated herein by reference. Pursuant to Instruction 3 to Paragraph (b) of Item 401 of Regulation S-K, information relating to the executive officers of the Registrant is included in Item 1 of this Report. -21- ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth, as of July 27, 1999, certain information with respect to (a) all shareholders known to be "beneficial owners" (as that term is defined in the rules of the Securities and Exchange Commission) of more than five percent of the Common Stock; and (b) the Common Stock "beneficially owned" (i) by each director or nominee for director, (ii) by the executive officers named above under "Executive Officers of the Registrant," and (iii) all executive officers and directors of the Company as a group. Except as otherwise indicated, the shareholders listed in the table have sole voting and investment powers with respect to the Common Stock owned by them. AMOUNT AND NATURE OF BENEFICIAL PERCENT OF NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP CLASS - ------------------------------------ ------------- --------- William G. Miller 6,369,409 13.61% Jeffrey I. Badgley 364,756 * Frank Madonia 323,756 * J. Vincent Mish 325,631 * James A. McKinney - * Adam L. Dunayer 83,500 * A. Russell Chandler, III 95,919 * Paul E. Drack 95,918 * Richard H. Roberts 80,918 * Daniel N. Sebastian 296,956 * All Executive Officers and Directors as a Group 8,036,763 17.17% (10 persons) - ---------------------------- * Less than one percent The Percent of Class column represents the percentage that the named person or group would beneficially own if such person or group, and only such person or group, exercised all currently exercisable options and rights to acquire shares of Common Stock held by such person or group. Mr. Miller's business address is c/o Miller Industries, Inc., 3220 Pointe Parkway, Suite 100, Norcross, Georgia 30092. Includes 546,444 shares held by the Miller Family Foundation, Inc., a Georgia non-profit corporation of which Mr. Miller is the sole director. Includes 288,179 shares which are issuable pursuant to options which are exercisable within sixty days of the date set forth above. Includes 245,679 shares which are issuable pursuant to options which are exercisable within sixty days of the date set forth above. Includes 247,554 shares which are issuable pursuant to options which are exercisable within sixty days of the date set forth above. Includes 83,500 shares which are issuable pursuant to options which are exercisable within sixty days of the date set forth above. Includes 95,919 shares which are issuable pursuant to options which are exercisable within sixty days of the date set forth above. Includes 95,918 shares which are issuable pursuant to options which are exercisable within sixty days of the date set forth above. Includes 80,918 shares which are issuable pursuant to options which are exercisable within sixty days of the date set forth above. Includes 221,521 shares which are issuable pursuant to options which are exercisable within sixty days of the date set forth above. Includes 1,364,688 shares which are issuable pursuant to options which are exercisable within sixty days of the date set forth above.
-22- For purposes of determining the aggregate market value of the Registrant's voting stock held by nonaffiliates, shares held by all current directors and executive officers of the Registrant have been excluded. The exclusion of such shares is not intended to, and shall not, constitute a determination as to which persons or entities may be "affiliates" of the Registrant as defined by the Securities and Exchange Commission. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS None. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (A)(1) Pursuant to Rule 12b-25, this item has been omitted from this Form 10-K and will be filed by subsequent amendment. (A)(2) Pursuant to Rule 12b-25, this item has been omitted from this Form 10-K and will be filed by subsequent amendment. -23- (A)(3) EXHIBITS The following exhibits are required to be filed with this Report by Item 601 of Regulation S-K:
INCORPORATED BY REFERENCE TO EXHIBIT REGISTRATION OR FILE FORM OR REPORT DATE OF REPORT NUMBER IN DESCRIPTION NUMBER REPORT - ------------ ----------------------------------------- ------------------------ ------------------- -------------------------------- 3.1 Charter of the Registrant (composite - 10-K April 30, 1998 3.1 conformed copy) 3.2 Bylaws of the Registrant 33-79430 S-1 August 1994 3.2 10.1 Settlement Letter dated April 27, 1994 33-79430 S-1 August 1994 10.7 between Miller Group, Inc. and the Management Group 10.5 Participants Agreement dated as of 33-79430 S-1 August 1994 10.11 April 30, 1994 between the Registrant, Century Holdings, Inc., Century Wrecker Corporation, William G. Miller and certain former shareholders of Miller Group, Inc. 10.20 Technology Transfer Agreement dated 33-79430 S-1 August 1994 10.26 March 21, 1991 between Miller Group, Inc., Verducci, Inc. and Jack Verducci 10.21 Form of Noncompetition Agreement 33-79430 S-1 August 1994 10.28 between the Registrant and certain officers of the Registrant 10.22 Form of Nonexclusive Distributor 33-79430 S-1 August 1994 10.31 Agreement 10.23 Miller Industries, Inc. Stock Option 33-79430 S-1 August 1994 10.1 and Incentive Plan** 10.24 Form of Incentive Stock Option 33-79430 S-1 August 1994 10.2 Agreement** 10.25 Miller Industries, Inc. Cash Bonus 33-79430 S-1 August 1994 10.3 Plan** 10.26 Miller Industries, Inc. Non-Employee 33-79430 S-1 August 1994 10.4 Director Stock Option Plan** -24- INCORPORATED BY REFERENCE TO EXHIBIT REGISTRATION OR FILE FORM OR REPORT DATE OF REPORT NUMBER IN DESCRIPTION NUMBER REPORT - ------------ ----------------------------------------- ------------------------ ------------------- -------------------------------- 10.27 Form of Director Stock Option 33-79430 S-1 August 1994 10.5 Agreement** 10.28 Employment Agreement dated October 14, 33-79430 S-1 August 1994 10.29 1993 between Century Wrecker Corporation and Jeffrey I. Badgley** 10.29 First Amendment to Employment Agreement 33-79430 S-1 August 1994 10.33 between Century Wrecker Corporation and Jeffrey I. Badgley** 10.30 Form of Employment Agreement between - Form 10-K April 30, 1995 10.37 Registrant and each of Messrs. Madonia and Mish** 10.31 First Amendment to Miller Industries, - Form 10-K April 30, 1995 10.38 Inc. Non-Employee Director Stock Option Plan** 10.32 Second Amendment to Miller Industries, - Form 10-K April 30, 1996 10.39 Inc. Non-Employee Director Stock Option Plan** 10.33 Second Amendment to Miller Industries, - Form 10-K April 30, 1996 10.40 Inc. Stock Option and Incentive Plan** 10.34 Employment Agreement dated July 8, 1997 0-24298 Form 10-Q/A July 31, 1997 10 between the Registrant and William G. Miller** 10.35 Credit Agreement Among NationsBank of - Form 10-K April 30, 1998 10.35 Tennessee, N.A., the Registrant and certain subsidiaries of Registrant dated January 30, 1998. 10.36 Negative Pledge Agreement Among - Form 10-K April 30, 1998 10.36 NationsBank of Tennessee, N.A., the Registrant and certain subsidiaries of Registrant dated January 30, 1998. -25- INCORPORATED BY REFERENCE TO EXHIBIT REGISTRATION OR FILE FORM OR REPORT DATE OF REPORT NUMBER IN DESCRIPTION NUMBER REPORT - ------------ ----------------------------------------- ------------------------ ------------------- -------------------------------- 10.37 Guaranty Agreement Among NationsBank of - Form 10-K April 30, 1998 10.37 Tennessee, N.A. and certain subsidiaries of Registrant dated January 30, 1998. 10.38 Stock Pledge Agreement Between - Form 10-K April 30, 1998 10.38 NationsBank of Tennessee, N.A. and the Registrant dated January 30, 1998. 10.39 Stock Pledge Agreement Between - Form 10-K April 30, 1998 10.39 NationsBank of Tennessee, N.A. and the certain subsidiaries of the Registrant dated January 30, 1998. 10.40 Revolving Note Among NationsBank of - Form 10-K April 30, 1998 10.40 Tennessee, N.A., the Registrant and certain subsidiaries of Registrant dated January 30, 1998. 10.41 Revolving Note Among Bank of America, - Form 10-K April 30, 1998 10.41 FSB, the Registrant and certain subsidiaries of Registrant dated January 30, 1998. 10.42 Revolving Note Among Wachovia Bank, - Form 10-K April 30, 1998 10.42 N.A., the Registrant and certain subsidiaries of Registrant dated January 30, 1998. 10.43 Revolving Note Among First American - Form 10-K April 30, 1998 10.43 National Bank, the Registrant and certain subsidiaries of Registrant dated January 30, 1998. 10.44 Swing Line Note Among NationsBank of - Form 10-K April 30, 1998 10.44 Tennessee, N.A., the Registrant and certain subsidiaries of Registrant dated January 30, 1998. 10.45 LC Account Agreement Among NationsBank - Form 10-K April 30, 1998 10.45 of Tennessee, N.A., the Registrant and certain subsidiaries of Registrant dated January 30, 1998. -26- INCORPORATED BY REFERENCE TO EXHIBIT REGISTRATION OR FILE FORM OR REPORT DATE OF REPORT NUMBER IN DESCRIPTION NUMBER REPORT - ------------ ----------------------------------------- ------------------------ ------------------- -------------------------------- 10.46 Amendment No. 1 to the Credit Agreement - Form 10-K April 30, 1998 10.46 Among NationsBank of Tennessee, N.A., the Registrant and certain subsidiaries of Registrant dated January 31, 1998. 10.47 Form of Indemnification Agreement dated - Form 10-Q September 14, 1998 10 June 8, 1998 by and between the Registrant and each of William G. Miller, Jeffrey I. Badgley, A. Russell Chandler, Paul E. Drack, Adam L. Dunayer, Stephen Furbacher, Frank Madonia, J. Vincent Mish, Richard H. Roberts, and Daniel N. Sebastian** 10.48 Employment Agreement between the - Form 10-Q December 15, 1998 10.1 Registrant and Jeffrey I. Badgley, dated September 11, 1998** 10.49 Employment Agreement between the - Form 10-Q December 15, 1998 10.2 Registrant and Adam L. Dunayer, dated September 11, 1998** 10.50 Employment Agreement between the - Form 10-Q December 15, 1998 10.3 Registrant and Frank Madonia, dated September 11, 1998** 10.51 Agreement between the Registrant and - Form 10-Q December 15, 1998 10.4 Jeffrey I. Badgley, dated September 11, 1998** 10.52 Agreement between the Registrant and - Form 10-Q December 15, 1998 10.5 Adam L. Dunayer, dated September 11, 1998** 10.53 Agreement between the Registrant and - Form 10-Q December 15, 1998 10.6 Frank Madonia, dated September 11, 1998** 10.54 Employment Agreement between the * Registrant and James A McKinney, dated May 12, 1999** -27- INCORPORATED BY REFERENCE TO EXHIBIT REGISTRATION OR FILE FORM OR REPORT DATE OF REPORT NUMBER IN DESCRIPTION NUMBER REPORT - ------------ ----------------------------------------- ------------------------ ------------------- -------------------------------- 10.55 Agreement between the Registrant and * James A. McKinney, dated May 12, 1999** 10.56 Amendment No. 3 to the Credit Agreement * Among Bank of America, N.A. d/b/a NationsBank, N.A. successor to NationsBank, N.A., the Registrant, and Certain Subsidiaries of Registrant dated July 27, 1999. 21 Subsidiaries of the Registrant * 23 Consent of Arthur Andersen LLP (to be filed by amendment) 24 Power of Attorney (see signature page) * 27 Financial Data Schedule (to be filed by amendment) - -----------------------------------------------------
* Filed herewith. ** Management contract or compensatory plan or arrangement (B) None. (C) Pursuant to Rule 12b-25, this item has been omitted from this Form 10-K and will be filed by subsequent amendment. (D) Pursuant to Rule 12b-25, this item has been omitted from this Form 10-K and will be filed by subsequent amendment. -28- SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 29th day of July, 1999. MILLER INDUSTRIES, INC. By: /s/ Jeffrey I. Badley Jeffrey I. Badgley, President, Chief Executive Officer and Director POWER OF ATTORNEY Know all men by these presents, that each person whose signature appears below constitutes and appoints Jeffrey I. Badgley and J. Vincent Mish, and either of them, as attorneys-in-fact, with power of substitution, for him in any and all capacities, to sign any amendments to this Report on Form 10-K, and to file the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorneys-in-fact may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant in the capacities indicated on the 29th day of July, 1999. Signature Title /s/ William G. Miller Chairman of the Board of Directors William G. Miller /s/ Jeffrey I. Badgley President, Chief Executive Officer Jeffrey I. Badgley and Director /s/ J. Vincent Mish Vice President, Treasurer and J. Vincent Mish Chief Financial Officer (Principal Financial and Accounting Officer) /s/ A. Russell Chandler, III Director A. Russell Chandler, III /s/ Paul E. Drack Director Paul E. Drack /s/ Richard H. Roberts Director Richard H. Roberts /s/ James A. McKinney Chief Executive Officer James A. McKinney - RoadOne, Inc. and Director II-1 EXHIBIT INDEX EXHIBIT DESCRIPTION 10.54 Employment Agreement between the Registrant and James A. McKinney, dated May 12, 1999. 10.55 Agreement between the Registrant and James A. McKinney, dated May 12, 1999. 10.56 Amendment No. 3 to the Credit Agreement among Bank of America, N.A. d/b/a NationsBank, N.A. successor to NationsBank, N.A., the Registrant, and certain Subsidiaries of the Registrant, dated July 27, 1999. 21 Subsidiaries of the Registrant 24 Power of Attorney (see signature page) EX-10.54 2 EMPLOYMENT AGREEMNENT - JAMES A. MCKINNEY EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into effective as of the 12th day of May, 1999 (the "Effective Date"), by and between MILLER INDUSTRIES, INC., a corporation organized under the laws of the State of Tennessee, USA (the "Company"), and JAMES A. MCKINNEY (the "Executive"). For and in consideration of the mutual covenants and agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. EMPLOYMENT. Subject to the terms and conditions of this Agreement, Executive shall be employed by the Company as Chief Executive Officer - Road One, Inc., and shall perform such duties and functions for the Company and any company controlling, controlled by or under common control with the Company (such companies hereinafter collectively called "Affiliates") as shall be specified from time to time by the Chairman of the Board; Executive hereby accepts such employment and agrees to perform such executive duties as may be assigned to him. 2. DUTIES. Executive shall devote his full business related time and best efforts to accomplishing such executive duties at such locations as may be requested by the Chairman of the Board of the Company. While employed by the Company, Executive shall not serve as a principal, partner, employee, officer or director of, or consultant to, any other business or entity conducting business for profit without the prior written approval of the Chairman of the Board of the Company. In addition, under no circumstances will Executive have any financial interest in any competitor of the Company; provided, however, that Executive may invest in no more than 2% of the outstanding stock or securities of any competitor whose stock or securities are traded on a national stock exchange of any country. 