<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 23, 1996
REGISTRATION NO. 333-396
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
POST-EFFECTIVE AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
UNITED TRANSNET, INC.
(Exact name of registrant as specified in its charter)
------------------------
<TABLE>
<S> <C> <C>
DELAWARE 4215 58-2198204
(State or other jurisdiction (Primary Standard (I.R.S. Employer Identification
of incorporation or organization) Industrial Classification Code Number) Number)
</TABLE>
1080 HOLCOMB BRIDGE ROAD, BUILDING 200, SUITE 140
ROSWELL, GEORGIA 30076
(770) 518-1180
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
------------------------
PHILIP A. BELYEW, CHAIRMAN
UNITED TRANSNET, INC.
1080 HOLCOMB BRIDGE ROAD, BUILDING 200, SUITE 140
ROSWELL, GEORGIA 30076
(770) 518-1180
(Name, address, including zip code,
telephone number, including area code, of agent for service)
------------------------
Copy to:
MARTHA JUELICH GORDON, ESQ.
SULLIVAN & WORCESTER LLP
ONE POST OFFICE SQUARE
BOSTON, MASSACHUSETTS 02109
(617) 338-2800
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
================================================================================
<PAGE> 2
<TABLE>
UNITED TRANSNET, INC.
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(b) OF REGULATION S-K
<CAPTION>
ITEM
NO. DESCRIPTION IN FORM S-1 CAPTION OR LOCATION IN PROSPECTUS
- ---- ----------------------- ---------------------------------
<S> <C> <C>
1. Forepart of Registration Statement and Outside Front
Cover Page of Prospectus.............................. Outside front cover page
2. Inside Front and Outside Back Cover Pages of
Prospectus............................................ Inside front cover page; Outside
back cover page
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges............................. Prospectus Summary; Risk Factors
4. Use of Proceeds....................................... Not applicable
5. Determination of Offering Price....................... Outside front cover page
6. Dilution.............................................. Not applicable
7. Selling Security Holders.............................. Not applicable
8. Plan of Distribution.................................. Outside front cover page
9. Description of the Securities to be Registered........ Outside front cover page;
Description of Capital Stock
10. Interests of Named Experts and Counsel................ Validity of Shares
11. Information with Respect to Registrant................ Prospectus Summary; Risk Factors;
The Company; Dividend Policy;
Capitalization; Selected
Financial Data; Unaudited Pro
Forma Financial Information;
Management's Discussion and
Analysis; Business; Management;
Certain Transactions; Principal
Stockholders; Description of
Capital Stock; Shares Eligible
for Future Sale.
12. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities........................ Not applicable
</TABLE>
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED MAY 23, 1996
PROSPECTUS
2,000,000 SHARES
LOGO
COMMON STOCK
------------------
This Prospectus covers 2,000,000 shares of common stock, par value $.001
per share (the "Common Stock"), which may be offered and issued by United
TransNet, Inc. (the "Company") from time to time in connection with mergers with
or acquisitions by the Company of other businesses and assets. It is expected
that the terms of acquisitions involving the issuance of securities covered by
this Prospectus will be determined by direct negotiations with the owners or
controlling persons of the businesses or assets to be merged with or acquired by
the Company, and that the shares of Common Stock issued will be valued at prices
reasonably related to market prices current either at the time a merger or
acquisition is agreed upon or at or about the time of delivery of shares. No
underwriting discounts or commissions will be paid, although finder's fees may
be paid from time to time with respect to specific mergers or acquisitions. Any
person receiving any such fees may be deemed to be an underwriter within the
meaning of the Securities Act of 1933, as amended (the "Securities Act").
The Company currently has 9,686,905 shares of its Common Stock listed on
the New York Stock Exchange under the symbol "UT", of which 4,668,573 are
registered and available for unrestricted trading in the public markets unless
owned by affiliates of the Company or unless such shares are subject to
restrictions on transfer under applicable federal tax law or by contract.
Applications have been and will be made to list the shares of Common Stock
offered hereby on the New York Stock Exchange in connection with each issuance
hereunder. On May 20, 1996, the closing price per share of the Common Stock, as
reported in a summary of composite transactions in The Wall Street Journal for
stocks listed on the New York Stock Exchange, was $27.75.
All expenses of this offering will be paid by the Company. All references
herein to the Company refer to the Company and its subsidiaries.
------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------
The date of this Prospectus is , 1996.
<PAGE> 4
<TABLE>
TABLE OF CONTENTS
<CAPTION>
SECTION PAGE
------- ----
<S> <C>
Additional Information................ 2
Prospectus Summary.................... 3
Risk Factors.......................... 9
The Company........................... 13
Price Range of Common Stock........... 14
Dividend Policy....................... 14
Capitalization........................ 15
Selected Financial Data............... 16
Unaudited Pro Forma Financial
Information......................... 22
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 29
<CAPTION>
SECTION PAGE
------- ----
<S> <C>
Business.............................. 35
Management............................ 47
Certain Transactions.................. 57
Principal Stockholders................ 61
Description of Capital Stock.......... 62
Shares Eligible for Future Sale....... 66
Validity of Shares.................... 67
Experts............................... 67
Index to Financial Statements......... F-1
</TABLE>
------------------------
ADDITIONAL INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information may be inspected and copied at the public
reference facilities maintained by the Commission at Judiciary Plaza Building,
450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and its regional
offices located at 7 World Trade Center, 13th Floor, New York, New York 10048;
and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such materials may be obtained from the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates.
The Company has filed with the Commission in Washington, D.C. a
Registration Statement under the Securities Act with respect to the Common Stock
offered hereby. This Prospectus does not contain all the information set forth
in the Registration Statement and the exhibits and schedules thereto. For
further information with respect to the Company and such Common Stock, reference
is made to such Registration Statement and exhibits and schedules. A copy of the
Registration Statement on file with the Commission may be obtained from the
Commission's principal office in Washington, D.C., upon payment of the fees
prescribed by the Commission. Statements contained in this Prospectus as to the
contents of any contract or any other document to which reference is made are
not necessarily complete. Where such contract or other document is an exhibit to
the Registration Statement, each such statement is qualified in all respects by
the provisions of such exhibit.
The Common Stock is listed on the New York Stock Exchange. Reports, proxy
statements and other information concerning the Company may also be inspected at
the offices of the New York Stock Exchange, 20 Broad Street, New York, New York
10005.
2
<PAGE> 5
- -------------------------------------------------------------------------------
PROSPECTUS SUMMARY
On December 20, 1995, wholly-owned subsidiaries of United TransNet, Inc.,
in separate transactions, merged (the "Mergers") with six companies which
provide ground and air courier services (the "Founding Companies") in exchange
for shares of United TransNet, Inc.'s Common Stock and cash. Unless otherwise
indicated herein, all references to the "Company" include United TransNet, Inc.
and the Founding Companies after giving effect to the Mergers, and all
references to the "Combined Founding Companies" refer to the combined Founding
Companies prior to the Mergers.
The following summary is qualified in its entirety by the detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. Unless otherwise noted, the share and per share
data in this Prospectus do not include up to 212,711 shares of Common Stock
issuable upon the exercise of outstanding stock options, up to 625,000 shares of
Common Stock issuable upon the exercise of outstanding stock options under the
Company's 1995 Stock Incentive Plan or up to 50,000 shares of Common Stock
issuable under, or upon the exercise of options granted under, the Company's
1996 Stock and Option Plan for Non-Employee Directors.
THE COMPANY
The Company offers a variety of customized distribution services for
corporate customers with time-sensitive pickup and delivery requirements.
Management believes that the Company is the leading provider of scheduled ground
courier services in the United States. Through both its ground and air
divisions, the Company provides scheduled and unscheduled delivery service for
local, regional, national and international shipments, and offers same-day and
next-day delivery options. The Company's ground delivery business serves 39
states and all major metropolitan markets in the United States. The Company's
fleet of approximately 4,082 ground transportation vehicles, which is one of the
largest courier and parcel fleets in the United States, facilitates the
Company's broad geographic coverage. Unlike most of the Company's competitors
which serve principally metropolitan areas, the Company serves all points in
many states and is the leading intrastate ground courier in most of such states.
The Company was created in 1995 to form a national ground and air courier
company. Prior to the Mergers, each of the Founding Companies was an established
business with a leading market position, experienced management and long-term
customer relationships in its respective regional market. The Company will
continue operating the business of each Founding Company on a decentralized
basis to preserve their strong regional franchises. The Company's senior
management will coordinate and standardize key functions of the Founding
Companies, including operations, purchasing, sales and marketing and
acquisitions.
Management estimates that the ground courier industry is a multi-billion
dollar industry comprised of thousands of companies. The Air Courier Conference
of America estimates that the annual revenue of the United States air courier
industry reached $40 billion in 1995, based upon industry-wide projections for
growth. The Company believes that it is well-positioned to continue to expand
its ground and air courier services in the markets it currently serves and
elsewhere.
Ground Service. The Company provides a variety of ground distribution
services to a broad range of customers requiring reliable, expedited delivery,
including (i) customized routed service, such as same-day or next-day delivery
of documents, data and canceled checks, primarily for financial institutions;
(ii) small package and parcel service, such as just-in-time delivery of
pharmaceutical products, medical supplies and office supplies; (iii) same-day
and overnight pouch service for items such as interoffice mail; (iv) expedited
mail delivery, such as morning and evening transfer of mail between post office
sorting centers and customer locations; and (v) other value-added services such
as on-call deliveries, mailroom management, warehousing and transportation
network consulting services.
Air Service. The Company offers air delivery service through commercial
airlines and chartered aircraft to transport time-sensitive documents and
packages, primarily for financial institutions, throughout the United States.
The Company provides scheduled door-to-door air service nationally, emergency
next-flight-out
- --------------------------------------------------------------------------------
3
<PAGE> 6
- -------------------------------------------------------------------------------
service both domestically and internationally and air cargo service primarily to
certain destinations in the Pacific Rim.
STRATEGY
The principal components of the Company's operating strategy are to
continue to focus primarily on customized, scheduled delivery service, to
maintain internal growth, to capitalize on favorable industry trends and to
pursue an aggressive acquisition program to consolidate the Company's position
and broaden its geographic reach:
- FOCUS ON CUSTOMIZED, SCHEDULED DELIVERY SERVICE: The Company
concentrates primarily on customized, same-day and overnight scheduled
delivery services. Most of the Company's 1995 ground and air revenue was
derived from scheduled service, which is provided to customers on a
recurring basis with specific pickup and delivery times. Because the
majority of the Company's revenue is derived from customized delivery
service, the Company generally does not compete directly with the large,
national parcel and overnight delivery companies, which offer primarily
standardized next-day service with fixed pickup and delivery schedules.
Additionally, the Company does not emphasize on-call messenger service,
because it is generally more price competitive and is not viewed by the
Company as a market with significant potential for growth.
- MAINTAIN STRONG INTERNAL GROWTH: The Mergers have enabled the Founding
Companies to broaden their geographic reach. Consequently, the Company
expects to capture substantial national account business with customers
previously served by the Founding Companies only on a regional basis.
Additionally, the Company will expand the use of its industrial
engineering group (an internal logistics consulting operation) to
maximize the efficiency of customers' delivery systems and to promote
additional services. The Company will also continue to diversify its
customer base.
- CAPITALIZE ON FAVORABLE INDUSTRY TRENDS: The Company intends to take
advantage of several favorable industry trends, including (i)
outsourcing -- companies are increasingly outsourcing non-core services
such as expedited pickup and delivery transportation services; (ii)
just-in-time inventory management -- companies seeking to reduce
inventory and warehousing costs are relying on service-intensive,
expedited delivery companies with increasing frequency; (iii) improved
communications technology -- improved technology facilitates effective,
just-in-time inventory management, while allowing providers of expedited
delivery services to be more responsive to customers; and (iv) continuing
demands of the financial services industry -- financial institutions,
which constitute a material portion of the Company's customer base,
continue to require the delivery of originals to process checks, the
volume of which has historically increased and is expected to continue to
rise.
- GROW THROUGH ACQUISITIONS: The Company intends to pursue an aggressive
acquisition program to consolidate its position in its current operating
regions and to broaden its geographic reach in a highly fragmented
industry. The Company's management believes its prior acquisition
experience will be instrumental in identifying and negotiating
acquisitions. By acquiring companies in markets where the Company already
has a presence, management expects to recognize substantial operating
advantages by consolidating overlapping delivery routes. The Company also
expects to achieve significant cost savings by eliminating redundant
administrative functions and facilities. Additionally, the Company
intends to expand into new markets with larger, strategic acquisitions.
In such situations, the key management of the acquired companies would,
under most circumstances, remain in place. In May 1996, the Company
consummated four acquisitions, one of which was Eddy Messenger Service,
Inc., based in New York State. See "Business -- Recent Developments." The
Company is not considering any acquisition which is both probable and
material as of the date of this Prospectus.
- -------------------------------------------------------------------------------
4
<PAGE> 7
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
SUMMARY FINANCIAL DATA
UNITED
COMBINED FOUNDING COMPANIES(1) TRANSNET, INC. PRO FORMA(2)
------------------------------------------------------------ --------------- ------------
PERIOD FROM PERIOD FROM
YEAR ENDED DECEMBER 31, JANUARY 1 TO DECEMBER 20 TO YEAR ENDED
------------------------------------------- DECEMBER 19, DECEMBER 31, DECEMBER 31,
1991(3) 1992 1993 1994 1995 1995 1995
-------- -------- -------- ---------- -------------- --------------- ------------
(IN THOUSANDS, EXCEPT
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net revenues............ $150,793 $154,884 $171,901 $ 214,099 $246,526 $7,748 $ 254,274
Gross profit............ 38,597 42,264 49,791 57,776 65,309 2,286 67,595
Operating income........ 2,912 5,844 6,438 5,714 8,661 609 9,270
Interest expense........ 1,741 2,291 2,387 3,758 5,288 137 5,425
Interest income and
other, net(4)......... 2,781 227 127 2,245 264 5 269
Income before income
taxes and
extraordinary item.... 3,952 3,780 4,178 4,201 3,637 477 4,114
Pro forma income before
extraordinary
item(5),(6)........... 2,837 1,281 1,900 2,447 2,616 2,708 3,595
Extraordinary loss on
extinguishment of
debt.................. -- -- -- -- -- 1,204 1,204
Pro forma net
income(6)............. 2,837 1,281 1,900 2,447 2,391
Pro forma earnings per
common share:
Income before
extraordinary
item................ $ 0.31 $ 0.46
Extraordinary loss on
early extinguishment
of debt............. -- 0.15
---------- ----------
Net income............ $ .031 0.31
---------- ----------
Weighted average number
of common and common
equivalent
shares(7)............. 7,802,636 7,848,962
---------- ----------
</TABLE>
<TABLE>
<CAPTION>
AS OF
DECEMBER 31,
1995
------------
<S> <C>
BALANCE SHEET DATA:
Working capital......................................................... $ 232
Property and equipment.................................................. 10,332
Total assets............................................................ 70,517
Long-term debt.......................................................... 24,811
Stockholders' equity.................................................... 16,177
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
SUMMARY FINANCIAL DATA
(UNAUDITED)
UNITED
TRANSNET,
COMBINED INC.
FOUNDING COMPANIES(8) ------------
--------------------- FOR THE
FOR THE THREE THREE
MONTHS ENDED MONTHS ENDED
MARCH 31, MARCH 30,
1995 1996
--------------------- ------------
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net revenues............................................. $ 60,100 $ 66,255
Gross profit............................................. 16,444 17,723
Operating income......................................... 2,869 3,319
Interest expense......................................... (1,214) (629)
Interest income and other, net........................... 57 21
Income before income taxes and extraordinary item........ 1,712 2,711
Income before extraordinary item......................... 1,444 1,616
Extraordinary loss on extinguishment of debt............. -- --
Net income............................................... 1,444 1,616
Net income available for common stockholders............. 917 1,616
Earnings per common share:
Income before extraordinary item...................... $ 0.18
Extraordinary loss on extinguishment of debt.......... --
----------
Net income............................................ $ 0.18
==========
UNAUDITED PRO FORMA INFORMATION:(5)
Income before income taxes and extraordinary item..... $ 1,712
Provision for taxes................................... 779
----------
Income before extraordinary item...................... 933
Extraordinary loss on extinguishment of debt.......... --
----------
Net income............................................ $ 933
==========
Earnings per common share:
Income before income taxes and extraordinary item..... $ 0.22
Provision for taxes................................... 0.10
----------
Income before extraordinary item...................... 0.12
Extraordinary loss on extinguishment of debt.......... --
----------
Net income............................................ $ 0.12
==========
Weighted average number of common and common equivalent
shares(7)............................................. 7,805,409 9,212,186
---------- ----------
BALANCE SHEET DATA:
Working capital.......................................... $ 8,895
Property and equipment................................... 9,681
Total assets............................................. 69,049
Long-term debt........................................... 23,210
Stockholders' equity..................................... 23,995
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</TABLE>
6
<PAGE> 9
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- ------------
[FN]
(1) The Founding Companies collectively are considered predecessors to the
Company. The following table represents selected information of the
individual Founding Companies for the two most recent fiscal years and the
period from January 1 to December 19, 1995.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER PERIOD FROM
31, JANUARY 1 TO
------------------- DECEMBER 19,
1993 1994 1995
-------- -------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
COURIER DISPATCH
Net revenues.................................................................... $ 70,631 $104,614 $133,701
Gross profit.................................................................... 20,671 27,929 33,905
Net loss........................................................................ (319) (1,768) (2,076)
======== ======== ========
TRICOR
Net revenues.................................................................... $ 32,504 $ 34,288 $ 37,252
Gross profit.................................................................... 8,778 9,442 10,080
Net income...................................................................... 1,666 4,112 3,156
======== ======== ========
FILM TRANSIT
Net revenues.................................................................... $ 24,692 $ 24,717 $ 22,352
Gross profit.................................................................... 8,613 7,888 7,786
Net income...................................................................... 688 253 396
======== ======== ========
LANTER
Net revenues.................................................................... $ 19,647 $ 21,431 $ 21,777
Gross profit.................................................................... 5,195 5,629 5,309
Net income...................................................................... 1,317 1,431 1,095
======== ======== ========
SUNBELT
Net revenues.................................................................... $ 11,882 $ 14,187 $ 16,629
Gross profit.................................................................... 2,616 2,984 3,542
Net (loss) income............................................................... (176) 54 272
======== ======== ========
3D
Net revenues.................................................................... $ 12,545 $ 14,862 $ 14,815
Gross profit.................................................................... 3,918 3,904 4,687
Net loss........................................................................ (65) (217) (227)
======== ======== ========
COMBINED
Net revenues.................................................................... $171,901 $214,099 $246,526
Gross profit.................................................................... 49,791 57,776 65,309
Net income...................................................................... 3,111 3,865 2,616
======== ======== ========
</TABLE>
[FN]
(2) Reflects the results of operations of the Combined Founding Companies for
the period from January 1 to December 19, 1995 and the results of
operations of United TransNet, Inc. for the period from December 20 to
December 31, 1995.
(3) Includes financial information of a predecessor company to Courier Dispatch
for nine months and actual data for Courier Dispatch for three months.
(4) Included in other income for the years ended December 31, 1991 and 1994 are
proceeds from key man life insurance of $3.0 million and $2.0 million,
respectively.
(5) Certain of the Founding Companies were S corporations during the periods
presented and, accordingly were not subject to corporate income taxes. The
unaudited pro forma information is presented for the purpose of reflecting
a provision for income taxes as if all of the Founding Companies had been
subject to income tax for all periods presented, calculated in accordance
with FAS 109, based on tax laws that were in effect during the respective
periods.
(6) Provision for income taxes for the period from December 20 to December 31,
1995 and the year ended December 31, 1995 reflects the benefits of (i) the
reversal of the valuation allowance of $2,164 related
- --------------------------------------------------------------------------------
7
<PAGE> 10
- -------------------------------------------------------------------------------
to the deferred tax assets of Courier Dispatch and (ii) the recording of a
net deferred tax asset of $243 at Tricor and Lanter upon their change from
S corporations to C corporations.
(7) Weighted average number of common and common equivalent shares for 1994
includes (i) 4,750,243 shares issued to the stockholders of the Founding
Companies in connection with the Mergers of the Founding Companies, (ii)
2,873,425 shares sold in the Company's initial public offering to cover the
cash portion of the purchase price paid in connection with the Mergers of
the Founding Companies and (iii) the dilution attributable to outstanding
options to purchase Common Stock, applying the treasury stock method. For
1995, weighted average number of common and common equivalent shares also
includes (i) the weighted average portion of the 3,925,000 shares sold in
the Company's initial public offering, net of the shares sold to cover the
cash portion of the purchase price paid in connection with the Mergers of
the Founding Companies, (ii) the weighted average portion of 58,021 shares
repurchased in December 1995 from a minority stockholder and (iii) the
weighted average portion of stock options which became exercisable during
1995.
(8) The Founding Companies are considered predecessors to the Company. The
following table represents selected unaudited information of the individual
Founding Companies for the period ending March 31, 1995.
<TABLE>
<CAPTION>
FOR THE
THREE
MONTHS ENDED
MARCH 31,
1995
------------
<S> <C>
COURIER DISPATCH
Net revenues................................................... $32,290
Gross profit................................................... 8,677
Net loss....................................................... (536)
=======
TRICOR
Net revenues................................................... $ 8,904
Gross profit................................................... 2,602
Net income..................................................... 887
=======
FILM TRANSIT
Net revenues................................................... $ 5,694
Gross profit................................................... 1,728
Net income..................................................... 46
=======
LANTER
Net revenues................................................... $ 5,529
Gross profit................................................... 1,395
Net income..................................................... 330
=======
SUNBELT
Net revenues................................................... $ 3,991
Gross profit................................................... 917
Net income..................................................... 110
=======
3D
Net revenues................................................... $ 3,692
Gross profit................................................... 1,125
Net income..................................................... 80
=======
COMBINED
Net revenues................................................... $60,100
Gross profit................................................... 16,444
Net income..................................................... 917
=======
</TABLE>
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8
<PAGE> 11
RISK FACTORS
In addition to the other information contained in this Prospectus,
prospective investors should consider carefully the following information
relating to the Company and the Common Stock before making an investment in the
Common Stock offered hereby.
ABSENCE OF COMBINED OPERATING HISTORY
The Company was founded in October 1995 to effect the Mergers and prior to
December 1995 conducted no operations. Prior to the Mergers, each of the
Founding Companies operated as a separate independent entity and there can be no
assurance that the Company's management will successfully integrate the combined
entity and effectively implement the Company's operating or growth strategies.
See "The Company," "Business" and "Management."
ACQUISITION STRATEGY; POSSIBLE NEED FOR ADDITIONAL FINANCING
One of the Company's business strategies is to acquire additional scheduled
ground and air courier companies that will complement its existing operations or
provide it with an entry into regions it does not presently serve. There can be
no assurance that the Company will be able to acquire or profitably manage
additional companies or successfully integrate such additional companies into
the Company. In addition, there can be no assurance that companies acquired in
the future either will be beneficial to the successful implementation of the
Company's overall strategy or will ultimately produce returns that justify the
investment therein, or that the Company will be successful in achieving
meaningful economies of scale through the acquisition thereof. See
"Business -- Acquisition Strategy."
The Company intends to issue shares of Common Stock as its primary method
of financing acquisitions. In the event that the Company chooses to issue Common
Stock as acquisition consideration and the Common Stock does not maintain a
sufficient valuation, or potential acquisition candidates are unwilling to
accept Common Stock as part of the consideration for the sale of their
businesses, the Company may be required to utilize more of its cash resources,
if available, in order to continue its acquisition program. If the Company does
not have sufficient cash resources, its growth could be limited unless it is
able to obtain the necessary capital through additional debt or equity
financings. There can be no assurance that the Company will be able to obtain
such financing if and when it is needed or that, if available, it will be
available on terms the Company deems acceptable. As a result, the Company might
be unable to implement successfully its acquisition strategy. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources."
HIGHLY COMPETITIVE INDUSTRY
The market for scheduled ground and air courier services is highly
competitive. Competition on pricing is often intense in the courier industry,
particularly for basic delivery services. Additionally, other companies with
significantly greater financial and other resources than the Company that do not
currently operate ground and air courier businesses may enter the industry in
the future. See "Business -- Competition."
CLAIMS EXPOSURE
As of March 30, 1996, the Company utilized the services of approximately
5,879 drivers and from time to time such drivers are involved in accidents. The
Company carries liability insurance of $15 million for each such accident (it
may effectively self-insure for the first $250,000 claimed), and independent
owner/operators are required to maintain liability insurance of at least the
minimum amounts required by applicable state law. Furthermore, all drivers and
independent owner/operators are covered by the Company's fidelity bond. There
can be no assurance that claims against the Company, whether under the liability
insurance or the fidelity bond, will not exceed the applicable amount of
coverage. In addition, the Company's increased visibility and financial strength
as a public company may create additional claims exposure. If the Company were
to experience a material increase in the frequency or severity of accidents,
liability claims, workers' compensation
9
<PAGE> 12
claims, or unfavorable resolutions of claims, the Company's operating results
could be materially adversely affected. In addition, significant increases in
insurance costs could reduce the Company's profitability.
RELIANCE ON KEY PERSONNEL
The Company's operations are dependent on the continued efforts of its
executive officers and senior management. Furthermore, the Company may to some
extent be dependent on the senior management of companies that may be acquired
in the future. If the executive officers of the Company become unable or decide
not to continue in their present roles, or if a material number of such senior
management fail to continue with the Company and the Company is unable to
attract and retain other skilled employees, the Company's business could be
adversely affected. See "Management."
STATUS OF INDEPENDENT OWNER/OPERATORS
From time to time, federal and state authorities have sought to assert that
independent owner/operators in the transportation industry, including those
utilized by the Company, are employees, rather than independent contractors. The
Company believes that the independent owner/operators utilized by the Company
are not employees under existing interpretations of federal and state laws.
However, there can be no assurance that federal and state authorities will not
challenge this position, or that other laws or regulations, including tax laws,
or interpretations thereof, will not change. If, as a result of any of the
foregoing, the Company is required to pay for and administer added benefits to
independent owner/operators, the Company's operating costs would increase.
Additionally, if the Company is required to pay backup withholding with respect
to amounts paid to such persons, it may be required to pay penalties and/or to
restate financial information from prior periods. See "Business -- Ground
Courier Operations -- Use of Independent Owner/Operators."
TECHNOLOGY
Some analysts have predicted that the increased use of electronic funds
transfers will cause the development of a "checkless society", which could
adversely affect demand for the Company's services from the financial services
industry. Similarly, technological advances in the nature of "electronic mail"
and "telefax" have affected the demand for on-call delivery services by
customers. While none of these technological developments has had a significant
adverse impact on the Company's business to date, and although the number of
checks written in the United States has increased annually since 1990, there can
be no assurance that these or similar technologies will not have an adverse
effect on the Company in the future. See "Business -- Business Strategy" and
"-- Ground Courier Operations."
SIGNIFICANT INFLUENCE OF DIRECTORS AND EXECUTIVE OFFICERS
As of the date of this Prospectus, the Company's directors and executive
officers as a group beneficially owned approximately 43% of the outstanding
Common Stock. Although the directors and executive officers as a group do not
hold a majority of the outstanding Common Stock, they are in a position, if they
act together, to exert significant influence over the election of directors and
other corporate actions requiring stockholder approval. See "Principal
Stockholders" and "Description of Capital Stock."
SHARES ELIGIBLE FOR FUTURE SALE; POSSIBLE ADVERSE EFFECT ON FUTURE MARKET PRICES
The Company can make no prediction as to the effect, if any, that sales of
additional shares of Common Stock or the availability of shares for future sale
will have on the market price of the Common Stock. Sales in the public market of
substantial amounts of the Common Stock (including shares issued upon the
exercise of outstanding options), or the perception that such sales could occur,
could depress prevailing market prices for the Common Stock. Such sales also may
make it more difficult for the Company to sell equity securities or
equity-related securities in the future at a time and price that the Company
deems appropriate. See "Shares Eligible for Future Sale."
10
<PAGE> 13
As partial consideration for the Mergers, the stockholders of the Founding
Companies received, in the aggregate, 4,692,222 shares of Common Stock. Such
shares are not registered under the Securities Act, and such stockholders have
demand and piggyback registration rights with respect to such shares. In
connection with the Mergers, the Company also granted to BancBoston Ventures
Inc. ("BancBoston"), Fleet Venture Resources, Inc. ("FVR") and Fleet Venture
Partners III ("FVP" and together with FVR, "Fleet") demand and piggyback
registration rights with respect to their shares of Common Stock, and granted
piggyback registration rights to First Union National Bank of Georgia ("First
Union"). Any shares which have not been registered may not be sold except in
transactions registered under the Securities Act or pursuant to an exemption
from registration. See "Description of Capital Stock -- Registration Rights."
As of the date of this Prospectus, the Company had outstanding options to
purchase 212,711 shares of Common Stock and had outstanding options to purchase
an additional 214,997 shares of Common Stock under its 1995 Stock Incentive
Plan, under which 405,003 shares remain available for issuance. Under the 1996
Stock and Option Plan for Non-Employee Directors, 50,000 shares of Common Stock
have been reserved for issuance. Seventy percent of the non-employee directors'
annual fee will be payable in the form of options to purchase Common Stock
pursuant to such plan and the balance will be payable in cash, and non-employee
directors will be able to elect to receive Common Stock in lieu of all or a
specified portion, in increments of twenty-five percent, of their cash
compensation. The Company intends to register the shares issuable upon exercise
of options granted under the foregoing two plans or otherwise granted and, upon
such registration and issuance, the shares will be eligible for resale in the
public markets. See "Shares Eligible for Future Sale" and "Management -- 1995
Stock Incentive Plan," "-- 1996 Stock and Option Plan for Non-Employee
Directors" and "-- Other Stock Options."
The Company, all of the stockholders of the Founding Companies and the
executive officers and directors of the Company have agreed not to offer or sell
any shares of Common Stock of the Company, including the shares referred to in
the second preceding paragraph, during a period of 180 days (the "Lockup
Period") commencing December 14, 1995 without the prior written consent of Smith
Barney Inc., except that the Company may issue Common Stock upon the exercise of
options or in connection with acquisitions. After the Lockup Period, all such
shares may be sold in accordance with Rule 144 promulgated under the Securities
Act, subject to the volume, holding period and other limitations of Rule 144.
EFFECT OF CERTAIN CHARTER PROVISIONS
Pursuant to the Company's Amended and Restated Certificate of
Incorporation, the Board of Directors is empowered to issue Preferred Stock
without stockholder approval. The existence of this "blank-check" Preferred
Stock could render more difficult or discourage an attempt to obtain control of
the Company by means of a tender offer, merger, proxy contest or otherwise, and
may adversely affect the prevailing market price of the Common Stock. In
addition, the Company is subject to Section 203 of the Delaware General
Corporation Law, which limits transactions between a publicly held company and
"interested stockholders" (generally, those stockholders who, together with
their affiliates and associates, own 15% or more of such company's outstanding
capital stock). Section 203 may have the effect of deterring certain potential
acquisitions of the Company. In addition to the Board of Directors' ability to
issue Preferred Stock, the Company's Amended and Restated Certificate of
Incorporation and By-Laws contain other provisions which may have anti-takeover
effects. The Company's Amended and Restated Certificate of Incorporation
furthermore contains a so-called "fair price" provision, which requires that,
unless certain transactions are approved by a majority of the Company's
disinterested directors, certain minimum price and procedural requirements must
be observed by any party which acquires more than ten percent of the outstanding
shares of Common Stock of the Company and then seeks to accomplish a merger or
other form of business combination or transaction (which would eliminate or
could significantly change the interests of the remaining stockholders). See
"Description of Capital Stock -- Preferred Stock" and "-- Provisions of Delaware
Law and the Company's Charter and By-Laws."
11
<PAGE> 14
NO DIVIDENDS
The Company does not anticipate paying any cash dividends on shares of its
Common Stock in the foreseeable future and intends to retain future earnings, if
any, for use in its business. In addition, the Company has entered into a credit
agreement (the "Credit Agreement") with First Union (for itself and as agent for
other participating lenders) pursuant to which the Company may borrow up to $50
million to refinance certain existing indebtedness of the Founding Companies
which was assumed in the Mergers, as well as to fund acquisitions and provide
working capital and for other general corporate purposes. The Credit Agreement
limits the Company's ability to pay cash dividends on its Common Stock. See
"Dividend Policy," "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources" and "Description
of Capital Stock -- Common Stock -- Dividends."
12
<PAGE> 15
THE COMPANY
The Company offers a variety of customized distribution services for
corporate customers with time-sensitive pickup and delivery requirements.
Through both its ground and air divisions, the Company provides scheduled and
unscheduled delivery service for local, regional, national and international
shipments, and offers same-day and next-day delivery options. Management
believes that the Company is the leading provider of scheduled ground courier
services in the United States.
<TABLE>
The Company was incorporated in October 1995 for the purpose of forming a
national ground and air courier company. In December 1995, the Company acquired
the Founding Companies. See "Business -- Organization" and "Certain Transactions
- -- Organization of the Company." The Founding Companies, each of which has been
in business for at least 13 years, provide ground and air courier service to the
areas listed below:
<CAPTION>
PERIOD ENDED
YEAR DECEMBER 19,
FOUNDING COMPANY ESTABLISHED 1995 AREAS SERVED
- ---------------- ----------- ------------ ------------
<S> <C> <C> <C>
Courier Dispatch(1)...... 1967 $133.7 million Alabama, Connecticut, Florida, Georgia, Maine,
Maryland, Massachusetts, Minnesota, New
Hampshire, North Carolina, North Dakota, Rhode
Island, South Carolina, South Dakota, Tennessee,
Vermont, Virginia and Washington, D.C.
Tricor(2)................ 1957 $ 37.3 million California; portions of Arizona, Colorado,
Florida, Georgia, Idaho, Illinois, Minnesota,
Nevada, New Jersey, New York, Oregon, Texas,
Utah, Washington and certain Pacific Rim
destinations
Film Transit(3).......... 1937 $ 22.4 million Alabama, Arkansas, Louisiana, Mississippi,
Oklahoma and Tennessee; portions of Florida,
Georgia, Illinois, Kentucky, Missouri and Texas
Lanter(4)................ 1981 $ 21.8 million Iowa, Wisconsin and Nebraska; portion of Michigan
Sunbelt(5)............... 1974 $ 16.6 million Arkansas, Louisiana and Mississippi; portions of
Alabama, Florida, Kentucky, Missouri, Oklahoma,
Tennessee and Texas
3D(6).................... 1982 $ 14.8 million Arkansas, Florida and Texas; portions of
Louisiana, Missouri and Oklahoma
<FN>
- ---------------
(1) Courier Dispatch Group, Inc. is referred to herein as "Courier Dispatch." In
connection with the Mergers, Courier Dispatch Group, Inc. was merged with
and into its parent company, CDG Holding Corp., and CDG Holding Corp.
changed its name to "Courier Dispatch Group, Inc."
(2) Tricor America, Inc., which is referred to herein as "Tricor," is the
successor by merger to Tricor California, Inc., Tricor Nevada, Inc. and
Tricor International, all of which were merged into Tricor America, Inc.
prior to the Mergers.
(3) Film Transit, Incorporated, which distributed the capital stock of its
subsidiary to its stockholders prior to the Mergers, is referred to herein
as "Film Transit."
(4) Lanter Courier Corporation is referred to herein as "Lanter." Immediately
prior to the Mergers, Lanter transferred the assets and liabilities relating
to its business conducted outside of the areas listed in the above chart to
Lanter Delivery Systems, Inc. The business which remained with Lanter, which
serves the areas listed in the above chart, is sometimes referred to herein
as the "Districts." See "Business -- Organization."
(5) Sunbelt Courier, Inc. is referred to herein as "Sunbelt." In connection with
the Mergers, Sunbelt Courier, Inc. was merged with and into its parent
company, Salmon Acquisition Corporation, and Salmon Acquisition Corporation
changed its name to "Sunbelt Courier, Inc."
(6) 3D Distribution Systems, Inc. and its affiliated corporations and
subsidiaries are referred to herein collectively as "3D."
</TABLE>
In May 1996, the Company acquired Eddy Messenger Service, Inc. ("Eddy
Messenger") which provides ground courier services in Connecticut, New Jersey
and New York State (including New York City). See "Business -- Recent
Developments."
The Company's principal executive offices are located at 1080 Holcomb
Bridge Road, Building 200, Suite 140, Roswell, Georgia 30076. The Company's
telephone number is (770) 518-1180 and its facsimile number is (770) 518-2587.
13
<PAGE> 16
PRICE RANGE OF COMMON STOCK
<TABLE>
<CAPTION>
The Company's Common Stock has been traded on the New York Stock Exchange
under the symbol "UT" since December 15, 1995. On May 20, 1996, the last sale
price of the Common Stock was $27.75 per share, as published in The Wall Street
Journal on May 21, 1996. On May 20, 1996, there were 65 shareholders of record
of the Company's Common Stock. The initial public offering price of the Common
Stock was $14.50 per share. The following table sets forth the range of high and
low sale prices for the Common Stock for the period from December 14, 1995, the
date of the Company's initial public offering, through May 20, 1996.
HIGH LOW
------- -------
<S> <C> <C>
1995
Fourth Quarter (from December 15)........... $15.125 $14.50(1)
FISCAL 1996
First Quarter............................... $23.375 $14.50
Second Quarter (through May 20)............. $ 29.00 $20.13
<FN>
- ---------------
(1) Represents the initial public offering price.
</TABLE>
DIVIDEND POLICY
The Company does not anticipate paying any dividends on its Common Stock in
the foreseeable future and intends to retain future earnings, if any, for use in
its business. Any future payment of dividends on the Common Stock is within the
discretion of the Board of Directors and will depend upon varying factors,
including the capital requirements, operating results and financial condition of
the Company from time to time. The Credit Agreement limits the Company's ability
to pay cash dividends on its Common Stock. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources" and "Description of Capital Stock -- Common
Stock -- Dividends."
14
<PAGE> 17
<TABLE>
CAPITALIZATION
<CAPTION>
The following table sets forth the long-term debt, short-term debt and
capitalization at December 31, 1995 and March 30, 1996 (unaudited) of the
Company. This table should be read in conjunction with the Consolidated
Financial Statements of the Company and the notes thereto and other information
appearing elsewhere in this Prospectus.
DECEMBER 31, MARCH 30,
1995 1996
-------------- -----------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
Short-term debt................................................... $ 1,500 $ 177
Long-term debt, net of current maturities(1)...................... 24,811 23,210
------- -------
Total debt................................................... 26,311 23,387
------- -------
Stockholders' equity:
Preferred stock.............................................. -- --
Common stock................................................. 9 9
Paid-in capital.............................................. 14,664 20,866
Retained earnings............................................ 1,504 3,120
------- -------
Total stockholders' equity.............................. 16,177 23,995
------- -------
Total capitalization.................................... $42,488 $47,382
======= =======
<FN>
- ---------------
(1) For a description of the Company's long-term debt, see Note 6 to the
Consolidated Financial Statements of the Company.
</TABLE>
15
<PAGE> 18
SELECTED FINANCIAL DATA
The statement of operations data shown below for the years ended December
31, 1991, 1992, 1993, and 1994 and the period from January 1 to December 19,
1995 and for the three months ended March 31, 1995 and the balance sheet data as
of December 31, 1991, 1992, 1993 and 1994 are that of the Combined Founding
Companies prior to the Mergers on a historical basis except for pro forma data.
During the periods presented the Combined Founding Companies were not under
common control or management and some were not taxable entities. Therefore the
data presented may not be comparable to or indicative of post-combination
results to be achieved by the Company after the Mergers.
The following selected financial data with respect to the Combined Founding
Companies' combined statements of operations for the years ended December 31,
1993 and 1994 and the period from January 1 to December 19, 1995 and for the
three months ended March 31, 1995 and with respect to the Combined Founding
Companies' combined balance sheets as of December 31, 1993 and 1994 have been
derived from the Combined Founding Companies' combined financial statements that
appear elsewhere in this Prospectus. The selected financial data with respect to
United TransNet, Inc.'s consolidated statements of operations for the period
from December 20 to December 31, 1995 and for the three months ended March 30,
1996 and with respect to United TransNet, Inc.'s consolidated balance sheets as
of December 31, 1995 and March 30, 1996 have been derived from United TransNet,
Inc.'s consolidated financial statements that appear elsewhere in this
Prospectus. The financial data provided below should be read in conjunction with
these accompanying financial statements and related notes thereto as well as
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
16
<PAGE> 19
<TABLE>
<CAPTION>
UNITED
COMBINED FOUNDING COMPANIES(1) TRANSNET, INC. PRO FORMA(2)
------------------------------------------------------------ --------------- ------------
PERIOD FROM PERIOD FROM
YEAR ENDED DECEMBER 31, JANUARY 1 TO DECEMBER 20 TO YEAR ENDED
------------------------------------------- DECEMBER 19, DECEMBER 31, DECEMBER 31,
1991(3) 1992 1993 1994 1995 1995 1995
-------- -------- -------- ---------- -------------- --------------- ------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS:
HISTORICAL DATA
Net revenues................ $150,793 $154,884 $171,901 $ 214,099 $246,526 $ 7,748 $ 254,274
Cost of delivery............ 112,196 112,620 122,110 156,323 181,217 5,462 186,679
-------- -------- -------- ---------- -------- ---------- ----------
Gross profit................ 38,597 42,264 49,791 57,776 65,309 2,286 67,595
Selling, general and
administrative expenses... 34,836 34,778 41,095 48,395 53,444 1,585 55,029
Amortization of intangible
assets.................... 849 1,642 2,258 3,667 3,204 92 3,296
-------- -------- -------- ---------- -------- ---------- ----------
Operating income............ 2,912 5,844 6,438 5,714 8,661 609 9,270
Interest expense............ 1,741 2,291 2,387 3,758 5,288 137 5,425
Interest income and other,
net(4).................... 2,781 227 127 2,245 264 5 269
-------- -------- -------- ---------- -------- ---------- ----------
Income before income taxes
and extraordinary item.... 3,952 3,780 4,178 4,201 3,637 477 4,114
Provision (benefit) for
income taxes.............. (223) 1,361 1,067 336 1,021 (2,231) (1,210)
-------- -------- -------- ---------- -------- ---------- ----------
Income before extraordinary
item...................... 4,175 2,419 3,111 3,865 2,616 2,708 5,324
Extraordinary loss on
extinguishment of debt.... -- -- -- -- -- 1,204 1,204
-------- -------- -------- ---------- -------- ---------- ----------
Net income................ $ 4,175 $ 2,419 $ 3,111 $ 3,865 $ 2,616 $ 1,504 $ 4,120
======== ======== ======== ========== ======== ========== ==========
Net income (loss) available
for common
stockholders(5)........... $ 4,175 $ 1,027 $ 2,980 $ 3,338 $(16,814)
Earnings per common share:
Income before
extraordinary item...... $ .31
Extraordinary loss on
early extinguishment of
debt.................... .14
----------
Net income................ $ .17
==========
Weighted average number of
common and common
equivalent shares(6)...... 8,798,963
UNAUDITED PRO FORMA DATA(7)
Income before income taxes
and extraordinary item.... $ 3,952 $ 3,780 $ 4,178 $ 4,201 $ 4,114
Provision for income
taxes(8).................. 1,115 2,499 2,278 1,754 519
Income before extraordinary
item...................... 2,837 1,281 1,900 2,447 3,595
Net income.................. 2,837 1,281 1,900 2,447 2,391
Pro forma earnings per
common share:
Income before
extraordinary item...... $ 0.31 $ 0.46
Extraordinary loss on
early extinguishment of
debt.................... -- 0.15
---------- ----------
Net income................ $ 0.31 $ 0.31
========== ==========
Weighted average number of
common and common
equivalent shares(9)...... 7,802,636 7,848,962
========== ==========
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF
------------------------------------------- DECEMBER 31,
1991 1992 1993 1994 1995
-------- -------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
BALANCE SHEETS DATA:
Working capital................ $ 3,744 $ 12 $ (407) $ (4,962) $ 232
Property and equipment......... 12,750 12,236 13,224 15,165 10,332
Total assets................... 42,393 45,264 47,130 68,423 70,430
Long-term debt................. 14,639 12,500 13,706 25,967 24,811
Stockholders' equity........... 12,144 11,731 7,152 3,056 16,177
</TABLE>
17
<PAGE> 20
<TABLE>
<CAPTION>
UNITED
TRANSNET,
COMBINED INC.
FOUNDING COMPANIES(10) ------------
---------------------- FOR THE
FOR THE THREE THREE
MONTHS ENDED MONTHS ENDED
MARCH 31, MARCH 30,
1995 1996
---------------------- ------------
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
(UNAUDITED)
<S> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net revenues............................................ $ 60,100 $ 66,255
Cost of delivery........................................ 43,656 48,532
---------- ----------
Gross profit............................................ 16,444 17,723
Selling, general and administrative expenses............ 12,770 13,657
Amortization of intangible assets....................... 805 747
---------- ----------
Operating income........................................ 2,869 3,319
Interest expense........................................ (1,214) (629)
Interest income and other, net.......................... 57 21
---------- ----------
Income before income taxes and extraordinary item....... 1,712 2,711
Provision for income taxes.............................. 268 1,095
---------- ----------
Income before extraordinary item........................ 1,444 1,616
Extraordinary loss on extinguishment of debt............ -- --
---------- ----------
Net income.............................................. $ 1,444 $ 1,616
========== ==========
Net income available for common stockholders(5)......... $ 917 $ 1,616
Earnings per common share:
Income before extraordinary item..................... $ 0.18
Extraordinary loss on extinguishment of debt......... --
----------
Net income........................................... $ 0.18
==========
UNAUDITED PRO FORMA INFORMATION:(7)
Income before income taxes and extraordinary item.... $ 1,712
Provision for taxes.................................. 779
----------
Income before extraordinary item..................... 933
Extraordinary loss on extinguishment of debt......... --
----------
Net income........................................... $ 933
==========
Earnings per common share:
Income before income taxes and extraordinary item.... $ 0.22
Provision for taxes.................................. 0.10
----------
Income before extraordinary item..................... 0.12
Extraordinary loss on extinguishment of debt......... --
----------
Net income........................................... $ 0.12
==========
Weighted average number of common and common equivalent
shares(9)............................................ 7,805,409 9,212,186
---------- ----------
BALANCE SHEET DATA:
Working capital......................................... $ 8,895
Property and equipment.................................. 9,681
Total assets............................................ 69,049
Long-term debt.......................................... 23,210
Stockholders' equity.................................... 23,995
</TABLE>
18
<PAGE> 21
- ---------------
[FN]
(1) The Founding Companies collectively are considered predecessors to the
Company. The following table represents selected information of the
individual Founding Companies for the two most recent fiscal years and the
period from January 1 to December 19, 1995.
<TABLE>
<CAPTION>
YEAR ENDED PERIOD FROM
DECEMBER 31, JANUARY 1 TO
------------------- DECEMBER 19,
1993 1994 1995
-------- -------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
COURIER DISPATCH
Net revenues............................................. $ 70,631 $104,614 $133,701
Gross profit............................................. 20,671 27,929 33,905
Selling, general and administrative...................... 17,443 24,060 28,533
Net loss................................................. (319) (1,768) (2,076)
======== ======== ========
TRICOR
Net revenues............................................. $ 32,504 $ 34,288 $ 37,252
Gross profit............................................. 8,778 9,442 10,080
Selling, general and administrative...................... 6,789 7,058 6,898
Net income............................................... 1,666 4,112 3,156
======== ======== ========
FILM TRANSIT
Net revenues............................................. $ 24,692 $ 24,717 $ 22,352
Gross profit............................................. 8,613 7,888 7,786
Selling, general and administrative...................... 7,348 7,351 7,155
Net income............................................... 688 253 396
======== ======== ========
LANTER
Net revenues............................................. $ 19,647 $ 21,431 $ 21,777
Gross profit............................................. 5,195 5,629 5,309
Selling, general and administrative...................... 3,511 3,816 3,845
Net income............................................... 1,317 1,431 1,095
======== ======== ========
SUNBELT
Net revenues............................................. $ 11,882 $ 14,187 $ 16,629
Gross profit............................................. 2,616 2,984 3,542
Selling, general and administrative...................... 2,135 2,096 2,320
Net (loss) income........................................ (176) 54 272
======== ======== ========
3D
Net revenues............................................. $ 12,545 $ 14,862 $ 14,815
Gross profit............................................. 3,918 3,904 4,687
Selling, general and administrative...................... 3,869 4,014 4,693
Net loss................................................. (65) (217) (227)
======== ======== ========
COMBINED
Net revenues............................................. $171,901 $214,099 $246,526
Gross profit............................................. 49,791 57,776 65,309
Selling, general and administrative...................... 41,095 48,395 53,444
Net income............................................... 3,111 3,865 2,616
======== ======== ========
</TABLE>
[FN]
(2) Reflects the results of operations of the Combined Founding Companies for
the period from January 1 to December 19, 1995 and the results of
operations of United TransNet, Inc. for the period from December 20 to
December 31, 1995.
19
<PAGE> 22
[FN]
(3) Includes financial information of a predecessor company to Courier Dispatch
for nine months and actual data for Courier Dispatch for three months.
(4) Included in other income for the years ended December 31, 1991 and 1994 are
proceeds from key man life insurance of $3.0 million and $2.0 million,
respectively.
(5) Net income (loss) available for common stockholders includes warrant
accretion for the years ended December 31, 1992, 1993 and 1994 and the
period ended December 19, 1995 and for the three months ended March 31,
1995 of $1.4 million, $0.1 million, $0.5 million, $19.4 million and $0.5
million, respectively.