3. TERM. The initial term of this Agreement shall be three (3) years commencing on the date hereof ("Effective Date") and ending on the third anniversary of the Effective Date. Beginning with the first annual shareholders' meeting at which directors are to be elected following the Effective Date and as of each annual shareholders' meeting at which directors are to be elected thereafter, Executive's employment and the term of this Agreement shall be extended automatically (without further action by either the Company or the Executive) for an additional period such that the Term of this Agreement will end on the 3rd anniversary of such shareholders' meeting, unless no later than 10 days following the date of such shareholders' meeting, the Company provides the Executive with written notice that the Term of this Agreement is not being extended. Notwithstanding the above, the Term of this Agreement shall end on the Executive's 65th birthday. 4. COMPENSATION AND BENEFITS. As compensation for his services during the Term of this Agreement, Executive shall be paid and receive the amounts and benefits set forth in subsections (a), (b), (c) and (d) below: (a) BASE SALARY. An annual base salary ("Base Salary") of $250,000 prorated for any partial year of employment. Executive's Base Salary shall be subject to annual review, commencing as of the first anniversary of the Effective Date of this Agreement, for adjustments at such time as the Company conducts salary reviews for its executive officers generally. Executive's salary shall be payable in accordance with the Company's regular payroll practices in effect from time to time for executive officers of the Company. (b) BONUS. In addition to the Base Salary, the Executive shall be entitled to participate in any of the Company's present and future stock or cash based bonus plans that are generally available to its executive officers, as such plans may exist or be changed from time to time at the discretion of the Company (c) OTHER BENEFITS. Executive shall be entitled to vacation with pay, life insurance, health insurance, fringe benefits, and such other employee benefits generally made available by the Company to its executive officers, in accordance with the established plans and policies of the Company, as in effect from time to time. (d) STOCK OPTIONS. As of the Effective Date of this Agreement, Executive will be granted 200,000 stock options under the Miller Industries, Inc. Stock Option and Incentive Plan ("Stock Option Plan") in accordance with Schedule A attached hereto. 5. TERMINATION. (a) BY EXECUTIVE. Executive may voluntarily terminate his employment hereunder at any time, to be effective 60 days after delivery to the Company of his signed, written resignation; Company may accept said resignation and pay Executive in lieu of waiting for passage of the notice period. (b) BY COMPANY. Subject to the terms of this Paragraph and Paragraph 5(c) below, the Company may terminate Executive's employment hereunder, in its sole discretion, whether with or without just cause (as defined in Paragraph 5(b)(ix) below and subject to the notice periods described therein), at any time upon written notice to Executive. If, prior to the end of the Term of this Agreement, the Company terminates Executive's employment without just cause (as defined in (ix) below), the Executive shall be entitled to receive, as damages payable as a result of, and arising from, a breach of this Agreement, the compensation and benefits set forth in (i) through (iv) below, subject to the Executive's obligation to mitigate damages by reducing the amounts he is entitled to receive hereunder by earnings from subsequent employment as provided in (viii) below. The time periods in (i) through (iii) below shall be the lesser of 36-months or the time period remaining from the date of Executive's termination to the end of the Term of this Agreement (the "Severance Period"). (i) Base Salary. The Executive will continue to receive his current ----------- Base Salary (subject to withholding of all applicable taxes and any amounts referred to in paragraph (iii) below) for the Severance Period in the same manner as it was being paid as of the date of termination. For purposes hereof, the Executive's "current Base Salary" shall be the highest rate in effect during the twelve-month period prior to the Executive's termination. (ii) Bonus. The Executive shall receive monthly bonus payments ----- from the Company for the Severance Period in an amount for each such month equal to one-twelfth of the average ("Average Bonus") of the bonuses earned by him for the three calendar years immediately preceding the year in which such termination occurs. Any bonus amounts that the Executive had previously earned from the Company but which may not yet have been paid as of the date of termination shall not be affected by this provision. Executive shall also receive, within 60 days after the date of his termination, a prorated bonus for any uncompleted fiscal year at the date of termination equal to the Average Bonus multiplied by the number of days he worked in such year divided by 365 days. (iii) Health and Life Insurance Coverage. Any health and life insurance ---------------------------------- benefits coverage (including any executive medical plan) provided to the Executive at his date of termination shall be continued by the Company at its expense at the same level and in the same manner as if his employment had not terminated (subject to the customary changes in such coverages if the Executive retires under a Company retirement plan, reaches age 65 or similar events and subject to Executive's right to make any changes in such coverages that an active employee is permitted to make), during the Severance Period. Any additional coverages the Executive had at termination, including dependent coverage, will also be continued for such period on the same terms. Any costs the Executive was paying for such coverages at the time of termination shall be paid by the Executive by separate check payable to the Company each month in advance. If the terms of any benefit plan referred to in this paragraph do not permit continued participation by the Executive, then the Company will arrange for other coverage at its expense providing substantially similar benefits. The coverages provided for in this paragraph shall be applied against and reduce the period for which COBRA will be provided. (iv) Stock Options. As of Executive's date of termination, all -------------- outstanding stock options granted to Executive under the Stock Option and Incentive Plan and any other Company stock option plan shall become 100% vested and immediately exercisable. To the extent necessary, the provisions of this paragraph (iv) shall constitute an amendment of the Executive's stock option agreements under the Stock Option Plans. (v) Effect of Death. In the event of the Executive's death --------------- after his termination of employment by the Company under this Paragraph 5(b), the benefits payable under (i) and (ii) of this Paragraph 5(b) shall continue for a period of twelve (12) months, or, if shorter, until the end of the Term of this Agreement; provided, however, such payments will be paid in a lump sum payment within 60 days following the Executive's death, to the Executive's surviving spouse, or, if none, to the Executive's estate. In addition, in the event of Executive's death, any dependent coverage in effect under (iii) of this Paragraph 5(b) shall continue at the Company's expense, for a period of 12 months, or, if shorter, until the end of the Term of this Agreement. (vi) Other Termination. Executive hereby agrees and ------------------- acknowledges that if he voluntarily resigns from his employment, or is terminated for just cause, prior to the end of the Term of this Agreement, then he shall be entitled to no payment or compensation whatsoever from the Company under this Agreement, other than as may be due him through his last day of employment including any vested benefits and any benefit continuation or conversion rights which he may have in accordance with the established plans and policies of the Company. (vii) Change in Control. Notwithstanding any provision of this ----------------- Agreement to the contrary, if Executive's employment is terminated (whether by the Company or by Executive) under circumstances that would entitle him to receive benefits under his agreement with the Company providing compensation and benefits for termination following a "change in control" of the Company (as defined in such agreement), then any such termination shall be treated under this Agreement as a termination by the Company without just cause and the Executive shall be entitled to the compensation and benefits set forth in (i) through (iv) above for the time periods provided in this Paragraph 5(b), and such amounts shall be treated as damages payable as a result of, and arising from, a breach of this Agreement. (viii) Obligation to Mitigate. Although Executive shall not be ---------------------- required to seek subsequent employment, if Executive accepts subsequent employment during the period he is receiving compensation and benefits under (i) through (iii) above, Executive shall be required to notify the Company within 10 days of accepting such subsequent employment, and the Executive shall be required to mitigate damages by reducing the amount of severance payments he is entitled to receive under (i) and (ii) above by any compensation he earns from subsequent employment during the period he is entitled to compensation under (i) and (ii) above. In addition, the life insurance coverage being continued under (iii) above shall terminate as of the date of the commencement of the Executive's subsequent employment, and the health insurance coverage being provided under (iii) above shall terminate as of the date the Executive becomes covered under a health plan of the subsequent employer. (ix) "For Just Cause". For purposes of this Agreement, the ----------------- phrase "for just cause" shall mean: (A) Executive's material fraud, malfeasance, gross negligence, or willful misconduct with respect to business affairs of the Company which is directly or materially harmful to the business or reputation of the Company or any subsidiary of the Company; (B) Executive's conviction of or failure to contest prosecution for a felony or a crime involving moral turpitude; or (C) Executive's material breach of this Agreement. A termination of Executive for just cause based on clause (A) or (C) of the preceding sentence shall take effect 30 days after the Executive receives from Company written notice of intent to terminate and Company's description of the alleged cause, unless Executive shall, during such 30-day period, remedy the events or circumstances constituting cause; provided, however, that such termination shall take effect immediately upon the giving of written notice of termination of just cause under any clause if the Company shall have determined in good faith that such events or circumstances are not remediable (which determination shall be stated in such notice). (c) BY DEATH OR DISABILITY. If Executive's employment is terminated due to Executive's death, the Executive's surviving spouse, or if none, his estate, shall receive the benefits payable under (i) and (ii) of Paragraph 5(b) above; provided, however, such payments shall be for a period of 12 months rather than 36 months and such payments shall be made in a lump sum payment within 60 days of the Executive's death. In addition, if the Executive's dependents are eligible to and actually elect to continue under COBRA any coverages provided under Paragraph 5(b)(iii), the Company shall pay the cost of such COBRA coverage for a period of 12 months following the date of Executive's death. If Executive's employment is terminated due to Executive's disability (as defined in the Company's long-term disability plan or insurance policy, or if no such plan or policy, as determined in good faith by the Company), Executive shall be entitled to the benefits payable or to be provided under (i), (ii), (iii) and (iv) of Paragraph 5(b); provided, however, the benefits under (i), (ii) or (iii) of Paragraph 5(b) shall be payable or to be provided for a period of 24 months. Executive or his estate, as the case may be, shall not by operation of this paragraph forfeit any rights in which he is vested at the time of his death or disability. (d) Upon termination of Executive's employment for any reason whatsoever (whether voluntary on the part of Executive, for just cause, or other reasons), the obligations of Executive pursuant to Paragraphs 6 and 7 hereof shall survive and remain in effect for the periods described in Paragraph 6. 6. COMPETITION, CONFIDENTIALITY, AND NONSOLICITATION. Executive agrees to be bound by the terms and conditions of the Noncompetition Agreement attached hereto as Exhibit "A", which is hereby made a part of this Agreement. 7. INJUNCTIVE RELIEF. The Executive acknowledges that his services to be rendered to the Company are of a special and unusual character which have a unique value to the Company, the loss of which cannot adequately be compensated by damages in an action at law. Executive further acknowledges that any breach of the terms of Paragraph 6, including Exhibit "A", would result in material damage to the Company, although it might be difficult to establish the monetary value of the damage. Executive therefore agrees that the Company, in addition to any other rights and remedies available to it, shall be entitled to obtain an immediate injunction (whether temporary or permanent) from any court of appropriate jurisdiction in the event of any such breach thereof by Executive, or threatened breach which the Company in good faith believes will or is likely to result in irreparable harm to the Company. The existence of any claim or cause of action by Executive against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of Executive's agreement under this Paragraph and Paragraph 6 above. 8. MISCELLANEOUS. (a) NOTICE. Any notice or other communication required or permitted under this Agreement shall be effective only if it is in writing and shall be deemed to have been duly given when delivered personally or seven days after mailing if mailed first class by registered or certified mail, postage prepaid, addressed as follows: If to the Company: Miller Industries, Inc. P.O. Box 120 8503 Hilltop Drive Ooltewah, Tennessee 37363 Attention: Chairman of the Board If to the Executive: James A. McKinney 1300 Twelve Oaks Circle Atlanta, Georgia 30327 or to such other address as any party may designate by notice to the others. (b) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the parties hereto with respect to the Executive's employment by the Company, and supersedes and is in full substitution for any and all prior understandings or agreements with respect to the Executive's employment. (c) AMENDMENT. This Agreement may be amended only by an instrument in writing signed by the parties hereto, and any provision hereof may be waived only by an instrument in writing signed by the party or parties against whom or which enforcement of such waiver is sought. The failure of either party hereto to comply with any provision hereof shall in no way affect the full right to require such performance at any time thereafter, nor shall the waiver by either party hereto of a breach of any provision hereof be taken or held to be a waiver of any succeeding breach of such provision, or a waiver of the provision itself, or a waiver of any other provision of this Agreement. (d) BINDING EFFECT. This Agreement is binding on and is for the benefit of the parties hereto and their respective successors, heirs, executors, administrators and other legal representatives. Neither this Agreement nor any right or obligation hereunder may be assigned by the Executive or the Company, except for assignment by the Company to any wholly owned subsidiary. (e) SEVERABILITY AND MODIFICATION. If any provision of this Agreement or portion thereof is so broad, in scope or duration, so as to be unenforceable, such provision or portion thereof shall be interpreted to be only so broad as is enforceable. In addition, to the extent that any provision of this Agreement as applied to either party or to any circumstances shall be adjudged by a court of competent jurisdiction to be void or unenforceable, the same shall in no way affect any other provision of this Agreement or the validity or enforceability of this Agreement. (f) INTERPRETATION. This Agreement shall be interpreted, construed and governed by and under the laws of the State of Tennessee. Each party irrevocably (i) consents to the exclusive jurisdiction and venue of the courts of Hamilton County, State of Tennessee and federal courts in the Eastern District of Tennessee, in any action arising under or relating to this Agreement (including Exhibit "A" hereto), and (ii) waives any jurisdictional defenses (including personal jurisdiction and venue) to any such action. If any provision of this Agreement is deemed or held to be illegal, invalid, or unenforceable under present or future laws effective during the term hereof, this Agreement shall be considered divisible and inoperative as to such provision to the extent it is deemed to be illegal, invalid or unenforceable, and in all other respects this Agreement shall remain in full force and effect; provided, however, that if any provision of this Agreement is deemed or held to be illegal, invalid or unenforceable there shall be added hereto automatically a provision as similar as possible to such illegal, invalid or unenforceable provision as shall be legal, valid or enforceable. Further, should any provision contained in this Agreement ever be reformed or rewritten by any judicial body of competent jurisdiction, such provision as so reformed or rewritten shall be binding upon the Executive and the Company. (g) FAILURE TO ENFORCE. The failure of either party hereto at any time, or for any period of time, to enforce any of the provisions of this Agreement shall not be construed as a waiver of such provision(s) or of the right of such party hereafter to enforce each and every such provision. (h) COUNTERPARTS. This Agreement may be executed in several counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument. (i) NO CONFLICTING AGREEMENT. The Executive represents and warrants that he is not party to any agreement, contract or understanding which would prohibit him from entering into this Agreement or performing fully his obligations hereunder. (j) HEADINGS. The headings and subheadings of this Agreement are inserted for convenience of reference only and are not to be considered in construction of the provisions hereof. (k) CONSTRUCTION. The Company and the Executive acknowledge that this Agreement was the result of arm's-length negotiations between sophisticated parties each represented by legal counsel. Each and every provision of this Agreement shall be construed as though both parties participated equally in the drafting of same, and any rule of construction that a document shall be construed against the drafting party shall not be applicable to this Agreement. IN WITNESS WHEREOF, the Company and the Executive have executed this Agreement effective as of the date first written above. EXECUTIVE /s/ James A. McKinney James A. McKinney MILLER INDUSTRIES, INC. By: /s/ William G. Miller Its Chairman SCHEDULE A - OPTIONS Incentive Stock Options to purchase 80,000 shares of Company common stock, or if less, the maximum number that can be granted as incentive stock options, with an exercise price of 100% of market value on the Effective Date. The remainder of the 200,000 options (approximately 120,000 options) shall be nonqualified stock options to purchase shares of Company common stock at an exercise price of $4.00 per share. All options shall vest 25% on each of the 1st through 4th anniversaries of the grant date. EXHIBIT "A" NONCOMPETITION AGREEMENT THIS NONCOMPETITION AGREEMENT is entered into effective this 12th day of May, 1999, between MILLER INDUSTRIES, INC. (the "Company") and JAMES A. MCKINNEY (the "Executive") contemporaneously with and as part of the Employment Agreement between the parties to which this Noncompetition Agreement is attached. REASONS FOR THIS NONCOMPETITION AGREEMENT: During Executive's relationship with the Company Executive has learned, will learn, or has or will have access to, important proprietary information related to the manufacturing and distribution of towing and recovery equipment, and towing services (collectively, the "Company's Business"). Executive acknowledges that the proprietary customer, operations, financial, and business information that has been or will be learned or accessible has been and will be developed through the Company's expenditure of substantial effort, time and money; and together with relationships developed with customers and employees, could be used to compete unfairly with the Company. The Company's ability to sell its products on a competitive basis depends, in part, on its proprietary information and customer relationships, and the Company would not share this information, provide training or promote Executive's relationship with customers if the Company believed that it would be used in competition with the Company, which non-disclosure would cause Executive's performance and opportunities to suffer. In consideration of employment or continued employment and other valuable consideration, the receipt and sufficiency of which are acknowledged, the Company and Executive agree: 1. DEFINITIONS: - For this Agreement, the following terms shall have the meaning specified below: (A) PERSON: - any individual, corporation, limited liability company, partnership, joint venture, association, unincorporated organization or other entity. (B) TERMINATION DATE: - the date of Executive's termination of employment from the Company, whether such termination is voluntary or involuntary, whether with or without cause, and whether before or after the expiration of the Term of the Executive's Employment Agreement. (C) CUSTOMERS: - all Persons (i) that Executive solicited or contacted on behalf of the Company; (ii) whose dealings with the Company were coordinated or supervised, in whole or in part, by Executive; or (iii) about whom Executive possessed Confidential Information, in each case during the one-year period immediately prior to the Executive's Termination Date. (D) CONFIDENTIAL INFORMATION: - information, without regard to form, relating to the Company's customers, operation, finances, and business that derives value, actual or potential, from not being generally known to other Persons, including, but not limited to, technical or nontechnical data, formulas, patterns, compilations (including compilations of customer information), programs (including fulfillment and marketing programs), devices, methods (including fulfillment methods), techniques, processes, financial data (including sales forecasts), or lists of actual or potential customers or suppliers (including identifying information about those customers), whether or not reduced to writing. Confidential Information includes information disclosed to the Company by third parties that the Company is obligated to maintain as confidential. Confidential Information subject to this Agreement may include information that is not a trade secret under applicable law, but information not constituting a trade secret only shall be treated as Confidential Information under this Agreement for a two year period after the Termination Date. (E) TERRITORY: - the term "Territory" as used in this Agreement means the continental United States. Executive acknowledges that Executive will provide services to Company and will have a substantial impact on the Company's Business throughout the Territory. (F) COMPETING BUSINESS: - any Person (other than the Company) providing or offering goods or services identical to or reasonably substitutable for the Company's Business. 2. CONFIDENTIAL INFORMATION: - Executive shall use best efforts to protect Confidential Information. During or after association with the Company, Executive will not use or disclose any of the Company's Confidential Information except in connection with his duties performed in accordance with his Employment Agreement or except with the prior written consent of the Chairman of the Board of the Company; provided, however, Executive may make disclosures required by a valid order or subpoena issued by a court or administrative agency of competent jurisdiction, in which event Executive will promptly notify the Company of such order or subpoena to provide the Company an opportunity to protect its interests. 3. RETURN OF MATERIALS: - On the Termination Date or for any reason or at any time at the Company's request, Executive will deliver promptly to the Company all materials, documents, plans, records, notes, or other papers and any copies in Executive's possession or control relating in any way to the Company's Business, which at all times shall be the property of the Company. 4. SOLICITATION OF EMPLOYEES: - During employment and for a period of 24 months following his Termination Date, Executive will not solicit or induce or in any manner attempt to solicit or induce, any person employed by the Company to leave such employment, whether or not such employment is pursuant to a written contract with the Company or at will. 5. SOLICITATION OF CUSTOMERS: - During employment and for a period of 24 months following his Termination Date, Executive will not solicit Customers for the purpose of providing or offering products or services identical to or reasonably substitutable for the Company's Business. 6. LIMITATIONS ON POST-TERMINATION COMPETITION: - During employment and for a period of 24 months following his Termination Date, Executive will not, within the Territory, be employed or engaged by a Competing Business as a director, executive, officer, manager, consultant or equivalent position. 7. Notwithstanding any provision of this Agreement to the contrary, if Executive's employment is terminated (whether by the Company or by Executive) under circumstances that would entitle him to receive benefits under his agreement with the Company providing compensation and benefits for terminations following a "change in control" of the Company (as defined in such agreement), then the time periods in Paragraphs 5 and 6 above shall be reduced to 12 months. 8. DISPARAGEMENT: - Executive shall not at any time make false, misleading or disparaging statements about the Company, including its products, management, employees, and customers. 9. OWNERSHIP OF CONFIDENTIAL INFORMATION. The Executive hereby agrees that any and all improvements, inventions, discoveries, formulas, processes, methods, know-how, confidential data, trade secrets and other proprietary information (collectively "Work Product") within the scope of any business of the Company or any affiliate which the Executive may conceive or make or has conceived or made during his employment with the Company shall be and are the sole and exclusive property of the Company, and that the Executive shall, whenever requested to do so by the Company, at its expense, execute and sign any and all applications, assignments or other instruments and do all other things which the Company may deem necessary or appropriate (i) in order to apply for, obtain, maintain, enforce or defend letters patent of the United States or any foreign country for any Work Product, or (ii) in order to assign, transfer, convey or otherwise make available to the Company the sole and exclusive right, title and interest in and to any Work Product. 