(6) Weighted average number of common and common equivalent shares for the
period from December 20 to December 31, 1995 includes (i) 4,692,222 shares
issued to the stockholders of the Founding Companies in connection with the
Mergers which gives effect to 58,021 shares repurchased from a minority
stockholder immediately prior to the Company's initial public offering,
(ii) 3,925,000 shares sold in the Company's initial public offering and
(iii) the dilution attributable to outstanding options to purchase Common
Stock, applying the treasury stock method.
(7) Certain of the Founding Companies were S corporations during the periods
presented and, accordingly were not subject to corporate income taxes. The
unaudited pro forma information is presented for the purpose of reflecting
a provision for income taxes as if all of the Founding Companies had been
subject to income tax for all periods presented, calculated in accordance
with FAS 109, based on tax laws that were in effect during the respective
periods.
(8) Provision for income taxes for the year ended December 31, 1995 reflects
the benefits of (i) the reversal of the valuation allowance of $2,164
related to the deferred tax assets of Courier Dispatch and (ii) the
recording of a net deferred tax asset of $243 at Tricor and Lanter upon
their change from S corporations to C corporations.
(9) Weighted average number of common and common equivalent shares for 1994
includes (i) 4,750,243 shares issued to the stockholders of the Founding
Companies in connection with the Mergers of the Founding Companies, (ii)
2,873,425 shares sold in the Company's initial public offering to cover the
cash portion of the purchase price paid in connection with the Mergers of
the Founding Companies and (iii) the dilution attributable to outstanding
options to purchase Common Stock, applying the treasury stock method. For
1995, weighted average number of common and common equivalent shares also
includes (i) the weighted average portion of the 3,925,000 shares sold in
the Company's initial public offering, net of the shares sold to cover the
cash portion of the purchase price paid in connection with the Mergers of
the Founding Companies, (ii) the weighted average portion of 58,021 shares
repurchased in December 1995 from a minority stockholder and (iii) the
weighted average portion of stock options which became exercisable during
1995.
<TABLE>
(10) The Founding Companies are considered predecessors to the Company. The
following table represents selected unaudited information of the
individual Founding Companies for the period ending March 31, 1995.
<CAPTION>
FOR THE
THREE
MONTHS ENDED
MARCH 31,
1995
------------
<S> <C>
COURIER DISPATCH
Net revenues................................................... $32,290
Gross profit................................................... 8,677
Selling, general and administrative............................ 6,930
Net loss....................................................... (536)
=======
TRICOR
Net revenues................................................... $ 8,904
Gross profit................................................... 2,602
Selling, general and administrative............................ 1,704
Net income..................................................... 887
=======
</TABLE>
20
<PAGE> 23
<TABLE>
<CAPTION>
FOR THE
THREE
MONTHS ENDED
MARCH 31,
1995
------------
<S> <C>
FILM TRANSIT
Net revenues................................................... $ 5,694
Gross profit................................................... 1,728
Selling, general and administrative............................ 1,647
Net income..................................................... 46
=======
LANTER
Net revenues................................................... $ 5,529
Gross profit................................................... 1,395
Selling, general and administrative............................ 970
Net income..................................................... 330
=======
SUNBELT
Net revenues................................................... $ 3,991
Gross profit................................................... 917
Selling, general and administrative............................ 553
Net income..................................................... 110
=======
3D
Net revenues................................................... $ 3,692
Gross profit................................................... 1,125
Selling, general and administrative............................ 966
Net income..................................................... 80
=======
COMBINED
Net revenues................................................... $60,100
Gross profit................................................... 16,444
Selling, general and administrative............................ 12,770
Net income..................................................... 917
=======
</TABLE>
21
<PAGE> 24
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma combined financial information provides
information on the combined financial information of the Company and Eddy
Messenger. The unaudited pro forma balance sheet presentation assumes that the
merger (the "Eddy Messenger Merger") of Eddy Messenger with a wholly-owned
subsidiary of the Company had been consummated as of March 30, 1996. The
unaudited pro forma income statement presentation assumes that the Eddy
Messenger Merger had been consummated at the inception of each income statement
period presented. In the Eddy Messenger Merger, the Company acquired all of the
outstanding capital stock of Eddy Messenger in exchange for approximately
226,900 shares of Common Stock and $3.6 million in cash, excluding certain
contingent payments based on future performance. The Eddy Messenger Merger will
be accounted for under the purchase method of accounting.
Since March 30, 1996, the Company has acquired the assets of M & R Express,
Inc. ("M&R"), the assets of Statewide Delivery Service, Inc. ("Statewide") used
in connection with Statewide's scheduled and unscheduled ground messenger and
courier services in Massachusetts and the capital stock of Carl Messenger
Service, Inc. ("Carl Messenger"). These companies provide scheduled and
unscheduled ground messenger and courier services in Connecticut, Maryland and
Massachusetts. The total revenue of these three companies for the year ended
December 31, 1995 was approximately $12 million. The aggregate consideration for
these transactions was $3.3 million in cash, excluding certain contingent
payments based on future performance, and approximately 58,000 shares of Common
Stock. The pro forma effect of these acquisitions is not presented since such
effect is not material either individually or in the aggregate.
22
<PAGE> 25
UNITED TRANSNET, INC.
<TABLE>
PRO FORMA COMBINING BALANCE SHEETS AS OF MARCH 30, 1996
(UNAUDITED)
(IN THOUSANDS)
<CAPTION>
UNITED EDDY
TRANSNET, INC. MESSENGER PRO FORMA PRO FORMA
CONSOLIDATED SERVICE, INC. ADJUSTMENTS COMBINED
-------------- ------------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents.............. $ 1,350 $ 161 $ $ 1,511
Accounts receivable.................... 22,086 803 22,889
Less: allowance........................ (383) -- (383)
Short-term investments................. 32 -- 32
Prepaids and other assets.............. 3,524 -- 3,524
Income taxes receivable................ 202 615 817
------- ------ ------ -------
Total current assets........... 26,811 1,579 28,390
Property and equipment................... 9,681 45 9,726
Goodwill, net............................ 16,120 -- 5,926 (1) 22,046
Other intangible assets, net............. 7,908 10 2,540 (1) 10,458
Other assets............................. 5,555 209 5,764
Deferred tax assets...................... 2,974 281 3,255
------- ------ ------ -------
Total assets................... $69,049 $2,124 $8,466 $79,639
======= ====== ====== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-term debt........................ $ 177 $ 225 $ (200)(1) $ 202
Dividends payable...................... 402 -- 402
Accounts payable....................... 8,441 118 8,559
Accrued liabilities.................... 8,115 1,061 (225)(1) 8,951
Income taxes payable................... 705 4 709
Deferred tax liabilities............... 76 -- 76
------- ------ ------ -------
Total current liabilities...... 17,916 1,408 (425) 18,899
Long term debt, net of current
maturities............................. 23,210 88 3,600 (1) 26,898
Deferred compensation.................... 451 -- 451
Other liabilities........................ 3,477 19 3,496
------- ------ ------ -------
Total liabilities.............. 45,054 1,515 3,175 49,744
------- ------ ------ -------
Stockholders' equity
Preferred stock.......................... -- -- -- --
Common stock............................. 9 -- -- 9
Paid-in capital.......................... 20,866 -- 5,900 (1)(2) 26,766
Treasury stock........................... -- (16) 16 (2) --
Retained earnings........................ 3,120 625 (625)(2) 3,120
------- ------ ------ -------
Total stockholders' equity..... 23,995 609 5,291 29,895
------- ------ ------ -------
Total liabilities and
stockholders' equity......... $69,049 $2,124 $8,466 $79,639
======= ====== ====== =======
</TABLE>
23
<PAGE> 26
<TABLE>
- ---------------
<FN>
(1) Intangibles resulting from the acquisition of Eddy Messenger:
<S> <C>
Purchase Price:
Common stock........................................ $5,900
Cash................................................ 3,600
Acquisition cost.................................... 75
------
Total..................................... 9,575
Pay-off of certain debt with cash proceeds.......... 500
Equity of Eddy Messenger............................ 609
------
Intangibles resulting from the acquisition of Eddy
Messenger......................................... $8,466
======
Allocation of resulting intangible
Goodwill............................................ $5,926
Other intangible -- customer list................... 2,540
------
$8,466
======
</TABLE>
<TABLE>
(2) To record issuance of Common Stock valued at $5.9 million for the
acquisition of Eddy Messenger as follows:
<CAPTION>
COMMON PAID-IN TREASURY RETAINED
STOCK CAPITAL STOCK EARNINGS
------ ------- -------- --------
<S> <C> <C> <C> <C>
Combined balances............................... $9 $20,866 $(16) $3,745
Issuance of 226,921 shares of Common Stock...... -- 5,900
Elimination of acquired entity.................. 16 (625)
--
------- ---- ------
Pro forma combined.............................. $9 $26,766 $ 0 $3,120
== ======= ==== ======
</TABLE>
24
<PAGE> 27
UNITED TRANSNET, INC.
<TABLE>
PRO FORMA COMBINING STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 30, 1996
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<CAPTION>
UNITED EDDY
TRANSNET, MESSENGER
INC. SERVICE, PRO FORMA PRO FORMA
CONSOLIDATED INC. ADJUSTMENTS COMBINED
------------ --------- ----------- ----------
<S> <C> <C> <C> <C>
Net revenues................................ $ 66,255 $ 2,838 $ $ 69,093
Cost of delivery............................ 48,532 2,330 (171)(3) 50,691
---------- ------- ------ ----------
Gross profit.............................. 17,723 508 171 18,402
Selling, general and administrative
expenses.................................. 13,657 1,548 (993)(3) 14,212
Amortization of intangibles................. 747 112(1) 859
---------- ------- ------ ----------
Operating income.......................... 3,319 (1,040) 1,052 3,331
Other income (expense)
Interest expense.......................... (629) (3) (62)(2) (694)
Interest income and other, net............ 21 104 (85)(3) 40
---------- ------- ------ ----------
Income (loss) before income taxes........... 2,711 (939) 905 2,677
Provision (benefit) for income taxes........ 1,095 (357) 344(4) 1,082
---------- ------- ------ ----------
Net income (loss)........................... $ 1,616 $ (582) $ 561 $ 1,595
========== ======= ====== ==========
Earnings per share.......................... $ 0.18 $ 0.17
========== ==========
Earnings per share -- fully diluted......... $ 0.18 $ 0.17(5)
========== ==========
Weighted average shares outstanding......... 9,212,186 9,439,107
========== ==========
</TABLE>
[FN]
- ---------------
(1) To amortize the assignment of the purchase price that exceeds the fair value
of the net assets acquired. The amount assigned to goodwill is to be
amortized using the straight-line method over a period of twenty-five years.
The amount assigned to the intangible -- customer list is to be amortized
using the straight-line method over a period of twelve years.
(2) To record the interest expense related to the cash portion of the
acquisition. The interest rate used is the actual borrowing rate for the
cash portion of the acquisition. The interest rate is 6.94%.
25
<PAGE> 28
[FN]
(3) As part of the acquisition of Eddy Messenger, the real estate operations of
Eddy Messenger will not be a continuing part of the operations of the
combined entities. Additionally, certain terms regarding officers' salaries
and rental expense on facilities with related parties have been agreed to
between the parties. The following adjustments reflect the effect of these
agreements on the continuing revenue and expenses of the combined entities:
<TABLE>
<CAPTION>
REAL ESTATE OPERATIONS TERMS PER AGREEMENT TOTAL
---------------------- ------------------- -----
<S> <C> <C> <C>
Revenues (included in interest income
and other, net)...................... $ 85 $ $ 85
==== ==== ====
Cost of delivery
Salaries............................. $ 52 $ $ 52
Telephone............................ 1 1
Property taxes....................... 11 11
Rent................................. 59 59
Other................................ 48 48
---- ---- ----
Total............................. $112 $ 59 $171
==== ==== ====
Selling, general and administrative
expenses
Salaries............................. $323 $361 $684
Insurance and benefits............... 16 18 34
Vehicle leases and maintenance....... 7 7
Vehicle depreciation................. 118 118
Leasehold improvements
depreciation...................... 138 138
Professional fees.................... 12 12
---- ---- ----
Total............................. $489 $504 $993
==== ==== ====
</TABLE>
[FN]
(4) Tax effect of the pro forma adjustments using a rate of 38%.
(5) Earnings per share - fully diluted include the effect of the contingent
payment of $3.65 million amortized using the straight-line method over a
period of twenty-five years.
26
<PAGE> 29
<TABLE>
PRO FORMA COMBINING STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<CAPTION>
UNITED EDDY
TRANSNET, INC. MESSENGER PRO FORMA PRO FORMA
CONSOLIDATED(6) SERVICE, INC. ADJUSTMENTS COMBINED
--------------- ------------- ----------- ----------
<S> <C> <C> <C> <C>
Net revenues........................ $ 254,274 $12,181 $ $ 266,455
Cost of delivery.................... 186,679 9,628 (392)(3) 195,915
---------- ------ ----- ----------
Gross profit................... 67,595 2,553 392 70,540
Selling, general and administrative
expenses.......................... 55,029 2,710 (993)(3) 56,746
Amortization of intangibles......... 3,296 -- 449(1) 3,745
---------- ------ ----- ----------
Operating income (loss)........ 9,270 (157) 936 10,049
Other income (expense)
Interest expense.................. (5,425) (6) (250)(2) (5,681)
Interest income and other, net.... 269 307 (207)(3) 369
---------- ------ ----- ----------
Income before income taxes and
extraordinary item................ 4,114 144 479 4,737
Unaudited information:(7)
Provision for income taxes.......... 519 62 182(4) 763
---------- ------ ----- ----------
Income before extraordinary items... $ 3,595 $ 82 $ 297 $ 3,974
========== ======= ===== ==========
Earnings per share -- primary....... $ 0.46 $ 0.49
========== ==========
Earnings per share -- fully
diluted........................... $ 0.46 $ 0.47(5)
========== ==========
Weighted average shares outstanding
primary and fully diluted......... 7,848,962 8,075,883
========== ==========
<FN>
- ---------------
(1) To amortize the assignment of the purchase price that exceeds the fair value
of the net assets acquired. The amount assigned to goodwill is to be
amortized using the straight-line method over a period of twenty-five years.
The amount assigned to the intangible-customer list is to be amortized using
the straight-line method over a period of twelve years.
(2) To record the interest expense to the cash portion of the acquisition. The
interest rate used is the actual borrowing rate for the cash portion of the
acquisition. The interest rate is 6.94%.
</TABLE>
27
<PAGE> 30
[FN]
<TABLE>
(3) As part of the acquisition of Eddy Messenger, the real estate operations of
Eddy Messenger will not be a continuing part of the operations of the
combined entities. Additionally, certain terms regarding officers' salaries
and rental expense on facilities with related parties have been agreed to
between the parties. The following adjustments reflect the effect of these
agreements on the continuing revenues and expenses of the combined entities:
<CAPTION>
REAL ESTATE TERMS PER
OPERATIONS AGREEMENT TOTAL
----------- --------- -----
<S> <C> <C> <C>
Revenues (included in interest
income and other, net)....... $207 $ $207
==== ==== ====
Cost of delivery
Salaries..................... $ 85 $ $ 85
Telephone.................... 5 5
Property taxes............... 69 69
Rent......................... 233 233
---- ---- ----
Total..................... $159 $233 $392
==== ==== ====
Selling, general and
administrative expenses
Salaries..................... $ 93 $617 $710
Insurance and benefits....... 34 29 63
Insurance building........... 24 24
Vehicle leases and
maintenance............... 25 25
Vehicle depreciation......... 46 46
Professional fees............ 77 48 125
---- ---- ----
Total..................... $228 $765 $993
==== ==== ====
<FN>
(4) Tax effect of the pro forma adjustments using a rate of 38%.
(5) Earnings per share - fully diluted include the effect of the contingent
payment of $3.65 million amortized using the straight-line method over a
period of twenty-five years.
(6) Reflects the results of operations of the Combining Founding Companies for
the period from January 1 to December 19, 1996 and the results of operations
of the Company for the period from December 20 to December 31, 1995.
(7) Certain of the Founding Companies were S corporations during the period
presented and accordingly were not subject to corporate income taxes. The
unaudited information is presented for the purpose of reflecting a provision
for income taxes as if all of the Founding Companies had been subject to
income tax for the period presented, calculated in accordance with Statement
of Financial Accounting Standards 109, based on the tax laws that were in
effect during the period.
</TABLE>
28
<PAGE> 31
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of the Company's results of operations and of its
liquidity and capital resources should be read in conjunction with the
Consolidated Financial Statements of the Company, the Combined Financial
Statements of the Combined Founding Companies, the Financial Statements of the
Founding Companies and the related Notes thereto appearing elsewhere in this
Prospectus.
INTRODUCTION
Simultaneously with the closing of the Company's initial public offering in
December 1995, separate wholly-owned subsidiaries of the Company merged with
each of the six Founding Companies. Prior to the Mergers, each of the Founding
Companies operated as a separate independent entity. As a result, historical
combined results may not be comparable to or indicative of future performance.
For the years ended December 31, 1993 and 1994, the Combined Financial
Statements include the accounts of the Founding Companies as if the Founding
Companies had always been members of the same operating group without giving
effect to the Mergers or the initial public offering. Pro Forma year ended
December 31, 1995 includes the accounts of the Founding Companies for the period
from January 1 to December 19, 1995 as if the Founding Companies had always been
members of the same operating group without giving effect to the Mergers or the
initial public offering and the accounts of the Company for the period from
December 20 to December 31, 1995.
The Founding Companies derived their revenues from fees charged for ground
and air delivery and distribution management services. Cost of delivery expenses
relating to ground delivery services consist primarily of salaries and related
benefits paid to drivers, fees paid to independent contractors and vehicle
operating and maintenance expenses. The primary cost of delivery expenses for
air delivery services include purchased services from commercial air carriers
and ground delivery agents.
Prior to the Mergers and the initial public offering, Tricor and Lanter
were S corporations under the Internal Revenue Code of 1986, as amended. The
Company will begin to file as a consolidated group for federal income tax
purposes. For purposes of the Combined Financial Statements presented in this
Prospectus, pro forma federal and state income taxes have been provided for
these two companies as if they had filed C corporation tax returns. See Note 15
to Notes to the Combined Financial Statements of the Combined Founding
Companies.
INCLUSION OF FORWARD-LOOKING STATEMENTS
Certain statements in this Prospectus, including "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. Any forward-looking statement included herein has been
included based upon the facts available to management at the date of this
Prospectus. Any forward-looking statement is, however, inherently subject to the
uncertainty of future events, whether economic, competitive or otherwise, many
of which are beyond the control of the Company, or which may involve
determinations which may be made by management in the future. There can,
therefore, be no assurance that the events or results described in such
forward-looking statements will occur, and actual events or results may vary
materially from those included herein. See "Risk Factors" for a discussion of
the material factors which may affect such events or results.
RESULTS OF OPERATIONS
<TABLE>
The following table sets forth various items as a percentage of revenues:
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
PRO
FORMA
1993 1994 1995
----- ----- -----
<S> <C> <C> <C>
Net revenue............................................................ 100.0% 100.0% 100.0%
Cost of delivery....................................................... 71.0% 73.0% 73.4%
----- ----- -----
Gross profit......................................................... 29.0% 27.0% 26.6%
</TABLE>
29
<PAGE> 32
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
PRO
FORMA
1993 1994 1995
----- ----- -----
<S> <C> <C> <C>
Selling, general and administrative expenses........................... 24.0% 22.6% 21.7%
Amortization........................................................... 1.3% 1.7% 1.3%
---- ---- ----
Operating income..................................................... 3.7% 2.7% 3.6%
Interest expense....................................................... 1.4% 1.8% 2.1%
Interest income and other, net......................................... 0.1% 1.1% 0.1%
---- ---- ----
Income before income taxes and extraordinary item.................... 2.4% 2.0% 1.6%
==== ==== ====
</TABLE>
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
---------------------------
MARCH 31, MARCH 30,
1995 1996
--------- ---------
<S> <C> <C>
Net revenue........................................................ 100.0% 100.0%
Cost of delivery................................................... 72.6% 73.3%
----- -----
Gross profit..................................................... 27.4% 26.7%
Selling, general and administrative expenses....................... 21.3% 20.6%
Amortization....................................................... 1.3% 1.1%
----- -----
Operating income................................................. 4.8% 5.0%
Interest expense................................................... 2.0% 0.9%
Interest income and other, net..................................... 0.1% 0.0%
----- -----
Income before income taxes....................................... 2.9% 4.1%
===== =====
</TABLE>
Consolidated Three Months Ended March 30, 1996 Compared to Combined Three
Months Ended March 31, 1995
Net revenues increased 10.2% to $66.3 million for the three months ended
March 30, 1996 from $60.1 million for the three months ended March 31, 1995. Of
this $6.2 million net increase, $2.0 million was attributable to acquisitions
made by Courier Dispatch in the Upper Midwest and Western regions in May 1995.
The remaining net increase was primarily attributable to internal growth through
additions to the customer base and increases in business with existing
customers.
Cost of delivery increased 11.2% to $48.5 million for the three months
ended March 30, 1996 from $43.7 million for the three months ended March 31,
1995. Of this $4.9 million increase, $1.6 million was attributable to
acquisitions made by Courier Dispatch in the Upper Midwest and Western regions
in May 1995. Cost of delivery as a percentage of revenues increased to 73.3% for
the three months ended March 30, 1996 from 72.6% for the three months ended
March 31, 1995. This deterioration in margin was attributable to a loss of
conjunctive business in the Florida and Upper Midwest regions, although offset
by a smaller increase at the Iowa and Wisconsin districts of the Upper Midwest
region. Additionally, hourly rate increases for drivers in the range of $0.25 to
$0.50 per hour were extended in the Upper Midwest, Mid-Atlantic and Southeast
regions.
Selling, general and administrative expenses increased 6.9% to $13.7
million for the three months ended March 30, 1996 from $12.8 million for the
three months ended March 31, 1995. The $0.9 million increase is a result of the
following: (i) Courier Dispatch's 1995 acquisitions, (ii) organizational changes
at the Company as a result of the Company's initial public offering, and (iii)
increases required to support higher levels of revenue.
Amortization of intangibles decreased to $0.7 million for the three months
ended March 30, 1996 from $0.8 million for the three months ended March 31,
1995. This decrease is attributable to non-competition agreements being fully
amortized at December 31, 1995.
Interest expense decreased to $0.6 million for the three months ending
March 30, 1996 from $1.2 million for the three months ended March 31, 1995. The
decrease is a result of the use of the proceeds of the Company's initial public
offering to repay a portion of the indebtedness of the Company.
30
<PAGE> 33
The effective tax rate was 40.3% for the three months ended March 30, 1996
compared to a pro forma effective tax rate of 45.5% for the three months ended
March 31, 1995. The decrease is the result of relatively constant federal
nontaxable items and a decrease in state nontaxable items creating
disproportionately higher taxable income for the three months ended March 31,
1995, as compared to the three months ended March 30, 1996.
Pro Forma Year Ended December 31, 1995 Compared to Historical Combined Year
Ended December 31, 1994
Net revenues increased 18.8% to $254.2 million for the year ended December
31, 1995 from $214.1 million for the year ended December 31, 1994. The increase
of $40.1 million was comprised of $33.6 million from Courier Dispatch, $4.1
million from Tricor and $4.3 million from Lanter, Sunbelt and 3D combined and a
decrease of $1.9 million from Film Transit. Of this net increase, $23.2 million
was attributable to acquisitions by Courier Dispatch in the Mid-Atlantic,
Florida and Upper Midwest regions. The remaining net increase was primarily
attributable to internal growth in Courier Dispatch, Tricor and Sunbelt through
additions to their customer base and increases in business with existing
customers.
Cost of delivery increased 19.4% to $186.7 million for the year ended
December 31, 1995 from $156.3 million for the year ended December 31, 1994. The
increase of $30.4 million was comprised of $26.2 million from Courier Dispatch,
$3.2 million from Tricor, $3.3 million from Sunbelt and Lanter combined, and a
decrease of $2.3 million from Film Transit and 3D combined. The increase at
Courier Dispatch is primarily due to 1994 and 1995 acquisitions. Cost of
delivery as a percentage of net revenues increased to 73.4% for the year ended
December 31, 1995 from 73.0% for the year ended December 31, 1994. This
deterioration in margin, attributable to Courier Dispatch, resulted primarily
from the implementation of benefit programs and lower profit margins associated
with Commercial Courier Express, Inc. ("Commercial Courier", acquired in June
1994), which has a higher concentration of dedicated as compared to conjunctive
business.
Selling, general and administrative expenses increased 13.7% to $55.0
million for the year ended December 31, 1995 from $48.4 million for the year
ended December 31, 1994. The increase of $6.6 million was comprised of $5.4
million from Courier Dispatch and $1.3 million from Tricor, Sunbelt, Lanter and
3D combined and a decrease of $0.1 million from Film Transit. The increase is a
result of (i) one-time compensation items associated with the Company's initial
public offering at Courier Dispatch and 3D, (ii) Courier Dispatch's 1994 and
1995 acquisitions, (iii) organizational changes at Courier Dispatch as a result
of the Company's initial public offering, and (iv) increases required to support
higher levels of revenue at Courier Dispatch, Tricor, Sunbelt, Lanter and 3D.
Amortization of intangibles decreased to $3.3 million for the year ended
December 31, 1995 from $3.7 million for the year ended December 31, 1994. This
decrease is primarily attributable to the one-time write-off of operating
certificates at December 31, 1994 which totalled $0.6 million. Excluding this
adjustment, amortization of intangibles increased $0.2 million for the year
ended December 31, 1995 primarily as a result of Courier Dispatch's 1994 and
1995 acquisitions.
Interest Expense increased to $5.4 million for the year ended December 31,
1995 from $3.8 million for the year ended December 31, 1994, primarily as a
result of borrowings by Courier Dispatch for acquisitions in 1994 and 1995 and
for working capital purposes.
Interest income and other, net decreased to $0.3 million for the year ended
December 31, 1995 from $2.2 million for the year ended December 31, 1994,
primarily as a result of $2.0 million of key man life insurance proceeds
received in 1994 related to the death of a former officer of Tricor.
The effective tax rate was (29.4%) in 1995 compared to 8.0% in 1994. In
1995, the valuation allowance of $2.2 million relating to the deferred tax
assets of Courier Dispatch was reversed because the consolidated earnings of the
Company have caused realization to become probable. Also in 1995, a benefit of
$0.2 million was recognized related to the recording of net deferred tax assets
at Tricor and Lanter upon their change from S corporations to C corporations.
See the notes to the related accompanying financial statements of United
TransNet, Inc. and the Combined Founding Companies for a more detailed analysis
of the provision for income taxes.
31
<PAGE> 34
The extraordinary loss of $1.2 million relates to the early extinguishment
of debt, reflecting the use of proceeds from the Company's initial public
offering.
Historical Combined Year Ended December 31, 1994 Compared to Historical
Combined Year Ended December 31, 1993
Net revenues increased 24.5% to $214.1 million in 1994 from $171.9 million
in 1993. The increase of $42.2 million was comprised of $34.0 million from
Courier Dispatch, $1.8 million from Tricor and $6.4 million from Film Transit,
Lanter, Sunbelt and 3D combined. Of this increase, $26.2 million was
attributable to acquisitions in 1993 and 1994 by Courier Dispatch in the
Mid-Atlantic, Florida and Upper Midwest regions. The remaining net increase was
primarily attributable to internal growth in Courier Dispatch, Tricor, Lanter
and Sunbelt through additions to their customer base and increases in business
with existing customers.
Cost of delivery increased 28.0% to $156.3 million for the year ended
December 31, 1994 from $122.1 million for the year ended December 31, 1993. The
increase of $34.2 million was comprised of $26.7 million from Courier Dispatch,
$2.3 million from 3D, and $5.2 million from Sunbelt, Tricor, Lanter and Film
combined. The increase at Courier Dispatch is primarily due to 1993 and 1994
acquisitions. Cost of delivery as a percentage of net revenues increased to
73.0% for the year ended December 31, 1994 from 71.0% for the year ended
December 31, 1993. This deterioration in margin, attributed to Courier Dispatch,
resulted primarily from lower profit margins associated with Commercial Courier,
which has a higher concentration of dedicated as compared to conjunctive
business.
Selling, general and administrative expenses increased 17.8% to $48.4
million for the year ended December 31, 1994 from $41.1 million for the year
ended December 31, 1993. The increase of $7.3 million was comprised of $6.6
million from Courier Dispatch and $0.7 million from Tricor, Sunbelt, Lanter, 3D
and Film combined. The increase at Courier Dispatch is primarily a result of
1993 and 1994 acquisitions as well as increases required to support higher
revenue.
Amortization of intangibles increased to $3.7 million for the year ended
December 31, 1994 from $2.3 million for the year ended December 31, 1993 as a
result of Courier Dispatch's acquisitions in 1993 and 1994.
Interest expense increased to $3.8 million in 1994 from $2.4 million in
1993, primarily as a result of Courier Dispatch borrowings for the acquisition
of companies and the repurchase of common stock.
Interest income and other, net, increased to $2.2 million in 1994 from $0.1
million in 1993, primarily as a result of $2.0 million of key man life insurance
proceeds received in 1994 related to the death of a former officer of Tricor.
The effective tax rate was 8.0% in 1994 compared to 25.5% in 1993. Income
not subject to corporate level taxation increased by $2.6 million in 1994
compared to 1993. See the notes to the related accompanying financial statements
of the Combined Founding Companies for a more detailed analysis of the provision
for income taxes.
LIQUIDITY AND CAPITAL RESOURCES
Historical Combined Year Ended December 31, 1993
During 1993, net cash provided by operating activities was $8.4 million.
Cash used in investing activities was $6.4 million, which primarily consisted of
$3.3 million of capital expenditures and payments of $3.1 million by Courier
Dispatch to acquire companies. Cash used in financing activities was $3.6
million which primarily consisted of net debt payments of $1.1 million by
Courier Dispatch, Tricor, Film Transit and 3D, a distribution by Tricor of $0.6
million to a stockholder, borrowings by Sunbelt of $0.3 million from a related
party and net payments by the Districts of $2.2 million to Lanter.
Historical Combined Year Ended December 31, 1994
During 1994, net cash provided by operating activities was $11.1 million.
Cash used in investing activities was $17.1 million, which primarily consisted
of $2.0 million of capital expenditures and payments of $14.3 million by Courier
Dispatch to acquire companies. Cash provided by financing activities was $8.1
million
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<PAGE> 35
which primarily consisted of net borrowings of $13.9 million by Courier
Dispatch, a distribution by Tricor of $1.6 million to a stockholder, payments by
Courier Dispatch of $3.0 million to repurchase common stock offset by proceeds
of $0.6 million from the sale of common stock, borrowings by Sunbelt of $0.5
million from a related party and net payments by the Districts of $2.3 million
to Lanter.
Pro Forma Year Ended December 31, 1995
During 1995, net cash provided by operating activities was $8.3 million.
Cash used in investing activities was $4.1 million, which primarily consisted of
$2.3 million of capital expenditures and payments of $3.5 million by Courier
Dispatch to acquire companies during the year. Cash used in financing activities
was $5.9 million, which consisted of net proceeds from the issuance of common
stock, net of the cash consideration of the Mergers, of $11.4 million, a net
increase in borrowings of $24.3 million, repayment of debt totaling $33.4
million, net payments by the Districts to Lanter of $2.1 million, a distribution
by Tricor of $5.3 million to a stockholder and $0.8 million for the repurchase
of Common Stock by Courier Dispatch. The net increase in borrowings was the
result of the repayment of existing debt assumed in the Mergers and additional
borrowings for working capital purposes. The repayment of debt was primarily the
refinancing of $12.9 million of debt incurred by Courier Dispatch for
acquisitions of companies in 1994 and 1995, repayment of $10.9 million of
Courier Dispatch subordinated debt and Sunbelt's repayment of $5.8 million to a
related party.
The Company for the Period from December 20 to December 31, 1995
On December 20, 1995, the Company completed the Mergers and its initial
public offering, which involved the public sale of 3,925,000 shares of Common
Stock at a price of $14.50 per share. The proceeds from the Company's initial
public offering, net of underwriting discounts and commissions and after
deducting expenses of the initial public offering, were approximately $47.2
million. Of this amount, $35.8 million was used to pay the cash portion of the
purchase price to the stockholders of the Founding Companies. The remaining
$11.4 million was used to repay a portion of the indebtedness assumed from the
Founding Companies in connection with the Mergers.
For the period from December 20 to December 31, 1995, net cash used by
operating activities was $1.8 million. Cash used in investing activities was
less than $0.1 million. Cash provided by financing activities was $0.8 million.
The Company for the Three Months Ended March 30, 1996
During the three months ended March 30, 1996, net cash used by operating
activities was $4.1 million. Cash used in investing activities was $0.2 million,
which primarily consisted of capital expenditures. Cash provided by financing
activities was $3.3 million which primarily consisted of net proceeds from the
issuance of Common Stock totaling $6.2 million, net of interest and underwriting
discounts and commissions, and the repayment of debt totaling $2.9 million. The
repayment of debt was for that incurred by Courier Dispatch for acquisitions of
companies in 1995 and included payments made on the Company's revolving line of
credit.
The Company has entered into the Credit Agreement with First Union (for
itself and as agent for other participating lenders) pursuant to which the
Company may borrow up to $50 million to refinance certain existing indebtedness
assumed in the Mergers, as well as to fund acquisitions and provide working
capital and for other general corporate purposes. The Credit Agreement provides
for a revolving line of credit of $50 million which terminates and, at the
Company's election, converts to a term facility on December 20, 1998, whereupon
the outstanding indebtedness will be fully amortized and repaid over the
succeeding three years. Under the Credit Agreement, First Union (for itself and
as agent for other participating lenders) holds a first priority security
interest on the Company's and its subsidiaries' accounts and accounts
receivable, a negative pledge with respect to the Company's and its
subsidiaries' remaining assets and a pledge of the stock of the Company's
subsidiaries. Also, successive borrowings by the Company will be subject to the
continued accuracy of certain representations and warranties set forth in the
Credit Agreement. Interest rates under the Credit Agreement are determined, at
the option of the Company, at either First Union's prime rate (or, if greater,
the federal funds rate plus 0.5%) plus an applicable margin of between 0.0% and
0.625% or LIBOR
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<PAGE> 36
plus an applicable margin of between 0.75% and 1.75%, in each case based upon
the ratio of the Company's consolidated debt to earnings before interest, taxes
and amortization.
The Credit Agreement contains certain operational and financial covenants
and other restrictions with which the Company must comply. These covenants
include, among others, maintenance of business, compliance with laws and
agreements and limitations on additional indebtedness, encumbrances, advances,
investments and sales of assets, as well as requirements to maintain certain
financial ratios. In particular, lender consent is required for acquisitions,
except for acquisitions of businesses substantially in the business of the
Company and its subsidiaries if the consideration does not exceed cash in excess
of $5 million or cash or cash and other consideration in excess of $10 million
(which limits will be reduced during the period prior to January 1, 1997 if
certain financial tests are not met).
The Company had borrowed approximately $31.4 million under the Credit
Agreement as of May 20, 1996, and as of that date approximately $13.2 million
was available for borrowing thereunder.
Based upon its present plans, management believes that operating cash flow
and available credit resources will be adequate to make the repayments of
indebtedness described herein and to meet the cash needs of the Company which
the Company anticipates over the next three years. The Company has no material
commitments for capital expenditures. Although the Company intends to issue
shares of Common Stock as its primary method of financing acquisitions, it
anticipates that additional funds may be required to implement successfully its
acquisition program, and will use various methods to finance acquisitions,
including the payment of cash, for this purpose.
ACCOUNTING STANDARDS
The Company currently accounts for stock-related compensation using
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" and therefore the Company does not expect any effect from the
adoption of Statement of Financial Accounting Standard No. 123, "Accounting for
Stock-Based Compensation." This statement is effective for the Company's year
ending December 31, 1996.
SEASONALITY AND INFLATION
The Company's revenue typically shows no significant seasonal variations,
although its delivery services may be affected by sudden or prolonged inclement
weather if transportation channels are disrupted.
The impact of inflation on the Company's operations has not been
significant to date. However, there can be no assurance that a high rate of
inflation in the future would not have an adverse effect on the Company's
operating results.
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<PAGE> 37
BUSINESS
GENERAL
The Company offers a variety of customized distribution services for
corporate customers with time-sensitive pickup and delivery requirements.
Management believes that the Company is the leading provider of scheduled ground
courier services in the United States. Through both its ground and air
divisions, the Company provides scheduled and unscheduled delivery service for
local, regional, national and international shipments, and offers same-day and
next-day delivery options. The Company's ground delivery business serves 39
states and all major metropolitan markets in the United States. The
approximately 4,082 ground transportation vehicles in the Company's fleet as of
March 30, 1996, which is one of the largest courier and parcel fleets in the
United States, facilitate the Company's broad geographic coverage. Unlike most
of the Company's competitors which serve principally metropolitan areas, the
Company serves all points in many states and is the leading intrastate ground
courier in most of such states. Additionally, the Company's air division
provides scheduled door-to-door air service nationally, emergency
next-flight-out service both domestically and internationally and air cargo
service primarily to certain destinations in the Pacific Rim.
INDUSTRY OVERVIEW
The ground courier industry in the United States is highly fragmented and
is composed of same-day, next-day and second-day service providers with a
customer base of businesses which regularly require time-sensitive deliveries of
documents and parcels. Management estimates that the ground courier industry is
a multi-billion dollar industry comprised of thousands of companies. The
document and parcel delivery market is served by (i) thousands of small,
closely-held owner-operator businesses which operate in only one location with
little or no national market share, (ii) numerous firms which operate
principally on a regional basis, (iii) fewer than ten multi-regional companies,
including the Company, which focus on same-day and early next-day delivery, and
(iv) several large companies with national hub-and-spoke delivery systems which
dominate the next-day and second-day delivery market and provide service based
upon their own pickup and delivery schedules rather than those established by
the customer. These large national companies currently do not have a broad
presence in the same-day delivery market.
The air courier industry in the United States provides same-day, next-day
and next-flight-out delivery services to customers requiring inter-city document
and parcel delivery. The Air Courier Conference Association estimates that the
annual revenue of the air courier industry reached $40 billion in 1995 based
upon industry-wide predictions for growth. The industry is comprised of numerous
closely-held companies as well as several large well-capitalized entities
serving either specified regions of the U.S. or the entire nation, many of which
utilize agency relationships to provide the ground services necessary to ship
deliveries to their final destinations.
BUSINESS STRATEGY
The principal components of the Company's operating strategy are to
continue to focus primarily on customized, scheduled delivery service, to
maintain internal growth, to capitalize on favorable industry trends and to
pursue an aggressive acquisition program to consolidate the Company's position
and broaden its geographic reach:
- FOCUS ON CUSTOMIZED, SCHEDULED DELIVERY SERVICE: The Company
concentrates primarily on customized, same-day and overnight scheduled
delivery services. Most of the Company's 1995 ground and air revenue was
derived from scheduled service, which is provided to customers on a
recurring basis with specific pickup and delivery times. Because the
majority of the Company's revenue is derived from customized delivery
service, the Company generally does not compete directly with the large,
national parcel and overnight delivery companies, which offer primarily
standardized next-day service with fixed pickup and delivery schedules.
Additionally, the Company does not emphasize on-call messenger service,
because it is generally more price competitive and is not viewed by the
Company as a market with significant potential for growth.
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<PAGE> 38
- MAINTAIN STRONG INTERNAL GROWTH: The Mergers have enabled the Founding
Companies to broaden their geographic reach. Consequently, the Company
expects to capture substantial national account business with customers
previously served by the Founding Companies only on a regional basis.
Additionally, the Company will expand the use of its industrial
engineering group (an internal logistics consulting operation) to
maximize the efficiency of customers' delivery systems and to promote
additional services. The Company will also continue to diversify its
customer base.
- CAPITALIZE ON FAVORABLE INDUSTRY TRENDS: The Company intends to take
advantage of several favorable industry trends, including (i)
outsourcing -- companies are increasingly outsourcing non-core services
such as expedited pickup and delivery transportation services; (ii)
just-in-time inventory management -- companies seeking to reduce
inventory and warehousing costs are relying on service-intensive,
expedited delivery companies with increasing frequency; (iii) improved
communications technology -- improved technology facilitates effective,
just-in-time inventory management, while allowing providers of expedited
delivery services to be more responsive to customers; and (iv) continuing
demands of the financial services industry -- financial institutions,
which constitute a material portion of the Company's customer base,
continue to require the delivery of originals to process checks and,
according to The Nilson Report, a publication which reports on consumer
payment systems, the volume of checks written has increased by 8.5% since
1990, and is expected to continue to increase through 2021.
- GROW THROUGH ACQUISITIONS: The Company intends to pursue an aggressive
acquisition program to consolidate its position in its current operating
regions and to broaden its geographic reach in a highly fragmented
industry. The Company's management believes its prior acquisition
experience will be instrumental in identifying and negotiating
acquisitions. By acquiring companies in markets where the Company already
has a presence, management expects to recognize substantial operating
advantages by consolidating overlapping delivery routes. The Company also
expects to achieve significant cost savings by eliminating redundant
administrative functions and facilities. Additionally, the Company
intends to expand into new markets with larger, strategic acquisitions.
In such situations, the key management of the acquired companies would,
under most circumstances, remain in place.
ACQUISITION STRATEGY
The highly fragmented courier industry consists of thousands of small
ground courier companies and numerous scheduled air courier companies. Many of
these companies present attractive acquisition opportunities for the Company.
The Company's senior management team has significant acquisition experience,
including (in addition to the Mergers) the completion of the acquisition of six
ground courier companies and two air courier companies in the last three years.
The Company intends to continue to acquire ground and air courier businesses in
regions where it currently has a presence, and may seek to make strategic
acquisitions in regions where it does not presently operate. The Company
recently consummated four acquisitions, as described below under "-- Recent
Developments." The Company is not considering any acquisition which is both
probable and material as of the date of this Prospectus.
In the regions where it has operations, the Company will endeavor to
acquire businesses with strong customer relationships, a history of superior
customer service and the potential to be assimilated efficiently into the
Company's existing regional management structure. For strategic acquisitions in
new regions, the Company will evaluate the strength of the existing management
and operations, and will seek management with operating philosophies consistent
with its own. In all acquisitions, the Company will evaluate the potential for
revenue growth and the efficiencies that may be achieved through consolidation.
The Company intends to appoint a vice president of acquisitions to work with
regional management to identify acquisition opportunities. The Company will rely
upon its senior management to negotiate acquisitions.
The Company believes it is an attractive acquiror for closely held
businesses which are unable to raise sufficient capital to expand and for
companies whose owners desire liquidity. The Company intends to issue shares of
Common Stock as its primary method of financing acquisitions; however, it may
use other financing
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<PAGE> 39
methods as necessary, including the payment of cash or the issuance of debt or
other equity securities. See "Risk Factors -- Acquisition Strategy; Possible
Need for Additional Financing."
The Company believes that it has a competitive advantage because of
management's experience in assimilating acquired companies into ongoing
operations. Once a new business has been acquired, the Company expects to assign
an operations logistics team from its industrial engineering group to integrate
the acquisition into the Company. The team would initially convert accounting,
payroll and cash management functions, assimilate and standardize insurance
coverage and employee benefits, visit customers and meet with employees.
Thereafter, in regions where the Company has already established operations, the
team would seek to consolidate route structures and facilities with the
Company's pre-existing operations.
RECENT DEVELOPMENTS
In May 1996, the Company acquired the assets of M & R, the assets of
Statewide used in connection with Statewide's scheduled and unscheduled ground
messenger and courier services in Massachusetts and the capital stock of Carl
Messenger. These companies provide scheduled and unscheduled ground messenger
and courier services in Connecticut, Maryland and Massachusetts. The total
revenue of these companies for the year ended December 31, 1995 was
approximately $12 million. The aggregate consideration for these transactions
was approximately $3.3 million in cash, excluding certain contingent payments
based on future performance, and approximately 58,000 shares of Common Stock.
On May 14, 1996, a wholly-owned subsidiary of the Company merged with Eddy
Messenger, a company which provides scheduled and unscheduled ground messenger
and courier services in Connecticut, New Jersey and New York State (including
New York City). The aggregate consideration (the "Eddy Messenger Merger
Consideration") for the Eddy Messenger Merger was valued at $9.5 million,
excluding certain contingent payments based on future performance, and included
the issuance of approximately 226,900 shares of Common Stock and the payment of
approximately $3.6 million in cash. The amount of the Eddy Messenger Merger
Consideration was determined based on Eddy Messenger's current operating
results, estimates of additional customer base available to Eddy Messenger and
estimates of cost savings for the Company resulting from the Eddy Messenger
Merger. The cash portion of the Eddy Messenger Merger Consideration was funded
by borrowings under the Company's revolving credit facility with First Union
National Bank of Georgia, as agent for a group of lenders.
In connection with the Eddy Messenger Merger, the Company entered into
leases for four properties which are partly or wholly-owned by entities owned or
controlled by various former stockholders of Eddy Messenger. The Company also
assumed two additional leases owned by third parties not affiliated with Eddy
Messenger or its former stockholders. Such properties were leased by Eddy
Messenger prior to the Eddy Messenger Merger for an aggregate monthly rental
expense to Eddy Messenger of approximately $36,660 per month. Under the leases
with the Company, the aggregate monthly rental expense for these properties is
approximately $21,223 per month. In additional to real property leases, the
tangible assets of Eddy Messenger include furniture, fixtures, equipment and
customer lists.
Upon the closing of the Eddy Messenger Merger, three of the four former
stockholders of Eddy Messenger entered into a three-year employment agreement
with the Company which includes a two-year covenant not to compete. The fourth
former Eddy Messenger stockholder entered into a two-year noncompetition
agreement with the Company.
GROUND COURIER OPERATIONS
The Company offers its customers scheduled ground parcel and package
courier service on a recurring basis with specific pickup and delivery times as
well as unscheduled (or on-call) ground courier service. The Company's ground
delivery business serves 39 states and all major metropolitan markets in the
United States and management believes that the Company is the leading provider
of scheduled ground courier services in the United States. Unlike most of the
Company's competitors which serve principally metropolitan areas, the Company
serves all points in many states and is the leading intrastate ground courier in
most of such states. The Company offers nationwide service with particularly
strong regional franchises in the Southeast, in the
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Midwest, along the East Coast and in select western states. The Company's fleet,
which consisted of approximately 4,082 ground transportation vehicles as of
March 30, 1996, is one of the largest courier and parcel fleets in the United
States and facilitates the Company's broad geographic coverage. The following
chart indicates the states in which the Company provides scheduled ground
courier services on a state-wide basis:
<TABLE>
<CAPTION>
STATEWIDE SERVICE
-----------------
<S> <C>
Northeast Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York,
Rhode Island, Vermont
Mid-Atlantic Maryland, North Carolina, South Carolina, Virginia, Washington, D.C.
Southeast Alabama, Florida, Georgia, Tennessee (Eastern)
South Central Arkansas, Louisiana, Mississippi, Oklahoma, Tennessee (Western), Texas
Midwest Iowa, Minnesota, Nebraska, North Dakota, South Dakota, Wisconsin
West California
</TABLE>
The Company also provides ground courier services in connection with its
air courier service to all locations within the United States.
The Company provides a variety of ground distribution services, including
(a) customized routed service, such as same-day or next-day delivery of
documents, data and canceled checks, primarily for financial institutions, (b)
small package and parcel service, such as just-in-time delivery of
pharmaceutical products, medical supplies and office supplies, (c) same-day and
overnight pouch service, for items such as interoffice mail, (d) expedited mail
delivery, such as morning and evening transfer of mail between post office
sorting centers and customer locations, and (e) other value-added services, such
as on-call deliveries, warehousing, mailroom management and transportation
network consulting services.
The Company primarily offers two types of ground courier service,
"conjunctive" service and "dedicated" service. When providing "conjunctive"
service, the Company adjusts its existing scheduled route structure in order to
meet a customer's pickup and delivery needs in conjunction with service provided
to other customers. The Company attempts to develop its conjunctive delivery
business to increase route concentration. Certain of the Company's customers
favor the Company's "dedicated" service, in which the Company assigns one or
more vehicles and drivers to pick up and deliver items for a single customer at
the times and to the locations designated by the customer.
The Company's subsidiaries have entered into written contracts with
approximately 450 customers. The contracts typically specify the types of
services to be provided, the price of such services and the term of the
contract, which is at least one year. Although such contracts generally can be
terminated by the customer after a short notice and cure period if the level of
service is inadequate, such terminations have been rare in the Company's
experience.
In recent years, unscheduled or on-call services have been offered as a
supplemental service to customers who request it, rather than developed as a
profit center of the Company's ground operations. For certain of its customers,
the Company provides warehousing services in the form of temporary storage of
parts and supplies required for distribution on demand. To a smaller degree, the
Company also provides in-house mailroom management.
Industrial Engineering. The Company's industrial engineering department
provides logistics consulting services and designs customized delivery programs.
The industrial engineering department utilizes the Company's costing models
(including cost factors such as fuel, insurance and labor costs, types of
vehicles to be used, time and mileage), data from operations and route dry runs
in making its recommendations for dedicated and conjunctive delivery routes. The
industrial engineering department works closely with the Company's marketing
staff and is actively involved in developing the Company's proposals for new
accounts
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and for additional services for existing accounts. The industrial engineering
department also provides consulting services to potential and existing customers
to analyze and evaluate a customer's existing operations and propose more
efficient delivery systems. Finally, the industrial engineering department
conducts internal studies of the Company's routes to assist the Company in
achieving maximum efficiency.