10. INTERPRETATION; SEVERABILITY: - Rights and restrictions in this Agreement may be exercised and are applicable only to the extent they do not violate any applicable laws, and are intended to be limited to the extent necessary so they will not render this Agreement illegal, invalid, or unenforceable. If any term shall be held illegal, invalid, or unenforceable by a court of competent jurisdiction, the remaining terms shall remain in full force and effect. This Agreement does not in any way limit the Company's rights under the laws of unfair competition, trade secret, copyright, patent, trademark or any other applicable laws(s), which are in addition to rights under this Agreement. The existence of a claim by Executive, whether predicated on this Agreement or otherwise, shall not constitute a defense to the Company's enforcement of this Agreement. EX-10.55 3 AGREEMENT BETWEEN REGISTRANT AND JAMES MCKINNEY EXHIBIT 10.55 AGREEMENT THIS AGREEMENT (the "Agreement"), effective this 12th day of May, 1999 (the "Effective Date"), by and between MILLER INDUSTRIES, INC., a Tennessee corporation (the "Company"), and JAMES A. MCKINNEY (the "Executive"). W I T N E S S E T H: WHEREAS, the Company wishes to assure both itself and its key employees of continuity of management and objective judgment in the event of any Change in Control of the Company, and to induce its key employees to remain employed by the Company, and the Executive is a key employee of the Company and an integral part of its management; and WHEREAS, this Agreement is not intended to alter materially the compensation and benefits that the Executive reasonably could expect to receive in the absence of a Change in Control of the Company, and this Agreement accordingly will be operative only upon circumstances relating to a Change in Control of the Company, as set forth herein. NOW, THEREFORE, for and in consideration of the premises and the mutual covenants herein contained, the parties hereby agree as follows: I. OPERATION OF AGREEMENT. This Agreement shall be effective immediately upon its execution by the parties hereto, but anything in this Agreement to the contrary notwithstanding, neither this Agreement nor any provision hereof shall be operative unless, during the term of this Agreement, there has been a Change in Control of the Company, as defined in Article III below. Immediately upon such an occurrence, all of the provisions hereof shall become operative. II. TERM OF AGREEMENT. The initial term of this Agreement shall be three (3) years commencing on the date hereof ("Effective Date") and ending on the third anniversary of the Effective Date. Beginning with the first annual shareholders' meeting at which directors are to be elected following the Effective Date and each annual shareholders' meeting at which directors are to be elected thereafter, Executive's employment and the term of this Agreement shall be extended automatically (without further action by either the Company or the Executive) for an additional period such that the Term of this Agreement will end on the 3rd anniversary of such shareholders' meeting, unless no later than 10 days following the date of such shareholders' meeting, the Company provides the Executive with written notice that the Term of this Agreement is not being extended. Notwithstanding the above, the Term of this Agreement shall end on the Executive's 65th birthday. III. DEFINITIONS. 1. Base Amount -- The term "BASE AMOUNT" shall have the same meaning as ----------- ascribed to it under Section 280G(b)(3) of the Internal Revenue Code of 1986, as amended (the "Code"). 2. Board or Board of Directors -- The Board of Directors of Miller ---------------------------- Industries, Inc., or its successor. 3. Cause -- The Term "CAUSE" as used herein shall mean: (i) Executive's ----- material fraud, malfeasance, gross negligence, or willful misconduct with respect to business affairs of the Company which is directly or materially harmful to the business or reputation of the Company or any subsidiary of the Company, or (ii) Executive's conviction of or failure to contest prosecution for a felony or a crime involving moral turpitude. A termination of Executive for "Cause" based on clause (i) of the preceding sentence shall take effect thirty (30) days after the Company gives written notice of such termination to Executive specifying the conduct deemed to qualify as Cause, unless Executive shall, during such 30-day period, remedy the events or circumstances constituting cause to the reasonable satisfaction of the Company. A termination for Cause based on clause (ii) above shall take effect immediately upon giving of the termination notice. 4. Change in Control -- The term "CHANGE IN CONTROL" as used herein shall mean: (a) the acquisition, directly or indirectly, by any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) of securities of the Company representing an aggregate of forty percent (40%) or more of the combined voting power of the Company's then outstanding securities (excluding the acquisition by persons who own such amount of securities on the date hereof, or acquisitions by persons who acquire such amount through inheritance or gift); or (b) when, during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Company, cease for any reason to constitute at least a majority thereof, provided, however, that a director who was not a director at the beginning of such period shall be deemed to have satisfied the two-year requirement if such director was elected by, or on the recommendation of or with the approval of, at least three-quarters of the directors who were directors at the beginning of such period (either actually or by prior operation of this Section 4(b)); or (c) consummation of (i) a merger, consolidation or other business combination of the Company with any other "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) or affiliate thereof, other than a merger, consolidation or business combination which would result in the outstanding common stock of the Company immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into common stock of the surviving entity or a parent or affiliate thereof) at least fifty percent (50%) of the outstanding common stock of the Company (or such surviving entity or parent or affiliate thereof) that is outstanding immediately after such merger, consolidation or business combination, or (ii) a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets; or (d) the occurrence of any other event or circumstance which is not covered by (a) through (c) above which the Board of the Company determines affects control of the Company and adopts a resolution that such event or circumstance constitutes a Change in Control for the purposes of this Agreement." 5. Disability -- The term "DISABILITY" shall mean the Executive's ---------- inability as a result of physical or mental incapacity to substantially perform his duties for the Company on a full-time basis for a period of six (6) months. 6. Excess Severance Payment -- The term "EXCESS SEVERANCE PAYMENT" -------------------------- shall have the same meaning as the term "excess parachute payment" defined in Section 280G(b)(1) of the Code. 7. Severance Payment -- The term "SEVERANCE PAYMENT" shall have the ----------------- same meaning as the term "parachute payment" defined in Section 280G(b)(2) of the Code. 8. Present Value -- The term "PRESENT VALUE" shall have the same -------------- meaning as provided in Section 280G(d)(4) of the Code. 9. Reasonable Compensation -- The term "REASONABLE COMPENSATION" shall ----------------------- have the same meaning as provided in Section 280G(b)(4) of the Code. IV. BENEFITS UPON TERMINATION FOLLOWING A CHANGE IN CONTROL. 1. Termination -- If a Change in Control occurs during the term of this ----------- Agreement and the Executive's employment is terminated (i) within twenty-four (24) months following the date of the Change in Control, or (ii) within six (6) months prior to the date of the Change in Control and is related to such Change in Control, and in either case (i) or (ii) such termination is a result of Involuntary Termination or Voluntary Termination, as defined below, then the benefits described in Section 2 below shall be paid or provided to the Executive: (a) Involuntary Termination -- For purposes hereof, "INVOLUNTARY ------------------------ TERMINATION" shall mean termination of employment that is involuntary on the part of the Executive and that occurs for reasons other than for Cause, Disability or death. (b) Voluntary Termination -- For purposes hereof, "VOLUNTARY ----------------------- TERMINATION" shall mean termination of employment that is voluntary on the part of the Executive, and, in the judgment of the Executive, is due to (i) a reduction of the Executive's responsibilities, title or status resulting from a formal change in such title or status, or from the assignment to the Executive of any duties inconsistent with his title, duties or responsibilities in effect within the year prior to the Change in Control; (ii) a reduction in the Executive's compensation or benefits, or (iii) a Company-required involuntary relocation of Executive's place of residence or a significant increase in the Executive's travel requirements. A termination shall not be considered voluntary within the meaning of this Agreement if such termination is the result of Cause, Disability or death of the Executive. 2. Benefits to be Provided -- If the Executive becomes eligible for ----------------------- benefits under Section 1 above, the Company shall pay or provide to Executive the compensation and benefits set forth in this Section 2; provided, however, that the compensation and benefits to be paid or provided pursuant to paragraphs (a), (b), (c) and (d) of this Section 2 shall be reduced to the extent that the Executive receives or is entitled to receive upon his termination the compensation and benefits (but only to the extent he actually receives such compensation and benefits) described in paragraphs (a), (b), (c) and (d) of this Section 2 pursuant to the terms of an employment agreement with the Company or as a result of a breach by the Company of the employment agreement; and provided, however, that notwithstanding contrary provisions in the employment agreement, to the extent benefits are actually paid or provided under this Agreement, the benefits shall be provided in lump sum payments where specified in paragraphs (a) and (b) below. (a) Salary -- The Executive will continue to receive his current salary ------ (subject to withholding of all applicable taxes and any amounts referred to in Section 2(c) below) for a period of thirty-six (36) months from his date of termination in the same manner as it was being paid as of the date of termination; provided, however, that the salary payments provided for hereunder shall be paid in a single lump sum payment, to be paid not later than 30 days after his termination of employment; provided, further, that the amount of such lump sum payment shall be determined by taking the salary payments to be made and discounting them to their Present Value (as defined in Section III.8) on the date Executive's employment is terminated. For purposes hereof, the Executive's "current salary" shall be the highest rate in effect during the twelve-month period prior to the Executive's termination. (b) Bonuses and Incentives -- The Executive shall receive bonus ------------------------ payments from the Company for the thirty-six (36) months following the month in which his employment is terminated in an amount for each month equal to one-twelfth of the average ("Average Bonus") of the bonuses paid to him for the three calendar years immediately preceding the year in which such termination occurs. Any bonus amounts that the Executive had previously earned from the Company but which may not yet have been paid as of the date of termination shall not be affected by this provision. Executive shall also receive a prorated bonus for any uncompleted fiscal year at the date of termination equal to the Average Bonus multiplied by the number of days he worked in such year divided by 365 days. The bonus amounts determined herein shall be paid in a single lump sum payment, to be paid not later than 30 days after termination of employment; provided, further, that the amount of such lump sum payment shall be determined by taking the bonus payments (as of the payment date) to be made and discounting them to their Present Value (as defined in Section III.8) on the date Executive's employment is terminated. (c) Health and Life Insurance Coverage -- The health and life insurance ---------------------------------- benefits coverage (including any executive medical plan) provided to the Executive at his date of termination shall be continued by the Company at its expense at the same level and in the same manner as if his employment had not terminated (subject to the customary changes in such coverages if the Executive retires under a Company retirement plan, reaches age 65 or similar events and subject to Executive's right to make any changes in such coverages that an active employee is permitted to make), beginning on the date of such termination and ending on the date thirty-six (36) months from the date of such termination. Any additional coverages the Executive had at termination, including dependent coverage, will also be continued for such period on the same terms, to the extent permitted by the applicable policies or contracts. Any costs the Executive was paying for such coverages at the time of termination shall be paid by the Executive by separate check payable to the Company each month in advance. If the terms of any benefit plan referred to in this Section do not permit continued participation by the Executive, the Company will arrange for other coverage at its expense providing substantially similar benefits. The coverages provided for in this Section shall be applied against and reduce the period for which COBRA will be provided. If the Executive is covered by a split-dollar or similar life insurance program at the date of termination, he shall have the option in his sole discretion to have such policy transferred to him upon termination, provided that the Company is paid for its interest in the policy upon such transfer. (d) Stock Options -- As of Executive's date of termination, all -------------- outstanding stock options granted to Executive under the Miller Industries, Inc. Stock Option and Incentive Plan and any such similar stock option plan (the "Stock Option Plans") shall become 100% vested and immediately exercisable. To the extent necessary, the provisions of this subsection (d) shall constitute an amendment of the Executive's stock option agreements under the Stock Option Plans. (e) Effect of Lump Sum Payment -- The lump sum payment under (a) or (b) -------------------------- above shall not alter the amounts Executive is entitled to receive under the benefit plans described in (c) above. Benefits under such plans shall be determined as if Executive had remained employed and received such payments without reduction for their Present Value over a period of thirty-six (36) months. V. LIMITATION OF BENEFITS. 1. Tax Equalization Payment. If all or any portion of the compensation ------------------------- or benefits provided to Executive under this Agreement are treated as Excess Severance Payments (whether by action of the Internal Revenue Service or otherwise), the Company shall protect Executive from depletion of the amount of such compensation and benefits by payment of a tax equalization payment in accordance with this subsection. In connection with any Internal Revenue Service examination, audit or other inquiry, the Company and Executive agree to take actions to provide and to cooperate in providing evidence to the Internal Revenue Service (and, if applicable, the State of the Executive's residence) that the compensation and benefits provided under this Agreement do not result in the payment of Excess Severance Payments. The tax equalization payment shall be an amount which when added to the other amounts payable, or to be provided, to Executive under this Agreement will place Executive in the same position as if the excise tax penalty of Code Section 4999 (and any state tax statute), or any successor statute of similar import, did not apply to any of the compensation or benefits provided under this Agreement. The amount of this tax equalization payment shall be determined by the Company's independent accountants and shall be paid to Executive not later than ten (10) days prior to the date any excise tax under Code Section 4999 is due to be paid by Executive. 2. Additional Limitation. In addition to the limits otherwise provided --------------------- in this Section V, to the extent permitted by law, Executive may in his sole discretion elect to reduce (or change the timing of) any payments or benefits he may be eligible to receive under this Agreement to prevent the imposition of excise taxes on Executive under Section 4999 of the Code or otherwise reduce or delay liability for taxes owed under the Code. VI. MISCELLANEOUS. 1. Notices -- Any notice or other communication required or permitted ------- under this Agreement shall be effective only if it is in writing and shall be deemed to have been duly given when delivered personally or seven days after mailing if mailed first class by registered or certified mail, postage prepaid, addressed as follows: If to the Company: Miller Industries, Inc. P.O. Box 120 8503 Hilltop Drive Ooltewah, Tennessee 37363 Attention: Chairman of the Board If to the Executive: James A. McKinney 1300 Twelve Oaks Circle Atlanta, Georgia 30327 or to such other address as any party may designate by notice to the others. 2. Assignment -- This Agreement shall inure to the benefit of and shall ---------- be binding upon the parties hereto and their respective executors, administrators, heirs, personal representatives and successors, but, except as hereinafter provided, neither this Agreement nor any right hereunder may be assigned or transferred by either party thereto, or by any beneficiary or any other person, nor be subject to alienation, anticipation, sale, pledge, encumbrance, execution, levy or other legal process of any kind against the Executive, his beneficiary or any other person. Notwithstanding the foregoing, any person or business entity succeeding to substantially all of the business of the Company by purchase, merger, consolidation, sale of assets or otherwise, shall be bound by and shall adopt and assume this Agreement and the Company shall obtain the assumption of this Agreement by such successor. If Executive shall die while any amount would still be payable to Executive hereunder (other than amounts which, by their terms, terminate upon the death of Executive) if Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the executors, personal representatives or administrators of Executive's estate. 3. No Obligation to Fund -- The agreement of the Company (or its ------------------------ successor) to make payments to the Executive hereunder shall represent solely the unsecured obligation of the Company (and its successor), except to the extent the Company (or its successors) in its sole discretion elects in whole or in part to fund its obligations under this Agreement pursuant to a trust arrangement or otherwise. 4. Applicable Law -- This Agreement shall be governed by and construed -------------- and enforced in accordance with the laws of the State of Tennessee. 5. Claims; Expenses -- All claims by Executive for compensation and ----------------- benefits under this Agreement shall be directed to and determined by the Board and shall be in writing. Any denial by the Board of a claim for benefits under this Agreement shall be delivered to Executive in writing and shall set forth the specific reasons for the denial and the specific provisions of this Agreement relied upon. The Board shall afford a reasonable opportunity to Executive for a review of a decision denying a claim and shall further allow Executive to appeal to the Board a decision of the Board within sixty (60) days after notification by the Board that Executive's claim has been denied. In the event the Executive incurs legal fees and other expenses in seeking to obtain or to enforce any rights or benefits provided by this Agreement and is successful, in whole or in part, in obtaining or enforcing any such rights or benefits through settlement or otherwise, the Company shall promptly pay Executive's reasonable legal fees and expenses incurred in enforcing this Agreement. Except to the extent provided in the preceding sentence, each party shall pay its own legal fees and other expenses associated with any dispute. 6. Conversion To Employment Agreement -- The Company reserves the right ---------------------------------- at any time in its sole discretion to convert all or any part of its obligations under this Agreement and restate them in an employment agreement with the Executive, provided that such employment agreement provides compensation and benefits to the Executive upon the basis and for the reasons stated in this Agreement that are substantially identical to the compensation and benefits provided under this Agreement. 7. Amendment -- This Agreement may only be amended by a written --------- instrument signed by the parties hereto, which makes specific reference to this Agreement. 8. Severability -- If any provision of this Agreement shall be held ------------ invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provisions hereof. 9. Other Benefits -- Nothing in this Agreement shall limit or replace -------------- the compensation or benefits payable to Executive, or otherwise adversely affect Executive's rights, under any other benefit plan, program or agreement to which Executive is a party. IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on its behalf by its duly authorized officers and the Executive has hereunder set his hand, as of the date first above written. MILLER INDUSTRIES, INC. By: /s/ William G. Miller Title: Chairman (Corporate Seal) Attest: ___________________ Secretary EXECUTIVE /s/ James A. McKinney James A. McKinney EX-10.56 4 AMENDMENT TO CREDIT AGREEMENT AMENDMENT NO, 3 TO CREDIT AGREEMENT ----------------------------------- THIS AMENDMENT NO. 3 TO CREDIT AGREEMENT (this "Amendment Agreement") is made and entered into effective as of the day of July, 1999, by and among MILLER INDUSTRIES, INC., a Tennessee corporation ("Miller"), and MILLER INDUSTRIES TOWING EQUIPMENT INC., a Delaware corporation and wholly owned subsidiary of Miller ("Miller Towing") (Miller and Miller Towing may be referred to herein individually as a "Borrower" and together as the "Borrowers"), EACH OF THE GUARANTORS SIGNATORY HERETO (the "Guarantors"), BANK OF AMERICA, N.A. D/B/A NATIONSBANK, N.A. SUCCESSOR TO NATIONSBANK, N.A., a national banking association organized and existing under the laws of the United States, as agent ("Agent") for the Lenders under the Credit Agreement (as defined below), and the Lenders signatory hereto. Unless the context otherwise requires, all terms used herein without definition shall have the definitions provided therefor in the Credit Agreement. W I T N E S S E T H: ------------------- WHEREAS, the Agent, the Lenders and the Borrowers have entered into that certain Credit Agreement dated as of January 30, 1998, as amended by Amendment No. 1 to Credit Agreement dated as of January 31, 1998 and by Amendment No. 2 to Credit Agreement dated as of October 30, 1998 (as hereby and from time to time amended, supplemented or replaced, the "Credit Agreement"), pursuant to which the Lenders have agreed to make and have made available to the Borrowers a revolving credit facility with a letter of credit sublimit and a swing line sublimit; and WHEREAS, the Borrowers have requested that the Agent and the Lenders make certain modifications to the Credit Agreement; WHEREAS, the Agent and the Lenders have agreed to such modifications pursuant to the terms and conditions set forth herein; WHEREAS, the parties hereto desire to amend the Credit Agreement in the manner herein set forth effective as of the date hereof; NOW, THEREFORE, the parties hereby agree as follows: 1. Definitions. The term "Credit Agreement" or "Agreement" (as the case ----------- may be) as used herein and in the Loan Documents shall mean the Credit Agreement as hereby amended and modified, and as further amended, modified or supplemented from time to time as permitted thereby. The term "Lender" as used herein and in the Loan Documents shall include each of the financial institutions signatory hereto as a Lender. The term "BAS" as used herein shall mean Banc of America Securities, LLC, successor to NationsBanc Montgomery Securities, LLC. 2. Amendments. Subject to the conditions hereof, the Credit Agreement --------- is hereby amended, effective as of the date hereof, as follows: (a) Section 1.1 of the Credit Agreement is hereby amended by amending ----------- and restating the following definitions as follows: "'Consolidated Fixed Charge Ratio' means, with respect to Miller and its Subsidiaries for any Four-Quarter Period ending on the date of computation thereof, the ratio of (i) Consolidated EBITDA plus, (W) to the extent deducted in arriving at Consolidated EBITDA, lease, rental and all other payments made in respect of or in connection with operating leases, plus (X) for the fiscal quarter of Miller ending July 31, 1999, the lesser of (i) the amount of the income tax refund due Miller for its fiscal year ending April 30, 1999 to be requested in its filing with the Internal Revenue Service for the year ended April 30, 1999 (but not to exceed $7,000,000) or (ii) the actual amount of such refund received, (provided, however, that to avoid duplication of such sum, it shall not otherwise be included in the calculation of the Consolidated Fixed Charge Ratio upon actual payment of such refund,) I= (Y) (without duplication) Capital Expenditures for such period, 1= (Z) (without duplication) income taxes paid in cash during such period, to (ii) Consolidated Fixed Charges, in each case during such Four-Quarter Period." "'Consolidated EBITDA' means, with respect to Miller and its Subsidiaries for any Four-Quarter Period ending on the date of computation thereof, (A) the gum of, without duplication, (i) --- Consolidated Net Income, (ii) Consolidated Interest Expense, (iii) taxes on income, (iv) amortization, (v) depreciation and (vi) nonrecurring noncash restructuring charges of not in excess of $10,000,000, minus (B) the sum of, without duplication, (a) net gains ----- --- on the sale, conversion or other disposition of capital assets (other than net gains on the sale, conversion or other disposition of used trucks in the towing services division in the ordinary course of business consistent with past practice), (b) net gains on the acquisition, retirement, sale or other disposition of capital stock and other securities of Miller or its Subsidiaries, (c) net gains on the collection of proceeds of life insurance policies, (d) any write-up of any asset other than as permitted in accordance with Statement No. 16 of the Financial Accounting Standards Board, and (e) any other net gain or credit of an extraordinary nature as determined in accordance with GAAP applied on a Consistent Basis; provided, however, that for each of the first four fiscal quarters following any Acquisition, the calculation of Consolidated EBITDA for each Four-Quarter Period ending on the last day of each such fiscal quarter shall include the historical financial performance of the acquired business for that portion of such Four-Quarter Period occurring prior to such Acquisition, to the extent that such Acquisition has not otherwise been reflected in Miller's consolidated financial statements." "'Consolidated Shareholders' Equity' means, as of any date on which the amount thereof is to be determined, the sum of the following in respect of Miller and its Subsidiaries (determined on a consolidated basis): (i) the amount of issued and outstanding share capital, plus (ii) the amount of additional paid-in capital and retained earnings (or, in the case of a deficit, minus the amount of ----- such deficit), plus ---- (iii) the amount of any foreign currency translation adjustment (if positive, or, if negative, minus the amount of such translation 2 adjustment), plus (iv) the amount of actual non-recurring noncash ---- restructuring charges incurred since October 31, 1997, in an aggregate amount not to exceed $10,000,000, minus (v) the amount of any treasury ----- stock, all as determined in accordance with GAAP applied on a Consistent Basis." "'Security Instruments' means the Pledge Agreement, the Collateral Assignment of Partnership Interests, the Negative Pledge Agreement, the LC Account Agreement, the Security Agreement, the Intellectual Property Security Agreement, the Mortgages, the Assignment of Leases and all other documents and agreements executed and delivered in connection herewith granting to the Lenders Liens on any assets of the Borrowers, any Guarantor, or any other Person collaterally to secure payment and performance of the Obligations and the Guarantors' Obligations under the Guaranty." (b) Section 1.1 of the Credit Agreement is hereby amended by adding ------------ the following definitions to appear in their appropriate order: "'Assignment of Leases' means the Assignment of Lessee's Interest in Leases by the Borrowers and the Guarantors to the Agent delivered pursuant to the terms hereof, including Sections 8.19 or 8.24 --------------------- hereof, as hereinafter modified, amended or supplemented from time to time." "'BAS' means Banc of America Securities, LLC, successor to NationsBanc Montgomery Securities, LLC." "'Intellectual Property Security Agreement' means the Intellectual Property Security Agreement dated as of July _, 1999 by the Borrowers and the Guarantors to the Agent, and any additional Intellectual Property Security Agreements by the Borrowers and the Guarantors to the Agent delivered pursuant to Section 8.19 hereof, as ------------ hereafter modified, amended or supplemented from time to time." "'Mortgages' means, collectively, all Mortgages, Deeds of Trust and Deeds to Secure Debt or other comparable instrument granting a Lien to the Agent (or a trustee for the benefit of the Agent) for the benefit of the Lenders in Collateral constituting real property and fixtures, as such documents may be amended, modified or supplemented from time to time." "'Security Agreement' means, collectively (or individually as the context may indicate), (i) the Security Agreement dated as of July __, 1999 by the Borrowers and Guarantors to the Agent, and (ii) any additional Security Agreement delivered to the Agent pursuant to the terms hereof, including Section 8.19, as hereafter modified, amended or ------------ supplemented from time to time." (c) Section 8.19 of the Credit Agreement is hereby amended by deleting such ------------ section in its