<TABLE>
Vehicles. As of March 30, 1996, the Company operated a fleet of
approximately 4,082 ground transportation vehicles, of which approximately 65%
were leased by the Company from approximately nine unaffiliated lessors. Of
these 4,082 vehicles, 37 were operated as manufacturers' test vehicles. To lower
its costs, the Company intends to reduce the number of firms from which it
leases vehicles. A Company vehicle lease typically has a term of 12 months with
renewal options. Monthly lease payments are calculated based upon a variable
percentage of the vehicle's stipulated cost. Upon termination of the lease, the
vehicle is sold with a stipulated residual value. The Company is responsible for
the vehicle's maintenance and insurance. Vehicles range in size from passenger
cars to trailers as set forth below:
VEHICLES IN OPERATION
(AS OF MARCH 30, 1996)
----------------------
<CAPTION>
APPROXIMATE APPROXIMATE
TYPE NUMBER % OF FLEET
- ---- ----------- -----------
<S> <C> <C>
Passenger Cars...................................................... 534 13.1%
Compact pickup trucks............................................... 1,211 29.7
Full-size vans/mid-size vans........................................ 1,715 42.0
Cube vans........................................................... 215 5.3
Dock trucks......................................................... 235 5.7
Tractors............................................................ 24 0.6
Trailers............................................................ 148 3.6
----- ----
Total............................................................... 4,082 100%
===== ====
</TABLE>
In an effort to extend the useful lives of its vehicles and to maximize
safety, the Company has implemented a sophisticated fleet maintenance program.
In its Northeast, Mid-Atlantic, Southeast, South Central and Midwest regions,
the Company operates thirty-five of its own maintenance shops in order to
provide high quality service for its vehicles. The Company, through one of its
vehicle lessors, participates in an extended warranty plan offered by certain
automobile manufacturers, and certain of its repair facilities are certified by
at least two such manufacturers. In all regions where it does not operate a
maintenance shop, the Company contracts with independent shops in order to
service its vehicles. Management anticipates establishing additional maintenance
shops throughout its operating regions in the future and expanding its extended
warranty program to cover leased vehicles in all the regions it serves.
Drivers. As of March 30, 1996, the Company employed approximately 5,879
full- and part-time drivers who constituted approximately 84% of its workforce.
The ground courier industry has typically experienced a high driver turnover
rate. The Company believes, based upon the experience of certain of the Founding
Companies, that its strict safety and human resources policies will continue to
favorably affect the Company's aggregate driver turnover rate. The Company
believes that continued reduction in the driver turnover rate will reduce the
time devoted to driver training and thereby increase the overall efficiency of
the Company's operations. The Company anticipates that over time it will
institute health insurance benefits for all of its full-time drivers in its
continuing effort to reduce its driver turnover rate.
Use of Independent Owner/Operators. In contrast to courier companies which
rely heavily or exclusively on independent owner/operators to provide ground
courier service, the Company has historically employed its drivers directly
because it can maintain greater control over the route operations and quality of
service provided. The Company will, however, utilize the services of independent
owner/operators where management deems this to be more cost-effective. As of
March 30, 1996, the Company had contracted with approximately 764 independent
owner/operators.
The federal employment and income tax reporting of many companies in the
transportation industry has been challenged by the Internal Revenue Service on
the grounds that independent owner/operators should
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<PAGE> 42
have been classified and treated, for federal tax purposes, as employees. In
order to avoid such issues, the Company will attempt to assure that its
arrangements with independent owner/operators are structured so that they will
not be deemed to be employees. As a result, such independent owner/operators
will, among other things, have substantial control over the timing and manner of
the services they provide.
AIR COURIER OPERATIONS
The Company offers air delivery service through commercial airlines and
chartered aircraft to transport time-sensitive documents and packages, primarily
for financial institutions, throughout the United States. The Company provides
scheduled door-to-door air service nationally, emergency next-flight-out service
both domestically and internationally and air cargo service primarily to the
Pacific Rim and Canada.
The Company purchases its air transportation from certain major airlines
and air charter operators. The Company has negotiated favorable terms with
commercial and charter airlines that enable it to charge competitive rates for
its services while maintaining its margins. The Company does not currently own
or operate any aircraft and has no intention to do so.
To meet the scheduling needs of its air courier customers, the Company
operates by means of a hub-and-spoke network centered in metropolitan areas
across the United States and by means of direct routing between certain cities.
In cities in which the Company maintains vehicles, the Company supplements its
air courier services with the Company's ground transportation services to
deliver its shipments to their ultimate destinations. In the cities in which the
Company does not maintain vehicles, the Company relies on agency relationships
with independent ground courier companies for transportation of shipments to and
from the airport. In providing air cargo delivery services, the Company acts as
a freight forwarding agent, arranging for cargo to be shipped to its final
destination. The Company advises customers by telephone and by an automated
transmission system on a regular basis of actual delivery times for each air
courier shipment.
The Company provides a variety of air delivery services, including (a)
customized scheduled service, such as same-day or next-day delivery of
documents, data and canceled checks, primarily for financial institutions, (b)
international service, which includes both air courier and air cargo deliveries,
and (c) next-flight-out service, in which the Company provides door-to-door
delivery of documents as quickly as possible, generally utilizing space on the
next available commercial aircraft.
CUSTOMERS
The financial services industry, including commercial banks, savings banks
and Federal Reserve banks, represents the Company's largest category of
customers, and in 1995 accounted for approximately 40% of the Combined Founding
Companies' revenue. Wholesale pharmaceutical companies, which deliver
pharmaceutical products to retail outlets, comprised the Company's next largest
category of customers, based on the 1995 revenue of the Combined Founding
Companies. Manufacturers of computer parts, automobile parts, tractor parts and
other parts and products, which utilize the Company's parcel delivery services
to ship parts and products to their customers, accounted for the third largest
share of the Combined Founding Companies' 1995 revenue. Various businesses
requiring expedited mail delivery, scheduled interoffice (or "pouch") deliveries
and other scheduled and unscheduled courier services comprised the balance of
aggregate 1995 revenues. Such businesses included insurance companies and
accounting, legal, retail, advertising, printing and other types of firms. As of
March 30, 1996, no single customer accounted for more than 5% of the Company's
revenue.
MARKETING AND CUSTOMER SERVICE
The Company conducts a comprehensive marketing program involving direct
sales and customer service to maintain and increase its customer base. As of
March 30, 1996, the Company employed approximately 42 sales employees and
approximately 50 customer service employees. The Company's marketing efforts are
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<PAGE> 43
organized regionally with senior management acting to coordinate the efforts of
regional staff and supplement their efforts in marketing for and serving
national accounts.
The Company's marketing representatives make regular calls on existing and
potential customers to design customized services capable of meeting the
customer's delivery requirements within reasonable cost parameters. Whenever
possible, the Company offers its customers several different service options in
an effort to provide the most cost effective delivery services possible when
bidding for new accounts. Customer service representatives regularly communicate
with customers to monitor the quality of services and to determine promptly a
customer's need for new or different services. The Company's senior management
attends and makes presentations at customer conferences, seminars and related
events to promote new business.
The Company's marketing and sales personnel also identify and pursue new
areas of business for the Company. The Company has identified and will pursue
deliveries of products for logistics companies, computer parts, and medical
office and hospital samples and specimen deliveries. In addition, the Company
intends to market its existing delivery routes to companies in various
industries which are outsourcing their delivery systems or otherwise require
customized delivery services.
RISK MANAGEMENT
From time to time, the Company's drivers are involved in accidents. The
Company carries liability insurance of $15 million for each such accident (it
may effectively self-insure for the first $250,000 claimed), and independent
owner/operators are required to maintain liability insurance of at least the
minimum amounts required by applicable state law. Furthermore, all drivers and
independent owner/operators are covered by the Company's fidelity bond. The
Company also has insurance policies covering property and fiduciary trust
liability.
The Company has appointed a director of risk management who is responsible
for overseeing the creation, implementation and enforcement of the Company's
safety policies and programs. In addition, each district within each region of
the Company's operations has a division safety manager who is responsible for
various safety-related duties such as conducting driver education courses,
analyzing accident records to design appropriate preventative measures and
implementing safety incentive programs for drivers. Management believes the
safety policies and programs of the Combined Founding Companies have contributed
to a decline in their aggregate insurance costs as a percentage of revenue.
COMPETITION
Both the ground and air courier businesses are highly competitive. In
general, the Company competes with national, regional and local ground and air
courier companies. Management believes that the principal competitive factors in
the courier business are the ability to provide timely deliveries on a
consistent basis at a competitive price. When competing for business, the
Company will emphasize custom-designed services, the Founding Companies' record
of maintaining excellent on-time performance standards and their established
operating history.
In its scheduled ground courier operations, the Company primarily competes
with organizations which operate on a regional basis and typically provide
scheduled courier services for time-sensitive documents and parcels. The Company
estimates that there are fewer than ten multi-regional companies which focus on
same-day and early next-day delivery and numerous firms which operate
principally on a regional basis, and that as of the closing of the Mergers the
Company was the largest of these companies. In contrast with the Company, many
of the regional and multi-regional companies serve principally metropolitan
centers without significant all-points service within a given state or region.
The Company also may compete with small, closely-held owner/operator businesses
which operate in only a small number of locations. The Company generally
competes on the basis of price and its ability to provide customized service to
more points regionally and nationally, which it believes is an important
advantage in this highly fragmented industry. Because the majority of the
Company's revenues are derived from customized, same-day delivery service, the
Company generally does not compete directly with the large, national parcel and
overnight delivery companies which offer primarily standardized next-day service
with fixed pickup and delivery schedules.
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<PAGE> 44
In its air courier operations, the Company primarily competes with other
air courier companies which specialize in scheduled air delivery services, as
well as other shippers of air cargo, in which shipments are arranged in
accordance with the needs of the customer. The Company estimates that there are
fewer than twenty air courier companies and that as of the closing of the
Mergers it was the third largest, following two national parcel delivery
organizations with extensive capital resources, which have acquired air courier
companies specializing in next-flight-out deliveries utilizing commercial and
chartered airlines. Next-flight-out deliveries are not a primary focus of the
Company's air courier division. To the extent the Company provides
next-flight-out air deliveries, it will compete directly against such larger
companies for this business. Moreover, such larger companies may in the future
pursue the Company's core scheduled, customized air delivery business, in which
event the Company will compete on the basis of price, service and its
historically high performance standards. See "Industry Overview."
ORGANIZATION
In December 1995, the Company consummated the Mergers with the six Founding
Companies. The aggregate consideration paid by the Company in the Mergers was
4,692,222 shares of Common Stock and approximately $35,820,000 in cash. The
stockholders of each of the Founding Companies, except for Courier Dispatch,
received their consideration for the Mergers in the form of Common Stock and
cash. The Courier Dispatch stockholders received only Common Stock. The
consideration to be paid to the stockholders of the Founding Companies was
determined through arm's length negotiations among the Company and the
stockholders of the Founding Companies. The valuation of each Founding Company
other than Courier Dispatch was generally based upon its current operating
results, estimates of the additional customer base available to such Founding
Company and estimates of cost savings resulting from the Mergers. The valuation
of Courier Dispatch was a function of the valuation of the Company as a whole
less the valuations of the other Founding Companies.
Certain information regarding each of the Founding Companies, each of which
is a subsidiary of the Company, is discussed below:
Courier Dispatch. Courier Dispatch is based in metropolitan Atlanta,
Georgia and its business was established in 1967. Courier Dispatch operates
scheduled ground and parcel courier services in seventeen states and the
District of Columbia and operates air courier services nationally. The
stockholders of Courier Dispatch received an aggregate of 329,775 shares of
Common Stock in the Merger. In connection with the Mergers, options to purchase
shares of Courier Dispatch common stock were terminated and replaced with
options to purchase an aggregate of 216,110 shares of Common Stock at purchase
prices ranging from $2.06 to $4.42 per share, 212,711 of which options are
currently exercisable. BancBoston, Fleet and First Union, each of which held
securities convertible into shares of Courier Dispatch common stock prior to the
Mergers, exchanged their respective convertible securities for an aggregate of
1,792,660 shares of Common Stock. Officers and stockholders of Courier Dispatch
included Mr. Philip A. Belyew, who is the President, Chief Executive Officer,
Chairman and a director of the Company and Mr. Ronald J. Barowski, who is an
Executive Vice President, the Treasurer and the Chief Financial Officer of the
Company. Mr. R. David England, Jr., who was a stockholder of Courier Dispatch
and its vice president, operations, became Executive Vice President, Ground, of
the Company upon the closing of the Mergers, and Mr. George G. Wagner, who was a
corporate vice president of Courier Dispatch, became the Senior Vice President,
National Account Sales, of the Company. In connection with the Mergers, each of
Mr. Belyew, Mr. Barowski, Mr. England and Mr. Wagner entered into a three-year
employment agreement with the Company which includes a covenant not to compete
expiring no earlier than the fifth anniversary of the date of his employment
agreement.
Tricor. Tricor is based in San Francisco, California and its business was
established in 1957. Tricor provides air courier services nationally, with
ground courier support in California, as well as major metropolitan areas in
fourteen other states and Guam. Tricor also provides international air courier
and cargo services to portions of Canada and the Pacific Rim. The stockholders
of Tricor received an aggregate of 840,520 shares of Common Stock and
$11,716,000 in cash in the Mergers. Mr. Chee B. Louie, who was the president, a
director and a stockholder of Tricor, became Executive Vice President, Air, and
a director of the Company upon the closing of the Mergers. Ms. Christina V.
Louie, who held stock of Tricor jointly with
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<PAGE> 45
Mr. Louie as his spouse, is employed by the Company at the regional level. Each
of Mr. and Ms. Louie entered into a three-year employment agreement with the
Company which includes a covenant not to compete expiring no earlier than the
fifth anniversary date of his or her employment agreement.
Film Transit. Film Transit is based in Memphis, Tennessee and was
established in 1937. Film Transit provides scheduled ground and parcel courier
services to all points in Alabama, Arkansas, Louisiana, Mississippi, Oklahoma
and Tennessee, and to portions of Florida, Georgia, Missouri, Illinois, Texas
and Kentucky. The stockholders of Film Transit received an aggregate of 530,202
shares of Common Stock and $7,390,000 in cash in the Mergers. Mr. Guilbert L.
Brandon, Jr., who was a director, the president and a stockholder of Film
Transit, became Vice President, Parcel, and a director of the Company upon the
closing of the Mergers. Mr. R. Wayne Mashburn, a former stockholder of Film
Transit, was employed by the Company at the regional level upon the closing of
the Mergers. In connection with the Mergers, each of Mr. Brandon and Mr.
Mashburn entered into a three-year employment agreement with the Company which
includes a covenant not to compete expiring no earlier than the fifth
anniversary of the date of his employment agreement. The three remaining former
stockholders of Film Transit entered into two-year covenants not to compete with
the Company.
Lanter. Lanter is based in Minneapolis, Minnesota and its business was
established in 1981. Lanter provides scheduled ground courier and parcel
delivery service to all points in Iowa, Nebraska and Wisconsin and to portions
of Michigan. The stockholders of Lanter received an aggregate of 662,145 shares
of Common Stock and $9,230,000 in cash in the Mergers. Mr. Steven W. Lanter, who
was the president, chief executive officer, a director and a stockholder of
Lanter became a director of the Company upon the closing of the Mergers. Mr.
Lanter and one of the other former stockholders of Lanter entered into a
two-year covenant not to compete with the Company. In connection with the
Mergers, Mr. Lanter pledged 31,434 shares of his Common Stock to the Company as
security for certain indemnification and other obligations owed by Mr. Lanter to
the Company under the Lanter Merger agreement. Also in connection with the
Mergers, Lanter Courier Corporation reorganized into two separate businesses:
Lanter, which was acquired by the Company in the Mergers, and Lanter Delivery
Systems, Inc. Lanter Delivery Systems, Inc. operates independently as a ground
courier and parcel delivery company in the states of Illinois, Indiana, Kansas,
Kentucky, Michigan (other than its upper peninsula), Missouri and Ohio. Prior to
the Mergers, Lanter was based in Madison, Illinois, outside of St. Louis,
Missouri. Lanter Delivery Systems, Inc. has covenanted not to operate in any
other states, except to the extent necessary to serve its ongoing business,
although the Company may compete with Lanter Delivery Systems, Inc. in such
states. The Company has a right of first refusal to acquire Lanter Delivery
Systems, Inc. which expires in December 2000.
Sunbelt. Sunbelt is based in Little Rock, Arkansas, and its business was
established in 1974. Sunbelt provides scheduled ground courier services to all
points in Arkansas, Louisiana and Mississippi and to portions of Alabama,
Florida, Kentucky, Missouri, Oklahoma, Tennessee and Texas. The stockholders of
Sunbelt received an aggregate of 270,028 shares of Common Stock and $3,764,000
in cash in the Mergers. Mr. James G. Salmon, who was the president and a
director of Sunbelt, became Vice President, Ground, and a director of the
Company upon the closing of the Mergers. In connection with the Mergers, Mr.
Salmon entered into a three-year employment agreement with the Company which
includes a covenant not to compete expiring no earlier than the fifth
anniversary of the date of his employment agreement. The three remaining former
stockholders of Sunbelt entered into two-year covenants not to compete with the
Company. Each of the covenants not to compete permits such stockholders to work
for their family business, which primarily provides contract mail transportation
service.
3D. 3D is based in Dallas, Texas and was established in 1982. 3D provides
ground parcel delivery services to most points in Arkansas, Florida and Texas
and to portions of Louisiana, Missouri and Oklahoma. The stockholders of 3D
received an aggregate of 266,892 shares of Common Stock and $3,720,000 in cash
in the Mergers. Ms. Carolyn Draper, who was the chairman, president, treasurer
and a stockholder of 3D, became a Vice President, the Secretary and a director
of the Company upon the closing of the Mergers. In connection with the Mergers,
Ms. Draper entered into a three-year employment agreement with the Company which
includes a covenant not to compete expiring no earlier than the fifth
anniversary of the date of her employment agreement. In connection with the
Mergers, Ms. Draper pledged 34,483 shares of her Common
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<PAGE> 46
Stock to the Company as security for certain indemnification obligations owed by
Ms. Draper to the Company under the 3D Merger Agreement. One other former
stockholder of 3D entered into a two-year covenant not to compete with the
Company.
The Company will continue to operate the business of each Founding Company
on a decentralized basis to preserve the strong customer relationships and
regional franchise of each major operating unit, but senior management will act
to standardize various administrative and operating procedures such as
accounting, safety, insurance and employment policies. Over time, the Company
will gradually phase out each Founding Company's name and begin to operate in
all regions under the name "United TransNet, Inc." The Company's senior
management is composed of personnel from each of the Founding Companies. The
Company believes that it has sufficient administration and operations personnel
to pursue its business strategy on a national scale.
For further information regarding the employment agreements and
non-competition covenants, see "Management -- Employment Agreements;
Covenants-Not-To-Compete."
REGULATION
As of January 1, 1995, the Federal Aviation Administration Authorization
Act of 1994 became effective, abolishing all intrastate regulatory control over
prices, routes and services to which the Company had previously been subject.
This legislation has increased the ability of the Company to expand into new
states and to expand its presence in its existing areas of service.
The Company holds nationwide general commodities authority from the Federal
Highway Administration (formerly the Interstate Commerce Commission) to operate
as a common carrier on an interstate basis within the contiguous 48 states. The
Trucking Industry Regulatory Reform Act of 1994 further deregulated certain
segments of the transportation industry, so that the Company is no longer
required to file tariffs setting forth its interstate rates.
In connection with the operation of certain large vehicles and the handling
of hazardous materials in its courier operations, the Company is subject to
regulation by the United States Department of Transportation with respect to the
safety of operation and equipment for the Company's vehicles. The Company is
also subject to regulation by the Occupational Health and Safety Administration
and, to the extent it holds licenses to operate two-way radios to communicate
with its fleet, by the Federal Communications Commission. Management believes
that the Company is in substantial compliance with all of these regulations.
The Company's operations are subject to various federal, state and local
environmental laws and regulations governing vehicle emissions, underground fuel
tanks and the storage, use and disposal of hazardous materials and hazardous
waste in connection with the Company's in-house maintenance operations. Prior to
entering into merger agreements with the Founding Companies, the Company
evaluated all of the properties to be assumed in the Mergers, and engaged an
independent environmental audit firm to conduct assessments of the properties
owned by, or on which vehicle maintenance activities are conducted by, the
Founding Companies other than Courier Dispatch. Such assessments included
reviews of governmental databases relating to, observation of surface conditions
on and interviews with persons familiar with, such properties. Management
believes that, in connection with its prior management activities with Courier
Dispatch, it has had sufficient experience to evaluate the Courier Dispatch
properties, all of which are leased, and has ordered no further environmental
reviews for such properties. No material environmental problems were discovered
in the evaluations and reviews. To the extent environmental contamination occurs
or has occurred for which the Company is deemed responsible under applicable
law, it will be required to assume the costs of remediation, which could be
material.
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PROPERTIES
<TABLE>
As of March 30, 1996, the Company operated ground courier facilities in 189
locations, of which 3 were owned, 179 were leased, 3 were operated at
customer-owned locations, 2 were maintained at individual couriers' residences
and 2 were owned by another national courier company and were operated by the
Company. These facilities are principally used for operations, general and
administrative functions and training. In addition, several facilities also
contain or will primarily be used for storage and warehouse space. The owned
properties were located in Florida (one), Georgia (one) and Minnesota (one). The
chart below summarizes the locations of facilities which the Company leases:
<CAPTION>
NUMBER OF
LEASED
PROPERTIES
AS OF
REGION MARCH 30, 1996
------ --------------
<S> <C>
Northeast (ME, MA, NH, RI, VT)................................. 6
Mid-Atlantic (MD, NC, NY, SC, VA, DC).......................... 21
Southeast (AL, FL, GA, TN (Eastern))........................... 47
South Central (AR, LA, MS, OK, TN (Western), TX)............... 57
Midwest (IA, IL, MN, NE, ND, SD, WI)........................... 30
West (AZ, CA, CO, NV, OR, UT, WA).............................. 18
</TABLE>
The company has entered into additional leases in connection with its
acquisition of Eddy Messenger. See "-- Recent Developments."
The Company believes that its properties are well maintained, in good
condition and adequate for its present needs. The Company anticipates that
suitable additional or replacement space will be available when required.
The Combined Founding Companies' aggregate facilities rental expense for
the period ended December 19, 1995 was approximately $14 million and the
Company's facilities rental expense for the period from December 20, 1995 to
December 31, 1995 was approximately $0.48 million. The Company's facilities
rental expense for the period from January 1, 1996 to March 30, 1996 was
approximately $1.1 million. For additional information concerning the Company's
leases, see Note 11 to Notes to Combined Financial Statements of the Combined
Founding Companies and Note 8 to Notes to Consolidated Financial Statements of
the Company.
EMPLOYEES
At March 30, 1996, the Combined Founding Companies had approximately 6,979
employees, of which approximately 1,099 were employed full-time primarily in
various management, supervisory, administrative, and other corporate positions,
approximately 4,719 were employed full-time as drivers and approximately 1,160
were employed part-time, primarily as drivers. In 1991, Courier Dispatch's
drivers and mechanics employed at its facilities in Georgia designated Local 728
of the Teamsters as their bargaining representative, although as of March 30,
1996 only approximately 8.5% of such drivers and mechanics were union members.
The stated term of the collective bargaining agreement entered into at that time
expired as of July 31, 1993; however, no formal notice of termination or renewal
has been given by either party under such agreement's automatic renewal clause.
None of the Company's other employees are represented by unions. The Company has
experienced no work stoppages and believes that its relations with its employees
are good.
LEGAL PROCEEDINGS
Except as set forth below, there are no pending legal proceedings involving
the Company other than routine litigation incidental to the Company's business,
including numerous motor vehicle-related accident claims. In the opinion of the
Company's management, such proceedings should not, individually or in the
aggregate, have a material adverse effect on the Company's results of operations
or financial condition. See Note 11 to Notes to Combined Financial Statements of
the Combined Founding Companies for information concerning the Combined Founding
Companies' insurance and casualty claims.
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On May 8, 1996, an employee working in the Company's Southeast region filed
suit against the Company in the Circuit Court for Hillsborough County, Florida.
The complaint contains allegations, among other things, of violations of
Florida's "whistleblower" statute and of retaliatory treatment by the Company.
The plaintiff seeks unspecified damages comprising front pay, compensation for
lost wages, benefits and other remuneration, compensatory and punitive damages,
and declaratory relief relating to his noncompetition agreement. The Company has
appointed a special committee to investigate all of the employee's claims. Based
on preliminary results of that inquiry, the Company believes the claims to be
without merit and will vigorously defend the action.
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<PAGE> 49
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
<TABLE>
The following table sets forth certain information concerning each of the
persons who are directors or executive officers of the Company.
<CAPTION>
NAME AGE POSITIONS
---- --- ---------
<S> <C> <C>
Philip A. Belyew(1)........... 48 Chairman, President, Chief Executive Officer and Director
Ronald J. Barowski............ 54 Executive Vice President, Treasurer, and Chief Financial Officer
R. David England, Jr.......... 41 Executive Vice President, Ground
Chee B. Louie................. 47 Executive Vice President, Air and Director
George G. Wagner.............. 61 Senior Vice President, National Account Sales
Guilbert L. Brandon, Jr....... 49 Vice President, Parcel, and Director
Carolyn Draper................ 53 Vice President, Secretary and Director
James G. Salmon............... 30 Vice President, Ground, and Director
James W. Bennett.............. 53 Vice President, Sales, Marketing and National Accounts
Mark E. Rykowski.............. 37 Vice President, Group Services
Craig H. Deery(2)(3).......... 48 Director
John B. Ellis(2)(3)........... 71 Director
Habib Y. Gorgi(1)(2).......... 39 Director
Charles A. Krause(1)(2)....... 63 Director
Steven W. Lanter(1)(2)........ 37 Director
<FN>
- ---------------
(1) Member of the Acquisition Committee, of which Mr. Gorgi is the Chairman.
(2) Member of the Audit Committee, of which Mr. Krause is the Chairman.
(3) Member of the Compensation Committee, of which Mr. Ellis is the Chairman.
</TABLE>
Philip A. Belyew became a director and the Chairman, President and Chief
Executive Officer of the Company in October 1995. Mr. Belyew has over seventeen
years of experience in the courier industry. From June 1994 to December 1995,
Mr. Belyew was the President and Chief Executive Officer of both CDG Holding
Corp. and Courier Dispatch Group, Inc., and was a director of CDG Holding Corp.
from February 1994 until December 1995. From December 1991 until June 1994, Mr.
Belyew was President and Chief Operating Officer of Courier Dispatch Group, Inc.
From 1988 until December 1991, Mr. Belyew was a Senior Vice President of Courier
Dispatch Group, Inc. in charge of all ground profit centers.
Ronald J. Barowski became the Executive Vice President, Treasurer,
Secretary and Chief Financial Officer of the Company in October 1995, although
he ceased to serve as Secretary in December 1995. Mr. Barowski has over 30 years
of experience in finance and accounting. From March 1992 to December 1995, Mr.
Barowski was the Vice President, Chief Financial Officer, Secretary and
Treasurer of CDG Holding Corp. and Courier Dispatch Group, Inc. From August 1986
until July 1991, Mr. Barowski was the Executive Vice President, Secretary and
Chief Financial Officer of Lease Plan U.S.A.
R. David England, Jr. became the Executive Vice President, Ground, of the
Company in December 1995. Mr. England has over fourteen years of experience in
the courier industry. From October 1994 to December 1995, Mr. England was the
Vice President, Operations, of Courier Dispatch Group, Inc. From October 1992 to
October 1994, Mr. England was the Vice President, Business Development, of
Courier Dispatch Group, Inc. From November 1990 until October 1992, Mr. England
was a Regional Manager with Courier Dispatch Group, Inc.
Chee B. Louie became a director and the Executive Vice President, Air, of
the Company in December 1995. Mr. Louie has fourteen years of experience in the
courier industry. From August 1990 to December 1995, Mr. Louie was a director
and the President, Chief Executive Officer and the Secretary of Tricor, and,
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<PAGE> 50
jointly with his spouse, was the sole stockholder of Tricor from September 1990
until December, 1995. Mr. Louie is also a director of CR Dispatch Service, Inc.,
a privately-held company.
George G. Wagner became the Senior Vice President, National Account Sales,
of the Company in December 1995. Mr. Wagner has over fifteen years of experience
in the courier industry. From 1988 to December 1995, Mr. Wagner was a Corporate
Vice President for air courier dispatch and national account sales and customer
service of Courier Dispatch Group, Inc.
Guilbert L. Brandon, Jr. became the Vice President, Parcel, and a director
of the Company in December 1995. Mr. Brandon has over ten years of experience in
the courier industry. From March 1985 to December 1995, Mr. Brandon was the
President of Film Transit.
Carolyn Draper became a director, a Vice President and the Secretary of the
Company in December 1995. Ms. Draper has over thirteen years of experience in
the transportation industry. From 1984 to December 1995, Ms. Draper was the
Chairman and President of 3D, and from December 1990 to December 1995 she was
3D's Treasurer.
James G. Salmon became a director and Vice President, Ground, of the
Company in December 1995. Mr. Salmon has eight years of experience in the
transportation industry. From January 1993 to December 1995, Mr. Salmon was a
director and the President of Salmon Acquisition Corporation and Sunbelt
Courier, Inc. Mr. Salmon was also employed on a part time basis as an assistant
to the executive officers of Pat Salmon and Sons, Inc., a company engaged in the
contract mail transportation business owned in part by his father and uncle.
From September 1990 to January 1993, Mr. Salmon was the Director of Personnel
and Legal Affairs of Pat Salmon and Sons, Inc.
James W. Bennett became Vice President, Sales, Marketing and National
Accounts, in March 1996. Mr. Bennett was the Vice President of Sales and
Marketing for Courier Dispatch from July 1994 to December 1995. From February
1989 to July 1994, Mr. Bennett was a Vice President of Pony Express Courier
Corp., a privately-held courier company.
Mark E. Rykowski became Vice President, Group Services, in March 1996. From
January 1996 to March 1996, Mr. Rykowski was the Vice President of Operations
for Courier Dispatch. Mr. Rykowski has been employed in various capacities by
Courier Dispatch, including as Regional Operations Analyst for Florida (1989 to
1990), General Manager, Florida (1990 to 1992), National Business Analyst (1992
to 1994) and Director of Operations (1994 to 1995).
Craig H. Deery became a director of the Company in December 1995. Mr. Deery
was a director of CDG Holding Corp. from 1991 to December 1995. Since 1986, Mr.
Deery has been a Managing Director of BancBoston. Mr. Deery is also a director
of Climax Manufacturing Company, The Sheridan Group, Inc., Bright Star, Inc. and
Bankers' Systems, Inc., all of which are privately-held companies.
John B. Ellis became a director of the Company in May 1996. Mr. Ellis, a
private investor, retired in 1986 as the Senior Vice President-Finance and
Treasurer of Genuine Parts Company (NYSE), a national distributor of automotive
replacement parts, where he had been employed in various capacities since 1974
and continues to serve as a director emeritus. Mr. Ellis is also a director of
Flowers Industries, Inc. (NYSE), Hughes Supply, Inc. (NYSE), Integrity,
Incorporated (OTC), Intermet Corporation (OTC), Interstate/Johnson-Lane, Inc.
(NYSE), Oxford Industries, Inc. (NYSE) and UAP, Inc. (Montreal and Toronto).
Habib Y. Gorgi became a director of the Company in December 1995. From 1986
to December 1995, Mr. Gorgi was the Executive Vice President of Fleet Growth
Resources, Inc. ("FGR"), the corporate general partner of FVP and was an
Executive Vice President of FVR from 1986 to December 1995. From January 1996 to
the present, Mr. Gorgi has been the President of FGR and FVR. Mr. Gorgi was a
director of CDG Holding Corp. from 1991 to December 1995. Mr. Gorgi is also a
director of Rosina Food Products, Inc., Dines Industrial Group, Inc., La Petite
Academy, Inc., Simonds Industries, Inc. and Wain-Roy, Inc., all of which are
privately-held companies.
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<PAGE> 51
Charles A. Krause became a director of the Company in December 1995. Mr.
Krause has over fifteen years of experience in management consulting. Since
1980, Mr. Krause has been the President and Chief Executive Officer of Krause
Consultants Ltd., a company which performs management consulting services,
primarily in the area of strategic planning. Mr. Krause is also a director of
the Milwaukee Brewers Baseball Club, Velvac, Inc., The TLC Group, The Todd
Corporation and Hall Steel Corporation, all of which are privately-held
companies.
Steven W. Lanter became a director of the Company in December 1995. Mr.
Lanter has over fourteen years of experience in the courier industry. Since
February 1992, Mr. Lanter has been the President and Chief Operating Officer of
Lanter Company, a company engaged primarily in warehousing and trucking which is
an affiliate of Lanter. From 1987 to December 1995, Mr. Lanter was the President
of Lanter. In December 1995, Mr. Lanter became the President of Lanter Delivery
Systems, Inc.
BOARD OF DIRECTORS
The Board of Directors of the Company consists of ten members. Each
director holds office until the annual meeting of the stockholders of the
Company next following his or her election, and until his or her successor is
elected and qualified. The holders of the shares of Common Stock, voting
separately as a class, are entitled to elect all of the directors.
The Board of Directors has established an Audit Committee, a Compensation
Committee and an Acquisition Committee.
Directors who are employees of the Company do not receive additional
compensation for serving as directors. Each director who is not an employee of
the Company will receive an annual fee of $26,800 as compensation for his or her
services as a member of the Board of Directors, plus attendance fees of $1,000
for each meeting and $1,000 for each meeting of a committee of the Board which
is not held in conjunction with a meeting of the Board of Directors.
Non-employee directors who chair committees of the Board receive an additional
fee of $2,000 per year. All directors of the Company are reimbursed for
out-of-pocket expenses incurred in attending meetings of the Board of Directors
or committees thereof, and for other expenses incurred in their capacities as
directors of the Company. Under the 1996 Stock and Option Plan for Non-Employee
Directors, beginning in 1997 seventy percent of the annual fee will be payable
in the form of an option to purchase Common Stock pursuant to such plan and
thirty percent of the annual fee will be payable in cash, and non-employee
directors will be able to elect to receive Common Stock in lieu of all or a
specified portion, in increments of twenty-five percent, of their cash
compensation.
EXECUTIVE COMPENSATION
The Company was incorporated in October 1995, and has conducted operations
since December 1995. During the fiscal year ending December 31, 1995 the
Company's most highly compensated executive officers were Messrs. Belyew,
Brandon, Barowski, England, Louie, and Wagner (the "Named Executive Officers"),
each of whom entered into an employment agreement providing for an annual salary
of $250,000, $190,000, $150,000, $150,000, $150,000 and $130,000, respectively,
for the year commencing as of December 20, 1995. See "-- Employment Agreements;
Covenants-Not-To-Compete." In addition to base salary, the Named Executive
Officers pursuant to their employment agreements are eligible to participate in
such bonus and incentive compensation plans as are from time to time made
available to senior executives of the Company.
49
<PAGE> 52
<TABLE>
Summary Compensation Table The following table provides certain information
concerning compensation earned by each of the Named Executive Officers during
the Company's fiscal year ended December 31, 1995.
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION SECURITIES
NAME AND ---------------------- UNDERLYING
PRINCIPAL POSITION YEAR(1) SALARY OPTIONS
- ------------------ ------- ------- ------------
<S> <C> <C> <C>
Philip A. Belyew................................. 1995 $28,042(2) 39,223
Chairman, President and Chief Executive Officer
Ronald J. Barowski............................... 1995 $12,709(3) 15,098
Executive Vice President, Treasurer and
Chief Financial Officer
Guilbert L. Brandon, Jr ......................... 1995 $ 5,250(4) 0
Vice President, Parcel
R. David England, Jr ............................ 1995 $10,417(3) 27,455
Executive Vice President, Ground
Chee B. Louie.................................... 1995 $ 4,616(3) 0
Executive Vice President, Air
George G. Wagner................................. 1995 $ 7,708(5) 31,378
Senior Vice President, National
Account Sales
- ---------------
<FN>
(1) The Common Stock of the Company became registered under Section 12 of the
Securities Exchange Act of 1934, as amended, effective December 14, 1995.
(2) Reflects payments made by the Company during the fiscal year ended December
31, 1995 under an employment agreement providing for an annual salary of
$250,000 commencing December 20, 1995.
(3) Reflects payments made by the Company during the fiscal year ended December
31, 1995 under an employment agreement providing for an annual salary of
$150,000 commencing December 20, 1995.
(4) Reflects payments made by the Company during the fiscal year ended December
31, 1995 under an employment agreement providing for an annual salary of
$190,000 commencing December 20, 1995.
(5) Reflects payments made by the Company during the fiscal year ended December
31, 1995 under an employment agreement providing for an annual salary of
$130,000 commencing December 20, 1995.
</TABLE>
<TABLE>
Option Grants in Last Fiscal Year. The following table sets forth
certain information concerning the grant of options to purchase Common Stock to
each of Messrs. Belyew, Barowski, England and Wagner. None of the other Named
Executive Officers were granted stock options in the fiscal year ended December
31, 1995.
OPTION GRANTS IN FISCAL YEAR 1995(1)
<CAPTION>
PERCENT OF
TOTAL POTENTIAL REALIZABLE VALUE AT
NUMBER OF OPTIONS ASSUMED ANNUAL RATE OF STOCK
SECURITIES GRANTED TO MARKET PRICE APPRECIATION FOR OPTION
UNDERLYING EMPLOYEES EXERCISE PRICE ON TERM(2)
OPTIONS IN FISCAL PRICE DATE OF EXPIRATION --------------------------------
NAME GRANTED YEAR 1995 ($/SH) GRANT DATE 0% 5% 10%
---- ---------- ---------- -------- -------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Philip A. Belyew.... 39,223 18.15% $2.06 $14.50 9/30/01 $487,934 $673,301 $906,413
Ronald J. Barowski.. 15,098 6.99% $2.06 $14.50 9/30/01 $187,819 $259,172 $348,903
R. David England,
Jr. ............... 27,455 12.70% $2.06 $14.50 9/30/01 $341,540 $471,292 $634,463
George G. Wagner.... 31,378 14.52% $2.06 $14.50 9/30/01 $390,342 $538,634 $725,121
- ---------------
<FN>
(1) The options noted in this table were issued upon conversion of options to
purchase Courier Dispatch common stock in the Mergers, and they are all
currently exercisable. See "-- Other Stock Options."
</TABLE>
50
<PAGE> 53
<TABLE>
(2) The number of years used for the life of the options is 5.778 years. The
stock price per year is as follows:
<CAPTION>
GROWTH RATE:
---------------------------
EXERCISE 5.00% 10.00%
PRICE STOCK PRICE STOCK PRICE
--------- ----------- -----------
<S> <C> <C> <C> <C>
12/20/95 $2.06 $14.50 $14.50
1 year 12/20/96 $2.06 $15.23 $15.95
1 year 12/20/97 $2.06 $15.99 $17.55
1 year 12/20/98 $2.06 $16.79 $19.30
1 year 12/20/99 $2.06 $17.62 $21.23
1 year 12/20/00 $2.06 $19.23 $25.17
0.788 year 09/30/01 $2.06 $19.23 $25.17
</TABLE>
<TABLE>
OPTION VALUES AT DECEMBER 31, 1995
<CAPTION>
NUMBER OF SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
NAME OPTIONS(1) OPTIONS(2)
- ---- -------------------- ------------
<S> <C> <C>
Philip A. Belyew............................................ 39,223 $512,448
Ronald J. Barowski.......................................... 15,098 $197,255
R. David England, Jr. ...................................... 27,455 $358,700
George G. Wagner............................................ 31,378 $409,954
- ---------------
<FN>
(1) All unexercised options were immediately exercisable at December 31, 1995.
(2) Based on $13.065 per share, which is equal to $15.125 per share (the closing
price per share of the Common Stock on Friday, December 29, 1995, as
reported in a summary of composite transactions in The Wall Street Journal)
minus $2.06 (the per share exercise price of the options). All unexercised
options were immediately exercisable at December 31, 1995.
</TABLE>
<TABLE>
During the period commencing January 1, 1995 and ending December 20, 1995,
each of the Named Executive Officers received total compensation prior to the
Mergers from the Founding Companies as follows:
<CAPTION>
APPROXIMATE AMOUNT
SOURCE OF AMOUNT AND TYPE OF AND TYPE OF NON-CASH
NAME COMPENSATION CASH COMPENSATION COMPENSATION
- ---- ---------------- ---------------------------- --------------------
<S> <C> <C> <C>
Philip A. Belyew............ Courier Dispatch $167,708 $522,528(1)
Guilbert L. Brandon, Jr. ... Film Transit $185,760 $ 38,334(2)
Ronald J. Barowski.......... Courier Dispatch $114,042 $183,153(3)
R. David England, Jr. ...... Courier Dispatch $124,583 $179,132(4)
Chee B. Louie............... Tricor $230,000 plus S corporation $ 55,363(6)
distributions of
$6,800,261(5)
George G. Wagner............ Courier Dispatch $114,042 $181,265(7)
- ---------------
<FN>
(1) Consists of (i) a car allowance ($9,000), (ii) purchase of Courier Dispatch common stock at below market value
($4,002), (iii) a non-cash taxable benefit created as a result of Courier Dispatch paying the monthly interest
on a management stock loan ($25,590), (iv) a non-cash taxable benefit created as a result of Courier Dispatch
repaying the outstanding principal and interest of a management stock loan ($250,676), (v) life insurance
premiums ($9,550) and (vi) a gross-up on taxes relating to certain of the foregoing items ($223,710).
(2) Consists of (i) a car allowance ($945), (ii) life insurance premiums ($305), (iii) disability insurance
($3,176), (iv) club dues ($3,248) and (v) a pension contribution ($30,660) by Film Transit on behalf of Mr.
Brandon for 1995.
(3) Consists of (i) a car allowance ($7,800), (ii) purchase of Courier Dispatch common stock at below market value
($2,001), (iii) a non-cash taxable benefit created as a result of Courier Dispatch paying the monthly interest
on a management stock loan ($8,567), (iv) a non-cash taxable benefit created as a result of Courier Dispatch
repaying the outstanding principal and interest of a management stock loan ($84,557), (v) life insurance
premiums ($2,415) and (vi) a gross-up on taxes relating to certain of the foregoing items ($77,813).
(4) Consists of (i) a car allowance ($7,800), (ii) purchase of Courier Dispatch common stock at below market value
($2,001), (iii) a non-cash taxable benefit created as a result of Courier Dispatch paying the monthly interest
on a management stock loan ($8,667), (iv) a non-cash taxable benefit created as a result of Courier Dispatch
repaying the outstanding principal and interest of a management stock loan ($84,560), (v) life insurance
premiums ($640) and (vi) a gross-up on taxes relating to certain of the foregoing items ($75,464).
(5) Consists of S corporation distributions during the period from January 1, 1995 through December 19, 1995.
(6) Consists of (i) a company car ($18,285), (ii) disability and life insurance ($35,930) and (iii) net employer
contribution to 401(k) ($1,148).
(7) Consists of (i) a car allowance ($7,800), (ii) purchase of Courier Dispatch common stock at below market value
($2,001), (iii) a non-cash taxable benefit created as a result of Courier Dispatch paying the monthly interest
on a management stock loan ($8,567), (iv) a non-cash taxable benefit created as a result of Courier Dispatch
repaying the outstanding principal and interest of a management stock loan ($84,557), (v) life insurance
premiums ($2,880) and (vi) a gross-up on taxes relating to certain of the foregoing items ($75,460).
</TABLE>
See "Certain Transactions -- Guarantees of Loans to Certain Officers."
51
<PAGE> 54
1995 STOCK INCENTIVE PLAN
The Board of Directors and the stockholders of the Company prior to the
Company's initial public offering adopted the 1995 Stock Incentive Plan (the
"1995 Plan") and reserved for issuance thereunder an aggregate of 110,000 shares
of Common Stock. the company's stockholders recently approved an amendment to
the 1995 plan to increase the maximum number of shares reserved for issuance
thereunder to 625,000, subject to adjustment for any dividend, stock split or
other relevant changes in the company's capitalization. the purpose of the 1995
Plan is to provide directors, key employees and certain advisors with additional
incentives to continue their association with the company by increasing their
proprietary interest in the Company. The 1995 Plan currently authorizes the
issuance to participating directors, key employees and certain advisors of
Common Stock pursuant to the exercise of nontransferable options or as shares
subject to restrictions under the 1995 Plan ("Restricted Stock"), and also
authorizes the issuance of stock appreciation rights ("SARs", and collectively
with Restricted Stock, "Other Rights"). Shares of Common Stock will be deemed to
be issued under the 1995 Plan only to the extent actually issued pursuant to an
option or other award or settled in cash or shares. Any shares subject to an
option or Other Right that is surrendered to the Company or terminates, lapses
or expires for any reason without exercise will be available again for issuance
under the 1995 Plan. The 1995 Plan is intended to qualify for favorable
treatment under Section 16 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), pursuant to Rule 16b-3 promulgated thereunder ("Rule
16b-3")
As of May 15, 1996, 214,997 shares of Common Stock were subject to
outstanding options under the 1995 Plan and 405,003 additional shares were
available for the grant of additional options or Other Rights. Options to
purchase 110,000 shares of Common Stock were issued as of January 16, 1996 at an
exercise price of $14.75 per share (the average of the high and low prices of
the Common Stock reported on the date of grant) and vest over a period of five
years, expiring on January 15, 2006. Options to purchase 104,997 shares of
Common Stock were issued as of May 7, 1996 at an exercise price of $26.125 (the
average of the high and low prices of the Common Stock reported on the date of
grant) and vest over a period of five years, expiring on May 6, 2006.
The 1995 Plan provides for the grant of incentive stock options ("ISOs") as
defined in Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), nonqualified stock options ("NSOs") and Other Rights (collectively
"Awards"). The 1995 Plan is required to be administered by a committee
consisting of two or more disinterested directors of the Company. Administration
of the 1995 Plan has been assigned to the Compensation Committee. The
Compensation Committee has, subject to the terms of the 1995 Plan, the sole
authority to grant Awards under the 1995 Plan, to construe and interpret the
1995 Plan and to make all other determinations and take any and all actions
necessary or advisable for the administration of the 1995 Plan. No shares of
Common Stock issuable upon the exercise of options or Other Rights granted
pursuant to the 1995 Plan are presently registered under the Securities Act,
although the Company anticipates registering the offering and issuance of such
shares in the future and, to the extent required under the Securities Act to
permit the unrestricted sale by affiliates, the resale of such shares. Until the
offering and issuance of such shares (including such resales) are registered
under the Securities Act, any issuance of Common Stock upon the exercise of
options or pursuant to Other Rights will be effected only pursuant to an
exemption from the registration provisions of the Securities Act and resales may
be effected in accordance with Rule 144 under the Securities Act.
The Company's key employees and other individuals who render services of
special importance to the management, operation and development of the Company
or a subsidiary are eligible to receive Awards under the 1995 Plan, but only
employees of the Company and its subsidiaries are eligible to receive ISOs. As
of the date of this Prospectus, approximately 6,700 employees, five non-employee
directors and no advisors were eligible to participate in the 1995 Plan. The
Compensation Committee consists of certain non-employee directors of the
Company. Pursuant to the terms of the 1995 Plan and in order for Awards under
the 1995 Plan to receive favorable treatment under Rule 16b-3 of the Exchange
Act, the Compensation Committee must be "disinterested" within the meaning of
such Rule. While non-employee directors are eligible to receive Awards under the
1995 Plan, in order to preserve the disinterested status of the Compensation
Committee, it is anticipated that no Compensation Committee member will receive
an Award under the 1995 Plan. Options
52
<PAGE> 55
will be exercisable during the period specified by the Compensation Committee in
each option agreement and will generally be exercisable in installments pursuant
to a vesting schedule to be determined by the Compensation Committee. Options
will become immediately exercisable in the event of a "change of control" of the
Company (as described in the 1995 Plan or an optionee's stock option agreement).
No option will remain exercisable later than ten years after the date of grant
(or five years from the date of grant in the case of ISOs granted to holders of
more than ten percent of the Common Stock).
The exercise price for ISOs granted under the 1995 Plan may be no less than
the fair market value of the Common Stock on the date of grant (or 110% in the
case of ISOs granted to employees owning more than ten percent of the Common
Stock). The exercise price for NSOs and all other Awards granted under the 1995
Plan will be in the discretion of the Compensation Committee. The "fair market
value" of a share of Common Stock at any particular date is the mean between the
lowest and highest reported sale prices of the Common Stock on the date in
question on the New York Stock Exchange, where the Common Stock is listed.
The Compensation Committee may grant SARs to 1995 Plan participants as to
such number of shares of Common Stock and on such terms and conditions as it may
determine. SARs may be granted separately or in connection with ISOs or NSOs.
Upon exercise of an SAR, the holder is entitled to receive payment equal to the
excess of the fair market value, on the date of exercise, of the number of
shares of Common Stock for which the SAR is exercised, over the exercise price
for such shares under a related option, or if there is no related option, over
an amount per share stated in the written agreement setting forth the terms and
conditions of the SAR. Payment may be made in cash or other property, including
Common Stock, in accordance with the provisions of an SAR agreement. Upon the
exercise of an SAR related to an option, the option shall terminate as to the
number of shares of Common Stock for which the SAR is exercised.
The Compensation Committee may grant to 1995 Plan participants a number of
shares of Restricted Stock determined in its discretion, subject to terms and
conditions so determined by it, including conditions that may require the holder
to forfeit the Common Stock in the event that he or she ceases to provide
services to the Company before a stated time. Unlike holders of options and
SARs, a holder of Restricted Stock has the rights of a stockholder of the
Company to vote and to receive payment of dividends on the Restricted Stock,
unless the Compensation Committee specifies to the contrary in the restricted
stock agreement setting forth the terms pursuant to which the Restricted Stock
is granted.