entirety and inserting in lieu thereof the following: 3 "Additional Support Documents" ---------------------------- (a) Within fifteen (15) days after the end of each fiscal quarter, with respect to each Domestic Subsidiary acquired or created during such fiscal quarter cause to be delivered to the Agent for the benefit of the Lenders each of the following: (i) a Guaranty executed by each such Domestic Subsidiary substantially in the form of Exhibit F hereto; (ii) a Security Agreement of such Domestic Subsidiary substantially similar to the Security Agreement delivered by the existing Domestic Subsidiaries, together with such Uniform Commercial Code financing statements on Form UCC-1 or otherwise duly executed by such Domestic Subsidiary as "Debtor" and naming the Agent for the benefit of the Agent and the Lenders as "Secured Party," in form, substance and number sufficient in the reasonable opinion of the Agent and its special counsel to be filed in all Uniform Commercial Code filing offices in all jurisdictions in which filing is necessary or advisable to perfect in favor of the Agent for the benefit of the Agent and the Lenders the Lien on Collateral conferred under such Security Instrument to the extent such Lien may be perfected by Uniform Commercial Code filing; (iii) a Negative Pledge Agreement executed by each such Domestic Subsidiary substantially in the form of Exhibit I hereto; --------- (iv) a Pledge Agreement executed by each such Domestic Subsidiary's stockholders substantially in the form of Exhibit K-1 or K-2 hereto, as ----------- --- applicable, pledging 100% (or such lesser percentage as such Person shall own of any Partially-Owned Subsidiary) of the capital stock and related interests and rights of such Domestic Subsidiary, or other comparable instrument pledging or assigning to the Agent for the benefit of the Lenders all of the equity, membership or partnership interest of such Domestic Subsidiary; (v) stock certificates representing 100% of the capital stock and related interests and rights of each such Domestic Subsidiary, or other appropriate evidence of ownership of 100% of the equity, membership or partnership interest of each such Domestic Subsidiary, in each case together with duly executed stock powers or powers of assignment in blank affixed thereto, or in the case that any such Domestic Subsidiary is a partnership or other entity that has not issued certificates evidencing ownership of such partnership or other entity, the Collateral Assignment of Interests and Certificate and Receipt of Registrar of such entity with respect to the registration of the Lien on Assigned Interests so long as such assignment is not prohibited by the Governing Documents of such entity; (vi) an opinion of counsel to each such Domestic Subsidiary dated as of the date of delivery of the Guaranty, Security Agreement and other Loan Documents provided for in this Section 8.19(a) and addressed to the Agent ---------------- 4 and the Lenders, in form and substance substantially identical to the opinion of counsel delivered pursuant to Section 6.1 (a)(ii) on the Closing ------------------- Date (including opinions covering the Security Agreement and the validity and perfection of the liens created thereunder), with respect to each Loan Party which is party to any Loan Document which such newly acquired or created Subsidiary is required to deliver or cause to be delivered pursuant to this Section 8,19(a); -------------- (vii) current copies of the Organizational Documents and Operating Documents of each such Domestic Subsidiary, minutes of duly called and conducted meetings (or duly effected consent actions) of the Board of Directors, partners, or appropriate committees thereof (and, if required by such Organizational Documents or Operating Documents, of the shareholders) of such Domestic Subsidiary authorizing the actions and the execution and delivery of documents described in this Section 8.19(a); and (viii) such other documents and agreements as may be reasonably requested by the Agent. (b) Within forty-five (45) days after the acquisition or creation of any Direct Foreign Subsidiary, cause to be delivered to the Agent for the benefit of the Lenders each of the following: (i) a Pledge Agreement executed by such Direct Foreign Subsidiary's stockholders in such form reasonably acceptable to the Agent, pledging 65% (or such lesser percentage as such Person shall own) of the Voting Stock of such Direct Foreign Subsidiary, or other comparable instrument pledging or assigning to the Agent for the benefit of the Lenders comparable percentages of the voting and non-voting stock of such Direct Foreign Subsidiary; (ii) to the extent that such Direct Foreign Subsidiary constitutes a Material Foreign Subsidiary, an opinion of foreign counsel to such Domestic Subsidiary dated as of the date of delivery of the Pledge Agreement or other comparable instrument provided for in this Section 8.19(b) and ---------------- addressed to the Agent and the Lenders, in form and substance acceptable to the Agent, with respect to each Loan Party which is party to any Loan Document which such newly acquired or created Direct Foreign Subsidiary is required to deliver or cause to be delivered pursuant to this Section 8.19(b); and ---- (iii) such other documents and agreements as may be reasonably requested by the Agent." (d) A new Section 8.24 of the Credit Agreement is hereby added as follows: ------------ "8.24 Certificate of Title Property and Other Collateral. (a) -------------------------------------------------- With respect to all property owned by a Borrower or Subsidiary which is a motor vehicle or other good which is (i) covered by a certificate of title issued under a statute of a state under the law of which indication of a security interest on the certificate is required as a condition of perfection and (ii) not subject to a purchase money Lien 5 in favor of another creditor which is permitted by Section 9.3 hereof ----------- (collectively, "Certificate of Title Property"), within thirty (30) days following a request by the Agent following (i) the occurrence of a Default or (ii) a determination by the Agent after completion of the field audit described in Section 8.25 or after any fiscal quarter end ------------ that the liquidation value of Collateral (applying loan value margins specified on Schedule 8-24) consisting of accounts receivable, -------------- inventory and property, plant and equipment located in the United States and which is covered by a security interest or lien in favor of the Agent for the benefit of the Lenders results in a loan to value ratio (based on the percentage which the principal balance of outstanding at the date of calculation bears to the aggregate liquidation value of all such Collateral at such time as determined by Agent) in excess of 95% (any event described in (i) or (ii) herein called an "Additional Collateral Event"), the Borrowers will execute and deliver, and will cause each Subsidiary which is a party to a Security Agreement to execute and deliver, to the Agent the original certificates of title or other comparable instrument for such property, together with a fully executed application for notation of a security interest or other comparable form and such other certificates, agreements, notices or other items as the Agent may deem necessary to perfect liens on such property. The Borrowers will pay all filing fees, taxes and other amounts which are payable to perfect the liens on such property. The Borrowers agree that upon the occurrence of an Additional Collateral Event, the Agent shall be entitled to have an agent or trustee administer and manage the certificates of title or other comparable documents on behalf of the Agent and that all fees and expenses in connection therewith shall be paid by the Borrowers. (b) Additionally, within thirty (30) days following request by the Agent after the occurrence of an Additional Collateral Event, the Borrowers will execute and deliver, and will cause each applicable Subsidiary to execute and deliver (i) a Mortgage on all real property and fixtures owned by such entities not already covered by a Mortgage, along with title insurance policies, surveys, environmental reports and legal opinions meeting the requirements set forth in Section 8.25, (ii) ------------ a Collateral Assignment of Leases with respect to all real property owned by a Borrower or Guarantor and leased to others and all real property not owned by a Borrower or Guarantor and leased to a Borrower or Guarantor together with, on a best efforts basis by Borrowers and Guarantors, a Landlord Consent, Waiver and Estoppel Certificate executed by each landlord or tenant as applicable and (iii) local counsel opinions covering perfection of liens in jurisdictions in which the Agent deems necessary." (e) Section 8.25 of the Credit Agreement is hereby added as follows: "Additional Collateral Documents; Audit. (a) The Borrowers agree that --------------------------------------- by August 27, 1999, each will deliver, and will cause each Guarantor to deliver, the following: (i) Mortgages, Deeds of Trust or other similar documentation necessary to grant to the Agent for the benefit of the Agent and the Lenders a lien on the real property owned by each Borrower and each 6 Guarantor (collectively, the "Mortgages") described below (subject only to existing liens approved by the Agent): (A) Ooltewah, Tennessee real property owned by __________ (B) Greeneville, Tennessee real property owned by ________ (C) Hermitage, Pennsylvania real property owned by _______ (D) Mercer, Pennsylvania real property owned by __________ (ii) Mortgagee title insurance policies from a title insurance company satisfactory to the Agent covering the Mortgages, in each case indicating the liens of the Mortgages are a first lien priority (subject only to existing liens approved by the Agent), containing no exceptions to coverage not acceptable to the Agent and providing a revolving credit endorsement and other endorsements required by Agent for such policy; (iii) Surveys for each of the properties covered by the Mortgages in form and substance satisfactory to the Agent as well as a certification as to whether the location of each property is within any "special flood hazard" area within the meaning of the Federal Flood Disaster Protection Act of 1973. (iv) Collateral Assignment of Lease covering the Road One Headquarters located at 7704 Basswood Drive, Chattanooga, Tennessee covered by the Lease Agreement dated August 6, 1997 between Dillard Limited Partnership, as landlord, and Road One, Inc., as lessee, together with, on a best efforts basis, a Landlord Consent, Waiver and Estoppel Certificate executed by the landlord satisfactory to Agent. (v) With respect to each leased location on which an amount of inventory (other than motor vehicles) and equipment (other than motor vehicles) in an amount deemed material by the Agent is located, deliver, on a best efforts basis, a Landlord Consent, Waiver and Estoppel Certificates regarding each such location. (vi) Environmental Reports on all real property covered by a Mortgage from an environmental firm satisfactory to Agent showing no environmental hazards with respect to such real property. (vii) Legal opinions from Georgia, Pennsylvania and Tennessee counsel for the Borrowers with respect to the documents executed and delivered under this Section 8.25 and the perfection of the liens created ------------ thereby in form and substance satisfactory to the Agent. (viii) Insurance policies and Certificates of Insurance evidencing compliance by the Borrowers with the insurance requirements of this Agreement and the Security Instruments. 7 (ix) UCC-11 search reports no older than thirty (30) days from the appropriate UCC filing office in the states where the Borrowers and Guarantors are doing business showing no liens or security interests on any assets of the Borrowers or Guarantors other than Permitted Liens. (b) The Borrowers agree that the Agent and its representatives may undertake a field audit on the inventory and accounts receivable of the Borrowers and the Guarantors and that the costs and expenses of this audit shall be paid by the Borrowers. The Borrowers agree to cooperate with the Agent and its representatives to facilitate completion of the audit by August 31, 1999." (f) Section 9.1 of the Credit Agreement is hereby amended by deleting ----------- existing clauses (b), (c) and (d) appearing therein and inserting in lieu thereof the following clauses (b), (c) and (d) which shall read in their entirety as follows: "9.1 Financial Covenants. ------------------- (b) Consolidated Funded Senior Indebtedness to Consolidated --------------------------------------------------------- EBITDA. Permit at any time during the respective periods set forth ------ below the ratio of Consolidated Funded Senior Indebtedness to Consolidated EBITDA for the FourQuarter Period most recently ended to be greater than that set forth opposite each such period: Consolidated Funded Senior Indebtedness To Consolidated Four Quarter Periods Ending EBITDA Must Not Be Greater Than: --------------------------- -------------------------------- Prior to and including 1/31/2000 4.25 to 1.00 During period 2/1/2000 and 3.00 to 1.00 thereafter 8 (c) Consolidated Funded Total Indebtedness to Consolidated --------------------------------------------------------- EBITDA. Permit at any time during the respective periods set forth ------ below the ratio of Consolidated Funded Total Indebtedness to Consolidated EBITDA for the Four-Quarter Period most recently ended to be greater than that set forth opposite each such period: Consolidated Funded Senior Four Quarter Indebtedness To Consolidated Periods Ending EBITDA Must Not Be Greater Than: -------------- --------------------------------- Prior to and including 1/31/2000 4.25 to 1.00 During period 2/1/2000 and 3.00 to 1.00 thereafter * provided that, in the event the ratio of Consolidated Funded Total Indebtedness to Consolidated EBITDA is less than 3.5 to 1.0 for two consecutive fiscal quarters following the fiscal quarter ended April 30, 1999, then the stated ratio of 4.25 to 1.00 shall be automatically reduced to 3.5 to 1.0 if requested by Borrowers by written notice to the Agent. (d) Consolidated Fixed Charge Ratio. Permit at any time during the respective periods set forth below the Consolidated Fixed Charge Ratio to be less than that set forth opposite each such period: Consolidated Funded Senior Indebtedness To Consolidated Four Quarter Periods Ending EBITDA Must Not Be Greater Than: --------------------------- -------------------------------- Prior to and including 1/31/2000 4.25 to 1.00 During period 2/1/2000 and thereafter 3.00 to 1.00 (g) Section 9.2 of the Credit Agreement is hereby amended by deleting ----------- such section in its entirety and inserting in lieu thereof the following: "Acquisitions. Enter into any agreement, contract, binding ------------ commitment or other arrangement providing for, or otherwise effect, any Acquisition, or take any action to solicit the tender of securities or proxies in respect thereof in order to effect any Acquisition unless approved in writing by the Required Lenders; provided, however , that the prior written consent of the Required Lender shall not be required and Miller or any Subsidiary may enter into any such agreement for, and effect, one or more Permitted Acquisitions if (x) the Cost of Acquisition for such Permitted 9 Acquisitions, in the aggregate, does not exceed $50,000,000 in any Fiscal Year and (y) (i) the ratio of Consolidated Funded Total Indebtedness to Consolidated EBITDA is less than 3.50 to 1.00 for two consecutive fiscal quarters of Miller and its Subsidiaries occurring after the fiscal quarter ended April 30, 1999, (ii) the required ratio of Consolidated Funded Total Indebtedness to Consolidated EBITDA has been reduced pursuant to Section 9.1(c) to 3.50 to 1.00 and (iii) the Borrowers have provided to the Agent projections reasonably satisfactory to the Agent indicating that the provisions of Section 9. 