Federal Income Tax Consequences. The rules governing the tax treatment of
options are quite technical. Therefore, the description of the Federal income
tax consequences set forth below is necessarily general in nature and does not
purport to be complete. Finally, the tax consequences under applicable state and
local income tax laws may not be the same as under the Federal income tax laws.
There are no Federal income tax consequences upon the grant of an option
under the 1995 Plan. Upon exercise of an NSO, the optionee generally will
recognize ordinary income in the amount equal to the difference between the fair
market value of the option shares at the time of exercise and the exercise
price, and the Company is generally entitled to a corresponding tax deduction.
When an optionee sells shares issued upon the exercise of an NSO, the optionee
realizes short-term or long-term capital gain or loss, depending on the length
of the holding period, but the Company is not entitled to any tax deduction in
connection with such sale.
An optionee will not be subject to federal income taxation upon the
exercise of ISOs granted under the 1995 Plan, and the Company will not be
entitled to a Federal income tax deduction by reason of such exercise. A sale of
shares of Common Stock acquired upon exercise of an ISO that does not occur
within one year after the exercise or within two years after the grant of the
option generally will result in the recognition of long-term capital gain or
loss in the amount of the difference between the amount realized on the sale and
the exercise price, and the Company is not entitled to any tax deduction in
connection therewith. If a sale of shares of Common Stock acquired upon exercise
of an ISO occurs within one year from the date of exercise of the option or
within two years from the date of the option grant (a "disqualifying
disposition"), the optionee generally will recognize ordinary income equal to
the lesser of (i) the excess of the fair market value of the shares on the date
of exercise of the options over the exercise price or (ii) the excess of the
amount realized on the sale of the shares over the exercise price. Any amount
realized on a disqualifying disposition in excess of
53
<PAGE> 56
the amount treated as ordinary income will be long-term or short-term capital
gain, depending upon the length of time the shares were held. The Company
generally will be entitled to a tax deduction on a disqualifying disposition
corresponding to the ordinary income recognized by the optionee.
In addition, if a director or an officer as defined in Section 16 of the
Exchange Act exercises all or a portion of his or her ISOs or NSOs within six
months of the grant date, no income will be recognized until six months have
expired from the grant date. At that time, such director or officer will
recognize income equal to the spread between the exercise price and the fair
market value of the stock on the six-month anniversary, including any
appreciation in the value of the stock between the exercise date and the
anniversary date. A director or officer could make an election under Section
83(b) of the Code to recognize an amount equal to the spread between the
exercise price and the fair market value on the date of exercise. Subsequent
appreciation (or depreciation), including any appreciation (or depreciation)
between the exercise date and the six-month anniversary, will be treated as
capital gain or loss and will not be recognized until the shares are sold. At
the time such director or officer recognizes compensation income, the Company
will be entitled to a corresponding deduction.
A recipient incurs no imputed income upon the grant of an SAR, but upon its
exercise realizes ordinary compensation income in an amount equal to the cash or
cash equivalent value of the Common Stock that he or she receives at that time.
If the recipient receives shares of Common Stock upon exercise of the SAR, he or
she incurs imputed income measured by the difference between the base amount set
forth in the SAR agreement and the fair market value of the Common Stock at the
exercise date (or, if at the exercise date the stock is subject to a substantial
risk of forfeiture and no election under Section 83(b) of the Code is made, at
the date or dates on which the risk expires). All such taxable amounts are
deductible by the Company at the time and in the amount of the ordinary
compensation income recognized by the recipient.
A person who receives a grant of Restricted Stock generally will not
recognize taxable income at the time the award is received, but will recognize
ordinary compensation income when restrictions constituting a substantial risk
of forfeiture lapse. The amount of ordinary compensation income that is imputed
will be equal to the excess of the aggregate fair market value, as of the date
the restrictions lapse, over the amount (if any) paid by the holder for the
Restricted Stock. Alternatively, a recipient of Restricted Stock may elect to be
taxed on the excess of the fair market value of the Restricted Stock at the time
of grant (determined without reference to the restrictions on the stock) over
the amount (if any) paid by the recipient for the Restricted Stock. All such
taxable amounts are deductible by the Company at the time and in the amount of
the ordinary compensation income recognized by the recipient of the Restricted
Stock.
1996 STOCK AND OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
The Board of Directors has adopted and the Company's stockholders have
approved the 1996 Stock and Option Plan for Non-Employee Directors (the "1996
Plan"). The purpose of the 1996 Plan is to advance the interests of the Company
and its subsidiaries by providing to each non-employee director an added
incentive to continue in the service of the Company and a more direct interest
in its future success by the acquisition of Common Stock and options. The 1996
Plan is intended to be structured in such a manner that non-employee directors
participating in the 1996 Plan will continue to qualify as "disinterested"
directors for purposes of the administration of the 1995 Plan. The 1996 Plan is
intended to qualify for favorable treatment under Section 16 of the Exchange Act
pursuant to Rule 16b-3. The 1996 Plan will become effective as of June 1, 1996.
The 1996 Plan provides for the grant to non-employee directors of the
Company of shares of Common Stock (a "Stock Grant") and NSOs ("Options") to
purchase shares of Common Stock. A "nonqualified stock option" is a stock option
that does not qualify as an ISO under applicable provisions of the Code. Only
directors of the Company who are not officers or employees of the Company or any
of its subsidiaries (each, an "Eligible Director") are eligible to receive Stock
Grants and Options under the 1996 Plan. As of the date of this Prospectus, there
were five Eligible Directors. A total of 50,000 shares of Common Stock may be
issued under the 1996 Plan (subject to adjustment for any dividend, stock split
or other relevant changes in the Company's capitalization). Any shares subject
to an Option that is surrendered to the Company or terminates, lapses or expires
for any reason will be available again for issuance under the 1996 Plan.
54
<PAGE> 57
The 1996 Plan is administered by the Board of Directors. The Board has,
subject to the terms of the 1996 Plan, the authority to construe and interpret
the 1996 Plan, and any option agreements entered into pursuant thereto, and to
make all determinations necessary or advisable for administering the 1996 Plan.
Notwithstanding the above, the Board has no discretionary or interpretive power
or authority with respect to the selection of the Eligible Directors who receive
Stock Grants or Options, the number of shares constituting any Stock Grant or
subject to any Option, the exercise price of any Option, the periods during
which any Option may be exercised, or the term of any Option.
No shares of Common Stock issuable pursuant to Stock Grants or upon the
exercise of Options pursuant to the 1996 Plan are presently registered under the
Securities Act, although the Company anticipates in the future registering the
offering and issuance of such shares and, to the extent required under the
Securities Act to permit the unrestricted sale by affiliates, the resale of such
shares. Until such offering and issuance (including such resales) are registered
under the Securities Act, any issuance of Common Stock under the 1996 Plan will
be effected only pursuant to an exemption from the registration provisions of
the Securities Act and resales may be effected in accordance with Rule 144 under
the Securities Act.
Stock in Lieu of Cash Compensation. As previously discussed, Eligible
Directors receive as compensation for services as members of the Board of
Directors an annual retainer fee of $26,800 (the "Annual Fee") and certain other
fees paid for attendance at meetings of the Board and any committees thereof or
for serving as chairman of a Board committee (in the aggregate, "Director's
Compensation"). See "-- Board of Directors." Under the 1996 Plan, each Eligible
Director may elect to receive in the form of Common Stock all or a specified
portion (in increments of twenty-five percent) of his or her Director's
Compensation, other than that portion of his or her Annual Fee that is paid in
the form of an Option. The Common Stock will be valued at the mean between the
lowest and highest reported sales prices of the Common Stock on the New York
Stock Exchange on the date of issuance. An election to receive Common Stock in
lieu of all, or a part, of the non-Option portion of a Director's Compensation
must be made at least six months before the Eligible Director is entitled to
receive his or her Director's Compensation. The shares of Common Stock issued to
an Eligible Director in lieu of cash will be nonforfeitable and an Eligible
Director will have all of the rights of a stockholder with respect to such
Common Stock. An Eligible Director who fails to elect to receive any portion of
his or her non-Option Director's Compensation in the form of Common Stock will
receive cash.
Stock Options. On the first day of each calendar year, starting with
January 1, 1997, each Eligible Director will be automatically granted an Option
to purchase Common Stock. Each Option issued under the 1996 Plan will have a
value equal to seventy percent of the Eligible Director's Annual Fee in effect
for the preceding calendar year. To determine the number of shares that the
Option represents, the "Black-Scholes option pricing model," which is a
mathematical formula used to value options, will be used. The Black-Scholes
option pricing model considers a number of factors in order to estimate the
present value of an option to acquire a share of stock, including: the price of
the stock on the option grant date, the stock's historical volatility, the
exercise period and exercise price of the option, the stock's current dividend
yield and the current risk-free rate of interest. Because the Company's Common
Stock does not have a history of public trading, the historical volatility
factor will be estimated for the first three years based on a peer group of four
public companies. If serving on January 1, 1997, Messrs. Deery, Gorgi, Krause
and Lanter will each be entitled to receive an Option equal to seventy percent
of such Director's Annual Fee for services rendered in 1996, i.e., an Option
with a value at the time of grant equal to $18,760. In addition, if Mr. Ellis is
serving on January 1, 1997, he will be entitled to receive an Option equal to
seventy percent of that portion of his Annual Fee which is attributable to
services rendered in 1996.
Each Option will be evidenced by an agreement that will reflect the terms
and conditions of the Option and such additional terms and conditions as are
determined by the Board to be appropriate and not inconsistent with the 1996
Plan. The exercise price for each share covered by the Option will be the fair
market value of the Common Stock on the date the Option is granted. The "fair
market value" of a share of Common Stock on any particular date is the mean
between the lowest and highest reported sale prices of the Common Stock on the
date in question on the New York Stock Exchange or, if not traded on that date,
on the preceding trading day. The exercise price for each share covered by the
Option will be payable in cash or by delivering to the Company previously owned
shares of Common Stock having a fair market value on the date
55
<PAGE> 58
of exercise equal to the exercise price for the shares being purchased, or by
delivering shares to be received upon exercise of the Option. Each Option will
be immediately exercisable, in whole or in part, but no Option may be exercised
after the expiration of ten years from the date of grant.
If an Eligible Director's service as a director terminates for any reason
other than death or for cause, any outstanding Option he or she holds will be
exercisable at any time prior to the earlier of the expiration date of the
Option or sixty days from the date the Eligible Director ceases to be a
director. Following the death of an Eligible Director during service as a
director, any outstanding Option held by the Eligible Director at the time of
death will be exercisable at any time prior to the earlier of the expiration
date of the Option or one year from the date of death. If an Eligible Director
is removed for cause, any outstanding Option held by him or her will
automatically terminate as of the date of his or her removal from office.
An Option will not be assignable or transferable except by will or the laws
of descent and distribution.
Federal Income Tax Consequences. The rules governing the tax treatment of
Stock Grants and Options are quite technical. Therefore, the description of the
Federal income tax consequences set forth below is necessarily general in nature
and does not purport to be complete. Finally, the tax consequences under
applicable state and local income tax laws may not be the same as under the
Federal income tax laws.
STOCK GRANTS. An Eligible Director is subject to Federal income tax at
ordinary income rates on the fair market value of Common Stock received pursuant
to his or her election to receive all or a portion of his or her Director's
Compensation in the form of stock in lieu of cash. The Company is entitled to a
deduction for the Director's Compensation paid to the Eligible Directors,
whether the Eligible Director elects to receive Common Stock or cash.
OPTIONS. An Eligible Director will not recognize any taxable income for
Federal income tax purposes upon receipt of an Option. Upon exercise of an
Option, the Optionee will recognize ordinary income in an amount equal to the
difference between the fair market value of the option shares at the time of
exercise and the exercise price, and the Company is entitled to a corresponding
tax deduction. When an Optionee sells shares issued upon the exercise of an
Option, the Optionee may realize short-term or long-term capital gain or loss,
depending on the length of the holding period, but the Company is not entitled
to any tax deduction in connection with such sale.
If an Eligible Director exercises all or a portion of his or her Option
within six months of the grant date, no income will be recognized until six
months have expired from the grant date. At that time, an Eligible Director will
recognize income equal to the spread between the exercise price and the fair
market value of the stock on the six-month anniversary, including any
appreciation in the value of the stock between the exercise date and the
anniversary date. An Eligible Director could make an election under Section
83(b) of the Code to recognize an amount equal to the spread between the
exercise price and the fair market value on the date of exercise. Subsequent
appreciation (or depreciation), including any appreciation (or depreciation)
between the exercise date and the six-month anniversary, will be treated as
capital gain (or loss) and will not be recognized until the shares are sold. At
the time an Eligible Director recognizes compensation income, the Company will
be entitled to a corresponding deduction.
OTHER STOCK OPTIONS
Between October 1991 and December 1994, Courier Dispatch granted options to
39 of its employees and one non-employee director to purchase an aggregate of
342,044 shares of its common stock at purchase prices between $1.40 and $3.00
per share. Such options vested over a period of time after grant. In connection
with the Mergers, all Courier Dispatch options were terminated and replaced with
options to purchase an aggregate of 216,110 shares of Common Stock at purchase
prices ranging from of $2.06 to $4.42 per share, 212,711 of which options are
currently exercisable.
EMPLOYMENT AGREEMENTS; COVENANTS-NOT-TO-COMPETE
All officers of the Company serve at the discretion of the Board of
Directors. However, each of Messrs. Belyew, Brandon, Barowski, England, Louie,
Mashburn, Wagner and Salmon and Ms. Draper and
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Ms. Louie has entered into a separate three-year employment agreement with the
Company. Each employment agreement includes a covenant not to compete expiring
on the later of the second anniversary of the date the employee ceases to be
entitled to receive base compensation and the fifth anniversary of the date of
the employment agreement. See "-- Executive Compensation." Each of the
employment agreements provides that, in the event of a termination of employment
by the Company without cause, such employee will be entitled to receive from the
Company such base compensation and group insurance benefits as the employee
would have received (at the times as the employee would have received them)
during the period which is the greater of one year or the remainder of the
three-year term, together with such other payments and benefits to which the
employee is entitled by law or pursuant to benefit plans of the Company then in
effect.
Additionally, to the extent permitted under applicable local law, a
majority of the Company's managers, department heads and sales representatives
have entered into an agreement not to compete with the Company for a period of
up to one year following termination of employment.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors of the Company was
formally established on January 16, 1996. The Compensation Committee consists of
John B. Ellis, who is the Chairman of the Committee, and Craig H. Deery. None of
these individuals has ever served as an officer or an employee of the Company or
of any of its subsidiaries. See "-- Directors and Executive Officers."
All executive compensation presently in effect was determined in connection
with the Mergers by negotiation among certain parties to the Mergers. Mr. Philip
A. Belyew and Mr. Ronald J. Barowski, who were the sole directors and officers
of the Company until the effectiveness of the Mergers, acted on behalf of the
Company in such negotiations.
Neither Mr. Belyew, Mr. Barowski nor any other executive officer of the
Company has ever served as (i) a member of the compensation committee or
equivalent body of any other entity, one of whose executive officers served on
the Company's Compensation Committee, (ii) a director of another entity, one of
whose executive officers served on the Company's Compensation Committee, or
(iii) a member of the compensation committee or equivalent of another entity,
one of whose executive officers served as a director of the Company.
INDEMNITY AGREEMENTS
The Company has entered into an agreement with each director, effective as
of the date of his or her appointment, pursuant to which it has agreed to
indemnify such director for monetary damages for breach of fiduciary duty as a
director to the fullest extent permitted by the Delaware General Corporation
Law. For a description of such law, see "Description of Capital
Stock -- Provisions of Delaware Law and the Company's Charter and
By-Laws -- Director's Liability."
CERTAIN TRANSACTIONS
ORGANIZATION OF THE COMPANY
In connection with the organization of the Company, each of the Founding
Companies requested Mr. Philip A. Belyew and Mr. Ronald J. Barowski to serve as
the founding stockholders of the Company for organizational purposes. The
Company issued 100 shares of Common Stock at a purchase price of $1.00 per share
to each of Mr. Belyew and Mr. Barowski. Such shares were redeemed and canceled
in connection with the Mergers. Prior to the Mergers, Mr. Belyew was a director
and officer, and Mr. Barowski was an officer, of Courier Dispatch. The
stockholders and holders of equity securities convertible into Courier Dispatch
common stock received an aggregate of 2,122,435 shares of Common Stock in the
Mergers, which amount was negotiated at arm's length by Courier Dispatch and
representatives of each of the other Founding Companies. A portion of such
shares was attributable to Courier Dispatch's role in organizing the Company.
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The Company received all of Courier Dispatch's business and assets in the
Mergers. In addition, the Company reimbursed Courier Dispatch for certain of the
costs it incurred in connection with the Company's initial public offering. See
"Business -- Organization."
In connection with the Mergers, certain officers and directors of the
Company received shares of Common Stock as follows: Mr. Belyew: 104,059 shares,
Mr. Barowski: 32,844 shares, Mr. Guilbert L. Brandon, Jr.: 213,752 shares, Mr.
R. David England: 32,845 shares, Ms. Carolyn Draper: 213,518 shares, Mr. Steven
W. Lanter: 572,137 shares, Mr. Chee B. Louie: 840,520 shares, Mr. James G.
Salmon: 67,507 shares and Mr. George G. Wagner: 32,844 shares. For a description
of the transactions pursuant to which the Company was formed, see
"Business -- Organization."
Courier Dispatch acquired certain assets in arm's length transactions
completed since January 1, 1992, all of which were a part of the assets and
business assumed by the Company in the Mergers. On October 30, 1992, Courier
Dispatch acquired the assets of Data Dispatch, Inc., which provided ground
courier services in Minnesota, for a cash purchase price of $320,000. On April
29, 1993, Courier Dispatch acquired the air courier assets of Clayton/National
Courier Systems, Inc. for a cash purchase price of $1.13 million. On May 13,
1993, Courier Dispatch acquired the stock of two corporations, Bancserv
Couriers, Inc. and NOW Courier, Inc., which provided ground courier services in
Alabama, for an aggregate cash purchase price of $1.96 million. On March 28,
1994, Courier Dispatch acquired the stock of Sunstate Courier, Inc., which
provided ground courier services in Florida for a cash purchase price of
approximately $2.58 million. On June 30, 1994, Courier Dispatch acquired the
stock of Commercial Courier, which provided ground courier services in North
Carolina, Virginia, Tennessee and Maryland, for a cash purchase price of $9.7
million. Also on June 30, 1994, Courier Dispatch acquired the stock of Armstrong
Couriers, Inc., a ground courier service operating in Minnesota, for a cash
purchase price of $1.265 million. On April 21, 1995, Courier Dispatch acquired
the ground courier business and assets of AirVantage, Incorporated
("AirVantage"), which provided ground courier services in Minnesota, North
Dakota, South Dakota and Wisconsin, for a purchase price of $2.65 million, of
which $400,000 was paid in cash, and the balance of which was paid by delivery
of a 9% promissory note, payable in quarterly installments until maturity on
March 31, 1999. On April 27, 1995, Courier Dispatch acquired the stock of
AirVantage Courier Inc., which provided air courier service and was based in New
Jersey, for a purchase price of $500,000, of which $150,000 was paid in cash,
and the balance of which was paid by delivery of promissory notes in the
aggregate principal amount of $350,000, each bearing interest at 9% and payable
in quarterly installments until maturity on March 31, 1999. The amounts due
under the promissory notes to each of AirVantage, Incorporated and the
stockholders of AirVantage Courier, Inc. were paid in full in January 1996.
GUARANTIES OF LOANS TO CERTAIN OFFICERS
In February 1994, CDG Holding Corp. sold 137,936 shares of its common stock
to Mr. Belyew, 40,754 of such shares to each of Mr. Barowski, Mr. England and
Mr. Wagner, and certain additional shares to other CDG Holding Corp. employees
at a purchase price per share less than the then fair market value of such
shares, and paid a bonus to each of such persons in an amount sufficient to
address the income tax consequences to such persons of such below-market
purchases. First Union made personal loans to each of Mr. Belyew, Mr. Barowski,
Mr. England and Mr. Wagner in order to enable them to purchase their shares, and
CDG Holding Corp. guaranteed each of such loans and paid all interest due on
them. In February 1995, another CDG Holding Corp. stockholder, who had purchased
common stock at the same time and on the same terms as the foregoing persons,
sold his 40,754 shares of such stock to Mr. Belyew, Mr. Barowski, Mr. England,
Mr. Wagner and another CDG Holding Corp. employee, who each purchased a pro rata
portion of such shares and assumed a corresponding pro rata portion of the
seller's outstanding loan from First Union. As of September 30, 1995, the
approximate outstanding principal amount of each of such loans was as follows:
Mr. Belyew -- $255,000; Mr. Barowski -- $85,000; Mr. England -- $85,000; and Mr.
Wagner -- $85,000. Immediately prior to the closing of the Company's initial
public offering, Courier Dispatch declared bonuses to each of such persons in
amounts sufficient to repay in full the outstanding principal and accrued and
unpaid interest on their respective loans from First Union, as well as to
address the income tax consequences to such persons of such payments.
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REAL ESTATE TRANSACTIONS
As a part of the Mergers, the Company became the lessee under two leases
for which the lessor is a general partnership of which Mr. Guilbert L. Brandon,
Jr. is a general partner. Such properties were leased by Film Transit prior to
the Mergers for an aggregate monthly rental expense to Film Transit under such
leases of approximately $15,000, plus an allocated portion of taxes, insurance
and maintenance expense. Under the leases with the Company, the aggregate
monthly rental expense is approximately $16,900.
As a part of the Mergers, the Company assumed the use of certain office
space and maintenance facilities in buildings owned by Cross Street Service,
Inc. ("Cross Street"), the stockholders of which are Mr. James G. Salmon's
father and uncle. Such facilities and services had been provided by such
corporation to Sunbelt free of charge. The Company has entered into leases with
Cross Street with respect to three of these properties. In addition, Sunbelt
had, prior to the Mergers, shared the use of certain of its facilities with
Cross Street free of charge. Except for those properties which it now leases
from Cross Street, the Company will discontinue all of these arrangements as
soon as practicable.
The Company leases three properties which are partly or wholly-owned by Mr.
Chee B. Louie. Such properties were leased by Tricor prior to the Mergers for an
aggregate monthly rental expense to Tricor of approximately $11,700. Under the
leases with the Company, the aggregate monthly rental expense for these
properties is approximately $12,950.
Prior to the Mergers, certain of the Founding Companies distributed real
estate owned by them to their stockholders, or in Sunbelt's case to Cross Street
in partial satisfaction of certain indebtedness, and such real estate is leased
to the Company at rental rates negotiated at arm's length. The aggregate monthly
rental expense to the Company is as follows: real estate leased from the Tricor
stockholders: approximately $18,400; real estate leased from the Film Transit
stockholders: approximately $2,000; and real estate leased from Cross Street
(after conveyance from the Sunbelt stockholders): approximately $11,000.
CERTAIN INDEBTEDNESS
As of September 30, 1995, BancBoston held an aggregate of $2.6 million
(including imputed interest of $529,000) of 10% Series A Senior Subordinated
Notes due 1999 (the "Series A Notes") of CDG Holding Corp. and an aggregate of
$3.65 million (including imputed interest of $699,000) of 11.5% Series B Junior
Subordinated Notes due 1996 (the "Series B Notes") of CDG Holding Corp. All of
the Series A Notes and the Series B Notes were repaid in full from the proceeds
of the Company's initial public offering. In connection with the issuance of the
Series A Notes and the Series B Notes, BancBoston acquired warrants to purchase
1,412,287 shares of CDG Holding Corp. common stock. Such warrants were exchanged
for 960,292 shares of the Company's Common Stock immediately prior to the
Mergers. Mr. Craig H. Deery, who is a director of the Company, is a Managing
Director of BancBoston.
As of September 30, 1995, Fleet held an aggregate of $2.6 million
(including imputed interest of $529,000) of Series A Notes and $2 million
(including imputed interest of $463,000) of 15% Series C Junior Subordinated
Notes due 1996 (the "Series C Notes") of CDG Holding Corp. All of the Series A
Notes and the Series C Notes were repaid in full with the proceeds of the
Company's initial public offering. In connection with the issuance of the Series
A Notes and the Series C Notes, Fleet acquired warrants to purchase 1,211,652
shares of CDG Holding Corp. common stock. Such warrants were exchanged for
823,869 shares of the Company's Common Stock immediately prior to the Mergers.
Mr. Habib Y. Gorgi, who is a director of the Company, is a General Partner of
FVP and President of FVR.
Cross Street loaned funds to Sunbelt. Of the remaining $4.9 million
principal balance of such loans outstanding at September 30, 1995, $837,000
incurred interest at 3.5%, $1.3 million incurred interest at a fluctuating rate,
and the balance incurred interest at 8%. The loan matured on December 31, 1999.
Sunbelt conveyed to Cross Street certain real estate, valued at its book value
of $1.3 million, in partial repayment of such loan. As of the effectiveness of
the Mergers, approximately $3.6 million in principal amount of such loan
remained outstanding, which amount was repaid in full from the proceeds of the
Company's initial public offering.
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Lanter issued a promissory note dated December 31, 1993 in the original
principal amount of $2.5 million to Mr. Wayne E. Lanter, Mr. Steven W. Lanter's
father, as a part of the redemption of his stock in Lanter. On May 17, 1995,
Lanter redeemed shares of its capital stock held by Mr. Jeffrey Lanter, Mr.
Steven Lanter's brother, for a purchase price of $1 million (increasing to $1.25
million upon the sale or merger of Lanter), which purchase price was paid in the
form of a promissory note of the same date. Both of such obligations and certain
additional payment obligations relating to Lanter's redemption of the capital
stock of certain other minority stockholders (which aggregate $75,000) were
assumed by Lanter Delivery Systems Inc., and the stockholders of Lanter have
agreed to indemnify the Company for any losses incurred in connection with such
liabilities, which indemnity is secured by a pledge of 31,434 shares of Common
Stock held by Mr. Steven Lanter.
OTHER TRANSACTIONS
Prior to the Mergers, Sunbelt purchased its insurance through a captive
insurance entity, the stockholders of which are Cross Street and Pat Salmon and
Sons, Inc. Insurance premiums paid in 1994 aggregated $827,000 and for fiscal
1995 through September 30, 1995 aggregated $718,000. The Company now provides
insurance for all of the former Founding Companies, and the arrangements with
such captive insurance entity have been terminated.
Lanter Company, an affiliate of Lanter prior to the Mergers of which Mr.
Steven W. Lanter is the President and Chief Operating Officer, provided certain
administrative services to Lanter and therefore allocated and charged a portion
of its corporate expenses to Lanter. These expenses were allocable to that
portion of Lanter which remained after the transfer of assets and liabilities to
Lanter Delivery Systems, Inc. as follows: $127,000, $272,000, $269,000 and
$506,000 for the years ended December 31, 1992, 1993 and 1994 and the nine
months ended September 30, 1995, respectively. Such services are now provided by
the Company.
COMPANY POLICY
It is anticipated that future transactions with affiliates of the Company
will be minimal, will be approved by a majority of the disinterested members of
the Board of Directors and will be made on terms no less favorable to the
Company than could be obtained from unaffiliated third parties.
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PRINCIPAL STOCKHOLDERS
<TABLE>
The following table sets forth certain information known to the Company
with respect to beneficial ownership of the Company's Common Stock by (i) each
stockholder known by the Company to be the beneficial owner of more than 5% of
the Common Stock, (ii) each director and director nominee, (iii) each executive
officer and (iv) all executive officers and directors as a group. Such
information is presented as of May 14, 1996.
<CAPTION>
AMOUNT OF BENEFICIAL
OWNERSHIP(1)
-------------------------------
NAME SHARES PERCENTAGE OWNED
- ---------------------------------------------------------------- --------- -----------------
<S> <C> <C>
Philip A. Belyew(2)............................................. 143,282 1.52%
Ronald J. Barowski(3)........................................... 47,942 *
R. David England, Jr.(4)........................................ 60,300 *
Chee B. Louie(5)................................................ 840,520 8.98%
George G. Wagner(6)............................................. 64,222 *
Guilbert L. Brandon, Jr......................................... 213,752 2.28%
Carolyn Draper(7)............................................... 213,518 2.28%
John B. Ellis................................................... 500 *
James G. Salmon................................................. 68,007 *
Mark E. Rykowski(8)............................................. 17,650 *
James W. Bennett(9)............................................. 5,438 *
Craig H. Deery(10).............................................. 960,292 10.25%
Habib Y. Gorgi(11).............................................. 823,869 8.80%
Charles A. Krause(12)........................................... 2,000 *
Steven W. Lanter(13)............................................ 572,137 6.11%
BancBoston Ventures Inc.(14).................................... 960,292 10.25%
Fleet Venture Resources, Inc.(15)............................... 576,708 6.16%
Fleet Venture Partners III(15).................................. 247,161 2.64%
All directors and executive officers as a group (15
persons)(16).................................................. 4,033,429 43.07%
<FN>
- ---------------
* Less than one percent
(1) Except as otherwise indicated, and subject to community property laws where
applicable, the persons named in the table above have sole voting and
investment power with respect to all shares of Common Stock shown as
beneficially owned by them.
(2) Includes 39,223 shares issuable upon the exercise of options which are
currently exercisable. See "Management -- Other Stock Options." Does not
include 50,000 shares issuable upon the exercise of options granted under
the 1995 Plan, which are not currently exercisable.
(3) Includes 15,098 shares issuable upon the exercise of options which are
currently exercisable. See "Management -- Other Stock Options." Does not
include 25,000 shares issuable upon the exercise of options granted under
the 1995 Plan, which are not currently exercisable.
(4) Includes 27,455 shares issuable upon the exercise of options which are
currently exercisable. See "Management -- Other Stock Options." Does not
include 25,000 shares issuable upon the exercise of options granted under
the 1995 Plan, which are not currently exercisable.
(5) Mr. Louie holds all of the shares indicated as beneficially owned by him
jointly with his wife. Mr. Louie's address is 717 Airport Boulevard, South
San Francisco, California 94080.
(6) Includes 31,378 shares issuable upon the exercise of options which are
currently exercisable. See "Management -- Other Stock Options." Does not
include 10,000 shares issuable upon the exercise of options granted under
the 1995 Plan, which are not currently exercisable.
(7) Does not include 6,981 shares held by Ms. Draper's adult child and 6,981
shares held by Ms. Draper's sister.
(8) Includes 17,650 shares issuable upon exercise of options which are
currently exercisable.
(9) Includes 3,399 shares issuable upon exercise of options which are currently
exercisable.
(10) Mr. Deery is a Managing Director of BancBoston. Mr. Deery disclaims
beneficial ownership of all shares of the Company's capital stock which are
directly owned by BancBoston.
(11) Consists of shares owned by FVP and FVR. Mr. Gorgi is the President of FGR,
the corporate general partner of FVP, an individual general partner of FVP
and the President of FVR. As an individual general partner of FVP, Mr.
Gorgi may be deemed to share voting and investment power with respect to
such shares with Robert M. VanDegna and FGR, the other general partners of
FVP. Mr. Gorgi disclaims beneficial ownership of all shares of the
Company's capital stock which are directly owned by FVR, and those shares
of the Company's capital stock which are directly owned by FVP, except for
his pecuniary interest therein.
(12) Consists of shares owned by Krause Consultants Ltd. Retirement Trust (the
"Krause Trust"). Mr. Krause in the sole beneficiary and administrator of
the Krause Trust.
(13) Mr. Lanter's address is 2 Lake Lorraine Court, Belleville, Illinois 62221.
(14) The stockholder's address is 100 Federal Street, Boston, Massachusetts
02110.
(15) The stockholder's address is 111 Westminster Street, Providence, Rhode
Island 02903.
(16) Includes 144,402 shares issuable upon the exercise of options which are
currently exercisable. See "Management -- Other Stock Options."
</TABLE>
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DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 25,000,000 shares
of Common Stock, $.001 par value per share, and one million shares of Preferred
Stock, $.001 par value per share. As of the date of this Prospectus, the Company
had 9,364,194 shares of Common Stock and no Preferred Stock outstanding. As of
May 20, 1996, there were 65 holders of record of Common Stock.
COMMON STOCK
Dividends. Holders of record of shares of Common Stock on the record date
fixed by the Company's Board of Directors are entitled to receive such dividends
as may be declared by the Board of Directors out of funds legally available for
such purpose, subject to any preferential dividend rights of the Preferred
Stock. The Credit Agreement limits the Company's ability to pay cash dividends
on its Common Stock. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."
Voting Rights. Holders of shares of Common Stock vote as a single class
together with any outstanding shares of Preferred Stock (except as otherwise
provided by the terms of the outstanding Preferred Stock) on all matters
submitted to a vote of the stockholders, with each share of Common Stock
entitled to one vote, except as otherwise provided by law. Under Delaware law,
the affirmative vote of the holders of a majority of the outstanding shares of
any class of common stock is required to approve, among other things, a change
in the designations, preferences and limitations of the shares of common stock.
Liquidation Rights. Upon liquidation, dissolution or winding-up of the
Company, the holders of Common Stock are entitled to share ratably with the
holders of each other class in all assets available for distribution after
payment in full of creditors and payment in full to any holders of Preferred
Stock then outstanding of any amount required to be paid under the terms of such
Preferred Stock.
Other Provisions. The holders of Common Stock are not entitled to
preemptive or subscription rights. The shares of Common Stock presently
outstanding are, and the shares of Common Stock offered hereby will be, upon
issuance, validly issued, fully paid and nonassessable.
PREFERRED STOCK
The one million authorized and unissued shares of Preferred Stock may be
issued with such designations, preferences, limitations and relative rights as
the Board of Directors may authorize, including, but not limited to: (i) the
distinctive designation of each series and the number of shares that will
constitute such series; (ii) the voting rights, if any, of shares of such
series; (iii) the dividend rate on the shares of such series, any restriction,
limitation or condition upon the payment of such dividends, whether dividends
shall be cumulative, and the dates on which dividends are payable; (iv) the
prices at which, and the terms and conditions on which, the shares of such
series may be redeemed, if such shares are redeemable; (v) the purchase or
sinking fund provisions, if any, for the purchase or redemption of shares of
such series; (vi) any preferential amount payable upon shares of such series in
the event of the liquidation, dissolution or winding-up of the Company or the
distribution of its assets; and (vii) the price or rates of conversion at which,
and the terms and conditions on which the shares of such series may be converted
into other securities, if such shares are convertible.
One of the effects of undesignated Preferred Stock may be to enable the
Board of Directors to render more difficult or to discourage an attempt to
obtain control of the Company by means of a tender offer, proxy contest, merger
or otherwise, and thereby to protect the continuity of the Company's management.
The issuance of shares of Preferred Stock pursuant to the Board of Directors'
authority described above may adversely affect the rights of the holders of
Common Stock. For example, Preferred Stock issued by the Company may rank prior
to the Common Stock as to dividend rights, liquidation preference or both, may
have full or limited voting rights and may be convertible into shares of Common
Stock. Accordingly, the issuance of shares of Preferred Stock may discourage
bids for the Common Stock at a premium or may otherwise adversely affect the
market price of the Common Stock.
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PROVISIONS OF DELAWARE LAW AND THE COMPANY'S CHARTER AND BY-LAWS
Directors' Liability. The Company's Amended and Restated Certificate of
Incorporation (the "Restated Certificate") provides that to the fullest extent
permitted by the Delaware General Corporation Law (the "Delaware Law") as it
currently exists, a director of the Company shall not be liable to the Company
or its stockholders for monetary damages for breach of fiduciary duty as a
director. Under current Delaware Law, liability of a director may not be limited
(i) for any breach of the director's duty of loyalty to the Company or its
stockholders, (ii) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law, (iii) in respect of
certain unlawful dividend payments or stock redemptions or repurchases and (iv)
for any transaction from which the director derives an improper personal
benefit. The effect of this provision of the Restated Certificate is to
eliminate the rights of the Company and its stockholders (through stockholders'
derivative suits on behalf of the Company) to recover monetary damages against a
director for breach of the fiduciary duty of care as director (including
breaches resulting from negligent or grossly negligent behavior) except in the
situations described in clauses (i) through (iv) above. This provision does not
limit or eliminate the rights of the Company or any stockholder to seek
non-monetary relief such as an injunction or rescission in the event of a breach
of a director's duty of care. In addition, the Restated Certificate provides
that the Company shall indemnify its directors, officers, employees and agents
to the fullest extent permitted by Delaware Law.
Section 203 of Delaware Law. The Company is a Delaware corporation and is
subject to Section 203 of Delaware Law. In general, Section 203 prevents an
"interested stockholder" (defined as a person who, together with affiliates and
associates, beneficially owns (or within three years, if an affiliate or
associate of the corporation did beneficially own) 15% or more of a
corporation's outstanding voting stock) from engaging in a "business
combination" (as defined below) with a Delaware corporation for three years
following the time such person became an interested stockholder unless (i)
before such person became an interested stockholder, the board of directors of
the corporation approved the transaction in which the interested stockholder
became an interested stockholder or approved the business combination; (ii) upon
consummation of the transaction that resulted in the interested stockholder
becoming an interested stockholder, the interested stockholder owns at least 85%
of the voting stock of the corporation outstanding at the time the transaction
commenced (excluding shares owned by persons who are both officers and directors
of the corporation, and shares held by certain employee stock ownership plans in
which employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or exchange
offer); or (iii) following the transaction in which such person became an
interested stockholder, the business combination is approved by the board of
directors of the corporation and authorized at a meeting of stockholders by the
affirmative vote of the holders of at least two-thirds of the outstanding voting
stock of the corporation not owned by the "interested stockholder." A "business
combination" generally includes mergers, stock or asset sales involving 10% or
more of the market value of the corporation's assets or stock, certain stock
transactions and other transactions resulting in a financial benefit to the
interested stockholders or an increase in their proportionate share of any class
or series of a corporation.
Appraisal. Delaware Law provides a statutory right to stockholders of a
corporation to dissent in connection with mergers and consolidations, and to
receive the "fair value" of their shares in cash. However, the legal proceeding
necessary to determine that fair value may involve significant expense, delay
and uncertainty to dissenting stockholders. In the case of certain business
combinations, such as sales of substantially all assets, reclassifications or
recapitalizations, the statutory right to dissent and obtain appraisal is not
available.
Provisions in the Restated Certificate. In addition to the Board of
Directors' ability to issue Preferred Stock, a number of provisions of the
Restated Certificate may have anti-takeover effects. Actions by stockholders may
be taken only at a stockholders' meeting and not by a written consent. Under
Delaware Law, stockholders can act by written consent by whatever vote would be
required at a stockholders' meeting, rather than acting at a stockholders'
meeting. Obtaining stockholder approval by calling and holding a stockholders'
meeting may be more difficult than obtaining approval by circulating a written
consent. Also, special stockholders' meetings may only be called, and their
agenda determined, by the Board, not by the stockholders. Only the Board, and
not the stockholders, may fix the record dates for stockholders' meetings.
63
<PAGE> 66
The size of the Board may be fixed only by the Board and not by the
stockholders. Board vacancies may only be filled by the Board until the next
stockholders' meeting, which means that Directors removed by the stockholders
during the year could be replaced only by the remaining Directors for the
balance of the removed Directors' terms.
Fair Price Provision. Upon obtaining the approval of its Board of
Directors and stockholders, the Company recently amended the Restated
Certificate to add a "fair price" provision (the "Fair Price Amendment"). Under
Delaware Law, mergers, consolidations, sales of substantially all assets and
adoption of a plan of dissolution must be approved by the holders of a majority
of the outstanding stock entitled to vote. Reclassifications and
recapitalizations involving amendments to the Restated Certificate also require
the approval of holders of a majority of the outstanding shares entitled to vote
thereon. The Fair Price Amendment requires the affirmative vote of the holders
of at least eighty percent of the voting power of all outstanding shares of
capital stock of the Company entitled to vote generally in the election of
directors to approve a "business combination" (as defined below) with a person
(other than the Company or any subsidiary of the Company and other than any
profit-sharing, employee stock ownership or other employee benefit or dividend
reinvestment plan of the Company or any subsidiary of the Company or any trustee
of or fiduciary with respect to any such plan when acting in such capacity) who
is the beneficial owner of Common Stock representing ten percent or more of the
then outstanding shares of Common Stock (the "Interested Stockholder"), or any
associate or affiliate of that person, except in cases in which either (i)
certain price criteria and procedural requirements are satisfied, or (ii) the
transaction is approved by a majority of the members of the Board of Directors
(the "Disinterested Directors") who are not affiliates, associates,
representatives or nominees of the Interested Stockholder involved in the
business combination or of any affiliate or associate of such Interested
Stockholder and who either (i) were members of the Board of Directors prior to
the time that such Interested Stockholder became an Interested Stockholder or
are current members of the Board of Directors, or (ii) are successors of
Directors referred to in clause (i) and were nominated or elected to succeed
such Directors by a majority of Disinterested Directors on the Board of
Directors at the time of such individuals' nomination or election. In the event
the price criteria and procedural requirements were to be met or the requisite
approval of the Disinterested Directors were to be given with respect to a
particular business combination, the normal requirements of Delaware Law would
apply. A "business combination" generally includes (i) mergers and
consolidations, (ii) sales, leases, exchanges, mortgages or similar transactions
involving assets or securities having an aggregate fair market value in excess
of $5 million, (iii) liquidation or dissolution, (iv) reclassification
(including a reverse stock split) of securities, recapitalization or other
similar transactions that increases the Interested Stockholder's percentage
ownership of the Company, (v) any tender offer or exchange offer resulting in
the Interested Stockholder's percentage beneficial ownership exceeding 110% of
his or her prior ownership or (vi) the issuance by the Company or any subsidiary
of any of the Company's securities to the Interested Stockholder having a fair
market value in excess of $5 million.
MINIMUM PRICE CRITERIA. The aggregate fair market value, as of the date of
the consummation of the business combination, of the consideration to be
received by the holders of Common Stock would have to be at least equal to the
highest of (i) the highest per share price paid by the Interested Stockholder
for any shares of Common Stock acquired by it within the two years immediately
prior to the first public announcement of the proposed business combination (the
"Announcement Date") or, if higher, paid in the transaction in which the
Interested Stockholder became such, or (ii) the fair market value of the Common
Stock on the Announcement Date or, if higher, on the date on which the
Interested Stockholder became an Interested Stockholder. The consideration would
be required to be paid either in cash or, at the option of the Company's
stockholders, in such other form as the Interested Stockholder has used to
acquire the largest number of shares of Common Stock it owns.
PROCEDURAL REQUIREMENT. In addition to the minimum price requirements, in
order to avoid the special stockholder vote requirement, the Interested
Stockholder would also be required to have sent a proxy or information statement
disclosing the terms and conditions of the proposed business combination and
complying with the requirements of the proxy rules promulgated under the
Exchange Act even if the Interested Stockholder would not otherwise be legally
required to provide such information to the Company's
64
<PAGE> 67
stockholders. The proxy or information statement must be mailed to all
stockholders of the Company at least thirty days prior to the consummation of
such business combination and must contain any statement as to the advisability
of the business combination that the Disinterested Directors may choose to make,
including, if the Disinterested Directors so decide, an opinion of an investment
banking firm selected by them as to the fairness (or not) of the terms of the
business combination from a financial point of view to the stockholders.
Provisions in the Company's By-Laws. The Company's By-Laws also contain a
number of provisions which may have an anti-takeover effect. Agenda items for
annual stockholders' meetings, if proposed by a stockholder, require prior
notice to the Board. The stockholder must give the Company notice at least
forty-five days before an annual meeting date of a proposed agenda item.
Nominees for Directors proposed by a stockholder require prior notice to the
Board. If a stockholder wishes to nominate a Director, the stockholder must give
notice at least forty-five days before the stockholders' meeting.
REGISTRATION RIGHTS
The Company has granted BancBoston and Fleet demand registration rights
with respect to their shares of Common Stock. Each of BancBoston or Fleet (or
transferees holding 51% or more of their respective shares) may require the
Company to effect up to three registrations of Common Stock, which demands must
be made at least six months apart and may not be made during periods when the
Company is in the process of registering Common Stock in an underwritten public
offering. Such rights may be exercised commencing after the closing of the
Company's initial public offering until the fourth anniversary of the
effectiveness of the Mergers. The Company may in its sole discretion postpone
registering Common Stock for up to 45 days after a demand.
The former stockholders of the Founding Companies may demand that the
Company effect registrations of Common Stock, which rights commence on the
second and expire on the fourth anniversary of the effectiveness of the Mergers.
Any such demand must be made by holders of not less than 2,039,595 shares of
Common Stock, not less than six months after any earlier demand, and may not be
made during periods when the Company is in the process of registering Common
Stock in an underwritten public offering. In addition, the Company may in its
sole discretion postpone registering Common Stock for up to 45 days after a
demand.
In connection with the Mergers, the Company also granted piggyback
registration rights to the former stockholders of the Founding Companies,
BancBoston, Fleet and First Union for shares of Common Stock received in the
Mergers, which rights shall remain in effect with respect to each such person or
entity until the resale provisions of Rule 144 promulgated under the Securities
Act ("Rule 144") are available to such person or entity without limitation as to
volume. See "Shares Eligible for Future Sale."
The number of shares registered pursuant to such demand and piggyback
rights may be limited by the lead manager of any underwritten offering. In the
event of the exercise of piggyback registration rights in connection with the
registration of Common Stock by the Company, the Company's registration will
take priority. Thereafter, in any underwritten demand or piggyback registration
in which the underwriters limit the total number of shares to be sold in the
offering, the stockholders who formerly held shares of the capital stock of Film
Transit will have the next priority over other stockholders seeking to have
their shares registered, until they have received aggregate cash proceeds from
the Merger and the sale of their shares of Common Stock (whether sold publicly
or privately) aggregating not less than $8 million. The former stockholders of
Courier Dispatch, BancBoston, Fleet and First Union will have the next priority
over others seeking to have shares registered, until such stockholders shall
have received cash in amounts proportionate to the greatest amount of cash
received in the Mergers and all subsequent sales (whether public or private) by
any other group of stockholders. All subsequent limitations on the number of
shares to be registered will thereafter first affect those stockholders who have
received the greatest proportionate amount of cash, whether in the Mergers or in
subsequent sales of Common Stock. Neither demand nor piggyback registration
rights are available to any stockholder which may sell shares of Common Stock in
reliance on the resale provisions of Rule 144 without limitation as to volume.
65
<PAGE> 68
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Company's Common Stock is First
Union National Bank of North Carolina, (telephone number (800) 829-8432).
LISTING
The Company currently has 9,686,905 shares of its Common Stock listed on
the New York Stock Exchange under the symbol "UT", of which 4,668,573 are
registered and available for unrestricted trading in the public markets unless
owned by affiliates of the Company or unless such shares are subject to
restrictions on transfer under applicable federal tax law or by contract.
Applications have been and will be made to list the shares of Common Stock
offered hereby on the New York Stock Exchange in connection with each issuance
hereunder.
SHARES ELIGIBLE FOR FUTURE SALE
Future sales of substantial amounts of Common Stock in the public market,
or the perception that such sales could occur, could adversely affect market
prices of the Common Stock prevailing from time to time. As described below,
only a limited number of shares are available for sale because of certain
contractual and legal restrictions on resale. Sales of substantial amounts of
Common Stock in the public market after these restrictions lapse could adversely
affect the prevailing market price and the ability of the Company to raise
equity capital in the future.
The Company presently has outstanding 9,364,194 shares of Common Stock. Of
these shares, 4,383,400 are freely tradable without restriction under the
Securities Act, unless purchased by "affiliates" of the Company as that term is
defined in Rule 144 or unless such shares are subject to restrictions on
transfer under applicable federal tax law or by contract.
Of the 9,364,194 shares of Common Stock presently outstanding 4,980,794 are
"restricted securities" as that term is defined in Rule 144 ("Restricted
Shares"). Restricted Shares may be sold in the public market only if registered
or if they qualify for an exemption from registration under Rule 144, which is
summarized below.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are required to be aggregated) who has beneficially owned shares of
Common Stock that constitute restricted securities and have been outstanding and
not held by any "affiliate" of the Company for a period of two years is entitled
to sell within any three-month period a number of shares that does not exceed
the greater of one percent of the then outstanding shares of Common Stock
(approximately 93,640 shares as of the date of this Prospectus) or the average
weekly reported trading volume of the Common Stock during the four calendar
weeks preceding the date on which notice of such sale is given, provided certain
requirements as to the manner of sale, notice of sale and the availability of
current public information are satisfied (which requirements as to the
availability of current public information were satisfied as of the date of this
Prospectus). Affiliates of the Company must comply with the foregoing
restrictions and requirements of Rule 144 as to both restricted and
non-restricted securities, except that the two-year holding period requirement
does not apply to shares of Common Stock that are not "restricted securities"
(such as shares acquired by affiliates in the Company's initial public
offering). Under Rule 144(k), a person who is not deemed an "affiliate" of the
Company at any time during the three months preceding a sale by such person, and
who has beneficially owned shares of Common Stock that were not acquired from
the Company or an "affiliate" of the Company within the previous three years,
would be entitled to sell such shares without regard to volume limitation,
manner of sale provisions, notification requirements or the availability of
current public information concerning the Company. As defined in Rule 144, an
"affiliate" of an issuer is a person that directly or indirectly through one or
more intermediaries controls, or is controlled by, or is under common control
with, such issuer.
All officers and directors of the Company, the former stockholders of the
Founding Companies, the Company and certain other stockholders have entered into
contractual "lock-up" agreements providing that they will not (with certain
limited exceptions) offer, sell, contract to sell or grant any option to
purchase or otherwise dispose of the shares of Common Stock owned by them or
that could be purchased by them through
66
<PAGE> 69
the exercise of options to purchase Common Stock for a period of 180 days after
the effective date of the Company's initial public offering without the prior
written consent of Smith Barney Inc. As a result of these contractual
restrictions, shares subject to lock up agreements may not be sold until the
agreements expire. Since many of the shares of Common Stock (other than the
shares of Common Stock sold in the Company's initial public offering) were
issued in the Mergers and were not issued in a transaction registered under the
Securities Act, they may not be sold pursuant to Rule 144 prior to the second
anniversary of their issuance.