1 (c) will not be violated on an going forward basis through the Stated Termination Date." (h) Exhibit M to the Credit Agreement is hereby amended and restated in its entirety as set forth on Annex I attached hereto and incorporated herein by reference. (i) Schedule 8.24, in the form of Schedule 8.24 attached hereto, ------------- ------------- is made a part of the Credit Agreement. 3. Applicable Margin; Commitment Fee Rate. The Applicable Margin for ----------------------------------------- Eurodollar Rate Loans and Base Rate Loans to be in effect as of July 27, 1999 through the Compliance Date which includes the January 31, 2000 reporting period (the "January 31, 2000 Compliance Date") shall be 2.50% and 1.25%, respectively. The current Commitment Fee Rate to be in effect as of July 27,1999 through the January 31, 2000 Compliance Date shall be 0.50%. After the January 31,2000 Compliance Date, the Applicable Margin and Commitment Fee Rate shall return to determination pursuant to the existing definitions in the Credit Agreement. 4. Guarantors. Each Guarantor hereby (i) consents and agrees to the ---------- amendments to the Credit Agreement set forth herein and (ii) confirms its joint and several guarantee of payment of all the Guarantors' Obligations pursuant to the Guaranty. 5. Representations and Warranties. Each of the Borrowers hereby certifies ------------------------------ that: (a) The representations and warranties made by the Borrowers in Article VII of the Credit Agreement are true and correct in all material respects on and as of the date hereof, with the same effect as though such representations and warranties were made on the date hereof, except that the financial statements referred to in Section 7.6(a) shall be those most -------------- recently furnished to each Lender pursuant to Sections 8.1 (a) and (b) of ------------------------ the Credit Agreement. (b) The Borrowers and each Subsidiary have the power and authority to execute and perform this Amendment Agreement and have taken all action required for the lawful execution, delivery and performance thereof. (c) There has been no material adverse change in the business, properties, prospects, operations or condition, financial or otherwise, of Miller and its Subsidiaries since the date of the most recent financial reports of Miller received by each Lender under Section 8.1 of the Agreement; and 10 (d) No event has occurred and no condition exists which, upon the consummation of the transaction contemplated hereby, will constitute a Default or an Event of Default on the part of the Borrowers under the Credit Agreement or any other Loan Document either immediately or with the lapse of time or the giving of notice, or both. 6. Conditions to Effectiveness. This Amendment shall not be effective until --------------------------- the Agent has received to its satisfaction each of the following: (a) ten (10) counterparts of this Amendment Agreement executed by the Borrower, the Guarantors, the Agent and the Lenders; (b) ten (10) counterparts of the Security Agreement by and among the Borrowers, the Guarantors and the Agent; (c) UCC-1 financing statements executed by each Borrower and each Guarantor in form and number to perfect the security interests in the Collateral granted pursuant to the Security Instruments; (d) ten (10) counterparts of the Intellectual Property Security Agreement by the Borrowers and the Guarantors to the Agent; (e) legal opinion of counsel to the Borrowers and Guarantors in form and content satisfactory to the Agent; (f) corporate resolutions of the Borrowers and Guarantors with respect to the transactions contemplated hereby; (g) with respect to each "new" Guarantor, fully executed copies of the following: (i) Guaranty Agreement (ii) Security Agreement (iii) Negative Pledge Agreement (iv) Stock Pledge Agreement (v) Stock Certificate (vi) Stock Power (vii) Secretary's Certificate (viii) Intellectual Property Security Agreement (h) evidence satisfactory to the Agent that all Subsidiaries of the Borrowers have executed all documentation required pursuant to the terms of the Credit Agreement and the other Loan Documents, including without limitation such documents and instruments as may be required pursuant to Section 8.19 of the Credit Agreement; 11 (i) copies of all letters of intent for acquisitions executed by the Borrowers or any Guarantor as to which the acquisitions contemplated thereby have not occurred; (j) evidence satisfactory to the Agent that all Persons party to the Pledge Agreement have executed this Amendment Agreement; (k) evidence of payment by Borrowers of all fees owing to Agent and BAS (including reasonable fees and expenses of their counsel, recording fees, and fees resulting from the fee letter), and payment by Borrowers to any consenting Lender of an amendment fee of fifteen (15) basis points on the Total Revolving Credit Commitment allocable to such Lender. (1) such other documents, instruments and certificates as reasonably requested by the Agent. 7. Default Waiver. The Agent and the Lenders hereby waive any Default or --------------- Event of Default resulting from any violation by the Borrowers of Sections 9.1 (b), (c) and (d) of the Credit Agreement for the reporting period of the Borrowers ended April 30, 1999. This waiver shall be a one-time waiver covering the period ended April 30, 1999 and shall in no way serve to waive any obligations of the Borrowers other than as expressly set forth above. 8. Entire Agreement. This Amendment Agreement sets forth the entire ----------------- understanding and agreement of the parties hereto in relation to the subject matter hereof and supersedes any prior negotiations and agreements among the parties relative to such subject matter. No promise, condition, representation or warranty, express or implied, not herein set forth shall bind any party hereto, and not one of them has relied on any such promise, condition, representation or warranty. Each of the parties hereto acknowledges that, except as otherwise expressly stated herein, no representations, warranties or commitments, express or implied, have been made by any party to the other. None of the terms or conditions of this Amendment Agreement may be changed, modified, waived or canceled orally or otherwise, except by writing, signed by all the parties hereto, specifying such change, modification, waiver or cancellation of such terms or conditions, or of any preceding or succeeding breach thereof. 9. Full Force and Effect of Agreement. Except as hereby specifically -------------------------------------- amended, modified or supplemented, the Credit Agreement and all of the other Loan Documents are hereby confirmed and ratified in all respects and shall remain in full force and effect according to their respective terms. Without limiting the foregoing all Security Instruments shall continue to secure all Obligations, as increased hereby, including without limitation the $175,000,000 of principal evidenced by the promissory notes in such aggregate amount delivered by the Borrowers in favor of the Lenders (including without limitation the promissory notes delivered in connection with the Assignment), which notes shall constitute "Notes" for all purposes under the Credit Agreement and the other Loan Documents. 12 10. Counterparts. This Amendment Agreement may be executed in one or more ------------ counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. 11. Governing Law. This Agreement shall in all respects be governed by, and ------------- construed in accordance with, the laws of the State of Georgia. 12. Enforceability. Should any one or more of the provisions of this -------------- Amendment Agreement be determined to be illegal or unenforceable as to one or more of the parties hereto, all other provisions nevertheless shall remain effective and binding on the parties hereto. 13. Credit Agreement. All references in any of the Loan Documents to the ---------------- "Credit Agreement" shall mean the Credit Agreement as amended hereby. 14. Successors and Assigns. This Amendment Agreement shall be binding upon ---------------------- and inure to the benefit of each of the Borrowers, the Lenders and the Agent and their respective successors, assigns and legal representatives; provided, however, that the Borrowers, without the prior consent of the Agent, may not assign any rights, powers, duties or obligations hereunder. 15. Expenses. The Borrowers agree to pay to the Agent all reasonable costs -------- and expenses (including without limitation legal fees and expenses) incurred or arising in connection with the negotiation and preparation of this Amendment Agreement. 16. Lenders. Each of the financial institutions signatory hereto as a ------- Lender (and each other financial institution which may hereafter execute and deliver an instrument of assignment pursuant to Section 12. 1 of the Credit Agreement ) shall be deemed a "Lender" and party to the Credit Agreement and other Loan Documents and shall be entitled to all rights and benefits described therein, be bound by the provisions thereof and perform all obligations as a Lender thereunder. IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 3 to Credit Agreement to be duly executed by their duly authorized officers, all as of the day and year first above written. [SIGNATURE PAGES FOLLOW] 13 BORROWERS: MILLER INDUSTRIES, INC. By: /s/ Frank Madonia Name: Frank Madonia Title: Executive Vice President MILLER INDUSTRIES TOWING EQUIPMENT INC. By: /s/ Frank Madonia Name: Frank Madonia Title: Vice President AMENDMENT NO. 3 TO CREDIT AGREEMENT SIGNATURE PAGE 1 OF 6 GUARANTORS: ---------- ACKERMAN WRECKER SERVICE, INC. A-EXCELLENCE TOWING CO. ALL AMERICAN TOWING SERVICES, INC. ALLIED GARDENS TOWING, INC. ALLIED TOWING AND RECOVERY, INC. ALTAMONTE TOWING, INC. ANDERSON TOWING SERVICE, INC. APACO, INC. APPLE TOWING CO., INC. ARROW WRECKER SERVICE, INC. A TO Z ENTERPRISES, INC. B&B ASSOCIATED INDUSTRIES, INC. B-G TOWING, INC. BEAR TRANSPORTATION, INC. BEATY TOWING & RECOVERY, INC. BERT'S TOWING RECOVERY CORPORATION BILL GERLOCK TOWING CO. BOB BOLIN SERVICES, INC. BOB'S AUTO SERVICE, INC. BOB VINCENT AND SONS WRECKER SERVICE, INC. BOULEVARD & TRUMBULL TOWING, INC. BREWER'S, INC. BRYRICH CORPORATION C&L TOWING SERVICES, INC. CAL WEST TOWING, INC. CEDAR BLUFF 24 HOUR TOWING, INC. CENTURY HOLDINGS, INC. CHAD'S, INC. CHAMPION CARRIER CORPORATION CHEVRON, INC. CHICAGO METRO SERVICES, INC. CLARENCE CORNISH AUTOMOTIVE SERVICE, INC. CLEVELAND VEHICLE DETENTION CENTER, INC. COLEMAN'S TOWING & RECOVERY, INC. DALLAS VEHICLE RECOVERY, INC. DICK'S TOWING & ROAD SERVICE, INC. DOLLAR ENTERPRISES, INC. DON'S TOWING, INC. DUN-RITE TOWING, INC. AMENDMENT NO. 3 TO CREDIT AGREEMENT SIGNATURE PAGE 2 OF 6 DURU, INC. E.B.T., INC. EXPORT ENTERPRISES, INC. GARY'S TOWING & SALVAGE POOL, INC GOLDEN WEST TOWING EQUIPMENT, INC. GOOD MECHANIC AUTO CO. OF RICHFIELD, INC. GREAT AMERICA TOWING, INC. GREG'S TOWING, INC. H&H TOWING ENTERPRISES, INC. HALL'S TOWING SERVICE, INC. HENDRICKSON TOWING, INC. H.M.R. ENTERPRISES, INC. INTERSTATE TOWING & RECOVERY, INC. JENKINS WRECKER SERVICE, INC. JENNINGS ENTERPRISES, INC. KAUFF'S, INC. KAUFF'S OF FT. PIERCE, INC. KAUFF'S OF MIAMI, INC. KAUFFS OF PALM BEACH, INC. KEN'S TOWING, INC. KING AUTOMOTIVE & INDUSTRIAL EQUIPMENT, INC. LANCE WRECKER SERVICE, INC. LAZER TOW SERVICES, INC. LEWIS WRECKER SERVICE, INC. LEVESQUE'S AUTO SERVICE, INC. LINCOLN TOWING ENTERPRISES, INC. M&M TOWING AND RECOVERY, INC. MAEJO, INC. MEL'S ACQUISITION CORP. MERL'S TOWING SERVICE, INC. MID AMERICA WRECKER & EQUIPMENT SALES, INC. OF COLORADO MIKE'S WRECKER SERVICE, INC. MILLER FINANCIAL SERVICES GROUP, INC. MILLER/GREENEVILLE, INC. MILLER INDUSTRIES DISTRIBUTING, INC. MILLER INDUSTRIES INTERNATIONAL, INC. MOORE'S SERVICE & TOWING, INC. MOORE'S TOWING SERVICE, INC. MOSTELLER'S GARAGE, INC. MURPHY'S TOWING, INC. OFFICIAL TOWING, INC. O'HARE TRUCK SERVICE, INC. PETE'S A TOWING, INC. PIPES ENTERPRISES, INC. AMENDMENT NO. 3 TO CREDIT AGREEMENT SIGNATURE PAGE 3 OF 6 PRO-TOW, INC. PULLEN'S TRUCK CENTER, INC. PURPOSE, INC. RAR ENTERPRISES, INC. RANDY'S HIGH COUNTRY TOWING, INC. RAY HARRIS, INC. RMA ACQUISITION CORP. RRIC ACQUISITION CORP. RAY'S TOWING, INC. RETRIEVER TOWING, INC. ROAD BUTLER; INC. ROAD ONE, INC. ROADONE EMPLOYEE SERVICES, INC. ROAD ONE INSURANCE SERVICES, INC. ROAD ONE SERVICE, INC. RONNY MILLER WRECKER SERVICE INC. SANDY'S AUTO & TRUCK SERVICE, INC. SAKSTRUP TOWING, INC. SONOMA CIRCUITS, INC. SOUTHERN WRECKER CENTER, INC. SOUTHERN WRECKER SALES, INC. SOUTHWEST TRANSPORT, INC. SPEED'S AUTOMOTIVE, INC. SPEED'S RENTALS, INC. SROGA'S AUTOMOTIVE SERVICES, INC. SUBURBAN WRECKER SERVICE, INC. TEAM TOWING AND RECOVERY, INC. TED'S OF FAYVILLE, INC. TEXAS TOWING CORPORATION THOMPSON'S WRECKER SERVICE, INC. TOW PRO CUSTOM TOWING & HAULING, INC. TREASURE COAST TOWING, INC. TRUCK SALES & SALVAGE CO., INC. VRCHOTA CORPORATION VULCAN EQUIPMENT COMPANY, INC. WALKER TOWING, INC. WES'S SERVICE INCORPORATED WESTERN TOWING; MCCLURE/EARLEY ENTERPRISES, INC. WHITEY'S TOWING, INC. AMENDMENT NO. 3 TO CREDIT AGREEMENT SIGNATURE PAGE 5 OF 6 WILTSE TOWING, INC. ZEBRA TOWING, INC. ZEHNER TOWING & RECOVERY, INC. By: /s/ Frank Madonia Name: Frank Madonia Title: Attorney-in-Fact AMENDMENT NO. 3 TO CREDIT AGREEMENT SIGNATURE PAGE 5 OF 6 AGENT AND LENDERS: BANK OF AMERICA, N.A. D/B/A NATIONSBANK, N.A. SUCCESSOR TO NATIONSBANK, N.A., By: /s/ Sybil H. Weldon Name: Sybil H. Weldon Title: Senior Vice President WACHOVIA BANK, N.A. By: /s/ Tammy F. Hughes Name: Tammy F. Hughes Title: Vice President FIRST AMERICAN NATIONAL BANK By: /s/ Michael W. Metcalf Name: Michael W. Metcalf Title: Vice President SUNTRUST BANK, CHATTANOOGA, N.A. By: /s/ Jon C. Long Name: Jon C. Long Title: Vice President AMENDMENT NO. 3 TO CREDIT AGREEMENT SIGNATURE PAGE 6 OF 6 ANNEX I NEW EXHIBIT M ------------- Compliance Certificate Bank of America, N.A., d/b/a NationsBank, N.A., successor to NationsBank, N.A. Independence Center, 15th Floor NC1-001-15-04 Charlotte, North Carolina 28255 Attention: Agency Services Telefacsimile: (704) 386-9436 Reference is hereby made to the Credit Agreement dated as of January 30, 1998, as amended pursuant to Amendment No. 1 to Credit Agreement dated as of January 31, 1998 and Amendment No. 2 to Credit Agreement dated as of October 30, 1998 and Amendment No. 3 to Credit Agreement dated as of July 27, 1999 (as may be further amended, modified or supplemented from time to time, the "Agreement") among MILLER INDUSTRIES, INC., a Tennessee corporation ("Miller"), MILLER INDUSTRIES TOWING EQUIPMENT INC., a Delaware corporation ("Miller Towing," and together with Miller, the "Borrowers"), the Lenders (as defined in the Agreement) and Bank of America, N.A., d/b/a NationsBank, N.A., successor to NationsBank, N.A., as Agent for the Lenders ("Agent"). Capitalized terms used but not otherwise defined herein shall have the respective meanings therefor set forth in the Agreement. The undersigned, a duly authorized and acting Authorized Representative, hereby certifies to you as of _____________, 19___ (the "Determination Date") as follows:
1. Calculations A. Compliance with Section 9.1(a): Consolidated Shareholders' Equity 1. Issued and outstanding share capital $__________ 2. Additional paid-in capital plus retained income (retained deficit to be expressed as a negative) $__________ 3. Foreign currency translation (to be expressed as a negative, if applicable) $__________ 4. Non-recurring noncash restructuring charges [not to exceed $10,000,000] since October 31, 1997 $__________ 5. Treasury stock $__________ 6. Consolidated Shareholders' Equity (A.1 + A.2 + A.3 + A.4 - A.5) $__________ REQUIRED: -------- (I) REQUIREMENT FOR PRIOR FISCAL QUARTER; PLUS $___________ (II) 50% OF CONSOLIDATED NET INCOME SINCE FIRST DAY OF CURRENT QUARTER; PLUS $___________ (III) 100% OF THE NET PROCEEDS OF ANY EQUITY OFFERING; MINUS $___________ (IV) NET REPURCHASED SHARES (NOT TO EXCEED $10,000,000) $___________ TOTAL: $___________ B. Compliance with Section 9.1(b): Consolidated Funded Senior Indebtedness to Consolidated EBITDA 1. 1. Consolidated Funded Senior Indebtedness a. Consolidated Total Funded Indebtedness $__________ b. Aggregate principal amount of all Subordinated Debt $__________ TOTAL (a-b) $__________ 2. Consolidated EBITDA for such period a. Consolidated Net Income $__________ b. Consolidated Interest Expense $__________ c. Taxes on income $__________ d. Amortization $__________ e. Depreciation $__________ f. Non-recurring noncash restructuring charges (not to exceed $10,000,000) $__________ g. Net gains on the sale, conversion or other disposition of capital assets $__________ h. Net gains on the acquisition, retirement, sale or other Annex I - 9 disposition of capital stock and other securities $__________ i. Net gains on the collection of proceeds of life insurance policies $__________ j. Write-ups of any assets other than permitted by FAS 16 $__________ k. Other extraordinary net gains or credits $__________ TOTAL ([a + b +c + d + e + f] - [g + h + i + j + k]) $__________ 3. Ratio of B.2 to B.1 ____ to ____ REQUIRED: LINE 3 MUST NOT BE MORE THAN THE FOLLOWING AT THE FOLLOWING TIMES: THROUGH 1/31/00 4.25 TO 1.00 2/1/00 AND THEREAFTER 3.00 TO 1.00 C. Compliance with Section 9.1(c): Consolidated Funded Total Indebtedness to Consolidated EBITDA 1. Consolidated Funded Total Indebtedness $__________ 2. Consolidated EBITDA for such period (see B.2) $__________ 3. Ratio of C.2 to C.1 ____ to ____ REQUIRED: LINE 3 MUST NOT BE MORE THAN THE FOLLOWING AT THE FOLLOWING TIMES: THROUGH 1/31/00 4.25 TO 1.00* 2/1/00 AND THEREAFTER 3.50 TO 1.00 *provided that, in the event the ratio of Consolidated Funded Total Indebtedness to Consolidated EBITDA is less than 3.5 to 1.0 for two consecutive fiscal quarters following the fiscal quarter ended April 30, 1999, then required ratio of 4.25 to 1.00 shall be automatically reduced to 3.5 to 1.0 if requested by Borrower. D. Compliance with Section 9.1(d): Consolidated Fixed Charge Ratio 1. Consolidated EBITDA for such period (see B.2) $___________ 2. Lease, rental and other expenses in connection with operating leases for such period (to the extent deducted in arriving at Consolidated EBITDA) $___________ 2a. For the fiscal quarter ending July 31, 1999 the amount representing income tax refund but not to exceed $7,000,000 $___________ Annex I - 10 3. Capital Expenditures for such period $___________ 4. Taxes paid or accrued on income for such period $___________ 5. Consolidated Fixed Charges for such period: (i) Consolidated Interest Expense, plus $___________ ---- (ii) Lease, rental and other expenses in connection with operating leases (to the extent deducted in arriving at Consolidated EBITDA), plus $___________ (iii) Current maturities of Consolidated Funded Total Indebtedness, plus $___________ (iv) Current maturities of Capital Leases, plus $___________ (v) Payments (contingent, deferred or otherwise) in respect of Acquisitions representing any deferred portion of consideration, plus $___________ (vi) Payments in respect of Off Balance Sheet Liabilities $___________ TOTAL (i + ii + iii + iv + v + vi) $___________ 6. D.1 + D.2 + D.2a $___________ 7. D.3 + D.4 $___________ 8. D.6 - D.7 $___________ 9. Ratio of D.8 to D.5 ___ to ___ REQUIRED: LINE 9 MUST NOT BE LESS THAN THE FOLLOWING AT THE FOLLOWING TIMES: THROUGH 1/31/00 1.00 TO 1.00 2/1/00 AND THEREAFTER 1.25 TO 1.00 E. Compliance with Section 9.2: Acquisitions 1. Acquisitions during fiscal quarter, including Cost of Acquisition a. Name of Subsidiary: ______________ $__________ b. Name of Subsidiary: ______________ $__________ c. Name of Subsidiary: ______________ $__________ d. Name of Subsidiary: ______________ $__________ e. Name of Subsidiary: ______________ $__________ f. Name of Subsidiary: ______________ $__________ g. Name of Subsidiary: ______________ $__________ h. Name of Subsidiary: ______________ $__________ Annex I - 11 2. Total Cost of Acquisition during fiscal quarter $__________ 3. Total Cost of Acquisition during prior fiscal quarters during such Fiscal year $__________ 4. Total Cost of Acquisition during Fiscal Year to date $__________ REQUIRED: COST OF ACQUISITION NOT GREATER THAN $10,000,000 PER ACQUISITION OR $50,000,000 IN ANY FISCAL YEAR F. Compliance with Section 9.4(d): Purchase Money Indebtedness and Capital Lease Obligations 1. Purchase money and Capital Lease obligations $__________ REQUIRED: NOT MORE THAN $5,000,000 OUTSTANDING AT ANY TIME G. Compliance with Section 9.4(e): Guarantees of Trade Account Indebtedness 1. Guarantees of trade account indebtedness $__________ REQUIRED: NOT MORE THAN $2,000,000 OUTSTANDING AT ANY TIME H. Compliance with Section 9.4(h): Additional Indebtedness 1. Total additional Indebtedness $__________ REQUIRED: NOT MORE THAN $5,000,000 OUTSTANDING AT ANY TIME I. Compliance with Section 9.8: Restricted Payments 1. Repurchases of Common Stock a. Aggregate cost of Net Repurchased Shares at end of prior quarter $_________ b. Aggregate cost of shares repurchased during quarter $__________ c. Aggregate cost of shares reissued in connection with Permitted Acquisitions during quarter $__________ Annex I - 12 d. Aggregate cost of Net Repurchased Shares at end of current quarter (a + b - c) $__________ REQUIRED: NOT MORE THAN $10,000,000 IN AGGREGATE COST OF NET REPURCHASED SHARES AT ANY TIME 2. Additional Restricted Payments a. Restricted Payments during fiscal quarter $__________ b. Restricted Payments during prior fiscal quarters during such Fiscal Year $__________ c. Restricted Payments during Fiscal Year to date $__________ REQUIRED: RESTRICTED PAYMENTS NOT GREATER THAN $3,000,000 DURING ANY FISCAL YEAR
2. No Default A. Since __________ (the date of the last similar certification), (a) the Borrowers have not defaulted in the keeping, observance, performance or fulfillment of its obligations pursuant to any of the Loan Documents; and (b) no Default or Event of Default specified in Article X of the Agreement has occurred and is continuing. B. If a Default or Event of Default has occurred since __________ (the date of the last similar certification), the Borrowers propose to take the following action with respect to such Default or Event of Default: (Note, if no Default or Event of Default has occurred, insert "Not ---- Applicable"). The Determination Date is the date of the last required financial statements submitted to the Lenders in accordance with Section 8.1 of the ------------ Agreement. IN WITNESS WHEREOF, I have executed this Certificate this _____ day of __________, 19___. By:____________________________ Authorized Representative Name:__________________________ Title:_________________________ Annex I - 13 SCHEDULE 8.24 Loan Value Margins ----------------- Type of Property Loan Value Margin ---------------- ----------------- Accounts Receivable 50% Inventory (Distribution) 50% Inventory (Manufacturing) 50% Property, Plant and Equipment (Manufacturing) (Non-Road One) 50% Property, Plant and Equipment - Trucks 75% (Road One) Property, Plant and Equipment - Other 50% (Road One) S-1 EX-21 5 LIST OF SUBSIDIARIES EXHIBIT 21
Subsidiaries of the Registrant ------------------------------- NAME STATE OF ORGANIZATION - ---- --------------------- 407664 British Columbia Ltd. British Columbia, Canada A to Z Enterprises, Inc. Delaware A-2 Wrecker Service, Inc. Delaware A-Excellence Towing Co. Delaware Ackerman Wrecker Service, Inc. Delaware All American Towing Services, Inc. Delaware Allied Gardens Towing, Inc. Delaware Allied Towing and Recovery, Inc. Delaware Altamonte Towing, Inc. Delaware Anderson Towing Service, Inc. Delaware APACO, Inc. Delaware Apple Towing Co., Inc. Delaware Arrow Wrecker Service, Inc. Delaware B&B Associated Industries, Inc. Delaware B-G Towing, Inc. Delaware Bear Transportation, Inc. Delaware Beaty Towing & Recovery, Inc. Delaware Bert's Towing Recovery Corporation Delaware Bill Gerlock Towing Co. Oregon Bob's Auto Service, Inc. Delaware Bob Bolin Services, Inc. Delaware Bob Vincent and Sons Wrecker Service, Inc. Kentucky Boniface Engineering, Ltd. Great Britain Boulevard & Trumbull Towing, Inc. Delaware Brewer's, Inc. Delaware Bryrich Corporation Delaware C&L Towing Services, Inc. Delaware Cal West Towing, Inc. Delaware Canadian Towing Equipment Inc. Ontario, Canada Casson Investment Corporation Missouri Cedar Bluff 24 Hour Towing, Inc. Delaware Century Holdings, Inc. Tennessee Century Wrecker (Canada), Ltd. Ontario, Canada Chad's, Inc. Delaware Champion Carrier Corporation Delaware Chevron, Inc. Pennsylvania Chicago Metro Services, Inc. Illinois Clarence Cornish Automotive Service, Inc. Delaware Cleveland Vehicle Detention Center, Inc. Delaware Coleman's Towing & Recovery, Inc. Delaware Competition Wheelift, Inc. Delaware D.A. Haneline, Inc. Delaware Dallas Vehicle Recovery, Inc. Delaware Dick's Towing & Road Service, Inc. Delaware Dollar Enterprises, Inc. Delaware Don's Towing, Inc. Delaware Dun-Rite Towing Inc. Delaware DuRu Inc. Delaware E&G Towing, Inc. Michigan E.B.T., Inc. Delaware Export Enterprises, Inc. Delaware F.G. Russell Truck Equipment Ltd. British Columbia, Canada Gary's Towing & Salvage Pool, Inc. Delaware Golden West Towing Equipment Inc. Delaware Good Mechanic Auto Co. of Richfield, Inc. Delaware Great America Towing, Inc. Delaware Greg's Towing, Inc. Delaware H&H Towing Enterprises, Inc. Delaware H.M.R. Enterprises, Inc. Maryland Hall's Towing Service, Inc. Delaware Hendrickson Towing, Inc. Delaware Interstate Towing & Recovery, Inc. Delaware Javion & Sam's 24 Hour Towing, Inc. Michigan Jenkins Wrecker Service, Inc. Delaware Jennings Enterprises, Inc. Delaware Jige International France Kauff's of Ft. Pierce, Inc. Florida Kauff's of Miami, Inc. Florida Kauff's of Palm Beach, Inc. Florida Kauff's, Inc. Delaware Ken's Towing, Inc. Delaware King Automotive & Industrial Equipment, Inc. Delaware Lance Wrecker Service, Inc. Delaware Lazer Tow Services, Inc. Delaware Levesque's Auto Service, Inc. Delaware Lewis Wrecker Service, Inc. Delaware Lincoln Towing Enterprises, Inc. Delaware M&M Towing and Recovery, Inc. Delaware Maejo, Inc. Delaware Mel's Acquisition Corp. Delaware Merl's Towing Service, Inc. Delaware Mid-America Wrecker & Equipment Sales, Inc. of Colorado Delaware Mike's Wrecker Service, Inc. Delaware Miller Financial Services Group, Inc. Tennessee Miller Industries Distributing, Inc. Delaware Miller Industries International, Inc. Tennessee Miller/Greeneville, Inc. Tennessee Moore's Service & Towing, Inc. Delaware Moore's Towing Service, Inc. Delaware Mosteller's Garage, Inc. Delaware Murphy's Towing, Inc. Delaware Official Towing, Inc. Delaware O'Hare Truck Service, Inc. Delaware Pete's A Towing, Inc. Delaware Pipes Enterprises, Inc. Delaware Pro-Tow, Inc. Delaware Pullen's Truck Center, Inc. Delaware Purpose, Inc. Delaware Randy's High Country Towing, Inc. Delaware RAR Enterprises, Inc. Delaware Ray's Towing, Inc. Delaware Ray Harris, Inc. Delaware Retriever Towing, Inc. Oregon RMA Acquisition Corp. Delaware Road Butler, Inc. Delaware Road One Employee Services, Inc. Delaware Road One Insurance Services, Inc. Delaware Road One Service, Inc. Delaware Road One, Inc. Delaware Ronny Miller Wrecker Service, Inc. Delaware RRIC Acquisition Corp. Delaware Sakstrup Towing, Inc. Delaware Sandy's Auto & Truck Service, Inc. Delaware Sonoma Circuits, Inc. Delaware Southern Wrecker Center, Inc. Delaware Southern Wrecker Sales, Inc. Delaware Southwest Transport, Inc. Florida Speed's Automotive, Inc. Oregon Speed's Rentals, Inc. Oregon Sroga's Automotive Services, Inc. Delaware Suburban Wrecker Service, Inc. Delaware Team Towing & Recovery, Inc. Illinois Ted's of Fayville, Inc. Delaware Texas Towing Corporation Delaware Thompson's Wrecker Service, Inc. Delaware Tow Pro Custom Towing & Hauling, Inc. Delaware Treasure Coast Towing, Inc. Delaware Treasure Coast Towing of Martin County, Inc. Florida Tuck Sales & Salvage Co., Inc. Delaware Vrchota Corporation Delaware Vulcan Equipment Company, Inc. Mississippi Vulcan International (Delaware), Inc. Delaware Walker Towing, Inc. Delaware Wes's Service Incorporated Delaware Western Towing; McClure/Early Enterprises, Inc. Delaware Whitey's Towing, Inc. Delaware Wiltse Towing, Inc. Delaware Zebra Towing, Inc. Delaware Zehner Towing & Recovery, Inc. Delaware
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