VALIDITY OF SHARES
The validity of the shares of Common Stock offered hereby have been passed
upon for the Company by Sullivan & Worcester LLP, Boston, Massachusetts. Harvey
E. Bines, a member of the firm of Sullivan & Worcester LLP, was a member of the
Board of Directors of the Company from December 20, 1995 to May 7, 1996. Mr.
Bines holds options to acquire 10,199 shares of Common Stock at a purchase price
of $4.42 per share and beneficially owns 1,000 shares of Common Stock.
EXPERTS
The consolidated financial statements of the Company as of December 31,
1995 and for the period from December 20 to December 31, 1995; the combined
financial statements of the Combined Founding Companies, the consolidated
financial statements of CDG Holding Corp., the combined financial statements of
Tricor America, Inc., the consolidated financial statements of Film Transit,
Incorporated, the combined financial statements of the Districts of Lanter
Courier Corporation and the consolidated financial statements of Salmon
Acquisition Corporation as of December 31, 1993 and 1994 and for the years ended
December 31, 1993 and 1994 and the period ended December 19, 1995; and the
consolidated financial statements of 3D Distribution Systems, Inc. as of
December 31, 1993 and 1994 and for the year ended October 31, 1993, for the two
months ended December 31, 1993, for the year ended December 31, 1994 and for the
period ended December 19, 1995 included in this Prospectus have been so included
in reliance on the reports of Price Waterhouse LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
The financial statements of Eddy Messenger Service, Inc. for the year ended
December 31, 1995 appearing in this Prospectus have been audited by Ernst &
Young LLP, independent auditors, as set forth in their report thereon appearing
elsewhere herein, and are included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
67
<PAGE> 70
UNITED TRANSNET, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
THE COMPANY
UNITED TRANSNET, INC.
Consolidated Balance Sheets as of March 30, 1996 (unaudited) and December 31,
1995........................................................................... F-4
Consolidated Statements of Operations of United TransNet, Inc. for the three
months ended March 30, 1996 (unaudited) and of the Combined Founding Companies
for the three months ended March 31, 1995 (unaudited).......................... F-5
Consolidated Statements of Cash Flows of United TransNet, Inc. for the three
months ended March 30, 1996 (unaudited) and of the Combined Founding Companies
for the three months ended March 31, 1995 (unaudited).......................... F-6
Consolidated Statements of Stockholders' Equity for the period ended March 30,
1996 (unaudited)............................................................... F-7
Notes to Consolidated Financial Statements...................................... F-8
Report of Price Waterhouse LLP, Independent Accountants......................... F-11
Consolidated Balance Sheet as of December 31, 1995.............................. F-12
Consolidated Statement of Operations for the period from December 20 to December
31, 1995....................................................................... F-13
Consolidated Statement of Stockholders' Equity for the period from December 20
to December 31, 1995........................................................... F-14
Consolidated Statement of Cash Flows for the period from December 20 to December
31, 1995....................................................................... F-15
Notes to Consolidated Financial Statements...................................... F-16
COMBINED FOUNDING COMPANIES (PREDECESSORS TO UNITED TRANSNET, INC.)
Report of Price Waterhouse LLP, Independent Accountants......................... F-25
Combined Balance Sheets as of December 31, 1993 and 1994........................ F-26
Combined Statements of Operations for the years ended December 31, 1993 and 1994
and for the period ended December 19, 1995..................................... F-27
Combined Statements of Stockholders' Equity for the years ended December 31,
1993 and 1994 and for the period ended December 19, 1995....................... F-28
Combined Statements of Cash Flows for the years ended December 31, 1993 and 1994
and for the period ended December 19, 1995..................................... F-29
Notes to Combined Financial Statements.......................................... F-30
FOUNDING COMPANIES
CDG HOLDING CORP.
Report of Price Waterhouse LLP, Independent Accountants......................... F-43
Consolidated Balance Sheets as of December 31, 1993 and 1994.................... F-44
Consolidated Statements of Operations for the years ended December 31, 1993 and
1994 and for the period ended December 19, 1995................................ F-45
Consolidated Statements of Stockholders' Deficit for the years ended December
31, 1993 and 1994 and for the period ended December 19, 1995................... F-46
Consolidated Statements of Cash Flows for the years ended December 31, 1993 and
1994 and for the period ended December 19, 1995................................ F-47
Notes to Consolidated Financial Statements...................................... F-48
</TABLE>
F-1
<PAGE> 71
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
TRICOR AMERICA, INC.
Report of Price Waterhouse LLP, Independent Accountants......................... F-61
Combined Balance Sheets as of December 31, 1993 and 1994........................ F-62
Combined Statements of Operations for the years ended December 31, 1993 and 1994
and for the period ended December 19, 1995..................................... F-63
Combined Statements of Stockholder's Equity for the years ended December 31,
1993 and 1994 and for the period ended December 19, 1995....................... F-64
Combined Statements of Cash Flows for the years ended December 31, 1993 and 1994
and for the period ended December 19, 1995..................................... F-65
Notes to Combined Financial Statements.......................................... F-66
FILM TRANSIT, INCORPORATED
Report of Price Waterhouse LLP, Independent Accountants......................... F-73
Consolidated Balance Sheets as of December 31, 1993 and 1994.................... F-74
Consolidated Statements of Operations for the years ended December 31, 1993 and
1994 and for the period ended December 19, 1995................................ F-75
Consolidated Statements of Stockholders' Equity for the years ended December 31,
1993 and 1994 and for the period ended December 19, 1995....................... F-76
Consolidated Statements of Cash Flows for the years ended December 31, 1993 and
1994 and for the period ended December 19, 1995................................ F-77
Notes to Consolidated Financial Statements...................................... F-78
THE DISTRICTS OF LANTER COURIER CORPORATION
Report of Price Waterhouse LLP, Independent Accountants......................... F-85
Combined Balance Sheets as of December 31, 1993 and 1994........................ F-86
Combined Statements of Operations for the years ended December 31, 1993 and 1994
and for the period ended December 19, 1995..................................... F-87
Combined Statements of Lanter Equity Investment Balance at December 31, 1993 and
1994 and for the period ended December 19, 1995................................ F-88
Combined Statements of Cash Flows for the years ended December 31, 1993
and 1994 and for the period ended December 19, 1995........................... F-89
Notes to Combined Financial Statements.......................................... F-90
SALMON ACQUISITION CORPORATION
Report of Price Waterhouse LLP, Independent Accountants......................... F-97
Consolidated Balance Sheets as of December 31, 1993 and 1994.................... F-98
Consolidated Statements of Operations for the years ended December 31, 1993 and
1994 and for the period ended December 19, 1995................................ F-99
Consolidated Statements of Stockholders' Equity (Deficit) for the years ended
December 31, 1993 and 1994 and for the period ended December 19, 1995.......... F-100
Consolidated Statements of Cash Flows for the years ended December 31, 1993 and
1994 and for the period ended December 19, 1995................................ F-101
Notes to Consolidated Financial Statements...................................... F-102
</TABLE>
F-2
<PAGE> 72
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
3D DISTRIBUTION SYSTEMS, INC.
Report of Price Waterhouse LLP, Independent Accountants......................... F-109
Consolidated Balance Sheets as of December 31, 1993 and 1994.................... F-110
Consolidated Statements of Operations for the year ended October 31, 1993, for
the two months ended December 31, 1993, for the year ended December 31, 1994
and for the period ended December 19, 1995..................................... F-111
Consolidated Statements of Stockholders' Equity for the year ended October 31,
1993, for the two months ended December 31, 1993, for the year ended December
31, 1994, and for the period ended December 19, 1995........................... F-112
Consolidated Statements of Cash Flows for the year ended October 31, 1993, for
the two months ended December 31, 1993, for the year ended December 31, 1994
and for the period ended December 19, 1995..................................... F-113
Notes to Consolidated Financial Statements...................................... F-114
EDDY MESSENGER SERVICE, INC.
Report of Ernst & Young LLP, Independent Auditors............................... F-121
Balance Sheets as of December 31, 1995 and March 31, 1996 (unaudited)........... F-122
Statements of Income for the year ended December 31, 1995 and for the three
months ended March 31, 1996 and 1995 (unaudited)............................... F-123
Statements of Retained Earnings as of December 31, 1995 and March 31, 1996
(unaudited)................................................................... F-124
Statements of Cash Flows for the year ended December 31, 1995 and for the three
months ended March 31, 1996 and 1995 (unaudited)............................... F-125
Notes to Financial Statements................................................... F-126
</TABLE>
F-3
<PAGE> 73
UNITED TRANSNET, INC.
<TABLE>
CONSOLIDATED BALANCE SHEETS
<CAPTION>
MARCH 30, DECEMBER 31,
1996 1995
------------ ------------
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
(UNAUDITED) (AUDITED)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents..................................... $ 1,350 $ 2,330
Accounts receivable, less allowance of $383 as of March 30,
1996 and $654 as of December 31, 1995...................... 21,703 20,512
Short-term investments........................................ 32 2
Prepaids and other assets..................................... 3,524 2,644
Income taxes receivable....................................... 202 198
------- -------
Total current assets....................................... 26,811 25,686
Property and equipment, net..................................... 9,681 10,332
Goodwill, net................................................... 16,120 16,429
Other intangible assets, net.................................... 7,908 8,340
Other assets.................................................... 5,555 5,661
Deferred tax assets............................................. 2,974 3,982
------- -------
Total assets.......................................... $69,049 $70,430
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term debt............................................... $ 177 $ 1,500
Dividends payable............................................. 402 402
Accounts payable.............................................. 8,441 9,105
Accrued liabilities........................................... 8,115 13,644
Income taxes payable.......................................... 705 727
Deferred tax liabilities...................................... 76 76
------- -------
Total current liabilities.................................. 17,916 25,454
Long-term debt, net of current maturities....................... 23,210 24,811
Deferred compensation........................................... 451 487
Other liabilities............................................... 3,477 3,501
------- -------
Total liabilities..................................... 45,054 54,253
------- -------
</TABLE>
<TABLE>
<CAPTION>
SHARE INFORMATION
---------------------------
1996 1995
----------- -----------
<S> <C> <C> <C> <C>
Stockholders' equity
Preferred stock:
Par value........................ $ 0.001 $ 0.001
Shares authorized................ 1,000,000 1,000,000
Shares issued and outstanding.... -- -- -- --
Common stock:
Par value........................ $ 0.001 $ 0.001
Shares authorized................ 25,000,000 25,000,000
Shares issued and outstanding.... 9,079,021 8,617,222 9 9
Paid-in capital................................................. 20,866 14,664
Retained earnings............................................... 3,120 1,504
------- -------
Total stockholders' equity................................. 23,995 16,177
------- -------
Commitments and contingencies................................... -- --
------- -------
Total liabilities and stockholders' equity............ $69,049 $70,430
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 74
UNITED TRANSNET, INC.
FOR THE THREE MONTHS ENDED MARCH 30, 1996 AND
COMBINED FOUNDING COMPANIES
FOR THE THREE MONTHS ENDED MARCH 31, 1995
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<CAPTION>
FOR THE THREE
MONTHS ENDED
-------------------------
MARCH 30, MARCH 31,
1996 1995
---------- ----------
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C>
Net revenues........................................................ $ 66,255 $ 60,100
Cost of delivery.................................................... 48,532 43,656
---------- ----------
Gross profit...................................................... 17,723 16,444
Selling, general and administrative expenses........................ 13,657 12,770
Amortization of intangible assets................................... 747 805
---------- ----------
Operating income.................................................. 3,319 2,869
Other income (expense)
Interest expense.................................................. (629) (1,214)
Interest income and other, net.................................... 21 57
---------- ----------
Income before income taxes.......................................... 2,711 1,712
Provision for income taxes.......................................... 1,095 268
---------- ----------
Net income.......................................................... 1,616 1,444
Warrant accretion................................................. -- (527)
---------- ----------
Net income available for common stockholders........................ $ 1,616 $ 917
========== ==========
Earnings per common share:
Net income........................................................ $ 0.18
==========
Unaudited pro forma information:
Net income before income taxes.................................... $ 1,712
Provision for income taxes........................................ 779
----------
Net income........................................................ $ 933
==========
Earnings per common share:..........................................
Net income before income taxes.................................... $ 0.22
Provision for income taxes........................................ 0.10
----------
Net income available for common stockholders...................... $ 0.12
==========
Weighted average shares outstanding................................. 9,212,186 7,805,409
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 75
UNITED TRANSNET, INC.
FOR THE THREE MONTHS ENDED MARCH 30, 1996 AND
COMBINED FOUNDING COMPANIES
FOR THE THREE MONTHS ENDED MARCH 31, 1995
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
FOR THE THREE MONTHS
ENDED
-------------------------
MARCH 30, MARCH 31,
1996 1995
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Cash flows from operating activities
Net income......................................................... $ 1,616 $ 1,444
Adjustments to reconcile net income to net cash provided by (used
in) operating activities
Depreciation and amortization................................... 797 910
Provision for bad debts......................................... (108) 29
Amortization of goodwill and other intangible assets............ 747 805
Amortization of discount on long-term debt...................... -- 221
Deferred income taxes........................................... 1,008 375
Change in operating assets and liabilities:
Accounts receivable........................................... (1,083) 2,467
Prepaid and other assets, current and noncurrent.............. (774) 1,986
Income tax receivable......................................... (4) --
Accounts payable.............................................. (664) (1,215)
Accrued liabilities........................................... (5,555) (514)
Income taxes payable.......................................... (20) 20
Deferred compensation......................................... (36) (30)
------- -------
Net cash provided by (used in) operating activities........ (4,076) 6,498
------- -------
Cash flows from investing activities
Capital expenditures, net of disposals............................. (146) (644)
Purchase of short term investments................................. (30) (100)
Purchase of companies, net of cash acquired........................ (6) (42)
------- -------
Net cash used in investing activities...................... (182) (786)
------- -------
Cash flows from financing activities
Net decrease in line of credit..................................... (1,550) (1,275)
Payments of debt................................................... (1,374) (1,629)
Distributions to stockholder....................................... -- (1,776)
Net transactions with Lanter....................................... -- (466)
Exercise of common stock options................................... 20 --
Issuance of common stock pursuant to overallotment option.......... 6,182 --
------- -------
Net cash provided by (used in) financing activities........ 3,278 (5,146)
------- -------
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents............................................ (980) 566
Beginning of period................................................ 2,330 4,020
------- -------
End of period...................................................... $ 1,350 $ 4,586
======= =======
Supplemental disclosure of cash flow information
Cash paid during the quarter for
Interest........................................................ $ 252 $ 602
Income taxes.................................................... 110 166
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 76
UNITED TRANSNET, INC.
<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED)
<CAPTION>
COMMON STOCK
-------------------- PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
--------- ------ ------- -------- -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995............. 8,617,222 $9 $14,664 $1,504 $16,177
Exercise of common stock options......... 3,399 -- 20 -- 20
Exercise of overallotment option......... 458,400 -- 6,182 -- 6,182
Net income............................... -- -- -- 1,616 1,616
--------- -- ------- ------ -------
Balance at March 30, 1996................ 9,079,021 $9 $20,866 $3,120 $23,995
========= == ======= ====== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE> 77
UNITED TRANSNET, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- BUSINESS AND ORGANIZATION
United TransNet, Inc. (the "Company") provides scheduled and unscheduled
ground and air delivery services for local, regional, national, and
international shipments and offers same-day and next-day delivery options.
Primary customers of the Company are financial institutions, pharmaceutical
companies and automotive parts suppliers.
The Company was formed by the mergers (the "Mergers") of CDG Holding Corp.
and its operating subsidiary, Courier Dispatch Group, Inc. (collectively
"Courier Dispatch"); Tricor America, Inc. ("Tricor"); Film Transit, Incorporated
("Film Transit"); Lanter Courier Corporation ("Lanter"); Salmon Acquisition
Corporation and its operating subsidiary, Sunbelt Courier, Inc. (collectively
"Sunbelt"); and 3D Distribution Systems, Inc. and its affiliated corporations
and subsidiaries (collectively "3D") (collectively the "Founding Companies").
Under the merger agreements, all outstanding shares of the Founding Companies'
capital stock were converted into shares of the Company's Common Stock
concurrent with the consummation of the initial public offering of such Common
Stock. The Founding Companies were considered predecessor companies to the
Company. The Mergers were accounted for in a manner similar to
poolings-of-interest and, accordingly, the assets and liabilities of the
Founding Companies were transferred at their historical amounts. Prior to the
Mergers, the Company had no significant transactions or operations.
NOTE 2 -- BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany accounts and transactions
have been eliminated in consolidation. The consolidated financial statements in
this report have not been audited. In the opinion of management, all adjustments
necessary for a fair presentation of the financial positions and results of
operations for the interim periods have been made. All such adjustments are of a
normal recurring nature. These statements should be read in conjunction with the
Company's audited Consolidated Financial Statements for the year ended December
31, 1995 set forth elsewhere in this Prospectus.
On January 16, 1996, the Company changed its fiscal year end from December
31 to the last Saturday in December, beginning with the fiscal year ending
December 28, 1996. Each of the Company's fiscal quarters will end on the last
Saturday of the last month of each calendar quarter, beginning with the fiscal
quarter ending March 30, 1996. Results of operations for the three months ended
March 30, 1996 are not necessarily indicative of the results of operations for
the year ending December 28, 1996 or any interim periods.
There have been no changes to the accounting policies of the Company during
the periods presented. For description of these policies, see Note 1 of the
Notes to Consolidated Financial Statements in the Company's audited Consolidated
Financial Statements for the year ended December 31, 1995 set forth elsewhere in
this Prospectus.
Certain of the Founding Companies were S Corporations during the period
ended March 31, 1995 and, accordingly were not subject to corporate income
taxes. The unaudited pro forma information is presented for the purpose of
reflecting a provision for income taxes as if all of the Founding Companies had
been subject to income tax for all periods presented, calculated in accordance
with FAS 109, based on tax laws that were in effect during the respective
periods.
NOTE 3 -- EARNINGS PER COMMON SHARE
Earnings per common share for the period ending March 30, 1996 was computed
based on the weighted average of common and common equivalent shares outstanding
during the period. Pro forma earnings per common share for the period ending
March 31, 1995 was computed based on common equivalent shares outstanding as if
the Mergers and common stock offering had been consummated.
F-8
<PAGE> 78
UNITED TRANSNET, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 4 -- COMBINED FOUNDING COMPANIES
The Combined Founding Companies collectively are considered predecessors to
the Company. The following table provides a reconciliation to the Combined
Founding Companies Consolidated Statement of Operations for the three months
ended March 31, 1995.
COMBINED FOUNDING COMPANIES
FOR THE THREE MONTHS ENDED MARCH 31, 1995
<TABLE>
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<CAPTION>
THE DISTRICTS OF
CDG 3D FILM LANTER SALMON TRICOR COMBINED
HOLDING DISTRIBUTION TRANSIT COURIER, ACQUISITION AMERICA FOUNDING
CORP. SYSTEMS, INC. INCORPORATED CORPORATION CORPORATION INC. COMPANIES
------- ------------- ------------ ---------------- ----------- ------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenues.......... $32,290 $3,692 $5,694 $5,529 $3,991 $8,904 $60,100
Cost of delivery...... 23,613 2,567 3,966 4,134 3,074 6,302 43,656
------- ------ ------ ------ ------ ------ -------
Gross profit........ 8,677 1,125 1,728 1,395 917 2,602 16,444
Selling, general and
administrative
expenses............ 6,930 966 1,647 970 553 1,704 12,770
Amortization of
intangible assets... 626 -- -- 95 75 9 805
------- ------ ------ ------ ------ ------ -------
Operating income.... 1,121 159 81 330 289 889 2,869
Other income (expense)
Interest expense.... (1,032) (21) (11) -- (107) (43) (1,214)
Interest income and
other, net....... -- -- 9 -- 7 41 57
------- ------ ------ ------ ------ ------ -------
Income before income
taxes and
extraordinary
items............... 89 138 79 330 189 887 1,712
Provision for income
taxes............... 98 58 33 -- 79 -- 268
------- ------ ------ ------ ------ ------ -------
Net income (loss)..... (9) 80 46 330 110 887 1,444
Warrant accretion... (527) -- -- -- -- -- (527)
------- ------ ------ ------ ------ ------ -------
Net income (loss)
available for common
stockholders........ $ (536) $ 80 $ 46 $ 330 $ 110 $ 887 $ 917
======= ====== ====== ====== ====== ====== =======
United pro forma
information:
Net income before
income taxes..... $ 89 $ 138 $ 79 $ 330 $ 189 $ 887 $ 1,712
Provision for income
taxes............ 98 58 33 138 79 373 779
------- ------ ------ ------ ------ ------ -------
Net income (loss)... $ (9) $ 80 $ 46 $ 192 $ 110 $ 514 $ 933
======= ====== ====== ====== ====== ====== =======
</TABLE>
F-9
<PAGE> 79
(This page intentionally left blank)
F-10
<PAGE> 80
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
United TransNet, Inc.
In our opinion, the accompanying consolidated balance sheet and related
consolidated statements of operations, of stockholders' equity and of cash flows
present fairly, in all material respects, the financial position of United
TransNet, Inc. and its subsidiaries at December 31, 1995 and the results of
their operations and their cash flows for the period from December 20 to
December 31, 1995, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above.
Price Waterhouse LLP
Atlanta, Georgia
March 12, 1996
F-11
<PAGE> 81
UNITED TRANSNET, INC.
<TABLE>
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<CAPTION>
DECEMBER 31,
1995
------------
<S> <C>
ASSETS
Current assets
Cash and cash equivalents..................................................... $ 2,330
Accounts receivable, less allowance of $654................................... 20,512
Short-term investments........................................................ 2
Prepaids and other assets..................................................... 2,644
Income taxes receivable....................................................... 198
-------
Total current assets.................................................. 25,686
Property and equipment, net..................................................... 10,332
Goodwill, net................................................................... 16,429
Other intangible assets, net.................................................... 8,340
Other assets.................................................................... 5,661
Deferred tax assets............................................................. 3,982
-------
$70,430
=======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term debt............................................................... $ 1,500
Dividends payable............................................................. 402
Accounts payable.............................................................. 9,105
Accrued liabilities........................................................... 13,644
Income taxes payable.......................................................... 727
Deferred tax liabilities...................................................... 76
-------
Total current liabilities............................................. 25,454
Long-term debt, net of current maturities....................................... 24,811
Deferred compensation........................................................... 487
Other liabilities............................................................... 3,501
-------
54,253
-------
Stockholders' equity
Preferred Stock, $.001 par value; 1,000,000 authorized; no shares issued and
outstanding................................................................ --
Common Stock, $.001 par value; 25,000,000 authorized; 8,617,222 issued and
outstanding................................................................ 9
Paid-in capital............................................................... 14,664
Retained earnings............................................................. 1,504
-------
Total stockholders' equity............................................ 16,177
-------
Commitments and contingencies................................................... --
-------
$70,430
=======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-12
<PAGE> 82
UNITED TRANSNET, INC.
<TABLE>
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD FROM DECEMBER 20 TO DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C>
Net revenues......................................................................... $ 7,748
Cost of delivery..................................................................... 5,462
-------
Gross profit....................................................................... 2,286
Selling, general and administrative expenses......................................... 1,585
Amortization of intangible assets.................................................... 92
-------
Operating income................................................................... 609
Other income (expense):
Interest expense................................................................... (137)
Interest income and other, net..................................................... 5
-------
Income before income taxes........................................................... 477
Provision (benefit) for income taxes................................................. (2,231)
-------
Income before extraordinary item..................................................... 2,708
Extraordinary item -- loss on early extinguishment of debt, net of income tax benefit
of $803............................................................................ 1,204
-------
Net income........................................................................... $ 1,504
=======
Earnings per common share
Income before extraordinary item................................................... $ .31
Extraordinary item................................................................. .14
-------
Net income......................................................................... $ .17
=======
Weighted average number of common and common equivalent shares....................... 8,799
=======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-13
<PAGE> 83
UNITED TRANSNET, INC.
<TABLE>
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM DECEMBER 20 TO DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<CAPTION>
COMMON STOCK
------------------ PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
--------- ------ -------- -------- --------
<S> <C> <C> <C> <C> <C>
Issuance of Common Stock to Founding Company
stockholders...................................... 4,692,222 $5 $ 3,309 $ -- $ 3,314
Issuance of Common Stock............................ 3,925,000 4 47,175 -- 47,179
Distribution to Founding Company stockholders....... -- -- (35,820) -- (35,820)
Net income.......................................... -- -- -- 1,504 1,504
--------- -- -------- -------- --------
Balance at December 31, 1995........................ 8,617,222 $9 $ 14,664 $1,504 $ 16,177
========= == ======== ====== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-14
<PAGE> 84
UNITED TRANSNET, INC.
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM DECEMBER 20 TO DECEMBER 31, 1995
(IN THOUSANDS)
<S> <C>
Cash flows from operating activities
Net income................................................................................ $ 1,504
Adjustments to reconcile net income to net cash used in operating activities
Depreciation and amortization.......................................................... 103
Provision for bad debts................................................................ (25)
Amortization of goodwill and other intangible assets................................... 92
Deferred income taxes.................................................................. (2,572)
Change in operating assets and liabilities
Accounts receivable.................................................................. 460
Other assets......................................................................... 188
Accrued interest-related party....................................................... 91
Accounts payable..................................................................... (3,343)
Accrued liabilities.................................................................. 1,269
Income taxes payable................................................................. 426
--------
Net cash used in operating activities............................................. (1,807)
--------
Cash flows from investing activities
Capital expenditures, net of disposals.................................................... (22)
--------
Net cash used in investing activities............................................. (22)
--------
Cash flows from financing activities
Increase in revolving line of credit...................................................... 23,434
Decrease in revolving line of credit...................................................... (6,495)
Payments of debt.......................................................................... (27,473)
Proceeds from sale of common stock........................................................ 47,179
Distribution to Founding Company stockholders............................................. (35,820)
--------
Net cash provided by financing activities......................................... 825
--------
Net decrease in cash and cash equivalents................................................... (1,004)
Cash and cash equivalents
Beginning of period....................................................................... 3,334
--------
End of period............................................................................. $ 2,330
========
Supplemental disclosure of cash flow information
Cash paid during the year for
Interest............................................................................... $ 34
Income taxes........................................................................... 8
========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-15
<PAGE> 85
UNITED TRANSNET, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1. BUSINESS AND ORGANIZATION
United TransNet, Inc. (the "Company") provides scheduled and unscheduled
ground and air delivery services for local, regional, national, and
international shipments and offers same-day and next-day delivery options.
Primary customers of the Company are financial institutions, pharmaceutical
companies and automotive parts suppliers.
The Company was formed by the merger of CDG Holding Corp. and its operating
subsidiary, Courier Dispatch Group, Inc. (collectively "Courier Dispatch");
Tricor America, Inc. ("Tricor"); Film Transit, Incorporated ("Film Transit");
Lanter Courier Corporation ("Lanter"); Salmon Acquisition Corporation and its
operating subsidiary, Sunbelt Courier, Inc. (collectively "Sunbelt"); and 3D
Distribution Systems, Inc. and its affiliated corporations and subsidiaries
(collectively "3D") (collectively the "Founding Companies"). Under the merger
agreements, all outstanding shares of the Founding Companies' capital stock were
converted into shares of the Company's Common Stock concurrent with the
consummation of the initial public offering (the "Offering") of such Common
Stock. The Founding Companies are considered predecessor companies to the
Company. The Mergers were accounted for in a manner similar to
poolings-of-interest and, accordingly, the assets and liabilities of the
Founding Companies were transferred at their historical amounts. Prior to the
Mergers, the Company had no significant transactions or operations.
2. BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany accounts and transactions
have been eliminated in consolidation.
Estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period, the most significant of which are related
to insurance accruals. Actual results could differ from those estimates.
Disclosures About Fair Value of Financial Instruments
In preparing disclosures about the fair value of financial instruments, the
Company has assumed that the carrying amount approximates fair value for cash
and cash equivalents, accounts receivable, short-term investments, short-term
debt, and accounts payable. The fair value of long-term debt instruments is
based upon the current interest rate environment and remaining term to maturity
(see Note 6). The Company feels that the carrying value of long-term debt
approximates the fair value.
The more significant accounting policies followed by the Company are
described below:
Cash and Cash Equivalents and Short-Term Investments
The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents. Short-term
investments consist of certificates with original maturities of less than one
year.
Property and Equipment
Property and equipment is recorded at cost. Additions and improvements are
capitalized while maintenance and repair costs are charged to expense as
incurred. Depreciation is computed using the straight-
F-16
<PAGE> 86
UNITED TRANSNET, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
line method over the estimated useful lives of the assets, which range from
three to thirty-one and a half years. The cost and accumulated depreciation of
property retired or otherwise disposed of are removed from the account balances
and any gain or loss is included in other income. Assets subject to capital
leases are amortized using the straight-line method over the terms of the
leases.
Goodwill and Other Intangible Assets
Goodwill and intangible assets are currently amortized on a straight-line
basis over periods ranging from 1 to 20 years. The carrying value of intangible
assets is evaluated for indications of possible impairment whenever events or
changes in circumstances indicate that the carrying value of an intangible asset
may not be recoverable. Events or changes in circumstances which may indicate
impairment include a significant adverse change in legal factors, business
climate or government regulation and current cash flow losses combined with a
history of cash flow losses or forecasted continuing cash flow losses associated
with an acquired company. The review is based on comparing the carrying amount
to the undiscounted estimated cash flows before interest charges from operations
over the remaining amortization period. No impairment is indicated as of
December 31, 1995.
Goodwill was $20,589 at December 31, 1995. Related accumulated amortization
totaled $4,160 at December 31, 1995.
Other Assets
Other assets consist principally of prepayments, other receivables, supply
items and advances to employees.
Insurance Claims
The Company is self-insured with respect to certain aspects of its workers'
compensation, general liability, automobile and physical damage on vehicles and
group health insurance. The accompanying financial statements include an
insurance accrual based upon third party administrator's and management's
evaluations of estimated future ultimate costs of outstanding claims and an
estimated liability for claims incurred but not reported on an undiscounted
basis. The ultimate cost of these claims will depend on the outcome of
individual claims given the potential for these claims to increase or decrease
over time.
Revenue Recognition
Revenue is recognized when the delivery is completed or the services are
rendered to customers.
Income Taxes
The Company determines taxes on income by using the liability method as
prescribed by Statement of Financial Accounting Standards No. 109 ("FAS 109"),
"Accounting for Income Taxes." This approach requires the recognition of
deferred tax assets and liabilities for the expected future tax consequences of
events that have been recognized in the Company's consolidated financial
statements or tax returns. In estimating future tax consequences, FAS 109
requires the consideration of all expected future events other than enactments
of changes in the tax laws or rates.
Earnings per Common Share
Earnings per share of common stock was computed based on the weighted
average number of common and common equivalent shares (if dilutive) outstanding
during the period from December 20 to December 31, 1995.
F-17
<PAGE> 87
UNITED TRANSNET, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
New Accounting Standards
The Company currently accounts for stock related compensation using
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" and therefore the Company does not expect the adoption of Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" to have a material impact on the Company's financial position or
results of operations. This statement is effective for the Company's year ending
December 31, 1996.
3. PROPERTY AND EQUIPMENT
<TABLE>
Property and equipment consists of the following:
<CAPTION>
DECEMBER 31,
1995
------------
<S> <C>
Land.................................................................. $ 577
Buildings............................................................. 2,904
Delivery vehicles..................................................... 15,144
Equipment and furnishings............................................. 6,290
Leasehold improvements................................................ 2,567
--------
27,482
Less accumulated depreciation and amortization........................ (17,150)
--------
$ 10,332
========
</TABLE>
4. OTHER INTANGIBLE ASSETS
<TABLE>
Other intangible assets consists of the following:
<CAPTION>
ESTIMATED
AMORTIZABLE
LIVES DECEMBER 31,
(YEARS) 1995
----------- ------------
<S> <C> <C>
Customer lists.............................................. 5-12 $ 7,524
Noncompete agreements....................................... 1-8 7,207
Other intangible assets..................................... 6 1,061
-------
15,792
Less accumulated amortization............................... (7,452)
-------
$ 8,340
=======
</TABLE>
5. ACCRUED LIABILITIES
<TABLE>
Accrued liabilities consists of the following:
<CAPTION>
DECEMBER 31,
1995
------------
<S> <C>
Accrued payroll and related benefits.................................... $ 3,454
Accrued insurance....................................................... 8,748
Other accrued liabilities............................................... 4,943
-------
17,145
Less current portion.................................................... 13,644
-------
$ 3,501
=======
</TABLE>
F-18
<PAGE> 88
UNITED TRANSNET, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
6. SHORT-TERM AND LONG-TERM DEBT
<TABLE>
Short-term and long-term obligations consist of the following:
<CAPTION>
DECEMBER 31,
1995
------------
<S> <C>
Term loans payable in varying monthly installments, plus interest
varying from 6% to 16%................................................ $ 147
Revolving line of credit with interest at the prime rate (8.5% at
December 31, 1995) plus 0.25%......................................... 23,434
Acquisition loans payable in varying monthly installments, plus interest
at 9%; final payment due March 1999................................... 2,300
Notes payable, net of imputed interest of approximately $2 at
December 31, 1995..................................................... 179
Contracts payable in monthly installments of $2, plus interest at
8.5%.................................................................. 16
Other notes payable..................................................... 232
Other non-compete agreements............................................ 3
-------
26,311
Less current portion.................................................... (1,500)
-------
$24,811
=======
</TABLE>
The Company maintains a line of credit aggregating $35 million which
expires on January 15, 1997. The Company is required to pay a commitment fee of
.25% on the unused portion of the line of credit. At December 31, 1995, $23,434
was outstanding under this agreement. The estimated fair market value of the
line of credit approximates the carrying value included in the balance sheet at
December 31, 1995 due to its varying interest rate.
<TABLE>
Debt maturities are as follows:
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------
<S> <C>
1996............................................. $ 1,500
1997............................................. 24,686
1998............................................. 45
1999............................................. 74
2000 and thereafter.............................. 6
-------
$26,311
=======
</TABLE>
In December 1995, the Company repaid all of the subordinated notes of
Courier Dispatch which were assumed in the Mergers and generated an
extraordinary loss of $2,007, net of a tax benefit of $803.
F-19
<PAGE> 89
UNITED TRANSNET, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
7. INCOME TAXES
<TABLE>
The provision (benefit) for income taxes is as follows:
<CAPTION>
PERIOD FROM
DECEMBER 20
TO
DECEMBER 31,
1995
------------
<S> <C>
Current tax expense
Federal....................................................................... $ 278
State......................................................................... 68
Deferred tax benefit
Federal....................................................................... (2,187)
State......................................................................... (390)
-------
Total provision (benefit)............................................. $(2,231)
=======
<CAPTION>
The differences in income taxes provided and the amounts determined by
applying the federal statutory tax rate to income before income taxes result
from the following:
PERIOD FROM
DECEMBER 20
TO
DECEMBER 31,
1995
------------
<S> <C>
Tax at federal statutory rate................................................... $ 163
State income taxes, net of federal income tax benefit........................... 23
Decrease in valuation allowance................................................. (2,164)
Nondeductible expenses.......................................................... 1
Change in corporate tax status.................................................. (243)
Other........................................................................... (11)
-------
$(2,231)
=======
</TABLE>
F-20
<PAGE> 90
UNITED TRANSNET, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
The components of deferred income taxes are as follows:
<CAPTION>
DECEMBER 31,
1995
------------
<S> <C>
Deferred tax assets
Insurance accrual............................................................. $ 2,430
Deferred compensation......................................................... 248
Vacation accrual.............................................................. 410
Accounts receivable allowance................................................. 259
Net operating loss carryforwards.............................................. 1,918
Other......................................................................... 84
-------
5,349
-------
Deferred tax liabilities
Accumulated depreciation...................................................... (940)
Non-compete agreements........................................................ (101)
Other......................................................................... (402)
-------
(1,443)
-------
$ 3,906
=======
</TABLE>
The valuation allowance of $2,164 at December 20, 1995 related to the
deferred tax assets of Courier Dispatch was reversed because the consolidated
earnings of the Company have caused realization to become probable.
At December 31, 1995, the Company has net operating loss carryforwards
available for tax purposes of approximately $4 million to offset future taxable
income through 2010.
8. COMMITMENTS AND CONTINGENCIES
Lease Commitments
Rent expense related to operating leases amounted to approximately $477 for
the period from December 20 to December 31, 1995.
<TABLE>
The following are the approximate future minimum lease payments required by
operating leases:
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------
<S> <C>
1996.......................................... $3,531
1997.......................................... 2,706
1998.......................................... 1,422
1999.......................................... 666
2000 and thereafter........................... 1,463
------
$9,788
======
</TABLE>
Litigation
The Company is, from time to time, party to litigation arising in the
normal course of its business, most of which involve claims for personal injury
and property damage incurred in connection with its operations. Management
believes that none of these actions will have a material adverse effect on the
financial position, results of operations, or cash flows of the Company.
F-21
<PAGE> 91
UNITED TRANSNET, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Self-Insurance Program
The Company is self-insured with respect to certain aspects of its workers'
compensation, general liability and automobile insurance and physical damage on
vehicles claims. In accordance with the terms of the insurance policy, the
Company maintains a $1,240 letter of credit with a commercial bank in favor of
the insurer. Management believes that any claims as of December 31, 1995,
arising under this self-insurance program will not have a material adverse
effect on the financial position, results of operations, or cash flows of the
Company.
9. RELATED PARTY TRANSACTIONS
A board member of the Company is an officer of a bank, an affiliate of
which is a significant customer of the Company. At December 31, 1995, the
Company had an accounts receivable balance of $565 from this customer. Sales to
this customer approximated $201 for the period from December 20 to December 31,
1995.
Sunbelt uses two facilities owned by a related party for which no rent is
charged. Sunbelt shares one of its facilities with this entity at no charge to
the entity.
Film Transit leases two facilities from a partnership of which the partners
are two stockholders of the Company. Rent paid to the partnership for the period
from December 20 to December 31, 1995 was $6.
10. EMPLOYEE BENEFIT PLANS
Several of the Company's subsidiaries have qualified defined contribution
plans which allow for voluntary pretax contributions by the employees. The
Company pays all general and administrative expenses of the plans and in some
cases makes matching contributions on behalf of the employees.
One subsidiary of the Company has a noncontributory profit sharing plan for
the benefit of qualifying employees. Contributions to the plan are calculated at
graduated percentages of the subsidiary's net income before taxes and employee
bonuses.
11. CONCENTRATION OF CREDIT RISK
During the period ended December 31, 1995, no one customer represented
greater than 10% of total revenue of the Company. The Company's revenues are
primarily derived from services to financial institutions, pharmaceutical
companies, automotive and farm implement companies. Although the Company is
affected by the creditworthiness of its customers, management does not believe
significant credit risk exists at December 31, 1995. The Company generally does
not require collateral, and maintains reserves for potential credit losses.
F-22
<PAGE> 92
UNITED TRANSNET, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
12. STOCK OPTION PLAN
<TABLE>
The Company has in place a stock option plan whereby selected members of
management have been granted options to purchase shares of common stock.
Transactions related to stock options for the period from December 20 to
December 31, 1995 are as follows:
<CAPTION>
OPTION PRICE
SHARES PER SHARE
------- ------------
<S> <C> <C>
Outstanding at December 20, 1995................................ 216,110 $2.06-4.42
Granted......................................................... -- --
Exercised....................................................... -- --
Cancelled or expired............................................ -- --
------- ----------
Outstanding at December 31, 1995................................ 216,110 $2.06-4.42
======= ==========
</TABLE>
13. UNAUDITED PRO FORMA INFORMATION
<TABLE>
The following table presents the unaudited results of operations of the
Company for the years ended December 31, 1994 and 1995 as if the mergers had
occurred on January 1, 1994. The pro forma information below reflects certain
adjustments, including the elimination of interest expense on debt paid off with
proceeds from the initial public offering and taxation as if Tricor and Lanter,
subchapter S corporations, had been subject to federal and state income taxes
throughout the periods presented.
<CAPTION>
YEAR ENDED
DECEMBER 31,
---------------------------
1994 1995
---------- ----------
<S> <C> <C>
Net revenues...................................................... $ 214,099 $ 254,274
Net income........................................................ 4,703 4,085
Net income per common share....................................... 0.53 0.46
Weighted average shares outstanding............................... 8,798,963 8,798,963
</TABLE>
14. SUBSEQUENT EVENTS
Sale of common stock
On January 16, 1996, the Company sold 458,400 shares of Common Stock
pursuant to an exercise of the underwriters' over-allotment option. The proceeds
from the exercise of the over-allotment option, net of underwriting discounts
and commissions and after deducting expenses related to the exercise, were
approximately $6.2 million.
1995 Stock Incentive Plan
On January 16, 1996, options to purchase 110,000 shares of Common Stock
were granted pursuant to the 1995 Stock Incentive Plan (the "1995 Plan") with an
exercise price of $14.75 per share, the market value of the Common Stock on the
date of grant. On March 6, 1996 the Board of Directors authorized increasing the
total number of shares subject to the 1995 Plan to an aggregate of 625,000
shares, subject to approval of that increase by stockholders of the Company.
1996 Stock and Option Plan
On March 6, 1996, the Board of Directors of the Company established the
1996 Stock and Option Plan (the "1996 Plan") for non-employee directors, subject
to approval of this plan by stockholders of the Company. Under the 1996 Plan,
50,000 shares of common stock are reserved for issuance. The initial grants of
stock and options may not occur before January 1, 1997.
F-23
<PAGE> 93
(This page intentionally left blank)
F-24
<PAGE> 94
REPORT OF INDEPENDENT ACCOUNTANTS
To the Boards of Directors and Stockholders of
the Combined Founding Companies
In our opinion, the accompanying combined balance sheets and the related
combined statements of operations, of stockholders' equity and of cash flows
present fairly, in all material respects, the combined financial position of the
Combined Founding Companies at December 31, 1993 and 1994 and the results of
their operations and their cash flows for each of the two years in the period
ended December 31, 1994 and for the period ended December 19, 1995, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Combined Founding Companies'
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
Price Waterhouse LLP
Atlanta, Georgia
March 12, 1996
F-25
<PAGE> 95
COMBINED FOUNDING COMPANIES
(PREDECESSORS TO UNITED TRANSNET, INC. -- SEE NOTE 1)
<TABLE>
COMBINED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNT)
<CAPTION>
DECEMBER 31,
-----------------
1993 1994
------- -------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents................................................ $ 1,918 $ 4,019
Accounts receivable, less allowance of $572 and $676..................... 13,114 18,868
Short-term investments................................................... -- 900
Prepaids and other assets................................................ 2,343 1,560
Deferred tax assets...................................................... 91 306
------- -------
Total current assets............................................. 17,466 25,653
Property and equipment, net................................................ 13,224 15,165
Goodwill, net.............................................................. 8,121 15,502
Other intangible assets, net............................................... 5,463 9,004
Other assets............................................................... 1,307 1,653
Restricted certificates of deposit......................................... 1,037 837
Deferred tax assets, net................................................... 512 609
------- -------
$47,130 $68,423
======= =======
LIABILITIES, COMMON STOCK WARRANTS AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term debt.......................................................... $ 3,510 $10,057
Short-term debt -- related parties....................................... 575 575
Accrued interest -- related parties...................................... 1,401 1,837
Accounts payable......................................................... 3,668 7,515
Accrued liabilities...................................................... 8,566 10,347
Income taxes payable..................................................... 153 284
------- -------
Total current liabilities........................................ 17,873 30,615
Long-term debt, net of current maturities.................................. 5,158 13,666
Long-term debt -- related parties, net of current maturities............... 8,548 12,301
Deferred compensation...................................................... 768 619
Other liabilities.......................................................... 2,939 2,294
------- -------
35,286 59,495
------- -------
Common stock warrants...................................................... 4,692 5,872
------- -------
Stockholders' equity
Common stock............................................................. 93 93
Paid-in capital.......................................................... 2,713 2,572
Retained earnings........................................................ 12,812 9,367
Treasury stock........................................................... (7,050) (7,050)
Common stock -- subscriptions receivable................................. -- (510)
Predecessor basis adjustment............................................. (1,416) (1,416)
------- -------
7,152 3,056
------- -------
Commitments and contingencies.............................................. -- --
------- -------
$47,130 $68,423
======= =======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-26
<PAGE> 96
COMBINED FOUNDING COMPANIES
(PREDECESSORS TO UNITED TRANSNET, INC. -- SEE NOTE 1)
<TABLE>
COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<CAPTION>
YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 19,
------------------- ------------
1993 1994 1995
-------- -------- ------------
<S> <C> <C> <C>
Net revenues................................................. $171,901 $214,099 $246,526
Cost of delivery............................................. 122,110 156,323 181,217
-------- -------- --------
Gross profit............................................... 49,791 57,776 65,309
Selling, general and administrative expenses................. 41,095 48,395 53,444
Amortization of intangible assets............................ 2,258 3,667 3,204
-------- -------- --------
Operating income........................................... 6,438 5,714 8,661
Other income (expense)
Interest expense -- related party.......................... (1,591) (2,146) (2,575)
Interest expense........................................... (796) (1,612) (2,713)
Interest income and other, net............................. 127 2,245 264
-------- -------- --------
Income before income taxes................................... 4,178 4,201 3,637
Provision for income taxes................................... 1,067 336 1,021
-------- -------- --------
Net income................................................... 3,111 3,865 2,616
Warrant accretion.......................................... (131) (527) (19,430)
-------- -------- --------
Net income (loss) available for common stockholders.......... $ 2,980 $ 3,338 $(16,814)
======== ======== ========
Unaudited pro forma information (Note 15):
Net income before income taxes............................. $ 4,178 $ 4,201 $ 3,637
Provision for income taxes................................. 2,278 1,754 2,750
-------- -------- --------
Net income................................................. 1,900 2,447 887
Warrant accretion.......................................... (131) (527) (19,430)
-------- -------- --------
Net income (loss) available for common stockholders.......... $ 1,769 $ 1,920 $(18,543)
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-27
<PAGE> 97
COMBINED FOUNDING COMPANIES
(PREDECESSORS TO UNITED TRANSNET, INC. -- SEE NOTE 1)
<TABLE>
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<CAPTION>
COMMON STOCK PREDECESSOR
------------------ TREASURY PAID IN SUBSCRIPTIONS RETAINED BASIS
SHARES AMOUNT STOCK CAPITAL RECEIVABLE EARNINGS ADJUSTMENT TOTAL
--------- ------ -------- ------- ------------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1992..... 1,272,445 $93 $(7,050) $ 3,477 $ -- $ 11,769 $(1,416) $ 6,873
Distributions to stockholders.... -- -- -- -- -- (608) -- (608)
Issuance of common stock......... 2,950 -- -- 38 -- -- -- 38
Net transactions with Lanter..... -- -- -- (2,119) -- -- -- (2,119)
Warrant accretion................ -- -- -- -- -- (131) -- (131)
3D net loss for two months ended
December 31, 1993.............. -- -- -- -- -- (12) -- (12)
Net income....................... -- -- -- 1,317 -- 1,794 -- 3,111
--------- --- ------- ------- ----- -------- ------- --------
Balance at December 31, 1993..... 1,275,395 93 (7,050) 2,713 -- 12,812 (1,416) 7,152
Distributions to stockholders.... -- -- -- -- -- (1,580) -- (1,580)
Issuance of common stock......... 300,952 1 -- 716 (556) -- -- 161
Retirement of treasury stock..... (954,098) (1) -- -- -- (3,772) -- (3,773)
Subscription payment............. -- -- -- -- 46 -- -- 46
Net transactions with Lanter..... -- -- -- (2,288) -- -- -- (2,288)
Warrant accretion................ -- -- -- -- -- (527) -- (527)
Net income....................... -- -- -- 1,431 -- 2,434 -- 3,865
--------- --- ------- ------- ----- -------- ------- --------
Balance at December 31, 1994..... 622,249 93 (7,050) 2,572 (510) 9,367 (1,416) 3,056
Distributions to stockholders.... -- -- -- -- -- (7,850) -- (7,850)
Contributions from stockholder... -- -- -- 586 -- -- -- 586
Issuance of common stock......... 22,506 -- -- 726 -- -- -- 726
Purchase and retirement of
stock.......................... (85,331) -- -- (782) -- -- -- (782)
Retirement of treasury stock..... (33,688) (1) 59 (59) -- -- -- (1)
Subscription payments............ -- -- -- -- 510 -- -- 510
Warrant accretion................ -- -- -- -- -- (19,430) -- (19,430)
Exercise of common stock
warrants....................... 2,636,439 2 -- 25,969 -- -- -- 25,971
Net transactions with Lanter..... -- -- -- (2,088) -- -- -- (2,088)
Net income....................... -- -- -- 1,095 -- 1,521 -- 2,616
--------- --- ------- ------- ----- -------- ------- --------
Balance at December 19, 1995..... 3,162,175 $94 $(6,991) $28,019 $ -- $(16,392) $(1,416) $ 3,314
========= === ======= ======= ===== ======== ======= ========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-28
<PAGE> 98
COMBINED FOUNDING COMPANIES
(PREDECESSORS TO UNITED TRANSNET, INC. -- SEE NOTE 1)
<TABLE>
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<CAPTION>
YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 19,
------------------ -------------
1993 1994 1995
------- -------- -------------
<S> <C> <C> <C>
Cash flows from operating activities
Net income................................................................................. $ 3,111 $ 3,865 $ 2,616
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization............................................................ 2,949 3,358 3,458
Provision for bad debts.................................................................. 270 288 8
Amortization of goodwill and other intangible assets..................................... 2,258 2,859 3,204
Amortization of discount on long-term debt............................................... 421 707 999
Deferred income taxes.................................................................... 516 (312) 383
Write-off of intangible assets........................................................... -- 808 --
Loss (gain) on sale of assets............................................................ 38 27 (69)
Non-cash employee compensation........................................................... 38 154 1,199
Change in operating assets and liabilities
Accounts receivable.................................................................... (1,971) (3,626) (2,121)
Other assets........................................................................... (323) 199 (6,930)
Accrued interest-related party......................................................... 372 352 (323)
Accounts payable....................................................................... 1,702 3,483 4,795
Accrued liabilities.................................................................... (595) (1,089) 58
Dividend payable....................................................................... -- -- 402
Income taxes payable................................................................... (218) 134 2,670
Deferred compensation.................................................................. (202) (149) (260)
------- -------- -------
Net cash provided by operating activities............................................ 8,366 11,058 10,089
------- -------- -------
Cash flows from investing activities
Capital expenditures, net of disposals..................................................... (3,305) (2,001) (2,265)
(Purchase) sale of short-term investments.................................................. -- (900) 900
Sale of restricted certificates of deposit................................................. -- 200 837
Purchase of companies, net of cash acquired................................................ (3,123) (14,391) (3,502)
------- -------- -------
Net cash used in investing activities................................................ (6,428) (17,092) (4,030)
------- -------- -------
Cash flows from financing activities
Net increase in revolving line of credit................................................... 1,535 4,913 347
Payments of debt........................................................................... (2,599) (6,217) (5,897)
Proceeds from issuance of debt............................................................. -- 15,208 7,045
Distributions to stockholder............................................................... (608) (1,580) (5,424)
Payments on long-term debt -- related party................................................ (110) (160) --
Proceeds from long-term debt -- related party.............................................. 428 650 --
Net transactions with Lanter............................................................... (2,200) (2,274) (2,062)
Purchase and retirement of common stock.................................................... -- (2,961) (782)
Sale of common stock....................................................................... -- 556 --
Exercise of stock options.................................................................. -- -- 27
Exercise of stock warrants................................................................. -- -- 2
------- -------- -------
Net cash (used in) provided by financing activities.................................. (3,554) 8,135 (6,744)
------- -------- -------
Net (decrease) increase in cash and cash equivalents......................................... (1,616) 2,101 (685)
Cash and cash equivalents
Beginning of the year...................................................................... 3,483 1,918 4,019
------- -------- -------
End of the year............................................................................ $ 1,867 $ 4,019 $ 3,334
======= ======== =======
Supplemental disclosure of cash flow information
Cash paid during the year for
Interest................................................................................. $ 1,418 $ 2,202 $ 4,320
Income taxes............................................................................. 747 707 758
Disclosure of noncash investing and financing activities
Net transfers of property.................................................................. 81 (14)
Workers compensation premiums financed through
issuance of notes payable................................................................ 738
Acquisition of property and equipment through
issuance of notes payable................................................................ 624 149 121
Stock grants to key employees.............................................................. 38 315 960
Non-cash distributions to stockholders..................................................... 2,024
Other non-cash transactions:
Consulting agreement....................................................................... 75
======= ======== =======
Supplemental schedule of noncash investing and financing activities
In conjunction with Courier Dispatch's acquisitions, liabilities were assumed as follows:
Fair value of assets acquired.............................................................. $ 3,095 $ 13,540 $ 3,150
Cash paid for capital stock and assets..................................................... (2,115) (12,127) (2,881)
------- -------- -------
Liabilities assumed...................................................................... $ 980 $ 1,413 $ 269
======= ======== =======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-29
<PAGE> 99
COMBINED FOUNDING COMPANIES
(PREDECESSORS TO UNITED TRANSNET, INC. -- SEE NOTE 1)
NOTES TO COMBINED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1. BUSINESS AND ORGANIZATION
Each of CDG Holding Corp. and its operating subsidiary, Courier Dispatch
Group, Inc. (collectively "Courier Dispatch"); Tricor America, Inc. ("Tricor");
Film Transit, Incorporated ("Film Transit"); Lanter Courier Corporation
("Lanter"); Salmon Acquisition Corporation and its operating subsidiary, Sunbelt
Courier, Inc. (collectively "Sunbelt"); and 3D Distribution Systems, Inc. and
its affiliated corporations and subsidiaries (collectively "3D") (collectively
the "Founding Companies") entered into definitive merger agreements with United
TransNet, Inc. (the "Company") pursuant to which wholly-owned subsidiaries of
the Company were, in separate transactions, merged with each of the Founding
Companies (the "Mergers"). Under the merger agreements, all outstanding shares
of the Founding Companies' capital stock were converted into shares of the
Company's Common Stock concurrently with the consummation of the initial public
offering (the "Offering") of such Common Stock. The Founding Companies are
considered predecessor companies to the Company.
The Founding Companies are in the business of providing scheduled and
non-scheduled ground and air courier services.
2. BASIS OF PRESENTATION
The accompanying combined financial statements and related notes to
combined financial statements are presented on a combined basis without giving
effect to the Mergers or the Offering. The assets and liabilities of the
Combined Founding Companies are reflected at their historical amounts.
3D changed its fiscal year end from October 31 to December 31 effective for
the year ended December 31, 1993. Accordingly, its accounts for the year ended
October 31, 1993 have been combined with the accounts of the other Founding
Companies for the year ended December 31, 1993. 3D's results of operations for
the two months ended December 31, 1993 have been reflected as an adjustment to
retained earnings.
On June 30, 1995, Lanter agreed to include its Iowa, Nebraska and Wisconsin
operations (the "Districts") in the Mergers. Lanter provided certain selling,
general and administrative services to the Districts including cash management,
accounting and finance, legal services, employee benefits administration, and
shared sales and distribution support. All cash, investments and borrowings for
Lanter's Districts (including Lanter) are maintained on a consolidated basis;
accordingly, amounts specifically related to Lanter are accounted for in the
equity section of Lanter's balance sheets. For purposes of consolidation, the
balance of Lanter's equity investment account is reflected as additional paid-in
capital.
Estimates
The preparation of combined financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period, the most significant of which are related
to insurance accruals. Actual results could differ from those estimates.
Disclosures About Fair Value of Financial Instruments
In preparing disclosures about the fair value of financial instruments, the
Combined Founding Companies have assumed that the carrying amount approximates
fair value for cash and cash equivalents, accounts receivable, short-term
investments, short-term debt and accounts payable. The fair values of long-term
debt instruments are based upon the current interest rate environment and
remaining term to maturity (see
F-30
<PAGE> 100
COMBINED FOUNDING COMPANIES
(PREDECESSORS TO UNITED TRANSNET, INC. -- SEE NOTE 1)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Note 7). The Combined Founding Companies feel that the carrying value of
long-term debt approximates the fair value.
Business Combinations
In May 1993, Courier Dispatch acquired the outstanding capital stock of a
delivery service in Alabama in exchange for $1,964, which included notes of $500
for the acquisition of a non-compete agreement with the company's stockholder.
The acquired company provides statewide ground courier service for customers.
The allocation of purchase price included the assignment of approximately $1,964
to intangible assets.
In October 1992 and April 1993, Courier Dispatch acquired all the customer
agreements and certain other records and the air banking division of delivery
services in Minnesota and Missouri in exchange for $320 and $1,131,
respectively, which included notes of $100 and $480, respectively, for
non-compete agreements entered into with certain stockholders and employees of
these companies. The allocation of purchase price included the assignment of
approximately $320 and $1,131 to intangible assets.
Effective March 28, 1994, Courier Dispatch acquired all of the outstanding
common stock of a delivery service in Florida and non-compete agreements entered
into with certain stockholders of the company in exchange for $2,575 in cash
plus the issuance of $1,103 in notes in consideration of the non-compete
agreements. The allocation of purchase price included the assignment of
approximately $2,657 to intangible assets.
Effective June 30, 1994, Courier Dispatch acquired all of the outstanding
common stock of two delivery services in North Carolina and Minnesota in
exchange for $9,700 and $1,265, respectively, which includes the issuance of
$300 and $10 in notes, respectively, for the entry into non-compete agreements
with certain stockholders and employees of these companies. The allocation of
purchase price included the assignment of approximately $8,525 and $1,045,
respectively, to intangible assets.
In April 1995, Courier Dispatch acquired the outstanding capital stock of a
delivery service in Minnesota in exchange for $150 in cash and $350 in notes.
Courier Dispatch also acquired all of the assets of a related delivery service
in Minnesota in exchange for $2,650, of which $400 was paid in cash, and the
balance of which was paid by delivery of a 9% promissory note payable in
quarterly installments until maturity on March 31, 1999, and the assumption of
$269 of the company's liabilities. As part of these acquisitions, Courier
Dispatch entered into non-compete agreements with certain stockholders of each
of the companies. The allocation of purchase price for these purchases included
the assignment of approximately $448 and $1,992, respectively, to intangible
assets.
These acquisitions were accounted for under the purchase method of
accounting which requires allocation of the acquisition cost to assets acquired
and liabilities assumed based upon their fair values at the date of acquisition.
Under purchase accounting, the excess of the acquisition costs over the fair
value of the acquired assets less assumed liabilities is recorded as goodwill.
The intangible assets acquired in the business combinations above are amortized
over periods ranging from 1 to 15 years, depending on the life of the asset. The
results of these combinations are included in the consolidated statements from
the date of acquisition.
F-31
<PAGE> 101
COMBINED FOUNDING COMPANIES
(PREDECESSORS TO UNITED TRANSNET, INC. -- SEE NOTE 1)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
The following table presents the unaudited results of operations of the
Combined Founding Companies for the years ended December 31, 1993 and 1994 as if
the June 30, 1994 North Carolina acquisition had occurred on January 1, 1994.
The pro forma information below also includes certain adjustments, including the
effects of amortization of intangible assets and interest expense related to
additional borrowings to fund the acquisition. The impact of other acquisitions
made by the Combined Founding Companies in 1993, 1994 and 1995 is not reflected
in the accompanying pro forma information because it is not material.
<CAPTION>
YEAR ENDED
DECEMBER 31,
---------------------
1993 1994
-------- --------
(UNAUDITED)
<S> <C> <C>
Net revenues................................................... $198,543 $227,458
Net income..................................................... 3,166 3,250
</TABLE>
The more significant accounting policies followed by the Combined Founding
Companies are described below:
Cash and Cash Equivalents and Short-Term Investments
The Combined Founding Companies consider all highly liquid investments with
original maturities of three months or less to be cash equivalents. Cash
equivalents are carried at cost, which approximates fair market value.
Short-term investments, which consist of certificates with original maturities
of less than one year, are accounted for at fair market value which approximates
cost.
Property and Equipment
Property and equipment is recorded at cost. Additions and improvements are
capitalized while maintenance and repair costs are charged to expense as
incurred. Depreciation is computed using the straight-line method over the
estimated useful lives of the assets, which range from three to thirty-one and a
half years. The cost and accumulated depreciation of property retired or
otherwise disposed of are removed from the amounts and any gain or loss is
included in other income. Assets subject to capital leases are amortized using
the straight-line method over the terms of the leases.
Goodwill and Other Intangible Assets
Goodwill and intangible assets are amortized on a straight-line basis over
periods ranging from 1 to 20 years. The carrying value of intangible assets is
evaluated for indications of possible impairment whenever events or changes in
circumstances indicate that the carrying value of an intangible asset may not be
recoverable. Events or changes in circumstances which may indicate impairment
include a significant adverse change in legal factors, business climate or
government regulation and current cash flow losses combined with a history of
cash flow losses or forecasted continuing cash flow losses associated with an
acquired company. The review is based on comparing the carrying amount to the
undiscounted estimated cash flows before interest charges from operations over
the remaining amortization period.
Goodwill was $9,754 and $18,075 at December 31, 1993 and 1994,
respectively. Related accumulated amortization totaled $1,633 and $2,573 at
December 31, 1993 and 1994.
Restricted Certificates of Deposit
Sunbelt has two certificates of deposits pledged to its workers
compensation and auto liability carrier in accordance with the collateral
requirements specified by its insurer. The certificates total $637 and $200,
respectively, bear interest at a weighted average rate and mature on July 9,
1995 and August 12, 1995,
F-32
<PAGE> 102
COMBINED FOUNDING COMPANIES
(PREDECESSORS TO UNITED TRANSNET, INC. -- SEE NOTE 1)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
respectively. Sunbelt is required to maintain this collateral throughout the
term of its relationship with this carrier.
Other Assets
Other assets consist principally of prepayments, other receivables, supply
items and advances to employees.
Insurance Claims
Certain of the Combined Founding Companies are self-insured with respect to
certain aspects of their workers' compensation, general liability, automobile
and physical damage on vehicles and group health insurance. The accompanying
financial statements include an insurance accrual based upon third party
administrators' and managements' evaluations of estimated future ultimate costs
of outstanding claims and an estimated liability for claims incurred but not
reported on an undiscounted basis. The ultimate cost of these claims will depend
on the outcome of individual claims given the potential for the claims to
increase or decrease over time.
Revenue Recognition
Revenue is recognized when the delivery is completed or the services are
rendered to customers.
Income Taxes
The Combined Founding Companies determine taxes on income by using the
liability method as prescribed by Statement of Financial Accounting Standards
No. 109 ("FAS 109"), "Accounting for Income Taxes," except for Tricor and
Lanter, which are organized as subchapter S corporations. This approach requires
the recognition of deferred tax assets and liabilities for the expected future
tax consequences of events that have been recognized in the Combined Founding
Companies' financial statements or tax returns. In estimating future tax
consequences, FAS 109 requires the consideration of all expected future events
other than enactments of changes in the tax laws or rates. See Note 15 for pro
forma income tax information.
Reclassifications
Certain prior year amounts have been reclassified to conform with the
current presentation.
4. PROPERTY AND EQUIPMENT
<TABLE>
Property and equipment consists of the following:
<CAPTION>
DECEMBER 31,
---------------------
1993 1994
-------- --------
<S> <C> <C>
Land........................................................... $ 1,777 $ 1,924
Buildings...................................................... 4,598 4,610
Delivery vehicles.............................................. 11,376 15,936
Equipment and furnishings...................................... 5,648 7,305
Leasehold improvements......................................... 1,849 2,206
-------- --------
25,248 31,981
Less accumulated depreciation and amortization................. (12,024) (16,816)
-------- --------
$ 13,224 $ 15,165
======== ========
</TABLE>
F-33
<PAGE> 103
COMBINED FOUNDING COMPANIES
(PREDECESSORS TO UNITED TRANSNET, INC. -- SEE NOTE 1)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
5. OTHER INTANGIBLE ASSETS
<TABLE>
Other intangible assets consists of the following:
<CAPTION>
ESTIMATED
AMORTIZABLE DECEMBER 31,
LIVES -------------------
(YEARS) 1993 1994
----------- ------- -------
<S> <C> <C> <C>
Customer lists...................................... 5-12 $ 2,036 $ 6,566
Noncompete agreements............................... 1-8 5,406 6,833
Operating certificates.............................. 5-11 812 --
Other intangible assets............................. 6 1,070 1,070
------- -------
9,324 14,469
Less accumulated amortization....................... (3,861) (5,465)
------- -------
$ 5,463 $ 9,004
======= =======
</TABLE>
6. ACCRUED LIABILITIES
<TABLE>
Accrued liabilities consists of the following:
<CAPTION>
DECEMBER 31,
------------------
1993 1994
------ -------
<S> <C> <C>
Accrued payroll and related benefits.............................. $2,589 $ 3,217
Accrued insurance................................................. 2,105 2,180
Other accrued liabilities......................................... 3,872 4,950
------ -------
$8,566 $10,347
====== =======
</TABLE>
7. SHORT-TERM AND LONG-TERM DEBT
<TABLE>
Short-term and long-term obligations consist of the following:
<CAPTION>
DECEMBER 31,
--------------------
1993 1994
------- --------
<S> <C> <C>
Term loans payable in varying monthly installments, plus
interest varying from 6% to 16%............................... $5,019 $3,857
Revolving lines of credit with interest varying from 9% to 16%
including $500 and $500 due to a related party................ 1,885 6,648
Series A Senior Subordinated Notes, due to related parties, net
of imputed interest of approximately $544 at December 31,
1994, due February 1999; interest payable quarterly at 10%.... -- 2,656
Series B Amended and Restated Junior Subordinated Notes, due to
a related party, net of imputed interest of approximately
$1,477 and $1,088 at December 31, 1993 and 1994, respectively,
due September 1996; interest payable quarterly at 11.5%....... 2,173 2,562
Series C Amended and Restated Junior Subordinated Notes, due to
a related party, net of imputed interest of approximately $920
and $702 at December 31, 1993 and 1994, respectively, due
September 1996; interest payable quarterly at 15%............. 1,080 1,298
</TABLE>
F-34
<PAGE> 104
COMBINED FOUNDING COMPANIES
(PREDECESSORS TO UNITED TRANSNET, INC. -- SEE NOTE 1)
<TABLE>
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<CAPTION>
DECEMBER 31,
--------------------
1993 1994
------- --------
<S> <C> <C>
Term note payable to related party due October 31, 1999; with
interest at 3.5%.............................................. 5,295 5,785
Acquisition loans payable in varying monthly installments, plus
interest at the prime rate (8.5% at December 31, 1994) plus
1/2%.......................................................... -- 11,708
Guarantee of term promissory note for management's purchase of
common stock payable in varying annual installments plus
interest at the rate of prime (8.5% at December 31, 1994) plus
1%; final payment due February 1997........................... -- 510
Notes payable, net of imputed interest of approximately $67 and
$10 at December 31, 1993 and 1994, respectively............... 657 426
Premium loan, Workers' Compensation Insurance, payable in
varying monthly installments, plus interest payable at 6%..... 693 312
Contracts payable in varying monthly installments, plus interest
ranging from 6.5% to 16.88%................................... 299 189
Other notes payable including $75 and $75 due to a related
party......................................................... 439 521
Other non-compete agreements.................................... 251 127
------- --------
17,791 36,599
Less current portion............................................ (3,510) (10,057)
Less current portion -- related parties......................... (575) (575)
------- --------
13,706 25,967
Long-term debt -- related parties............................... (8,548) (12,301)
------- --------
$ 5,158 $ 13,666
======= ========
</TABLE>
<TABLE>
Debt maturities are as follows:
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------
<S> <C>
1995............................................. $10,632
1996............................................. 13,568
1997............................................. 4,005
1998............................................. 1,625
1999 and thereafter.............................. 6,769
-------
$36,599
=======
</TABLE>
F-35
<PAGE> 105
COMBINED FOUNDING COMPANIES
(PREDECESSORS TO UNITED TRANSNET, INC. -- SEE NOTE 1)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
8. COMMON STOCK WARRANTS
<TABLE>
In connection with the issuance of the subordinated notes, warrants for the
purchase of common stock of Courier Dispatch were issued to the lenders as
follows:
<CAPTION>
NUMBER ASSIGNED
OF WARRANTS VALUE
----------- --------
<S> <C> <C>
Series A Senior Notes 4 through 6............................. 666,666 $ 667
Series A Senior Notes 1 through 3............................. 653,146 653
Series B Junior Notes......................................... 752,381 1,731
Series C Junior Notes......................................... 551,746 1,269
</TABLE>
These warrants are exercisable in whole or in part at any time and expire
upon the earliest of September 30, 2002 or the sixth anniversary of the
prepayment in full of the related subordinated note. The warrants provide for
various rights, including the right to require Courier Dispatch to purchase the
warrants after September 30, 1996 for the warrants issued in connection with the
Series B and C Notes and February 18, 1999 for the warrants issued in connection
with the Series A Notes or upon the occurrence of an event of default, at the
greater of a formula price as defined in the securities purchase agreement
("formula price") or fair market value (as determined by negotiation or
appraisal). At any time after the later of September 30, 1998, for the warrants
issued in connection with the Series B and C Notes, and February 18, 2001, for
the warrants issued in connection with the Series A Notes, or, in either case,
payment in full of all subordinated notes issued pursuant to the securities
purchase agreement, Courier Dispatch may purchase, at its option, all of the
warrants at the greater of the formula price or fair market value. The warrants
are exercisable at a nominal exercise price. The valuation of these warrants
resulted in an original issue discount on the related debt which is being
amortized using the interest method over the term of the related debt.
In connection with the restructuring of certain of its bank debt in July
1995, 12,500 warrants for the purchase of common stock of Courier Dispatch were
issued to the lender.
<TABLE>
Transactions related to common stock warrants for each of the two years
ended December 31, 1994 and the period ended December 19, 1995 are as follows:
<CAPTION>
NUMBER OF ASSIGNED
WARRANTS VALUE
---------- --------
<S> <C> <C>
Balance at December 31, 1992................................. 1,304,127 $ 4,561
Issuance................................................... -- --
Accretion.................................................. -- 131
---------- --------
Balance at December 31, 1993................................. 1,304,127 4,692
Issuance................................................... 653,146 653
Accretion.................................................. -- 527
---------- --------
Balance at December 31, 1994................................. 1,957,273 5,872
Issuance................................................... 679,166 667
Accretion.................................................. -- 19,430
Exercise................................................... (2,636,439) (25,969)
---------- --------
Balance at December 19, 1995................................. -- $ --
========== ========
</TABLE>
9. INCOME TAXES
The Combined Founding Companies will file a consolidated federal income tax
return for periods subsequent to the Mergers described in Notes 1 and 2. Each
Combined Founding Company will file a "short-period" federal tax return through
the date of the Mergers.
F-36
<PAGE> 106
COMBINED FOUNDING COMPANIES
(PREDECESSORS TO UNITED TRANSNET, INC. -- SEE NOTE 1)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The Combined Founding Companies have implemented FAS 109 for all periods.
This statement provides for a liability approach to accounting for income taxes.
<TABLE>
Combined federal and state income taxes are as follows:
<CAPTION>
YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 19,
-------------- ------------
1993 1994 1995
------ ----- ------------
<S> <C> <C> <C>
Current tax expense
Federal......................................................... $ 374 $ 483 $ 522
State........................................................... 170 165 116
Deferred tax expense (benefit)
Federal......................................................... 450 (274) 320
State........................................................... 73 (38) 63
------ ----- ------
Total provision......................................... $1,067 $ 336 $1,021
====== ===== ======
</TABLE>
<TABLE>
The differences in income taxes provided and the amounts determined by
applying the federal statutory tax rate to income before income taxes result
from the following:
<CAPTION>
YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 19,
---------------- ------------
1993 1994 1995
------ ------- ------------
<S> <C> <C> <C>
Tax at federal statutory rate.................................... $ 1,421 $ 1,429 $ 1,237
State income taxes, net of federal income tax benefit............ 153 105 84
Effect of valuation allowance.................................... 160 (18) 276
Nondeductible expenses........................................... 352 685 960
Income not subject to corporate level taxation................... (1,028) (1,890) (1,445)
Other............................................................ 9 25 (91)
------- ------- -------
$ 1,067 $ 336 $ 1,021
======= ======= =======
</TABLE>
<TABLE>
The components of deferred income taxes are as follows:
<CAPTION>
DECEMBER 31,
-------------------
1993 1994
------- -------
<S> <C> <C>
Deferred tax assets
Insurance accrual...................................................... $ 2,545 $ 2,732
Deferred compensation.................................................. 403 293
Vacation accrual....................................................... 212 261
Accounts receivable allowance.......................................... 163 164
Other.................................................................. 336 418
------- -------
3,659 3,868
------- -------
Deferred tax liabilities
Accumulated depreciation............................................... (973) (832)
Other.................................................................. (98) (154)
------- -------
(1,071) (986)
------- -------
Valuation allowance...................................................... (1,985) (1,967)
------- -------
$ 603 $ 915
======= =======
</TABLE>
F-37
<PAGE> 107
COMBINED FOUNDING COMPANIES
(PREDECESSORS TO UNITED TRANSNET, INC. -- SEE NOTE 1)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Tricor and Lanter are organized as subchapter S corporations and, as a
result, the tax on each company's income is the responsibility of the individual
stockholders. See the combined statements of operations for unaudited pro forma
income tax information.
In 1993 and 1994, the Combined Founding Companies utilized approximately
$128 and $125 of alternative minimum tax credits which were generated in 1991
and 1992, respectively, to reduce their current federal income tax expense.
<TABLE>
10. STOCKHOLDERS' EQUITY
<CAPTION>
DECEMBER 31,
-------------
1993 1994
---- ----
<S> <C> <C>
COURIER DISPATCH
Class A Common Stock; $.001 par value; 3,750,000 shares authorized; 550,664
issued and outstanding....................................................... $ 1 $ 1
Class B Common Stock; $.001 par value; 3,750,000 shares authorized; 0 shares
issued and outstanding....................................................... -- --
TRICOR
Tricor California, Inc. -- Common Stock; no par value; 10,000 shares
authorized; 22.5 shares issued and outstanding............................... -- --
Tricor International -- Common Stock; no par value; 10,000 shares authorized;
225 shares issued and outstanding............................................ 43 43
Tricor America, Inc. -- Common Stock; no par value; 10,000 shares authorized;
75 shares issued and outstanding............................................. 21 21
Tricor Nevada, Inc. -- Common Stock; no par value; 2,500 shares authorized; 45
shares issued and outstanding................................................ 1 1
FILM TRANSIT
Class A Common Stock; $50 par value; 500 shares authorized; 197.33 shares
issued and outstanding....................................................... 10 10
Class B Common Stock; $50 par value; 500 shares authorized; 308 shares issued
and outstanding.............................................................. 15 15
SUNBELT
Common Stock; no par value; 1,000 shares authorized; 400 shares issued and
outstanding.................................................................. 1 1
3D
Common Stock; $.01 par value; 100,000,000 shares authorized; 70,875 shares
issued and outstanding....................................................... 1 1
--- ---
$93 $93
=== ===
</TABLE>
11. COMMITMENTS AND CONTINGENCIES
Lease Commitments
Rent expense related to operating leases amounted to approximately $10,218,
$12,959, and $14,044 for the years ended December 31, 1993 and 1994 and the
period ended December 19, 1995, respectively.
F-38
<PAGE> 108
COMBINED FOUNDING COMPANIES
(PREDECESSORS TO UNITED TRANSNET, INC. -- SEE NOTE 1)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
The following are the approximate future minimum lease payments required by
operating leases:
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------
<S> <C>
1995.......................................... $2,657
1996.......................................... 2,281
1997.......................................... 1,635
1998.......................................... 1,042
1999 and thereafter........................... 1,689
------
$9,304
======
</TABLE>
Litigation
The Combined Founding Companies are, from time to time, parties to
litigation arising in the normal course of their business, most of which involve
claims for personal injury and property damage incurred in connection with their
respective operations. Management believes that none of these actions will have
a material adverse effect on the financial position or results of operations of
the Combined Founding Companies.
Self-Insurance Program
The Combined Founding Companies are self-insured with respect to workers'
compensation, general liability and automobile insurance and physical damage on
vehicles claims. In accordance with the terms of the insurance policy, Courier
Dispatch maintains a $1,240 letter of credit with a commercial bank in favor of
the insurer. Management believes that any claims as of December 19, 1995,
arising under this self-insurance program will not have a material adverse
effect on the financial position or results of operations of the Combined
Founding Companies.
12. RELATED PARTY TRANSACTIONS
At December 31, 1993 and 1994, Courier Dispatch had outstanding $2,173 and
$3,890 of its subordinated notes, net of imputed interest, with a bank. In
connection with the notes, the bank acquired warrants to purchase 1,412,287
shares of common stock of Courier Dispatch. A managing director of the bank is a
director of Courier Dispatch.
At December 31, 1993 and 1994, Courier Dispatch had outstanding $1,080 and
$2,626 of its subordinated notes, net of imputed interest, with another bank. In
connection with the notes, the bank acquired warrants to purchase 1,211,652
shares of the common stock of Courier Dispatch. An executive vice president of
the bank is a director of Courier Dispatch. An affiliate of the bank is a
significant customer of Courier Dispatch. At December 31, 1993 and 1994, Courier
Dispatch had an accounts receivable balance of approximately $250 and $1,184,
respectively, from this customer. Sales to this customer approximated $4,972,
$5,513 and $6,458 for the years ended December 31, 1993 and 1994 and the period
ended December 19, 1995, respectively.
In April 1992, Sunbelt began maintaining workers' compensation and auto
liability coverage through a captive insurance company owned by relatives of
Sunbelt's stockholders. The accounts between Sunbelt and the insurance carrier
are settled in the ordinary course of business and are governed by state
insurance regulations. Sunbelt has pledged two certificates of deposit to the
insurance carrier in accordance with collateral requirements specified in the
above policies. Sunbelt is required to maintain the collateral throughout the
term of its relationship with the insurance carrier. Premiums paid to the
insurance carrier were
F-39
<PAGE> 109
COMBINED FOUNDING COMPANIES
(PREDECESSORS TO UNITED TRANSNET, INC. -- SEE NOTE 1)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
approximately $698, $827 and $932 during the years ended December 31, 1993 and
1994 and the period ended December 19, 1995.
Lanter Company, an affiliate of Lanter, provides certain administrative
services to Lanter and therefore allocates and charges a portion of its
corporate service expenses to Lanter. These expenses are allocated to Lanter
based upon estimated time incurred. These allocations were $700, $646 and $630
for the years ended December 31, 1993 and 1994 and the period ended December 19,
1995, respectively.
At December 31, 1993 and 1994, 3D had a revolving line of credit with a
former stockholder and officer of 3D of approximately $500 and $500,
respectively. Additionally, 3D had notes payable to this officer at December 31,
1993 and 1994 of $75 and $75, respectively.
Sunbelt had an unsecured note payable of $5,295 and $5,785 at December 31,
1993 and 1994, respectively, to a related party. The note matures on December
31, 1999. Accrued interest on these notes was $1,217 and $1,569 as of December
31, 1993 and 1994, respectively.
Sunbelt uses two facilities owned by a related party for which no rent is
charged. Sunbelt shares one of its facilities with this entity at no charge to
the entity.
Film Transit leases two facilities from a partnership consisting of two
stockholders of Film Transit. Rent paid to the partnership for the years ended
December 31, 1993 and 1994 and the period ended December 19, 1995 were $186,
$207, and $193, respectively.
13. EMPLOYEE BENEFIT PLANS
Several of the Combined Founding Companies have qualified defined
contribution plans, which allow for voluntary pretax contributions by the
employees. The Combined Founding Companies pay all general and administrative
expenses of the plans and in some cases make matching contributions on behalf of
the employees. For the years ended December 31, 1993 and 1994, and the period
ended December 19, 1995, the Combined Founding Companies had expenses totaling
$116, $152 and $832, respectively, related to these plans.
Courier Dispatch, Lanter and Tricor have defined contribution 401(k) Plans
which allow for voluntary pretax contributions by their employees. Each company
may also contribute an additional amount at its discretion. Employer
contributions totaled $129, $116 and $194 during the years ended December 31,
1993 and 1994 and the period ended December 19, 1995, respectively, for these
three companies.
Film Transit has a noncontributory profit sharing plan for the benefit of
qualifying employees. Contributions by Film Transit are calculated at graduated
percentages of net income before taxes and employee bonuses. During the years
ended December 31, 1993 and 1994 and the period ended December 19, 1995, Film
Transit contributed $752, $904 and $591 to the plan.
14. STOCK OPTION PLAN
Courier Dispatch has in place a stock option plan whereby selected members
of Courier Dispatch's management have been granted options to purchase shares of
Courier Dispatch's common stock. Transactions
F-40
<PAGE> 110
COMBINED FOUNDING COMPANIES
(PREDECESSORS TO UNITED TRANSNET, INC. -- SEE NOTE 1)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
related to stock options for each of the two years ended December 31, 1994 and
the period ended December 19, 1995 are as follows:
<CAPTION>
OPTION PRICE
SHARES PER SHARE
------- ------------
<S> <C> <C>
Outstanding at December 31, 1992............................. 29,343 $ 1.40
Granted...................................................... 48,163 1.40
Exercised.................................................... -- --
Cancelled or expired......................................... -- --
------- ------------
Outstanding at December 31, 1993............................. 77,506 1.40
Granted...................................................... 94,535 1.40 - 3.00
Exercised.................................................... -- --
Cancelled or expired......................................... -- --
------- ------------
Outstanding at December 31, 1994............................. 172,041 1.40 - 3.00
Granted...................................................... 167,503 1.40 - 3.00
Exercised.................................................... 19,669 1.40
Cancelled or expired......................................... -- --
------- ------------
Outstanding at December 19, 1995............................. 319,875 $1.40 - 3.00
======= ============
</TABLE>
Compensation expense related to the stock options for the years ended
December 31, 1993, 1994 and the period ended December 19, 1995 approximately $0,
$154, and $500, respectively.
15. UNAUDITED PRO FORMA INFORMATION
Income Taxes
<TABLE>
The following unaudited pro forma tax information is presented in
accordance with FAS 109, as if Tricor and Lanter, each subchapter S
corporations, had been subject to federal and state income taxes throughout the
periods presented.
<CAPTION>
YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 19,
---------------- ------------
1993 1994 1995
------ ------ ------------
<S> <C> <C> <C>
Earnings before pro forma adjustments, per combined statements
of operations................................................. $4,178 $4,201 $3,637
Pro forma provision for income taxes............................ 2,278 1,754 2,750
------ ------ ------
Pro forma earnings as above..................................... $1,900 $2,447 $ 887
====== ====== ======
</TABLE>
16. SUBSEQUENT EVENTS
On December 20, 1995, in exchange for shares of Common Stock and cash,
wholly-owned subsidiaries of the Company, in separate transactions, merged with
each of the Founding Companies.
F-41
<PAGE> 111
(This page intentionally left blank)
F-42
<PAGE> 112
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
CDG Holding Corp.
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, of stockholders' deficit and of
cash flows present fairly, in all material respects, the financial position of
CDG Holding Corp. and its subsidiary, Courier Dispatch Group, Inc.
(collectively, "Courier Dispatch") at December 31, 1993 and 1994, and the
results of their operations and their cash flows for each of the two years in
the period ended December 31, 1994 and for the period ended December 19, 1995 in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of Courier Dispatch's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
Price Waterhouse LLP
Atlanta, Georgia
March 12, 1996
F-43
<PAGE> 113
CDG HOLDING CORP.
<TABLE>
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<CAPTION>
DECEMBER 31,
-------------------
1993 1994
------- -------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents.................................................................... $ 329 $ 1,122
Accounts receivable, less allowance of $223 and $331......................................... 4,286 9,160
Prepaids and other assets.................................................................... 603 780
------- -------
Total current assets................................................................... 5,218 11,062
Property and equipment, net.................................................................. 4,348 5,558
Goodwill, net................................................................................ 5,902 13,442
Intangible assets, net....................................................................... 4,061 8,096
Other assets................................................................................. 99 712
Deferred tax assets.......................................................................... 936 1,090
------- -------
$20,564 $39,960
======= =======
LIABILITIES, COMMON STOCK WARRANTS AND STOCKHOLDERS' DEFICIT
Current liabilities
Short-term debt.............................................................................. $ 1,819 $ 8,725
Accrued interest-related parties............................................................. 184 268
Accounts payable............................................................................. 1,986 5,731
Accrued liabilities.......................................................................... 2,850 3,993
Income taxes payable......................................................................... 115 17
------- -------
Total current liabilities.............................................................. 6,954 18,734
Long-term debt, net of current maturities
Senior....................................................................................... 2,029 11,855
Subordinated -- related parties.............................................................. 3,253 6,516
Deferred compensation.......................................................................... 768 619
Long-term portion of accrued insurance......................................................... 2,879 2,236
------- -------
15,883 39,960
------- -------
Common stock warrants.......................................................................... 4,692 5,872
------- -------
Stockholders' equity (deficit)
Class A common stock, $.001 par value; 3,750,000 shares authorized; 550,664 shares issued and
outstanding................................................................................ 1 1
Class B common stock, $.001 par value; 3,750,000 shares authorized; 0 shares issued and
outstanding................................................................................ -- --
Paid-in capital.............................................................................. 1,159 1,875
Retained earnings (deficit).................................................................. 245 (5,822)
Common stock -- subscriptions receivable..................................................... -- (510)
Predecessor basis adjustment................................................................. (1,416) (1,416)
------- -------
(11) (5,872)
------- -------
Commitments and contingencies.................................................................. -- --
------- -------
$20,564 $39,960
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-44
<PAGE> 114
CDG HOLDING CORP.
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<CAPTION>
YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 19,
------------------ ------------
1993 1994 1995
------- -------- ------------
<S> <C> <C> <C>
Net revenues.................................................. $70,631 $104,614 $133,701
Cost of delivery.............................................. 49,960 76,685 99,796
------- -------- --------
Gross profit........................................ 20,671 27,929 33,905
Selling, general and administrative expenses.................. 17,443 24,060 28,533
Amortization of intangible assets............................. 1,454 2,722 2,538
------- -------- --------
Operating income.................................... 1,774 1,147 2,834
Other income (expense)
Interest expense-related party.............................. (1,151) (1,728) (2,147)
Interest expense............................................ (372) (1,219) (2,421)
Interest income and other, net.............................. 22 2 1
------- -------- --------
Income (loss) before income taxes............................. 273 (1,798) (1,733)
Provision (benefit) for income taxes.......................... 592 (30) 343
------- -------- --------
Net loss...................................................... (319) (1,768) (2,076)
Warrant accretion............................................. (131) (527) (19,430)
------- -------- --------
Net loss available for common stockholders.................... $ (450) $ (2,295) $(21,506)
======= ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-45
<PAGE> 115
CDG HOLDING CORP.
<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<CAPTION>
COMMON STOCK PREDECESSOR
------------------ PAID-IN SUBSCRIPTIONS RETAINED BASIS
SHARES AMOUNT CAPITAL RECEIVABLE EARNINGS ADJUSTMENT TOTAL
--------- ------ ------- ------------- -------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1992........................... 1,203,810 $ 1 $ 1,159 $ -- $ 695 $(1,416) $ 439
Warrant accretion................ -- -- -- -- (131) -- (131)
Net loss......................... -- -- -- -- (319) -- (319)
--------- --- ------- ----- -------- ------- --------
Balance at December 31,
1993........................... 1,203,810 1 1,159 -- 245 (1,416) (11)
Issuance of common stock......... 300,952 1 716 (556) -- -- 161
Purchase and retirement of
stock.......................... (954,098) (1) -- -- (3,772) -- (3,773)
Subscription payment............. -- -- -- 46 -- -- 46
Warrant accretion................ -- -- -- -- (527) -- (527)
Net loss......................... -- -- -- -- (1,768) -- (1,768)
--------- --- ------- ----- -------- ------- --------
Balance at December 31,
1994........................... 550,664 1 1,875 (510) (5,822) (1,416) (5,872)
Exercise of common stock
options........................ 19,669 -- 27 -- -- -- 27
Warrant accretion................ -- -- -- -- (19,430) -- (19,430)
Exercise of common stock
warrants....................... 2,636,439 2 25,969 -- -- -- 25,971
Subscription payment............. -- -- -- 510 -- -- 510
Purchase and retirement of
stock.......................... (85,331) -- (782) -- -- -- (782)
Net loss......................... -- -- -- -- (2,076) -- (2,076)
--------- --- ------- ----- -------- ------- --------
Balance at December 19,
1995........................... 3,121,441 $ 3 $27,089 $ -- $(27,328) $(1,416) $ (1,652)
========= === ======= ===== ======== ======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-46
<PAGE> 116
CDG HOLDING CORP.
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<CAPTION>
YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 19,
------------------ ------------
1993 1994 1995
------- -------- ------------
<S> <C> <C> <C>
Cash flows from operating activities
Net loss.............................................................. $ (319) $ (1,768) $(2,076)
Adjustments to reconcile net loss to net cash provided by operating
activities
Depreciation and amortization...................................... 775 1,101 1,090
Provision for bad debts............................................ 126 119 (85)
Amortization of goodwill and other intangible assets............... 1,454 2,068 2,538
Amortization of discount on long-term debt......................... 421 707 999
Deferred income taxes.............................................. 386 (154) 509
Write-off of operating certificates................................ -- 654 --
Noncash employee compensation...................................... -- 154 500
Change in operating assets and liabilities
Accounts receivable.............................................. (722) (2,577) (1,415)
Other assets..................................................... 115 (738) (6,248)
Accounts payable................................................. 1,506 3,381 3,210
Accrued liabilities.............................................. (1,036) (1,725) 2,444
Income taxes payable............................................. (101) (95) (447)
Deferred compensation............................................ (202) (149) (260)
------- -------- -------
Net cash provided by operating activities..................... 2,403 978 759
------- -------- -------
Cash flows from investing activities
Capital expenditures, net of disposals................................ (1,132) 880 (616)
Purchase of companies, net of cash acquired........................... (3,123) (14,391) (3,502)
------- -------- -------
Net cash used in investing activities......................... (4,255) (13,511) (4,118)
------- -------- -------
Cash flows from financing activities
Net increase in revolving line of credit.............................. 1,385 4,763 347
Payments of debt...................................................... (865) (4,240) (2,705)
Proceeds from issuance of debt........................................ -- 15,208 6,551
Purchase/retirement of common stock................................... -- (2,961) (782)
Proceeds from sale of common stock.................................... -- 556 --
Exercise of stock options............................................. -- -- 27
Exercise of stock warrants............................................ -- -- 2
------- -------- -------
Net cash provided by financing activities..................... 520 13,326 3,440
------- -------- -------
Net (decrease) increase in cash and cash equivalents.................... (1,332) 793 81
Cash and cash equivalents
Beginning of the period............................................... 1,661 329 1,122
------- -------- -------
End of the period..................................................... $ 329 $ 1,122 $ 1,203
======= ======== =======
Supplemental disclosure of cash flow information
Cash paid during the period for
Interest........................................................... $ 925 $ 1,733 $ 3,795
Income taxes....................................................... 297 501 224
Disclosure of noncash investing and financing activities
Non-cash employee compensation........................................ 315 500
Supplemental schedule of noncash investing and financing activities
In conjunction with the Courier Dispatch's acquisitions, liabilities
were assumed as follows:
Fair value of assets acquired......................................... $ 3,095 $ 13,540 $ 3,150
Cash paid for capital stock and assets................................ (2,115) (12,127) (2,881)
------- -------- -------
Liabilities assumed................................................ $ 980 $ 1,413 $ 269
======= ======== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-47
<PAGE> 117
CDG HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1. BUSINESS AND ORGANIZATION
CDG Holding Corp. ("Holding") and its subsidiary, Courier Dispatch Group,
Inc. ("CDG"), collectively, "Courier Dispatch", provide air and ground courier
services for customers requesting delivery of time-sensitive documents. Courier
Dispatch operates in the southeast, northeast, and midwest.
Courier Dispatch and its stockholders entered into a definitive merger
agreement with United TransNet, Inc. (the "Company") pursuant to which a
wholly-owned subsidiary of the Company merged with Courier Dispatch. Under the
merger agreement, all outstanding shares of Courier Dispatch's capital stock
were converted into shares of the Company's Common Stock concurrently with the
consummation of an initial public offering of such Common Stock. Simultaneously
with the entry by Courier Dispatch into such merger agreement, five other
companies, Tricor America, Inc. ("Tricor"); Film Transit, Incorporated ("Film
Transit"); Lanter Courier Corporation ("Lanter"); Salmon Acquisition Corporation
and its operating subsidiary, Sunbelt Courier, Inc. (collectively, "Sunbelt");
and 3D Distribution Systems, Inc. and its affiliated corporations and
subsidiaries (collectively, "3D") (collectively with Courier Dispatch, the
"Founding Companies") entered into substantially similar merger agreements with
the Company, pursuant to which wholly-owned subsidiaries of the Company merged
with such Founding Companies (the "Mergers").
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The more significant accounting policies followed by Courier Dispatch are
summarized below:
Basis of Presentation
The consolidated financial statements include the accounts of Courier
Dispatch and its subsidiary. All significant intercompany accounts and
transactions have been eliminated in consolidation.
Estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period, the most significant of which are related
to insurance accruals. Actual results could differ from those estimates.
Disclosures About Fair Value of Financial Instruments
In preparing disclosures about the fair value of financial instruments,
Courier Dispatch has assumed that the carrying amount approximates fair value
for cash and cash equivalents, accounts receivable, short-term debt and accounts
payable. The fair value of long-term debt instruments is based upon the current
interest rate environment and remaining term to maturity (see Note 6). Courier
Dispatch feels that the carrying value of long-term debt approximates the fair
value.
Cash and Cash Equivalents
Courier Dispatch considers all highly liquid investments with original
maturities of three months or less to be cash equivalents. Cash equivalents are
carried at cost, which approximates fair market value.
Property and Equipment
Property and equipment is recorded at cost. Additions and improvements are
capitalized while maintenance and repair costs are charged to expense as
incurred. Depreciation is computed using the straight-line method over the
estimated useful lives of the assets, which range from three to twenty-five
years. The cost
F-48
<PAGE> 118
CDG HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
and accumulated depreciation of property retired or otherwise disposed of are
removed from the accounts and any gain or loss is included in income.
Other Assets
Other assets consist principally of prepayments, other receivables, supply
items and advances to employees.
Goodwill and Intangible Assets
Goodwill and intangible assets are amortized on a straight-line basis over
periods ranging from 1 to 15 years. The carrying value of intangible assets is
evaluated for indications of possible impairment whenever events or changes in
circumstances indicate that the carrying value of an intangible asset may not be
recoverable. Events or changes in circumstances which may indicate impairment
include a significant adverse change in legal factors, business climate or
government regulation and current cash flow losses combined with a history of
cash flow losses or forecasted continuing cash flow losses associated with an
acquired company. The review is based on comparing the carrying amount to the
undiscounted estimated cash flows before interest charges from operations over
the remaining amortization period.
Goodwill was $6,874 and $15,195 at December 31, 1993 and 1994. Related
accumulated amortization totaled $972 and $1,753, respectively.
Insurance Claims
Courier Dispatch is self-insured with respect to certain aspects of its
workers' compensation, general liability and automobile and physical damage on
vehicles. The accompanying financial statements include an insurance accrual
based upon the third party administrator's and management's evaluations of
estimated future ultimate costs of outstanding claims and an estimated liability
for claims incurred but not reported on an undiscounted basis. The ultimate cost
of these claims will depend on the outcome of individual claims given the
potential for these claims to increase or decrease over time.
Deferred Compensation
Courier Dispatch has an agreement with its former chairman that provides
for minimum specified annual payments until his death. The accrual for these
payments at December 31, 1993 and 1994 was approximately $1,090 and $732,
respectively.
Revenue
Revenue is recognized when the delivery is completed or the services are
rendered to customers.
Income Taxes
Taxes on income are determined by using the liability method as prescribed
by Statement of Financial Accounting Standards No. 109 ("FAS 109"), "Accounting
for Income Taxes." This approach requires the recognition of deferred tax assets
and liabilities for the expected future tax consequences of events that have
been recognized in Courier Dispatch's financial statements or tax returns. In
estimating future tax consequences, FAS 109 requires the consideration of all
expected future events other than enactments of changes in the tax laws or
rates.
F-49
<PAGE> 119
CDG HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Reclassifications
Certain prior year amounts have been reclassified to conform with the
current presentation.
Business Combinations
In May 1993, Courier Dispatch acquired the outstanding capital stock of a
delivery service in Alabama in exchange for $1,964, which included notes of $500
for the acquisition of a non-compete agreement with the company's stockholder.
The acquired company provides statewide ground courier service for customers.
The allocation of purchase price included the assignment of approximately $1,964
to intangible assets.
In October 1992 and April 1993, Courier Dispatch acquired all the customer
agreements and certain other records and the air banking division of delivery
services in Minnesota and Missouri in exchange for $320 and $1,131,
respectively, which included notes of $100 and $480, respectively, for
non-compete agreements entered into with certain stockholders and employees of
these companies. The allocation of purchase price included the assignment of
approximately $320 and $1,131 to intangible assets.
Effective March 28, 1994, Courier Dispatch acquired all of the outstanding
common stock of a delivery service in Florida and non-compete agreements entered
into with certain stockholders of the acquired company in exchange for $2,575 in
cash plus the issuance of $1,103 in notes in consideration of the non-compete
agreements. The allocation of purchase price included the assignment of
approximately $2,657 to intangible assets.
Effective June 30, 1994, Courier Dispatch acquired all of the outstanding
common stock of two delivery services in North Carolina and Minnesota in
exchange for $9,700 and $1,265, respectively, which includes the issuance of
$300 and $10 in notes, respectively, for the entry into non-compete agreements
with certain stockholders and employees of these companies. The allocation of
purchase price included the assignment of approximately $8,525 and $1,045,
respectively, to intangible assets.
In April 1995, Courier Dispatch acquired the outstanding capital stock of a
delivery service in Minnesota in exchange for $150 in cash and $350 in notes.
Courier Dispatch also acquired all of the assets of a related delivery service
in Minnesota in exchange for $2,650, of which $400 was paid in cash and the
balance of which was paid by delivery of a 9% promissory note, payable in
quarterly installments until maturity on March 31, 1999, plus the assumption of
$269 of the company's liabilities. As part of these acquisitions, Courier
Dispatch entered into non-compete agreements with certain stockholders of each
of the acquired companies. The allocation of purchase price for these purchases
included the assignment of approximately $448 and $1,992, respectively, to
intangible assets.
These acquisitions were accounted for under the purchase method of
accounting which requires allocation of the acquisition cost to assets acquired
and liabilities assumed based upon their fair values at the date of acquisition.
Under purchase accounting, the excess of the acquisition costs over the fair
value of the acquired assets less assumed liabilities is recorded as goodwill.
The intangible assets acquired in the business combinations above are amortized
over periods ranging from 3 to 15 years, depending on the life of the asset. The
results of these combinations are included in the consolidated statements from
the date of acquisition.
The following presents the unaudited results of operations of Courier
Dispatch for the years ended December 31, 1993 and 1994 as if the June 30, 1994
North Carolina acquisition had occurred on January 1, 1994. The pro forma
information below also includes certain adjustments, including the effects of
amortization of intangible assets and interest expense related to additional
borrowings to fund the acquisition. The impact of
F-50
<PAGE> 120
CDG HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
other acquisitions made by Courier Dispatch in 1993, 1994 and 1995 is not
reflected in the accompanying pro forma information because it is not material.
<CAPTION>
YEAR ENDED
DECEMBER 31,
---------------------
1993 1994
------- --------
(UNAUDITED)
<S> <C> <C>
Net revenues........................................... $97,284 $117,985
Net (loss)............................................. (263) (2,583)
</TABLE>
3. PROPERTY AND EQUIPMENT
<TABLE>
Property and equipment consists of the following:
<CAPTION>
DECEMBER 31,
--------------------
1993 1994
------- -------
<S> <C> <C>
Land............................................................ $ 577 $ 577
Buildings....................................................... 1,995 2,007
Delivery vehicles............................................... 173 2,921
Equipment and furnishings....................................... 2,355 3,740
Leasehold improvements.......................................... 916 1,269
------ -------
6,016 10,514
Less accumulated depreciation and amortization.................. (1,668) (4,956)
------ -------
$ 4,348 $ 5,558
====== =======
</TABLE>
4. INTANGIBLE ASSETS
<TABLE>
Intangible assets consists of the following:
<CAPTION>
ESTIMATED
AMORTIZABLE DECEMBER 31,
LIVES -------------------
(YEARS) 1993 1994
----------- ------- -------
<S> <C> <C> <C>
Customer lists...................................... 5-12 $ 2,036 $ 6,566
Noncompete agreements............................... 1-7 2,515 3,942
Operating certificates.............................. 5-11 812 --
Other intangibles................................... 6 1,070 1,070
------- -------
6,433 11,578
Less accumulated amortization....................... (2,372) (3,482)
------- -------
$ 4,061 $ 8,096
======= =======
</TABLE>
F-51
<PAGE> 121
CDG HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
5. ACCRUED LIABILITIES
<TABLE>
Accrued liabilities consists of the following:
<CAPTION>
DECEMBER 31,
------------------
1993 1994
------ ------
<S> <C> <C>
Accrued payroll and related benefits............................ $ 942 $1,503
Accrued vacation................................................ 387 440
Accrued insurance............................................... 793 498
Other accrued liabilities....................................... 728 1,552
------ ------
$2,850 $3,993
====== ======
</TABLE>
6. SHORT-TERM AND LONG-TERM DEBT
<TABLE>
Short-term and long-term debt consist of the following:
<CAPTION>
DECEMBER 31,
--------------------
1993 1994
------- -------
<S> <C> <C>
Term loan payable in varying monthly installments, plus interest
at the prime rate (8.5% at December 31, 1994) plus 1/2%...... $ 1,676 $ 1,552
Revolving line of credit with interest payable monthly at the
prime rate (8.5% at December 31, 1994) plus 1/2%............. 1,385 6,148
Series A Senior Subordinated Notes, due to related parties, net
of imputed interest of approximately $544 at December 31,
1994, due February 1999; interest payable quarterly at 10%.... -- 2,656
Series B Amended and Restated Junior Subordinated Notes, due to
a related party, net of imputed interest of approximately
$1,477 and $1,088 at December 31, 1993 and 1994, respectively,
due September 1996; interest payable quarterly at 11.5%....... 2,173 2,562
Series C Amended and Restated Junior Subordinated Notes, due to
a related party, net of imputed interest of approximately $920
and $702 at December 31, 1993 and 1994, respectively, due
September 1996, interest payable quarterly at 15%............. 1,080 1,298
Acquisition loans payable in varying monthly installments, plus
interest at the prime rate (8.5% at December 31, 1994) plus
1/2%......................................................... -- 11,708
Guarantee of term promissory note for management's purchase of
common stock payable in varying annual installments, plus
interest at the rate of prime (8.5% at December 31, 1994) plus
1%; final payment due February 1997........................... -- 510
Notes payable, net of imputed interest of approximately $67 and
$10 at December 31, 1993 and 1994, respectively............... 657 426
Other notes payable............................................. 66 201
Other non-compete agreements.................................... 64 35
------- -------
7,101 27,096
Less current portion............................................ (1,819) (8,725)
------- -------
5,282 18,371
Less subordinated debt to related parties....................... (3,253) (6,516)
------- -------
$ 2,029 $11,855
======= =======
</TABLE>
F-52
<PAGE> 122
CDG HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Term Loan
On September 30, 1991, Courier Dispatch entered into a loan agreement (the
"Agreement") with a bank. The Agreement provides Courier Dispatch with a $5,400
credit facility consisting of a $3,000 revolving line of credit, a $600 senior
term loan and a $1,800 senior term loan. During 1992, the $600 senior term loan
was paid. The revolving line of credit expires in March 1997, and is revocable
upon the occurrence of certain events. At December 31, 1994, the balance
outstanding under the line of credit was approximately $6,148. During 1993,
Courier Dispatch entered into a second loan agreement (the "Amendment") with the
bank. The Amendment provides Courier Dispatch with an additional $500 under the
revolving line of credit, amends the original amortization period of the $1,800
term loan, changes its maturity date and amends certain financial loan
covenants.
During 1994, Courier Dispatch entered into two loan agreements (the
"Restated Agreement" and the "New Agreement") with the bank. Together these
agreements provided Courier Dispatch with an additional $1,500 under the
revolving line of credit, extended the term of the revolving line of credit
three years, provided for acquisition loans in the aggregate amount of $12,500
for the purchases of the Florida, North Carolina and Minnesota entities and
amended certain financial loan covenants.
Borrowings under the line of credit averaged approximately $1,131 and
$3,869, respectively, with corresponding average interest rates of 6.25% and
7.29% for the years ended December 31, 1993 and 1994. Maximum borrowings were
approximately $1,600 and $6,148, respectively for the years ended December 31,
1993 and 1994.
Borrowings under the line of credit are subject to certain percentage
limitations of eligible accounts receivable as specified in the Restated
Agreement and the New Agreement. Courier Dispatch may elect on any October 1
through loan maturity to pay interest at a fixed rate as set by the lender for
any one-year period beginning October 1 for the term loan. Borrowings under the
facility are secured by substantially all of the assets of Courier Dispatch. The
Restated Agreement and the New Agreement also provide for the issuance of
standby letters of credit in the amount of approximately $1,600. The letters of
credit expire at various dates through March 1997.
The Restated Agreement and the New Agreement contain numerous covenants,
including but not limited to, the maintenance of specified financial ratios,
limitations on capital additions and disposals and limitations on additional
borrowings. At December 31, 1994, Courier Dispatch was in compliance with or had
obtained waivers for noncompliance of all of the financial ratio covenants.
During 1995, Courier Dispatch restructured certain of its existing debt
with a bank by combining certain of its acquisition loans into one instrument.
Courier Dispatch also borrowed an additional $1,300 under this new facility. The
new note bears interest at the rate of prime plus 1% and matures on January 15,
1997.
Subordinated Notes
The Series B Amended and Restated Junior Subordinated and C Amended and
Restated Junior Subordinated Notes ("Series B and C Notes") of $2,452 and
$1,235, respectively, are payable in full on September 30, 1996 or upon the
occurrence of certain capital transactions as specified in the loan agreements,
as amended. The Series A Senior Subordinated Notes ("Series A Notes") of $2,626
related to Courier Dispatch's repurchase and retirement of common stock in 1994
and is payable in full on February 18, 1999. During 1995, Courier Dispatch
issued additional Series A Senior Subordinated Notes ("Series A Notes Four, Five
and Six"). The Series A Notes Four, Five and Six are payable in full on February
18, 1999. The Series A Note, and Series A Notes Four, Five and Six and Series B
and Series C Notes are secured by a priority interest in substantially all of
the assets of Courier Dispatch.
F-53
<PAGE> 123
CDG HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
Debt maturities are as follows:
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------
<S> <C>
1995............................................ $ 8,725
1996............................................ 12,243
1997............................................ 3,862
1998............................................ 1,515
1999 and thereafter............................. 751
-------
$27,096
=======
</TABLE>
7. COMMON STOCK WARRANTS
<TABLE>
In connection with the issuance of the Subordinated Notes, warrants for the
purchase of common stock of Courier Dispatch were issued to the lenders as
follows:
<CAPTION>
NUMBER ASSIGNED
OF WARRANTS VALUE
----------- ------
<S> <C> <C>
Series A Senior Notes 4 through 6....................... 666,666 $ 667
Series A Senior Notes 1 through 3....................... 653,146 653
Series B Junior Notes................................... 752,381 1,731
Series C Junior Notes................................... 551,746 1,269
</TABLE>
These warrants are exercisable in whole or in part at any time and expire upon
the earliest of September 30, 2002 or the sixth anniversary of the prepayment in
full of the related subordinated debt. The warrants provide for various rights,
including the right to require Courier Dispatch to purchase the warrants after
September 30, 1996 for the warrants issued in connection with the Series B and C
Notes and February 18, 1999 for the warrants issued in connection with the
Series A Notes or upon the occurrence of an event of default, at the greater of
a formula price as defined in the securities purchase agreement ("formula
price") or fair market value (as determined by negotiation or appraisal). At any
time after the later of September 30, 1998 for the warrants issued in connection
with the Series B and C Notes and February 18, 2001 for the warrants issued in
connection with the Series A Notes, or, in either case, payment in full of all
subordinated notes issued pursuant to the securities purchase agreement, Courier
Dispatch may purchase, at its option, all of the warrants at the greater of the
formula price or fair market value. The warrants are exercisable at a nominal
exercise price. The valuation of these warrants resulted in an original issue
discount on the related debt which is being amortized using the interest method
over the term of the related debt.
In connection with the restructuring of certain of its bank debt in July
1995, 12,500 warrants for the purchase of common stock of Courier Dispatch were
issued to the lender.
F-54
<PAGE> 124
CDG HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
Transactions related to common stock warrants for each of the two years
ended December 31, 1994 and the period ended December 19, 1995 are as follows:
<CAPTION>
NUMBER ASSIGNED
OF WARRANTS VALUE
----------- --------
<S> <C> <C>
Balance at December 31, 1992......................... 1,304,127 $ 4,561
Issuance........................................... -- --
Accretion.......................................... -- 131
----------- --------
Balance At December 31, 1993......................... 1,304,127 4,692
Issuance........................................... 653,146 653
Accretion.......................................... -- 527
----------- --------
Balance at December 31, 1994......................... 1,957,273 5,872
Issuance........................................... 679,166 667
Accretion.......................................... -- 19,430
Exercise........................................... (2,636,439) (25,969)
----------- --------
Balance at December 19, 1995......................... -- $ --
=========== ========
</TABLE>
8. STOCKHOLDERS' EQUITY
In February 1994, Courier Dispatch repurchased and retired 954,098 shares
of common stock from minority owners. Immediately upon completion of the
purchase of the common stock and the placement of the related indebtedness to
fund such purchase, Courier Dispatch sold 300,952 shares of common stock to
certain members of Courier Dispatch's management. After these transactions there
were 550,664 shares of common stock issued and outstanding.
Management's purchase of common stock was financed through bank loans to
management which Courier Dispatch has guaranteed. Courier Dispatch has recorded
these loans in its accounts and the stock subscriptions receivable in its
equity. The loan and stock subscriptions receivable are reduced as management
makes principal payments.
In February 1994, Courier Dispatch recapitalized its existing equity
structure, resulting in a change in the authorized common stock from 3,000,000
shares authorized at December 31, 1993 to 3,750,000 shares of Class A voting
common stock authorized and 3,750,000 shares of Class B non-voting common stock
authorized. Subsequent to the recapitalization, total shares issued and
outstanding remained at 550,664 shares of Class A voting stock.
F-55
<PAGE> 125
CDG HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
9. INCOME TAXES
<TABLE>
The provision (benefit) for income taxes is as follows:
<CAPTION>
YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 19,
------------ ------------
1993 1994 1995
---- ----- ------------
<S> <C> <C> <C>
Current tax provision (benefit)
Federal.......................................................... $121 $ 30 $(166)
State............................................................ 85 94 --
---- ----- -----
206 124 (166)
---- ----- -----
Deferred tax provision (benefit)
Federal.......................................................... 330 (131) 433
State............................................................ 56 (23) 76
---- ----- -----
386 (154) 509
---- ----- ------
Total provision (benefit).......................................... $592 $ (30) $ 343
==== ===== ======
</TABLE>
In 1993 and 1994, Courier Dispatch utilized approximately $128 and $125,
respectively, of alternative minimum tax credits which were generated in 1991
and 1992 to reduce its current federal income tax expense.
<TABLE>
The deferred tax assets (liabilities) consist of the following:
<CAPTION>
DECEMBER 31,
-------------------
1993 1994
------- -------
<S> <C> <C>
Deferred tax assets
Insurance accrual.............................................. $ 2,545 $ 2,513
Deferred compensation.......................................... 403 293
Vacation accrual............................................... 118 139
Accounts receivable allowance.................................. 137 132
Other.......................................................... 290 349
------- -------
3,493 3,426
------- -------
Deferred tax liabilities
Accumulated depreciation....................................... (572) (448)
------- -------
(572) (448)
------- -------
Valuation allowance.............................................. (1,985) (1,888)
------- -------
$ 936 $ 1,090
======= =======
</TABLE>
<TABLE>
The differences in income taxes provided and the amounts determined by
applying the federal statutory tax rate to income before income taxes result
from the following:
<CAPTION>
YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 19,
------------ ------------
1993 1994 1995
---- ----- ------------
<S> <C> <C> <C>
Tax provision (benefit) at federal statutory rate.................. $ 93 $(611) $(589)
State income taxes, net of federal income tax benefit.............. 71 63 --
Nondeductible expenses, primarily goodwill......................... 268 615 656
Effect of valuation allowance...................................... 160 (97) 276
---- ----- -----
$592 $ (30) $ 343
==== ===== =====
</TABLE>
F-56
<PAGE> 126
CDG HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
10. STOCK OPTION PLAN
<TABLE>
Courier Dispatch has in place a stock option plan whereby selected members
of Courier Dispatch's management have been granted options to purchase shares of
Courier Dispatch's common stock. Transactions related to stock options for each
of the two years ended December 31, 1994 and the period ended December 19, 1995
are as follows:
<CAPTION>
OPTION PRICE
SHARES PER SHARE
------- ------------
<S> <C> <C>
Outstanding at December 31, 1992.............................. 29,343 $ 1.40
Granted....................................................... 48,163 1.40
Exercised..................................................... -- --
Canceled or expired........................................... -- --
------- ------------
Outstanding at December 31, 1993.............................. 77,506 1.40
Granted....................................................... 94,535 1.40 - 3.00
Exercised..................................................... -- --
Canceled or expired........................................... -- --
------- ------------
Outstanding at December 31, 1994.............................. 172,041 1.40 - 3.00
Granted....................................................... 167,503 1.40 - 3.00
Exercised..................................................... 19,669 1.40
Canceled or expired........................................... -- --
------- ------------
Outstanding at December 19, 1995.............................. 319,875 $1.40 - 3.00
======= ============
</TABLE>
Compensation expense related to the stock options for the years ended
December 31, 1993, 1994 and the period ended December 19, 1995 was approximately
$0, $154, and $500, respectively.
11. COMMITMENTS AND CONTINGENCIES
Lease Commitments
<TABLE>
Courier Dispatch leases office and operating facilities and certain
equipment under noncancelable operating leases with terms in excess of one year.
Future minimum lease payments required by operating leases approximate the
following:
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------
<S> <C>
1995............................................. $1,540
1996............................................. 1,352
1997............................................. 1,076
1998............................................. 860
1999 and thereafter.............................. 617
------
$5,445
======
</TABLE>
Several operating lease agreements have provisions for escalation in rents
to approximate the change in the consumer price index. In addition, Courier
Dispatch leases office and operating facilities and certain vehicles and
equipment on a month-to-month basis. Lease expense for the years ended December
31, 1993 and 1994 and for the period ended December 19, 1995 were approximately
$4,494, $7,061 and $8,322, respectively.
F-57
<PAGE> 127
CDG HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Litigation
Courier Dispatch is, from time to time, a party to litigation arising in
the normal course of its business, most of which involves claims for personal
injury and property damage incurred in connection with its operations.
Management believes that none of these actions will have a material adverse
effect on the financial position or results of operations of Courier Dispatch.
Self-Insurance Program
Courier Dispatch is self-insured with respect to certain aspects of its
workers' compensation, general liability and automobile and physical damage on
vehicles claims. The self-insured risk is $100 per general liability claim and
$250 per workers compensation and automobile and vehicle damage claims. In
accordance with the terms of the insurance policy, Courier Dispatch maintains a
$1,240 letter of credit with a commercial bank in favor of the insurer.
Management believes that any claims as of December 19, 1995 arising under this
self-insurance program will not have a material adverse effect on the financial
position or results of operations of Courier Dispatch.
12. RELATED PARTY TRANSACTIONS
At December 31, 1993 and 1994, Courier Dispatch had outstanding $2,173 and
$3,890 of its subordinated notes, net of imputed interest, with a bank. In
connection with the notes, the bank acquired warrants to purchase 1,412,287
shares of Courier Dispatch's common stock. A managing director of the bank is a
director of Courier Dispatch.
At December 31, 1993 and 1994, Courier Dispatch had outstanding $1,080 and
$2,626 of its subordinated notes, net of imputed interest, with another bank. In
connection with the notes, the bank acquired warrants to purchase 1,211,652
shares of Courier Dispatch's common stock. An executive vice president of the
bank is a director of Courier Dispatch. An affiliate of the bank is a
significant customer of Courier Dispatch. At December 31, 1993 and 1994, Courier
Dispatch had an account receivable balance of approximately $250 and $1,184,
respectively, from this customer. Sales to this customer approximated $4,972,
$5,513 and $6,458 for the years ended December 31, 1993 and 1994 and the period
ended December 19, 1995, respectively.
13. EMPLOYEE BENEFIT PLANS
Effective October 1, 1994, Courier Dispatch adopted a defined contribution
plan. Courier Dispatch pays all general and administrative expenses of the plan
and has the option to make contributions to the plan at its sole discretion. For
the year ended December 31, 1994 and the period ended December 19, 1995, Courier
Dispatch made no contributions to the plan. General and administrative expenses
related to the plan for the year ended December 31, 1994 and the period ended
December 19, 1995 were $23 and $47, respectively.
14. CONCENTRATION OF CREDIT RISK
During the years ended December 31, 1993 and 1994 and the period ended
December 19, 1995, no one customer represented greater than 10% of total sales
revenue of Courier Dispatch. Courier Dispatch operates primarily in the
southeast, northeast and midwest. Services to financial institutions comprised
approximately 55% of total sales for each of the years ended December 31, 1993
and 1994 and the period ended December 19, 1995, with the remainder of sales
primarily relating to pharmaceutical and other. Although Courier Dispatch is
affected by the creditworthiness of its customers, management does not believe
significant
F-58
<PAGE> 128
CDG HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
credit risk exists at December 19, 1995. Courier Dispatch generally does not
require collateral, and maintains reserves for potential credit losses.
Historically, such losses have been within management's expectations.
15. SUBSEQUENT EVENTS
On December 20, 1995, in exchange for shares of Common Stock, Courier
Dispatch merged with a wholly-owned subsidiary of the Company.
F-59
<PAGE> 129
(This page intentionally left blank)
F-60
<PAGE> 130
REPORT OF INDEPENDENT ACCOUNTANTS
To the Boards of Directors and Stockholder
of Tricor America, Inc.
In our opinion, the accompanying combined balance sheets and the related
combined statements of operations, of stockholder's equity and of cash flows
present fairly, in all material respects, the financial position of Tricor
America, Inc. ("Tricor") at December 31, 1993 and 1994, and the results of its
operations and its cash flows for each of the two years in the period ended
December 31, 1994, and for the period ended December 19, 1995, in conformity
with generally accepted accounting principles. These financial statements are
the responsibility of Tricor's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Sacramento, California
March 12, 1996
F-61
<PAGE> 131
TRICOR
<TABLE>
COMBINED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<CAPTION>
DECEMBER 31,
-------------------
1993 1994
------- -------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents.............................................. $ 834 $ 2,411
Accounts receivable, less allowance of $229 and $230................... 3,988 4,421
Short-term investments................................................. -- 500
Prepaid workers' compensation.......................................... 685 --
Prepaids and other assets.............................................. 368 206
------- -------
Total current assets........................................... 5,875 7,538
Property and equipment, net.............................................. 3,902 3,808
Other assets............................................................. 668 485
------- -------
$10,445 $11,831
======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Current maturities of long-term debt................................... $ 975 $ 688
Accounts payable....................................................... 725 595
Accrued liabilities.................................................... 1,552 1,523
Income taxes payable................................................... 26 2
------- -------
Total current liabilities...................................... 3,278 2,808
Long-term debt, net of current maturities................................ 2,209 1,533
------- -------
5,487 4,341
------- -------
Stockholder's equity
Common stock........................................................... 65 65
Retained earnings...................................................... 4,893 7,425
------- -------
4,958 7,490
------- -------
Commitments and contingencies............................................ -- --
------- -------
$10,445 $11,831
======= =======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-62
<PAGE> 132
TRICOR
<TABLE>
COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<CAPTION>
YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 19,
----------------- ------------
1993 1994 1995
------- ------- ------------
<S> <C> <C> <C>
Net revenues................................................... $32,504 $34,288 $37,252
Cost of delivery............................................... 23,726 24,846 27,172
------- ------- -------
Gross profit................................................. 8,778 9,442 10,080
Selling, general and administrative
expenses..................................................... 6,789 7,058 6,898
Amortization of intangible assets.............................. 100 172 --
------- ------- -------
Operating income............................................. 1,889 2,212 3,182
Other income (expense)
Interest expense............................................. (249) (276) (186)
Interest income and other, net............................... 67 2,191 178
------- ------- -------
Income before income taxes..................................... 1,707 4,127 3,174
Provision for income taxes..................................... 41 15 18
------- ------- -------
Net income..................................................... $ 1,666 $ 4,112 $ 3,156
======= ======= =======
Unaudited pro forma data (Note 9)
Income before income taxes................................... $ 1,707 $ 4,127 $ 3,174
Pro forma provision for income taxes......................... 703 851 1,293
------- ------- -------
Net income..................................................... $ 1,004 $ 3,276 $ 1,881
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-63
<PAGE> 133
TRICOR
<TABLE>
COMBINED STATEMENTS OF STOCKHOLDER'S EQUITY
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<CAPTION>
COMMON STOCK
----------------- RETAINED
SHARES AMOUNT EARNINGS TOTAL
------ ------ --------- -------
<S> <C> <C> <C> <C>
Balance at December 31, 1992.......................... 368 $65 $ 3,835 $ 3,900
Distributions to stockholder.......................... -- -- (608) (608)
Net income............................................ -- -- 1,666 1,666
--- --- -------- -------
Balance at December 31, 1993.......................... 368 65 4,893 4,958
Distributions to stockholder.......................... -- -- (1,580) (1,580)
Net income............................................ -- -- 4,112 4,112
--- --- -------- -------
Balance at December 31, 1994.......................... 368 65 7,425 7,490
Distributions to stockholder.......................... -- -- (7,128) (7,128)
Net income............................................ -- -- 3,156 3,156
--- --- ------- -------
Balance at December 19, 1995.......................... 368 $65 $ 3,453 $ 3,518
=== === ======= =======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-64
<PAGE> 134
TRICOR
<TABLE>
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<CAPTION>
YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 19,
----------------- ------------
1993 1994 1995
------- ------- ------------
<S> <C> <C> <C>
Cash flows from operating activities
Net income..................................................... $ 1,666 $ 4,112 $ 3,156
Adjustments to reconcile net income to net cash provided by
operating activities
Depreciation................................................. 541 574 543
Provision for bad debts...................................... 23 79 --
Amortization of intangible assets............................ 100 105 --
Write-off of intangible assets............................... -- 67 --
Change in operating assets and liabilities
Accounts receivable....................................... (832) (512) (331)
Prepaid workers' compensation............................. -- 685 --
Deferred and other assets................................. (244) 173 (180)
Accounts payable.......................................... (217) (130) 1,271
Income taxes payable...................................... -- (24) --
Accrued liabilities....................................... 443 (29) 199
Dividend payable.......................................... -- -- 402
------- ------- -------
Net cash provided by operating activities...................... 1,480 5,100 5,060
------- ------- -------
Cash flows from investing activities
Net (purchases) sales of short-term investments.............. -- (500) 500
Capital expenditures, net of disposals....................... (437) (348) (407)
------- ------- -------
Net cash (used in) provided by investing activities............ (437) (848) 93
------- ------- -------
Cash flows from financing activities
Payments of debt............................................. (812) (1,095) (716)
Distributions to stockholder................................. (608) (1,580) (5,424)
------- ------- -------
Net cash used in financing activities.......................... (1,420) (2,675) (6,140)
------- ------- -------
Net (decrease) increase in cash and cash equivalents........... (377) 1,577 (987)
Cash and cash equivalents
Beginning of the period...................................... 1,211 834 2,411
------- ------- -------
End of the period............................................ $ 834 $ 2,411 $ 1,424
======= ======= =======
Supplemental disclosure of cash flow information
Cash paid during the period for
Interest.................................................. $ 249 $ 276 $ 186
Income taxes.............................................. 41 41
Disclosure of non-cash investing and financing activities
Capital expenditures financed through issuance of notes
payable................................................... 213 132
Workers' compensation premiums financed through issuance of
notes payable............................................. 738
Non-cash distributions to stockholder........................ 1,302
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-65
<PAGE> 135
TRICOR
NOTES TO COMBINED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1. BUSINESS AND ORGANIZATION
Tricor America, Inc. ("Tricor") is engaged in interstate, intrastate and
international courier services for customers requiring delivery of
time-sensitive documents, using air and surface transportation. Tricor primarily
operates in the Western United States and Pacific Rim with the bulk of its
business concentrated with large banks and other financial services companies.
Tricor is closely held and commonly controlled by one individual, the
"stockholder." In October 1995, Tricor California, Inc. ("California"), Tricor
International ("International") and Tricor Nevada, Inc. ("Nevada") were merged
into and with Tricor America, Inc. Prior to this merger America, California, and
International were S corporations and Nevada was a C corporation. California had
authorized 10,000 shares of no par value common stock with 22.5 shares issued
and outstanding, International had authorized 10,000 shares of no par value
common stock with 225 shares issued and outstanding, and Nevada had authorized
2,500 shares of no par value common stock with 45 shares issued and outstanding.
Tricor and its stockholder entered into a definitive merger agreement with
United TransNet, Inc. (the "Company")pursuant to which a wholly-owned subsidiary
of the Company merged with Tricor. Under the merger agreement, all outstanding
shares of Tricor's capital stock were converted into shares of the Company's
Common Stock and cash concurrently with the consummation of an initial public
offering of such Common Stock. Simultaneously with the entry by Tricor into such
merger agreement, five other companies, CDG Holding Corp. and its operating
subsidiary, Courier Dispatch Group, Inc. (collectively, "Courier Dispatch");
Film Transit, Incorporated ("Film Transit"); Lanter Courier Corporation
("Lanter"); Salmon Acquisition Corporation and its operating subsidiary, Sunbelt
Courier, Inc. (collectively, "Sunbelt"); and 3D Distribution Systems, Inc. and
its affiliated corporations and subsidiaries (collectively, "3D") (collectively
with Tricor, the "Founding Companies") entered into substantially similar merger
agreements with the Company, pursuant to which wholly-owned subsidiaries of the
Company merged with such Founding Companies (the "Mergers"). Prior to
consummating the Mergers, Tricor distributed certain assets with a book value of
$2,791, net of related indebtedness of $1,489, to its stockholder as a dividend.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The more significant accounting policies followed by Tricor are summarized
below:
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period, the most significant of which are related
to insurance accruals. Actual results could differ from those estimates.
Disclosures About Fair Value of Financial Instruments
In preparing disclosures about the fair value of financial instruments,
Tricor has assumed that the carrying amount approximates fair value for cash and
cash equivalents, accounts receivable, short-term investments, short-term debt
and accounts payable. The fair value of long-term debt instruments is based upon
the current interest rate environment and remaining term to maturity (see Note
5). Tricor feels that the carrying value of long-term debt approximates the fair
value.
F-66
<PAGE> 136
TRICOR
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Cash and Cash Equivalents and Short-Term Investments
Cash and equivalents include certificates of deposit and money market
accounts, all of which have original maturities of three months or less.
Short-term investments, which consist of certificates of deposit with original
maturities between three months and one year, are accounted for at fair market
value, which approximates cost.
Property and Equipment
Property and equipment are recorded at cost. Additions and improvements are
capitalized while maintenance and repair costs are charged to expense as
incurred. Tricor computes depreciation using the double-declining balance method
over the estimated useful lives of the assets, which range from 5 - 31.5 years.
The cost and accumulated depreciation of property retired or otherwise disposed
of are removed from the accounts and any gain or loss is included in income.
Other Assets
Other assets is comprised primarily of prepaid expenses, other receivables
and a non-compete agreement with a stockholder which was written off in 1994.
Insurance Claims
Tricor is self-insured with respect to group health coverage and automobile
and physical damage on vehicles up to specified per claim and aggregate amounts.
The accompanying financial statements include an insurance accrual based upon a
third party administrator's and management's evaluations of estimated future
ultimate costs of outstanding claims and an estimated liability for claims
incurred but not reported on an undiscounted basis. The ultimate cost of these
claims will depend on the outcome of individual claims given the potential for
these claims to increase or decrease over time.
Revenue
Revenue is recognized when the delivery is completed.
Income Taxes
America, California, and International elected S corporation status for
federal and state tax purposes. Under S corporation rules, all income tax
liability flows through to Tricor's stockholder with the exception of certain
state taxes. Effective January 1, 1994, the state tax rate applicable to Tricor
changed from 2.5% to 1.5%. Nevada accounts for federal and state income taxes in
accordance with Statement of Financial Standards No. 109 (SFAS 109), "Accounting
for Income Taxes". See Note 9 for pro forma income tax information.
Reclassifications
Certain prior year amounts have been reclassified to conform with the
current presentation.
F-67
<PAGE> 137
TRICOR
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<CAPTION>
DECEMBER 31,
-------------------
1993 1994
------- -------
<S> <C> <C>
Land............................................................. $ 846 $ 846
Buildings........................................................ 1,728 1,728
Delivery vehicles................................................ 1,776 1,915
Equipment and furnishings........................................ 1,280 1,392
Leasehold improvements........................................... 722 722
------- -------
6,352 6,603
Less accumulated depreciation and amortization................... (2,450) (2,795)
------- -------
$ 3,902 $ 3,808
======= =======
</TABLE>
<TABLE>
4. ACCRUED LIABILITIES
Accrued liabilities consists of the following:
<CAPTION>
DECEMBER 31,
-----------------
1993 1994
------ ------
<S> <C> <C>
Accrued payroll and related benefits............................... $ 775 $ 697
Accrued insurance.................................................. 479 414
Other accrued liabilities.......................................... 298 412
------ ------
$1,552 $1,523
====== ======
</TABLE>
<TABLE>
5. LONG-TERM DEBT
<CAPTION>
DECEMBER 31,
-----------------
1993 1994
------ ------
<S> <C> <C>
Long-term debt consists of the following:
Note payable, secured by land and building in Los Angeles,
California; payable in monthly principal and interest
installments of $3 to $5; bearing interest based on the cost of
funds for the 11th District savings institutions plus a margin of
2.25%; interest at December 31, 1994 was 7.26%................... $398 $361
Note payable, secured by land and building in Irving, Texas;
payable in monthly principal installments of $2 plus interest at
an adjustable rate indexed to prime rate; interest at December
31, 1994 was 9.75%............................................... 178 135
Contracts payable, secured by property and equipment payable in
monthly installments ranging from $22 to $23 including principal
and interest at rates from 6.5% to 16.88%........................ 299 189
Note payable, secured by land and building in South San Francisco,
California, repaid in 1994....................................... 236 --
Note payable, secured by land and building in South San Francisco,
California, payable in monthly installments of $8 including
principal and interest; bearing interest at 9.1%; payable in full
at January 1, 1996............................................... 899 890
</TABLE>
F-68
<PAGE> 138
TRICOR
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
1993 1994
------ ------
<S> <C> <C>
Premium loan, Workers' Compensation Insurance, payable in monthly
installments ranging from $26 to $79 including principal and
interest, bearing interest at 6%................................. $ 693 $ 312
Note payable to former stockholder, in connection with covenant not
to compete, secured by a pledge of 25% of Tricor's stock, payable
in monthly installments of $8, non-interest bearing.............. 187 92
Note payable to former stockholder, in connection with stock
redemption, secured by the pledge of 25% of the Tricor's stock,
payable in monthly installments of $6 to $14; bearing interest at
12%; payable in full at January 1, 1996.......................... 280 238
Other notes payable................................................ 14 4
------ ------
3,184 2,221
Less -- current portion.......................................... (975) (688)
------ ------
$2,209 $1,533
====== ======
</TABLE>
<TABLE>
Debt maturities are as follows:
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------
<S> <C>
1995.......................................... $ 688
1996.......................................... 1,057
1997.......................................... 133
1998.......................................... 110
1999 and thereafter........................... 233
------
$2,221
======
</TABLE>
6. COMMITMENTS AND CONTINGENCIES
Lease Commitments
<TABLE>
Tricor leases office and operating facilities from related parties and
non-related parties and certain equipment from non-related parties under
noncancelable operating leases with terms in excess of one year. Future minimum
lease payments required by operating leases approximate the following:
<CAPTION>
YEAR ENDED RELATED NON-RELATED
DECEMBER 31, PARTIES PARTIES
------------ ------- -----------
<S> <C> <C>
1995............................... $ 140 $203
1996............................... 140 134
1997............................... 50 64
1998............................... 50 30
1999 and thereafter................ 983 36
------ ----
$1,363 $467
====== ====
</TABLE>
Several operating lease agreements have provisions for escalation in rents
to approximate the change in the consumer price index and for Tricor's share of
real estate taxes and building operating expenses. Lease
F-69
<PAGE> 139
TRICOR
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
expense to related parties for the years December 31, 1993, and 1994 and for the
period ended December 19, 1995 totaled approximately $115, $140 and $65,
respectively. Lease expense to non-related parties for the same periods totaled
approximately $244, $250 and $372, respectively.
Litigation
Tricor is, from time to time, a party to litigation arising in the normal
course of its business. Management believes that none of these actions will have
a material adverse effect on the financial position or results of operations of
Tricor.
7. EMPLOYEE RETIREMENT PLAN
Tricor has a Qualified 401(k) Employee Savings and Profit Sharing Plan for
the benefit of all eligible employees. Employees are eligible to participate in
the plan if they have been employed by Tricor for one year and work at least 20
hours per week. Generally, employees can defer up to 15% of their salary under
the plan. Tricor can make a discretionary matching contribution based on a
percentage of the deferral up to 5% of the yearly compensation. Employer
contributions for the plan for the year ended December 31, 1993 and 1994, and
for the period ended December 19, 1995, totaled approximately $101, $103, and
$165, respectively.
8. LIFE INSURANCE PROCEEDS
During 1994, Tricor received life insurance proceeds totaling approximately
$2,015 upon the death of a former officer of Tricor, which are recorded as other
income.
9. UNAUDITED PRO FORMA INFORMATION
Income Taxes
Tricor has calculated the December 31, 1993 and 1994 and the December 19,
1995 pro forma provision for income taxes under Financial Accounting Standards
Board Statement No. 109 (SFAS 109).
<TABLE>
The pro forma income tax provision is as follows:
<CAPTION>
YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 19,
------------ ------------
1993 1994 1995
---- ---- ------------
<S> <C> <C> <C>
Current tax provision
Federal......................................................... $568 $649 $1,037
State........................................................... 170 194 301
---- ---- ------
738 843 1,338
---- ---- ------
Deferred tax (benefit) provision
Federal......................................................... (28) 4 (43)
State........................................................... (7) 4 (2)
---- ---- ------
(35) 8 (45)
---- ---- ------
Total provision......................................... $703 $851 $1,293
==== ==== ======
</TABLE>
F-70
<PAGE> 140
TRICOR
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
The differences in pro forma income taxes provided and the amounts
determined by applying the federal statutory tax rate to income before income
taxes result from the following:
<CAPTION>
YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 19,
-------------- ------------
1993 1994 1995
---- ------ ------------
<S> <C> <C> <C>
Tax at federal statutory rate................................... $581 $1,403 $1,079
State income taxes, net of federal income tax benefit........... 108 133 193
Life insurance proceeds......................................... -- (685) --
Other........................................................... 14 -- 21
---- ------ ------
$703 $ 851 $1,293
==== ====== ======
</TABLE>
Pro forma deferred income taxes result from temporary differences in the
recognition of certain expenses for financial and income tax reporting purposes.
<TABLE>
Deferred taxes would be provided for the temporary differences between the
financial reporting basis and the tax basis of Tricor's assets and liabilities.
Pro forma deferred tax assets would consist of the following:
<CAPTION>
DECEMBER 31,
-------------
1993 1994
---- ----
<S> <C> <C>
Compensated absence accrual........................................... $132 $144
Self-insurance accrual................................................ 208 179
State income taxes.................................................... 25 35
Other................................................................. 104 103
---- ----
$469 $461
==== ====
</TABLE>
10. SUBSEQUENT EVENTS
On December 20, 1995, in exchange for shares of Common Stock and cash,
Tricor merged with a wholly-owned subsidiary of the Company.
F-71
<PAGE> 141
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F-72
<PAGE> 142
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Film Transit, Incorporated
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, of stockholders' equity and of
cash flows present fairly, in all material respects, the financial position of
Film Transit, Incorporated and its subsidiary (collectively, "Film Transit") at
December 31, 1993 and 1994, and the results of their operations and their cash
flows for each of the two years in the period ended December 31, 1994 and for
the period ended December 19, 1995, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of Film
Transit's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Memphis, Tennessee
March 12, 1996
F-73
<PAGE> 143
FILM TRANSIT, INCORPORATED
<TABLE>
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<CAPTION>
DECEMBER 31,
-------------------
1993 1994
------- -------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents............................................ $ 425 $ 101
Short-term investments............................................... -- 400
Accounts receivable, less allowance of $60 and $60................... 1,476 1,559
Deferred tax assets.................................................. 55 229
Prepaids and other assets............................................ 417 416
------- -------
Total current assets......................................... 2,373 2,705
Property and equipment, net............................................ 2,190 2,082
Intangibles and other assets, net...................................... 256 187
------- -------
$ 4,819 $ 4,974
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term debt...................................................... $ 527 $ 470
Accounts payable..................................................... 435 438
Accrued liabilities.................................................. 2,235 2,656
Income taxes payable................................................. 12 79
------- -------
Total current liabilities.................................... 3,209 3,643
Long-term debt, net of current maturities.............................. 624 141
Deferred tax liabilities............................................... 364 317
Other liabilities...................................................... 60 58
------- -------
4,257 4,159
------- -------
Stockholders' equity
Class "A" common stock, $50 par value; 500 shares authorized; 197
shares issued and outstanding..................................... 10 10
Class "B" common stock, $50 par value; 500 shares authorized; 308
shares issued and outstanding..................................... 15 15
Paid-in capital...................................................... 100 100
Retained earnings.................................................... 7,428 7,681
Treasury stock (144 Class "A" Shares and 308 Class "B" Shares)....... (6,991) (6,991)
------- -------
562 815
------- -------
Commitments and contingencies.......................................... -- --
------- -------
$ 4,819 $ 4,974
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-74
<PAGE> 144
FILM TRANSIT, INCORPORATED
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<CAPTION>
YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 19,
----------------- ------------
1993 1994 1995
------- ------- ------------
<S> <C> <C> <C>
Net revenues................................................... $24,692 $24,717 $22,352
Cost of delivery............................................... 16,079 16,829 14,566
------- ------- -------
Gross profit.............................................. 8,613 7,888 7,786
Selling, general and administrative expenses................... 7,348 7,351 7,155
Amortization of intangible assets.............................. 37 91 --
------- ------- -------
Operating income.......................................... 1,228 446 631
Other income (expense).........................................
Interest expense.......................................... (97) (62) (43)
Interest income and other, net............................ 7 19 49
------- ------- -------
Income before income taxes..................................... 1,138 403 637
Provision for income taxes..................................... 450 150 241
------- ------- -------
Net income..................................................... $ 688 $ 253 $ 396
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-75
<PAGE> 145
FILM TRANSIT, INCORPORATED
<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<CAPTION>
CLASS "A" CLASS "B"
COMMON STOCK COMMON STOCK
--------------- --------------- PAID-IN RETAINED TREASURY
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS STOCK TOTAL
------ ------ ------ ------ ------- --------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1992.... 197 $10 308 $15 $100 $6,740 $(6,991) $(126)
Net income...................... -- -- -- -- -- 688 -- 688
--- --- --- --- ---- ------ ------- -----
Balance at December 31, 1993.... 197 10 308 15 100 7,428 (6,991) 562
Net income...................... -- -- -- -- -- 253 -- 253
--- --- --- --- ---- ------ ------- -----
Balance at December 31, 1994.... 197 10 308 15 100 7,681 (6,991) 815
Distributions to stockholders... -- -- -- -- -- (519) -- (519)
Net income...................... -- -- -- -- -- 396 -- 396
--- --- --- --- ---- ------ ------- -----
Balance at December 19, 1995.... 197 $10 308 $15 $100 $7,558 $(6,991) $ 692
=== === === === ==== ====== ======= =====
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-76
<PAGE> 146
FILM TRANSIT, INCORPORATED
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<CAPTION>
YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 19,
--------------- ------------
1993 1994 1995
------ ------ ------------
<S> <C> <C> <C>
Cash flows from operating activities
Net income..................................................... $ 688 $ 253 $ 396
Adjustments to reconcile net income to net cash provided by
operating activities
Depreciation and amortization............................... 498 483 462
Provision for bad debts..................................... 14 43 61
Amortization of intangible assets........................... 33 -- --
Loss (gain) on sale of assets............................... 18 15 (3)
Amortization/write off of authority licenses................ 4 91 --
Deferred income taxes....................................... 131 (221) 64
Change in operating assets and liabilities
Accounts receivable....................................... 138 (126) (78)
Other assets.............................................. (101) (20) (346)
Accounts payable.......................................... 127 3 60
Accrued liabilities....................................... (281) 421 (162)
Income taxes payable...................................... (90) 67 (111)
Other liabilities......................................... 4 (2) --
------ ------ -----
Net cash provided by operating activities.............. 1,183 1,007 343
------ ------ -----
Cash flows from investing activities
(Purchases) sales of short-term investments.................... -- (400) 400
Capital expenditures, net of disposals......................... (529) (391) (441)
------ ------ -----
Net cash used in investing activities.................. (529) (791) (41)
------ ------ -----
Cash flows from financing activities
Payments of debt............................................... (502) (540) (879)
Proceeds from issuance of debt................................. -- -- 494
------ ------ -----
Net cash used in financing activities.................. (502) (540) (385)
------ ------ -----
Net increase (decrease) in cash and cash equivalents............. 152 (324) (83)
Cash and cash equivalents
Beginning of the period........................................ 273 425 101
------ ------ -----
End of the period.............................................. $ 425 $ 101 $ 18
====== ====== =====
Supplemental disclosure of cash flow information
Cash paid during the period for
Interest.................................................... $ 97 $ 62 $ 32
Income taxes................................................ 408 303 288
Disclosure of non-cash investing and financing activities
Non-cash distributions to stockholder.......................... $ 519
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-77
<PAGE> 147
FILM TRANSIT, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1. BUSINESS AND ORGANIZATION
Film Transit, Incorporated, including its subsidiary, (collectively, "Film
Transit") is a Class I common carrier specializing in the transportation of
motion picture film and theater supplies, magazines, surface movement of air
freight and general commodities. A large proportion of Film Transit's revenues
are developed from the transportation of small package shipments. Film Transit
operates in the mid-south.
Film Transit and its stockholders entered into a definitive merger
agreement with United TransNet, Inc. (the "Company") pursuant to which a
wholly-owned subsidiary of the Company merged with Film Transit. Under the
merger agreement, all outstanding shares of Film Transit's capital stock were
converted into shares of the Company's Common Stock concurrently with the
consummation of an initial public offering of such Common Stock. Simultaneously
with the entry by Film Transit into such merger agreement, five other companies,
CDG Holding Corp. and its operating subsidiary, Courier Dispatch Group, Inc.
(collectively "Courier Dispatch"); Tricor America, Inc. ("Tricor"); Salmon
Acquisition Corporation and its operating subsidiary, Sunbelt Courier, Inc.
(collectively, "Sunbelt"); and 3D Distribution Systems, Inc. and its affiliated
corporations and subsidiaries (collectively, "3D") (collectively with Film
Transit, the "Founding Companies") entered into substantially similar merger
agreements with the Company, pursuant to which wholly-owned subsidiaries of the
Company merged with such Founding Companies (the "Mergers"). Prior to
consummating the agreement, Film Transit distributed certain assets to its
stockholders as a dividend.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The more significant accounting policies followed by Film Transit are
summarized below:
Basis of Presentation
The consolidated financial statements include the accounts of Film Transit,
Incorporated and its wholly-owned subsidiary, Commonwealth Associates. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
Estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period, the most significant of which are related
to insurance accruals. Actual results could differ from those estimates.
Disclosures About Fair Value of Financial Instruments
In preparing disclosures about the fair value of financial instruments,
Film Transit has assumed that the carrying amount approximates fair value for
cash and cash equivalents, accounts receivable, short-term investments,
short-term debt and accounts payable. The fair value of long-term debt
instruments is based upon the current interest rate environment and remaining
term to maturity (see Notes 5 and 6). Film Transit feels that the carrying value
of long-term debt approximates the fair value.
Cash and Cash Equivalents and Short-Term Investments
Cash on hand, amounts due from banks and certificates of deposit and
repurchase agreements having original maturities of three months or less are
classified as cash and cash equivalents by Film Transit. Short-term investments
consist of certificates of deposit with original maturities of less than one
year and are recorded at market which approximates cost.
F-78
<PAGE> 148
FILM TRANSIT, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Property and Equipment
Property and equipment are recorded at cost. Additions and improvements are
capitalized while maintenance and repair costs are charged to expense as
incurred. Film Transit computes depreciation using the straight-line method over
the estimated useful life of the assets. Average depreciable lives are: building
and improvements 31.5 years; fixtures and equipment 7-15 years; and vehicles and
accessories 3-5 years. The cost and accumulated depreciation of property retired
or otherwise disposed of are removed from the accounts and any gain or loss is
included in income.
Insurance Claims
Film Transit is self-insured with respect to workers' compensation up to
the deductible of $200 a claim and $950 in aggregate at December 19, 1995. The
aggregate deductible at December 31, 1993 and 1994 was $1,550 and $1,450,
respectively. The accompanying financial statements include an insurance accrual
based upon the third party administrator's and management's evaluations of
estimated future ultimate costs outstanding claims and an estimated liability
for claims incurred but not reported on an undiscounted basis.
Revenue
Revenue is recognized when the delivery is completed.
Income Taxes
Taxes on income are determined by using the liability method as prescribed
by Statement of Financial Accounting Standards No. 109 ("FAS 109"), "Accounting
for Income Taxes." This approach requires the recognition of deferred tax assets
and liabilities for the expected future tax consequences of events that have
been recognized in Film Transit's financial statements or tax returns. In
estimating future tax consequences, FAS 109 requires the consideration of all
expected future events other than enactments of changes in the tax laws or
rates.
Reclassifications
Certain prior year amounts have been reclassified to conform with the
current presentation.
3. PROPERTY AND EQUIPMENT
<TABLE>
Property and equipment consists of the following:
<CAPTION>
DECEMBER 31,
-------------------
1993 1994
------- -------
<S> <C> <C>
Land............................................................. $ 56 $ 56
Buildings........................................................ 232 232
Delivery vehicles................................................ 5,827 5,731
Equipment and furnishings........................................ 1,297 1,343
Leasehold improvements........................................... 54 53
------- -------
7,466 7,415
Less accumulated depreciation and amortization................... (5,276) (5,333)
------- -------
$ 2,190 $ 2,082
======= =======
</TABLE>
F-79
<PAGE> 149
FILM TRANSIT, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
4. ACCRUED LIABILITIES
<TABLE>
Accrued liabilities consists of the following:
<CAPTION>
DECEMBER 31,
------------------
1993 1994
------- -------
<S> <C> <C>
Accrued payroll and related benefits............................... $1,002 $1,154
Accrued vacation................................................... 175 175
Accrued insurance.................................................. 686 805
Other accrued liabilities.......................................... 372 522
------ ------
$2,235 $2,656
====== ======
</TABLE>
5. SHORT-TERM DEBT
On September 8, 1988, Film Transit and a bank entered into a note, amended
November 1, 1992, which provides Film Transit with an available line of credit
of $1,700 and bears interest at the bank's prime (8.5% at December 31, 1994).
The note matures May 1, 1996. Borrowings under the note are cross collateralized
with the long-term note described below and are secured by accounts receivable,
inventory and property and equipment.
6. LONG-TERM DEBT
<TABLE>
Long-term debt consists of the following:
<CAPTION>
DECEMBER 31,
----------------
1993 1994
------ -----
<S> <C> <C>
Note payable to a financial institution, payable in monthly
installments of $45 including principal and interest at 6.65%
with a final payment in March 1996. Secured by substantially all
assets of Film Transit and certain stockholder guarantees........ $1,151 $ 611
Less current portion............................................... (527) (470)
------ -----
$ 624 $ 141
====== =====
</TABLE>
Under the most restrictive covenants of this note, Film Transit cannot pay
dividends or incur losses for two consecutive quarters.
<TABLE>
Debt maturities are as follows:
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------
<S> <C>
1995................................................ $470
1996................................................ 141
----
$611
====
</TABLE>
F-80
<PAGE> 150
FILM TRANSIT, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
7. INCOME TAXES
<TABLE>
The provision for income taxes is as follows:
<CAPTION>
YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 19,
-------------- ------------
1993 1994 1995
---- ----- ------------
<S> <C> <C> <C>
Current tax provision
Federal.................................................. $275 $ 319 $149
State.................................................... 44 52 28
---- ----- ----
319 371 177
---- ----- ----
Deferred tax provision (benefit)
Federal.................................................. 113 (189) 56
State.................................................... 18 (32) 8
---- ----- ----
131 (221) 64
---- ----- ----
Total provision.................................. $450 $ 150 $241
==== ===== ====
</TABLE>
<TABLE>
Deferred tax assets (liabilities) consist of the following:
<CAPTION>
DECEMBER 31,
---------------
1993 1994
----- -----
<S> <C> <C>
Deferred tax assets
Insurance accrual..................................................... $ -- $ 140
Vacation accrual...................................................... 66 66
Accounts receivable allowance......................................... 23 23
Authority rights/permits.............................................. 22 57
----- -----
111 286
----- -----
Deferred tax liabilities
Accumulated depreciation.............................................. (386) (374)
Other................................................................. (34) --
----- -----
(420) (374)
----- -----
$(309) $ (88)
===== =====
</TABLE>
<TABLE>
The differences in income taxes provided and the amounts determined by the
federal statutory tax rate to income before income taxes result from the
following:
<CAPTION>
YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 19,
------------- ------------
1993 1994 1995
---- ---- ------------
<S> <C> <C> <C>
Tax at federal statutory rate............................. $387 $137 $217
State income taxes, net of federal income tax benefit..... 40 13 18
Nondeductible expenses.................................... 11 -- 4
Other..................................................... 12 -- 2
---- ---- ----
$450 $150 $241
==== ==== ====
</TABLE>
F-81
<PAGE> 151
FILM TRANSIT, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
8. COMMITMENTS AND CONTINGENCIES
Lease Commitments
<TABLE>
Film Transit leases office and operating facilities and certain equipment
under noncancelable operating leases with terms in excess of one year. Future
minimum lease payments required by operating leases approximate the following:
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------
<S> <C>
1995................................................ $267
1996................................................ 205
1997................................................ 137
1998................................................ 18
----
$627
====
</TABLE>
In addition, Film Transit leases office and operating facilities, and
certain vehicles and equipment on a month-to-month basis. Film Transit leases
automotive equipment furnished by employees contracting for the delivery service
of the Film Transit. Lease expense for the years ended December 31, 1993 and
1994 and for the period ended December 19, 1995, was $3,542, $3,415 and $3,069,
respectively.
Litigation
Film Transit is, from time to time, a party to litigation arising in the
normal course of its business. Management believes that none of these actions
will have a material adverse effect on the financial position or results of
operations of Film Transit.
Contingencies
At December 19, 1995, Film Transit was contingently liable for $320 as
endorser of employee notes from Film Transit, Incorporated Employees Profit
Sharing Plan and Trust (the "Plan"). The notes are secured by the vested
interest in the Plan and/or chattel mortgage where applicable.
A standby letter of credit is outstanding at December 19, 1995 for $672 as
security for the insurance carrier in connection with Film Transit's workers'
compensation policy.
9. RELATED PARTY TRANSACTIONS
Film Transit leases two facilities from a partnership consisting of two
stockholders of Film Transit. Monthly rent expense is $15 plus an allocated
portion of the real estate tax, insurance and maintenance expense. Rent expense
paid to the partnership for the years ended December 31, 1993 and 1994 and for
the period ended December 19, 1995, was $186, $207 and $193, respectively.
10. EMPLOYEE PROFIT SHARING PLAN AND TRUST
Film Transit has a noncontributory profit sharing plan for the benefit of
qualifying employees who have completed six months of service and attained the
age of 18. Contributions by Film Transit are calculated at graduated percentages
of net income before taxes and employee bonuses, as specified in the Plan.
During the years ended December 31, 1993 and 1994, and the period ended December
19, 1995, Film Transit's profit sharing expense was $752, $904, and $591,
respectively.
F-82
<PAGE> 152
FILM TRANSIT, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
11. CONCENTRATION OF CREDIT RISK
During the years ended December 31, 1993 and 1994, and the period ended
December 19, 1995, no one customer represented greater than 10% of the total
sales revenue of Film Transit. Film Transit operates primarily in Alabama,
Arkansas, Louisiana, Mississippi, Oklahoma, Tennessee and Texas. Services to the
automotive and farm implement industry comprise approximately 65% of total sales
for the three year period ended December 31, 1994 and the period ended December
19, 1995. Although Film Transit is affected by the creditworthiness of its
customers, management does not believe significant credit risk exists at
December 19, 1995. Film Transit maintains reserves for potential credit losses,
and historically, such losses have been within management's expectations.
12. SUBSEQUENT EVENT
On December 20, 1995, in exchange for shares of Common Stock and cash, Film
Transit merged with a wholly-owned subsidiary of the Company.
F-83
<PAGE> 153
(This page intentionally left blank)
F-84
<PAGE> 154
REPORT OF INDEPENDENT ACCOUNTANTS
To Board of Directors and Stockholders of
Lanter Courier Corporation
In our opinion, the accompanying combined balance sheets and the related
combined statements of operations, of Lanter Courier Corporation ("Lanter")
equity investment and of cash flows present fairly, in all material respects,
the financial position of the Iowa, Nebraska and Wisconsin operations (the
"Districts") of Lanter as described in Note 1 to the combined financial
statements, at December 31, 1993 and 1994, and the results of their operations
and their cash flows for each of the two years in the period ended December 31,
1994 and for the period ended December 19, 1995, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of Lanter's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
St. Louis, Missouri
March 12, 1996
F-85
<PAGE> 155
THE DISTRICTS OF LANTER COURIER CORPORATION
<TABLE>
COMBINED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<CAPTION>
DECEMBER 31,
-----------------
1993 1994
------ ------
<S> <C> <C>
ASSETS
Current assets
Accounts receivable, less allowance of $41 and $31....................... $1,163 $1,103
Prepaids and other assets................................................ 82 54
------ ------
Total current assets............................................. 1,245 1,157
Property and equipment, net................................................ 265 204
Intangibles, net........................................................... 851 498
Other assets............................................................... 248 220
------ ------
$2,609 $2,079
====== ======
LIABILITIES AND LANTER EQUITY INVESTMENT
Current liabilities
Accounts payable......................................................... $ 172 $ 369
Accrued liabilities...................................................... 1,021 1,151
------ ------
Total current liabilities........................................ 1,193 1,520
------ ------
Lanter equity investment................................................... 1,416 559
------ ------
Commitments and contingencies.............................................. -- --
------ ------
$2,609 $2,079
====== ======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-86
<PAGE> 156
THE DISTRICTS OF LANTER COURIER CORPORATION
<TABLE>
COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<CAPTION>
YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 19,
----------------- ------------
1993 1994 1995
------- ------- ------------
<S> <C> <C> <C>
Net revenues................................................... $19,647 $21,431 $21,777
Cost of delivery............................................... 14,452 15,802 16,468
------- ------- -------
Gross profit.............................................. 5,195 5,629 5,309
Selling, general and administrative expenses................... 3,511 3,816 3,845
Amortization of intangible assets.............................. 367 382 369
------- ------- -------
Net income................................................... $ 1,317 $ 1,431 $ 1,095
======= ======= =======
Unaudited pro forma data (Note 10)
Income before income taxes................................... $ 1,317 $ 1,431 $ 1,095
Pro forma provision for income taxes......................... 534 582 454
------- ------- -------
Pro forma net income...................................... $ 783 $ 849 $ 641
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-87
<PAGE> 157
THE DISTRICTS OF LANTER COURIER CORPORATION
<TABLE>
COMBINED STATEMENTS OF LANTER EQUITY INVESTMENT
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C>
Balance at December 31, 1992....................................................... $ 2,218
Net income......................................................................... 1,317
Net cash transactions with Lanter.................................................. (2,200)
Net non-cash transactions with Lanter.............................................. 81
-------
Balance at December 31, 1993....................................................... 1,416
Net income......................................................................... 1,431
Net cash transactions with Lanter.................................................. (2,274)
Net non-cash transactions with Lanter.............................................. (14)
-------
Balance at December 31, 1994....................................................... 559
Distributions to stockholder....................................................... (143)
Contributions from stockholder..................................................... 586
Net cash transactions with Lanter.................................................. (2,062)
Net non-cash transactions with Lanter.............................................. (26)
Net income......................................................................... 1,095
-------
Balance at December 19, 1995....................................................... $ 9
=======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-88
<PAGE> 158
THE DISTRICTS OF LANTER COURIER CORPORATION
<TABLE>
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<CAPTION>
YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 19,
----------------- ------------
1993 1994 1995
------- ------- ------------
<S> <C> <C> <C>
Cash flows from operating activities
Net income.......................................................... $ 1,317 $ 1,431 $ 1,095
Adjustments to reconcile net income to net cash provided by
operating activities
Depreciation and amortization..................................... 290 158 116
Provision for bad debts........................................... 65 20 --
Amortization of intangible assets................................. 367 382 369
Loss on sale of property.......................................... -- -- (14)
Change in operating assets and liabilities
Accounts receivable............................................. (125) 40 (80)
Other assets.................................................... (122) 28 (120)
Accounts payable................................................ 49 197 235
Accrued liabilities............................................. 462 130 585
------- ------- -------
Net cash provided by operating
activities................................................. 2,303 2,386 2,186
------- ------- -------
Cash flows from investing activities
Capital expenditures, net of disposals.............................. (103) (112) (24)
------- ------- -------
Net cash used in investing activities........................ (103) (112) (24)
------- ------- -------
Cash flows from financing activities
Net transactions with Lanter........................................ (2,200) (2,274) (2,062)
------- ------- -------
Net cash used in financing activities........................ (2,200) (2,274) (2,062)
------- ------- -------
Net increase in cash and cash equivalents............................. -- -- 100
Cash and cash equivalents
Beginning of the period........................................... -- -- --
------- ------- -------
End of the period................................................. $ -- $ -- $ 100
======= ======= =======
Disclosure of non-cash investing and financing activities
Net transfers of property with Lanter............................... $ 81 $ (14) $ (26)
Other non-cash transactions:
Addition of consulting agreement.................................... $ 75
Non-cash distributions to stockholder............................... (143)
Non-cash contribution from stockholder.............................. 586
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-89
<PAGE> 159
THE DISTRICTS OF LANTER COURIER CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1. BUSINESS AND ORGANIZATION
Lanter Courier Corporation ("Lanter") has operations in Iowa, Nebraska and
Wisconsin (collectively referred to as the "Districts"). The Districts are
engaged in the business of providing courier and delivery services to customers
primarily within Iowa, Nebraska and Wisconsin. Other Lanter operations were to
be transferred to another company owned by Lanter stockholders in connection
with the merger discussed below. The transferred operations were not a part of
the planned Mergers.
Lanter and its stockholders entered into a definitive merger agreement with
United TransNet, Inc. (the "Company") pursuant to which a wholly-owned
subsidiary of the Company will merge with Lanter. Under the merger agreement,
all outstanding shares of Lanter's capital stock were converted into cash and
shares of the Company's Common Stock concurrently with the consummation of an
initial public offering of such Common Stock. Simultaneously with the entry by
Lanter into such merger agreement, five other companies, CDG Holding Corp. and
its operating subsidiary, Courier Dispatch Group, Inc. (collectively, "Courier
Dispatch"); Tricor America, Inc. ("Tricor"); Film Transit, Incorporated ("Film
Transit"); Salmon Acquisition Corporation and its operating subsidiary, Sunbelt
Courier, Inc. (collectively, "Sunbelt"); and 3D Distribution Systems, Inc. and
its affiliated corporations and subsidiaries (collectively, "3D") (collectively
with Lanter, the "Founding Companies") entered into substantially similar merger
agreements with the Company pursuant to which wholly-owned subsidiaries of the
Company merged with such Founding Companies (the "Mergers"). Prior to the
closing of the agreement, Lanter distributed certain assets to its stockholders
as a dividend in conjunction with the transfer of other Lanter operations
discussed above.
The combined statements of income and cash flows of the Districts were
derived from the accounting records of Lanter and include the revenue, expenses
and cash flows directly attributable to the Districts' operations, as well as an
allocation of Lanter corporate expenses (see Note 7). The combined balance
sheets include assets and liabilities at Lanter's historical cost basis which
are specifically identifiable to the Districts. All cash, investments and
borrowings were maintained on a consolidated basis for all of Lanter's
districts; accordingly, cash, investments and borrowings and related interest
income and expense are not reflected in the combined financial statements of the
Districts for the years ended December 31, 1993 and 1994 and for the period
ended December 19, 1995. All debt and certain other obligations of Lanter will
be included with the transferred operations discussed above. The Company has
received indemnification from Lanter's stockholders for all debt and certain
other obligations of Lanter. Accordingly, such amounts will not be obligations
of the Districts included in the Mergers.
The accompanying combined financial statements have been prepared on a
historical basis. The financial information in these combined financial
statements is not necessarily indicative of results that would have occurred if
the Districts had been a separate stand-alone entity during the periods
presented or of future results of the Districts.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The District's significant accounting policies which conform to generally
accepted accounting principles and are applied on a consistent basis among years
are described below:
Basis of Presentation
These combined financial statements include the historical accounts of the
Districts. The Districts do not have intercompany transactions.
F-90
<PAGE> 160
THE DISTRICTS OF LANTER COURIER CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period, the most significant of which are related
to insurance accruals. Actual results could differ from those estimates.
Disclosures About Fair Value of Financial Instruments
In preparing disclosures about the fair value of financial instruments, the
Districts have assumed that the carrying amount approximates fair value for
accounts receivable and accounts payable.
Property and Equipment
Property and equipment are recorded at cost. Additions and improvements are
capitalized while maintenance and repair costs are charged to expense as
incurred. Lanter computes depreciation using the straight-line method over the
estimated useful lives of the assets, which range from three to thirty-one and a
half years. The cost and accumulated depreciation of property retired or
otherwise disposed of are removed from the accounts and any gain or loss is
included in income.
Intangible Assets
On each of December 31, 1990 and June 30, 1992, Lanter entered into
separate non-compete agreements with third parties. Pursuant to such agreements,
such third parties agreed not to compete with Lanter's courier and delivery
service for a period of five years. The non-compete agreements were allocated to
the Districts based upon the geographic areas involved. Non-compete agreements
are amortized on a straight-line basis over the term of each agreement.
Accumulated amortization of non-compete agreements was $915 and $1,268 at
December 31, 1993 and 1994, respectively.
The carrying value of intangible assets is evaluated for indications of
possible impairment. The review is based on comparing the carrying amount to the
undiscounted estimated cash flows from operations over the remaining
amortization period.
Consulting Agreement
On June 30, 1992, Lanter entered into a consulting agreement with a third
party pursuant to which the third party agreed to provide advisory and
consulting services to Lanter in connection with its operations for a period of
124 months. The consulting agreement has been allocated to the Districts based
upon the geographic location involved. The consulting agreement is amortized on
a straight-line basis over the 124 month term of the agreement. Accumulated
amortization of the consulting agreement was $7 and $29 at December 31, 1993 and
1994, respectively.
Insurance Claims
The Districts are self-insured with respect to workers' compensation,
general liability and automobile claims and medical benefits. Prior to 1993 and
1994, the Districts were fully insured by an insurance company for workers'
compensation and automobile claims, respectively. The accompanying financial
statements include an insurance accrual for automobile, workers' compensation
and medical claims based upon the third-party administrator's and management's
evaluations of estimated future ultimate costs of outstanding claims and an
estimated liability for claims incurred but not reported on an undiscounted
basis. The ultimate cost of
F-91
<PAGE> 161
THE DISTRICTS OF LANTER COURIER CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
these claims will depend on the outcome of individual claims given the potential
for these claims to increase or decrease over time.
Revenue
Revenue is recognized when the delivery is completed.
Income Taxes
Lanter is a subchapter S corporation. Therefore, the Districts' income is
included in Lanter's stockholders' income for federal income tax purposes. While
the Districts are not subject to federal income tax, they are subject to certain
state and local taxes. See Note 10 for unaudited pro forma income tax
information.
Reclassifications
Certain prior year amounts have been reclassified to conform with the
current presentation.
3. PROPERTY AND EQUIPMENT
<TABLE>
Property and equipment consists of the following:
<CAPTION>
DECEMBER 31,
-----------------
1993 1994
------ ------
<S> <C> <C>
Delivery vehicles.................................................. $ 735 $ 879
Machinery, equipment and furnishings............................... 66 105
Leasehold improvements............................................. 10 15
----- -----
811 999
Less accumulated depreciation and amortization..................... (546) (795)
----- -----
$ 265 $ 204
===== =====
</TABLE>
4. OTHER ASSETS
<TABLE>
Other assets consists of the following:
<CAPTION>
DECEMBER 31,
-----------------
1993 1994
------ ------
<S> <C> <C>
Consulting agreement............................................... $218 $196
Other.............................................................. 30 24
---- ----
$248 $220
==== ====
</TABLE>
F-92
<PAGE> 162
THE DISTRICTS OF LANTER COURIER CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
5. ACCRUED LIABILITIES
<TABLE>
Accrued liabilities consists of the following:
<CAPTION>
DECEMBER 31,
-----------------
1993 1994
------ ------
<S> <C> <C>
Accrued payroll and related benefits............................... $ 329 $ 390
Accrued insurance.................................................. 436 670
Accrued sales and use taxes........................................ 100 --
Other accrued liabilities.......................................... 156 91
------ ------
$1,021 $1,151
====== ======
</TABLE>
6. COMMITMENTS AND CONTINGENCIES
Lease Commitments
<TABLE>
The Districts lease certain office and warehouse space in various locations
throughout Iowa, Nebraska and Wisconsin and certain vehicles for use in
operations. Future minimum lease payments required by noncancellable operating
leases approximate the following:
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------
<S> <C>
1995............................................... $157
1996............................................... 275
1997............................................... 216
1998............................................... 75
1999............................................... 53
----
Total minimum lease payments....................... $776
====
</TABLE>
Lease expense for all operating leases was $1,211, $1,500 and $1,706 for
the years ended December 1993 and 1994 and the period ended December 19, 1995,
respectively.
Receivables of the Districts of $1,204 and $1,134 at December 31, 1993 and
1994 are pledged as collateral on Lanter's term loan with a financial
institution.
Litigation
Lanter is, from time to time, a party to litigation arising in the normal
course of its business. Management believes that none of these actions will have
a material adverse effect on the financial position or results of operations of
Lanter. The Company has received indemnification from Lanter's stockholders for
damages and expenses related to certain liabilities of the Districts.
7. RELATED PARTY TRANSACTIONS
Lanter uses a centralized cash management system to finance its operations.
Cash receipts related to the Districts' operations are received by Lanter and
cash disbursements of the Districts are paid by Lanter. No interest has been
charged on transactions with Lanter.
As part of the merger agreement, Lanter was required to maintain a minimum
equity investment. In order to meet this requirement at December 19, 1995,
Lanter contributed $443, net of distributions, in the form of a note receivable
which is payable to the Districts by Lanter upon demand.
F-93
<PAGE> 163
THE DISTRICTS OF LANTER COURIER CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The net intercompany balance with Lanter resulting from the funding of all
financial transactions will not be settled. As a result, the net intercompany
balance has been included as a Lanter Equity Investment in the combined balance
sheets of the Districts.
Lanter provides certain selling, general and administrative services to the
Districts including cash management, accounting and finance, legal services,
employee benefits administration, and shared sales and distribution support.
These expenses were allocated to the Districts primarily based on estimated time
incurred which management believes to be reasonable. These allocations were
$428, $377 and $630, for the years ended December 31, 1993 and 1994, and the
period ended December 19, 1995, respectively. Such allocations are included in
selling, general and administrative expenses in the combined statements of
operations of the Districts.
Lanter Company, an affiliate of Lanter, provides certain administrative
services to Lanter and therefore allocates and charges a portion of its
corporate service expenses to Lanter. These expenses are allocated to the
Districts primarily based upon estimated time incurred which management believes
to be reasonable. These allocations were $272, $269 and $18 for the years ended
December 31, 1993 and 1994 and the period ended December 19, 1995, respectively.
Such allocations are included in selling, general and administrative expenses in
the combined statements of operations of the Districts.
8. EMPLOYEE RETIREMENT PLANS
The Districts participate in Lanter's voluntary defined contribution 401(k)
Plan (the "Plan") which is available to substantially all employees of the
Districts. Prior to January 1, 1995, the Plan was jointly sponsored by Lanter
Company, an affiliate of Lanter. On January 1, 1995, the assets related to
Lanter employees were transferred to a new plan sponsored solely by Lanter. The
cost of these benefits has historically been allocated to the Districts as
incurred. Lanter matches up to 50% of the employees' contribution and may
contribute a discretionary amount and/or a profit sharing amount to the Plan.
The Districts have been allocated expenses of $15, $26 and $29 for 401(k)
expenses related to employees of the Districts during the years ended December
31, 1993 and 1994 and the period ended December 19, 1995, respectively.
9. SALES TO MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK
During the years ended December 31, 1993 and 1994 and the period ended
December 19, 1995, no one customer represented greater than 10% of total sales
revenue of the Districts. The Districts operate primarily in Iowa, Nebraska and
Wisconsin. Services to financial institutions comprised approximately 40%, 38%
and 36% of total sales for the years ended December 31, 1993 and 1994 and the
period ended December 19, 1995, respectively, with the remainder relating to
parcel service. Although the Districts are affected by the creditworthiness of
its customers, management does not believe significant credit risk exists at
December 19, 1995. The Districts generally do not require collateral. The
Districts maintain reserves for potential credit losses and historically such
losses have been within management's expectations.
10. UNAUDITED PRO FORMA INFORMATION
Income Taxes
The Districts have calculated the December 31, 1993 and 1994 and the
December 19, 1995 pro forma provision for income taxes under Statement of
Financial Accounting Standards No. 109 ("FAS 109") "Accounting for Income
Taxes."
F-94
<PAGE> 164
THE DISTRICTS OF LANTER COURIER CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
The pro forma income tax provision is as follows:
<CAPTION>
YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 19,
------------ ------------
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Current tax provision
Federal.......................................................... $ 528 $511 $375
State............................................................ 168 163 118
----- ---- ----
696 674 493
----- ---- ----
Deferred tax provision (benefit)
Federal.......................................................... (123) (70) (30)
State............................................................ (39) (22) (9)
----- ---- ----
(162) (92) (39)
----- ---- ----
Total provision.......................................... $ 534 $582 $454
===== ==== ====
</TABLE>
<TABLE>
The differences in pro forma income taxes provided and the amounts
determined by applying the federal statutory tax rate to income before income
taxes result from the following:
<CAPTION>
YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 19,
------------- -------------
1993 1994 1995
---- ---- -------------
<S> <C> <C> <C>
Tax at federal statutory rate................................. $448 $487 $372
State income taxes, net of federal income tax benefit......... 85 93 72
Other......................................................... 1 2 10
---- ---- ----
$534 $582 $454
==== ==== ====
</TABLE>
Pro forma deferred income taxes result from temporary differences in the
recognition of certain expenses for financial and income tax reporting purposes.
<TABLE>
Deferred taxes would be provided for the temporary differences between the
financial reporting basis and the tax basis of the Districts' assets and
liabilities. Pro forma deferred tax assets (liabilities) would consist of the
following:
<CAPTION>
DECEMBER 31,
-------------
1993 1994
---- ----
<S> <C> <C>
Self-insurance accrual................................................ $178 $275
Accounts receivable allowance......................................... 18 14
Other................................................................. (33) (21)
---- ----
Total....................................................... $163 $268
==== ====
</TABLE>
11. SUBSEQUENT EVENTS
On December 20, 1995, in exchange for shares of Common Stock and cash, the
Districts merged with a wholly-owned subsidiary of the Company.
F-95
<PAGE> 165
(This page intentionally left blank)
F-96
<PAGE> 166
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Salmon Acquisition Corporation
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, of stockholders' equity (deficit)
and of cash flows present fairly, in all material respects, the financial
position of Salmon Acquisition Corporation and its subsidiary (collectively,
"Sunbelt") at December 31, 1993 and 1994 and the results of their operations and
their cash flows for each of the two years in the period ended December 31,
1994, and for the period ended December 19, 1995, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of Sunbelt's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Memphis, Tennessee
March 12, 1996
F-97
<PAGE> 167
SALMON ACQUISITION CORPORATION
<TABLE>
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<CAPTION>
DECEMBER 31,
-----------------
1993 1994
------ ------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents................................................ $ 276 $ 382
Accounts receivable, less allowance of
$19 and $24........................................................... 1,086 1,308
Income taxes refundable.................................................. 87 --
Deferred tax assets...................................................... 31 65
Prepaids and other assets................................................ 15 52
------ ------
Total current assets............................................. 1,495 1,807
Property and equipment, net................................................ 1,890 3,078
Goodwill, net.............................................................. 2,219 2,060
Intangible assets, net..................................................... 551 410
Restricted certificates of deposit......................................... 1,037 837
Other assets............................................................... 7 15
------ ------
$7,199 $8,207
====== ======
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Accrued interest -- related party........................................ $1,217 $1,569
Accounts payable......................................................... 64 103
Accrued liabilities...................................................... 442 438
Obligations under non-compete agreement.................................. 206 --
Income taxes payable..................................................... -- 177
------ ------
Total current liabilities........................................ 1,929 2,287
Long-term debt -- related party............................................ 5,295 5,785
Deferred tax liabilities................................................... 50 156
------ ------
7,274 8,228
------ ------
Stockholders' deficit
Common stock, no par value; 1,000 shares authorized; 400 shares issued
and outstanding....................................................... 1 1
Retained deficit......................................................... (76) (22)
------ ------
(75) (21)
------ ------
Commitments and contingencies.............................................. -- --
------ ------
$7,199 $8,207
====== ======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-98
<PAGE> 168
SALMON ACQUISITION CORPORATION
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<CAPTION>
YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 19,
------------------ ------------
1993 1994 1995
------- ------- ------------
<S> <C> <C> <C>
Net revenues................................................. $11,882 $14,187 $16,629
Cost of delivery............................................. 9,266 11,203 13,087
------- ------- -------
Gross profit.......................................... 2,616 2,984 3,542
Selling, general and administrative expenses................. 2,135 2,096 2,320
Amortization of intangible assets............................ 300 300 297
------- ------- -------
Operating income...................................... 181 588 925
Other income (expense)
Interest expense -- related party.......................... (403) (373) (428)
Interest income and other, net............................. 31 33 35
------- ------- -------
Income (loss) before income taxes............................ (191) 248 532
Provision (benefit) for income taxes......................... (15) 194 260
------- ------- -------
Net (loss) income..................................... $ (176) $ 54 $ 272
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-99
<PAGE> 169
SALMON ACQUISITION CORPORATION
<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<CAPTION>
COMMON STOCK RETAINED
----------------- (DEFICIT)
SHARES AMOUNT EARNINGS TOTAL
------ ------ --------- -----
<S> <C> <C> <C> <C>
Balance at December 31, 1992............................ 400 $1 $ 100 $ 101
Net loss................................................ -- -- (176) (176)
--- -- ----- -----
Balance at December 31, 1993............................ 400 1 (76) (75)
Net income.............................................. -- -- 54 54
--- -- ----- -----
Balance at December 31, 1994............................ 400 1 (22) (21)
Distributions to stockholders........................... -- -- (59) (59)
Net income.............................................. -- -- 272 272
--- -- ----- -----
Balance at December 19, 1995............................ 400 $1 $ 191 $ 192
=== == ===== =====
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-100
<PAGE> 170
SALMON ACQUISITION CORPORATION
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<CAPTION>
YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 19,
----------------- ------------
1993 1994 1995
------- ------- ------------
<S> <C> <C> <C>
Cash flows from operating activities
Net (loss) income............................................ $ (176) $ 54 $ 272
Adjustments to reconcile net (loss) income to net cash
provided by operating activities
Depreciation and amortization............................. 553 754 1,009
Provision for bad debts................................... 25 25 11
Amortization of goodwill and other intangible assets...... 300 300 297
Loss on sale of assets.................................... 20 12 5
Deferred income taxes..................................... 10 72 (95)
Change in operating assets and liabilities
Accounts receivable..................................... (183) (247) (236)
Other assets............................................ 34 (45) 32
Income taxes refundable................................. -- 87 146
Accrued interest -- related party....................... 372 352 (232)
Accounts payable........................................ (33) 39 119
Accrued liabilities..................................... 45 (4) --
Obligations under non-compete agreement................. (225) (206) --
Income taxes payable.................................... (27) 177 --
------- ------- -------
Net cash provided by operating activities............ 715 1,370 1,328
------- ------- -------
Cash flows from investing activities
Sale of restricted certificates of deposit................... -- 200 837
Capital expenditures, net of disposals....................... (1,092) (1,954) (791)
------- ------- -------
Net cash (used in) provided by investing
activities......................................... (1,092) (1,754) 46
------- ------- -------
Cash flows from financing activities
Payments on long-term debt -- related party.................. (110) (160) (1,249)
Proceeds from long-term debt -- related party................ 428 650 --
------- ------- -------
Net cash provided by (used in) financing
activities......................................... 318 490 (1,249)
------- ------- -------
Net (decrease) increase in cash and cash equivalents........... (59) 106 125
Cash and cash equivalents
Beginning of the period...................................... 335 276 382
------- ------- -------
End of the period............................................ $ 276 $ 382 $ 507
======= ======= =======
Supplemental disclosure of cash flow information
Cash paid during the period for
Interest.................................................. $ 32 $ 20 $ 221
Income taxes.............................................. 1 (140) 199
Supplemental schedule of non-cash investing and financing
activities
Distribution of assets for payment of interest............... $ 1,337
Distribution of assets for payment of dividends.............. 59
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-101
<PAGE> 171
SALMON ACQUISITION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1. BUSINESS AND ORGANIZATION
Salmon Acquisition Corporation, including its subsidiary (collectively,
"Sunbelt") is a contract courier service providing ground courier services for
customers requiring delivery of time-sensitive documents. The Company operates
in the Mid-South.
Sunbelt and its stockholders entered into a definitive merger agreement
with United TransNet, Inc. (the "Company") pursuant to which a wholly-owned
subsidiary of the Company merged with Sunbelt. Under the merger agreement, all
outstanding shares of Sunbelt's capital stock were converted into shares of the
Company's Common Stock concurrently with the consummation of an initial public
offering of such Common Stock. Simultaneously with the entry by Sunbelt into
such merger agreement, five other companies, CDG Holding Corp. and its operating
subsidiary, Courier Dispatch Group, Inc. (collectively "Courier Dispatch");
Tricor America, Inc. ("Tricor"); Film Transit, Incorporated ("Film Transit");
Lanter Courier Corporation ("Lanter"); and 3D Distribution Systems, Inc. and its
affiliated corporations and subsidiaries (collectively, "3D") (collectively with
Sunbelt, the "Founding Companies") entered into substantially similar merger
agreements with the Company, pursuant to which wholly-owned subsidiaries of the
Company merged with such Founding Companies (the "Mergers"). Prior to
consummating the agreement, Sunbelt distributed certain assets to its
stockholders as a dividend.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The more significant accounting policies followed by the Company are
summarized below:
Basis of Presentation
The consolidated financial statements include the accounts of Salmon
Acquisition Corporation and its wholly-owned subsidiary, Sunbelt Courier, Inc.
All significant intercompany accounts and transactions have been eliminated in
consolidation.
Estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period, the most significant of which are related
to insurance accruals. Actual results could differ from those estimates.
Disclosures About Fair Value of Financial Instruments
In preparing disclosures about the fair value of financial instruments,
Sunbelt has assumed that the carrying amount approximates fair value for cash
and cash equivalents, accounts receivable and accounts payable. The fair value
of long-term debt instruments is based upon the current interest rate
environment and remaining term to maturity (see Note 5). Sunbelt feels that the
carrying value of long-term debt approximates the fair value.
Cash and Cash Equivalents
Cash on hand, amounts due from banks and certificates of deposit and
repurchase agreements having original maturities of three months or less are
classified as cash and cash equivalents by Sunbelt.
F-102
<PAGE> 172
SALMON ACQUISITION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Property and Equipment
Property and equipment is recorded at cost. Additions and improvements are
capitalized while maintenance and repair costs are charged to expense as
incurred. Sunbelt computes depreciation using the straight-line method over the
estimated useful lives of the assets. Average depreciable lives are: building
and improvements 31.5 years; fixtures and equipment 7 - 15 years; and vehicles
and accessories 3 - 5 years. The cost and accumulated depreciation of property
retired or otherwise disposed of are removed from the accounts and any gain or
loss is included in income.
Goodwill and Other Intangible Assets
Goodwill in connection with a business acquired in October 1989 aggregated
approximately $2,880 and is being amortized over 20 years. Accumulated
amortization totaled $661 and $820 at December 31, 1993 and 1994, respectively.
The carrying value of intangible assets is evaluated for indications of possible
impairment whenever events or changes in circumstances indicate that the
carrying value of an intangible asset may not be recoverable. Events or changes
in circumstances which may indicate impairment include a significant adverse
change in legal factors, business climate or government regulation and current
cash flow losses combined with a history of cash flow losses or forecasted
continuing cash flow losses associated with an acquired company. The review is
based on comparing the carrying amount to the undiscounted estimated cash flows
before interest charges from operations over the remaining amortization period.
In connection with the acquisition, Sunbelt entered into a non-compete
agreement for a period of eight years with the sellers. Sunbelt paid the
liability resulting from this agreement totaling $1,125 over a five-year period.
The related asset is being amortized over eight years, the life of the
agreement. Accumulated amortization totaled $574 and $715 at December 31, 1993
and 1994, respectively.
Revenue
Revenue is recognized when the delivery is completed.
Income Taxes
Taxes are provided on substantially all income and expense items included
in income, regardless of the period in which such items are recognized for tax
purposes. Taxes on income are determined by using the liability method as
prescribed by Statement of Financial Accounting Standards No. 109 ("FAS 109"),
"Accounting for Income Taxes." This approach requires the recognition of
deferred tax assets and liabilities for the expected future tax consequences of
events that have been recognized in Sunbelt's financial statements or tax
returns. In estimating future tax consequences, FAS 109 requires the
consideration of all expected future events other than enactments of changes in
the tax laws or rates.
Reclassifications
Certain prior year amounts have been reclassified to conform with the
current presentation.
F-103
<PAGE> 173
SALMON ACQUISITION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<CAPTION>
DECEMBER 31,
-------------------
1993 1994
------- -------
<S> <C> <C>
Land............................................................. $ 298 $ 445
Buildings........................................................ 643 643
Delivery vehicles................................................ 1,997 3,548
Equipment and furnishings........................................ 347 384
Construction in progress......................................... -- 26
------- -------
3,285 5,046
Less accumulated depreciation and amortization................... (1,395) (1,968)
------- -------
$ 1,890 $ 3,078
======= =======
</TABLE>
<TABLE>
4. ACCRUED LIABILITIES
Accrued liabilities consists of the following:
<CAPTION>
DECEMBER 31,
-------------
1993 1994
---- ----
<S> <C> <C>
Accrued payroll and related benefits.................................. $145 $194
Accrued vacation...................................................... 150 150
Accrued insurance..................................................... 147 94
---- ----
$442 $438
==== ====
</TABLE>
5. LONG-TERM DEBT -- RELATED PARTY
Sunbelt has an unsecured note payable with a company owned by relatives of
Sunbelt's stockholders. This agreement, as amended, has no specific repayment
terms and provides for a maturity date of October 31, 1999. The balance has been
classified long term based on the agreement from the related party that no
payment will be demanded during the next twelve months; however, the note is
payable immediately upon a change in ownership. The accrued interest-related
party is associated with this outstanding debt, and the related interest expense
associated with these notes totaled $403, $373 and $428 during 1993 and 1994,
and the period ended December 19, 1995, respectively.
F-104
<PAGE> 174
SALMON ACQUISITION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
6. INCOME TAXES
<TABLE>
The provision (benefit) for income taxes is as follows:
<CAPTION>
YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 19,
------------- ------------
1993 1994 1995
---- ---- ------------
<S> <C> <C> <C>
Current tax (benefit) provision
Federal............................................... $(25) $118 $308
State................................................. -- 4 47
---- ---- ----
(25) 122 355
Deferred tax provision (benefit)
Federal............................................... 11 55 (81)
State................................................. (1) 17 (14)
---- ---- ----
10 72 (95)
---- ---- ----
Total (benefit) provision..................... $(15) $194 $260
==== ==== ====
</TABLE>
<TABLE>
Deferred tax assets (liabilities) consist of the following:
<CAPTION>
DECEMBER 31,
--------------
1993 1994
---- -----
<S> <C> <C>
Deferred tax assets
Accounts receivable allowance...................................... $ 3 $ 9
Vacation accrual................................................... 28 56
Accumulated depreciation........................................... 1 --
Net operating loss carryforward.................................... 13 --
---- -----
45 65
---- -----
Deferred tax liabilities
Accumulated depreciation........................................... -- (2)
Non-compete agreement.............................................. (64) (154)
---- -----
(64) (156)
---- -----
$(19) $ (91)
==== =====
</TABLE>
<TABLE>
The differences in income taxes provided and the amounts determined by
applying the federal statutory tax rate to income before income taxes result
from the following:
<CAPTION>
YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 19,
------------- ------------
1993 1994 1995
---- ---- ------------
<S> <C> <C> <C>
Tax at federal statutory rate............................ $(65) $ 84 $181
State income taxes, net of federal income tax benefit.... 1 14 31
Effect of goodwill amortization.......................... 54 54 56
Change in effective rate used for deferred taxes......... -- 33 --
Other.................................................... (5) 9 (8)
---- ---- ----
$(15) $194 $260
==== ==== ====
</TABLE>
F-105
<PAGE> 175
SALMON ACQUISITION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
For the year ended December 31, 1993, Sunbelt was able to utilize the
surtax exemptions, whereby its federal tax expense (benefit) was based upon
income tax rates less than the maximum statutory income tax rates. Likewise, the
deferred tax expense (benefit) was based upon the lower rates at which the
temporary differences were expected to reverse. Beginning with the year ended
December 31, 1994, the rate was increased from the surtax to statutory rate
based on a change in earnings levels and the rate the temporary differences were
expected to reverse.
7. COMMITMENTS AND CONTINGENCIES
Lease Commitments
<TABLE>
Sunbelt leases office and operating facilities and certain equipment under
noncancelable operating leases with terms in excess of one year. Future minimum
lease payments required by operating leases approximate the following:
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------
<S> <C>
1995................................................. $16
1996................................................. 4
---
$20
===
</TABLE>
In addition, Sunbelt leases office and operating facilities, and certain
vehicles and equipment on a month-to-month basis. Lease expense for the years
ended December 31, 1993 and 1994 and the period ended December 19, 1995 was $66,
$62 and $150, respectively.
Litigation
Sunbelt is, from time to time, a party to litigation arising in the normal
course of its business. Management believes that none of these actions will have
a material adverse effect on the financial position or results of operations of
Sunbelt.
8. RELATED PARTY TRANSACTIONS
Sunbelt uses office space and maintenance facilities in buildings in three
locations owned by an entity which is owned by relatives of Sunbelt's
stockholders. Sunbelt stores delivery vehicles on the premises owned by this
related party and conducts daily operations at these facilities and does not pay
for these services. Sunbelt also shares its Baton Rouge facilities with this
entity in reciprocity. Additionally, Sunbelt allows this related party to store
its vehicles at the Baton Rouge site at no charge.
In April 1992, Sunbelt began maintaining its workers' compensation and auto
liability coverage through a captive insurance company owned by relatives of
Sunbelt's stockholders. The accounts between Sunbelt and the insurance carrier
are settled in the ordinary course of business and are governed by state
insurance regulations. Sunbelt has pledged two certificates of deposit of $200
and $637 which mature on August 12, 1995 and July 9, 1995, respectively, and
bear interest at a weighted average rate to the insurance carrier in accordance
with collateral requirements specified in the above policies. Sunbelt is
required to maintain this collateral throughout the term of their relationship
with the insurance carrier. Premiums paid to the insurance carrier were
approximately $698, $827 and $932 during 1993, 1994 and the period ended
December 19, 1995, respectively.
See Note 5 for additional related party disclosures of the long-term debt
and accrued interest.
F-106
<PAGE> 176
SALMON ACQUISITION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
9. CONCENTRATION OF CREDIT RISK
During the years ended December 31, 1993 and 1994, and the period ended
December 19, 1995, no one customer represented greater than 10% of total sales
revenue of Sunbelt. Sunbelt operates primarily in Alabama, Arkansas, Louisiana,
Mississippi and Tennessee. Services to the financial institutions comprise
approximately 77%, 74% and 63% of total sales for the years ended December 31,
1993 and 1994, and the period ended December 19, 1995, respectively. Although
Sunbelt is affected by the creditworthiness of its customers, management does
not believe significant credit risk exists at December 19, 1995. Sunbelt
maintains reserves for potential credit losses, and historically, such losses
have been within management's expectations.
10. SUBSEQUENT EVENT
On December 20, 1995, in exchange for shares of Common Stock and cash,
Sunbelt merged with a wholly-owned subsidiary of the Company.
F-107
<PAGE> 177
(This page intentionally left blank)
F-108
<PAGE> 178
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
3D Distribution Systems, Inc.
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, of stockholders' equity and of
cash flows present fairly, in all material respects, the financial position of
3D Distribution Systems, Inc. and its subsidiaries (collectively, "3D") at
December 31, 1993 and 1994 and the results of their operations and their cash
flows for the year ended October 31, 1993, for the two months ended December 31,
1993, for the year ended December 31, 1994 and for the period ended December 19,
1995, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of 3D's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
Price Waterhouse LLP
Dallas, Texas
March 12, 1996
F-109
<PAGE> 179
3D DISTRIBUTION SYSTEMS, INC.
<TABLE>
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<CAPTION>
DECEMBER 31,
-----------------
1993 1994
------ ------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents................................................ $ 54 $ 3
Accounts receivable...................................................... 1,115 1,317
Other receivables........................................................ 5 10
Deferred tax assets...................................................... 5 12
Prepaids and other assets................................................ 81 42
------ ------
Total current assets............................................. 1,260 1,384
Property and equipment, net................................................ 629 435
Other assets............................................................... 29 34
------ ------
$1,918 $1,853
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt..................................... $ 189 $ 174
Accounts payable......................................................... 286 279
Accrued liabilities...................................................... 260 586
Income taxes payable..................................................... -- 9
Notes payable to former stockholder...................................... 575 575
------ ------
Total current liabilities........................................ 1,310 1,623
Long-term debt, net of current maturities.................................. 296 137
Deferred tax liabilities................................................... 10 8
------ ------
1,616 1,768
------ ------
Stockholders' equity
Common stock, $.01 par value; 100,000,000 shares authorized; 70,312
shares issued and outstanding............................................ 1 1
Paid-in capital.......................................................... 38 38
Retained earnings........................................................ 322 105
Treasury stock at cost, 33,400 shares.................................... (59) (59)
------ ------
302 85
------ ------
Commitments and contingencies -- --
------ ------
$1,918 $1,853
====== ======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-110
<PAGE> 180
3D DISTRIBUTION SYSTEMS, INC.
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<CAPTION>
TWO MONTHS
YEAR ENDED ENDED YEAR ENDED PERIOD ENDED
OCTOBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 19,
1993 1993 1994 1995
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net revenues.......................................... $12,545 $2,202 $14,862 $14,815
Cost of delivery...................................... 8,627 1,460 10,958 10,128
------- ------ ------- -------
Gross profit...................................... 3,918 742 3,904 4,687
Selling, general and administrative expenses.......... 3,869 733 4,014 4,693
------- ------ ------- -------
Operating (loss) income........................... 49 9 (110) (6)
Other income (expense)
Interest expense-related party...................... (37) (5) (45) --
Interest expense.................................... (78) (13) (55) (63)
Interest income and other, net...................... -- 11 -- 1
------- ------ ------- -------
(Loss) income before
income taxes........................................ (66) 2 (210) (68)
Provision (benefit) for
income taxes........................................ (1) 14 7 159
------- ------ ------- -------
Net loss.............................................. $ (65) $ (12) $ (217) $ (227)
======= ====== ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-111
<PAGE> 181
3D DISTRIBUTION SYSTEMS, INC.
<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<CAPTION>
COMMON STOCK
----------------- PAID-IN RETAINED TREASURY
SHARES AMOUNT CAPITAL EARNINGS STOCK TOTAL
------- ------ -------- -------- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance at October 31, 1992............. 67,362 $ 1 $ -- $ 399 $(59) $ 341
Issuance of common stock................ 2,950 -- 38 -- -- 38
Net loss................................ -- -- -- (65) -- (65)
------- --- ---- ----- ---- -----
Balance at October 31, 1993............. 70,312 1 38 334 (59) 314
Net loss for two months ended
December 31, 1993..................... -- -- -- (12) -- (12)
------- --- ---- ----- ---- -----
Balance at December 31, 1993............ 70,312 1 38 322 (59) 302
Net loss................................ -- -- -- (217) -- (217)
------- --- ---- ----- ---- -----
Balance at December 31, 1994............ 70,312 1 38 105 (59) 85
Issuance of common stock................ 2,837 -- 699 -- -- 699
Retirement of treasury stock............ (33,688) (1) (59) -- 59 (1)
Net loss................................ -- -- -- (227) -- (227)
------- --- ---- ----- ---- -----
Balance at December 19,1995............. 39,461 $-- $678 $(122) $ -- $ 556
======= === ==== ===== ==== =====
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-112
<PAGE> 182
3D DISTRIBUTION SYSTEMS, INC.
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<CAPTION>
TWO MONTHS
YEAR ENDED ENDED YEAR ENDED PERIOD ENDED
OCTOBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 19,
1993 1993 1994 1995
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Cash flows from operating activities
Net loss................................. $ (65) $ (12) $(217) $(227)
Adjustments to reconcile net loss to net
cash provided by (used in) operating
activities
Depreciation and amortization......... 292 43 288 237
Provision for bad debts............... 17 -- 2 21
Gain from disposal of assets.......... -- -- -- (57)
Deferred income taxes................. (11) 1 (9) (95)
Noncash employee compensation......... 38 -- -- 699
Change in operating assets and
liabilities
Accounts receivable................. (247) 183 (204) 20
Other receivables................... 4 -- (5) 8
Other assets........................ (9) 15 34 (76)
Accounts payable.................... 270 (290) (7) (191)
Accrued liabilities................. (7) 47 326 (117)
Income taxes payable................ -- -- 9 191
----- ----- ----- -----
Net cash provided by (used in)
operating activities........... 282 (13) 217 413
----- ----- ----- -----
Cash flows from investing activities
Capital expenditures, net of disposals... (12) (10) (76) 14
----- ----- ----- -----
Net cash (used in) provided by
investing activities........... (12) (10) (76) 14
----- ----- ----- -----
Cash flows from financing activities
Net increase in revolving line
of credit............................. 150 100 150 --
Payments of debt......................... (420) (26) (342) (348)
----- ----- ----- -----
Net cash (used in) provided by
financing activities........... (270) 74 (192) (348)
----- ----- ----- -----
Net increase (decrease) in cash and cash
equivalents.............................. -- 51 (51) 79
Cash and cash equivalents
Beginning of the period.................. 3 3 54 3
----- ----- ----- -----
End of the period........................ $ 3 $ 54 $ 3 $ 82
===== ===== ===== =====
Supplemental disclosure of cash flow
information
Cash paid during the period for
Interest.............................. $ 115 $ 19 $ 111 $ 86
Income taxes.......................... 2 40
Disclosure of noncash investing and
financing activities
Acquisition of property and equipment for
notes payable......................... 411 17 121
Stock grants to key employees............ 38 699
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-113
<PAGE> 183
3D DISTRIBUTION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1. BUSINESS AND ORGANIZATION
3D Distribution Systems, Inc. and its subsidiary, MDH Couriers, Inc., and
its affiliates, Texas Package Express, Inc., 3D Consolidation and Distribution
Systems, Inc., 3D Freight, Inc. and 3D Package Express, Inc. (collectively,
"3D") provide air and ground courier services for customers requiring delivery
of time-sensitive documents. 3D operates in the southeast, midwest, and Texas.
3D and its stockholders entered into a definitive merger agreement with
United TransNet, Inc. (the "Company") pursuant to which a wholly-owned
subsidiary of the Company merged with 3D. Under the merger agreement, all
outstanding shares of 3D's capital stock were converted into shares of the
Company Common Stock concurrently with the consummation of an initial public
offering of such Common Stock. Simultaneously with the entry by 3D into such
merger agreement, five other companies, CDG Holding Corp. and its operating
subsidiary, Courier Dispatch Group, Inc. (collectively, "Courier Dispatch");
Tricor America, Inc. ("Tricor"); Film Transit, Incorporated ("Film Transit");
Lanter Courier Corporation ("Lanter"); and Salmon Acquisition Corporation and
its operating subsidiary, Sunbelt Courier, Inc. (collectively, "Sunbelt")
(collectively with 3D, the "Founding Companies") entered into substantially
similar merger agreements with the Company pursuant to which wholly-owned
subsidiaries of the Company merged with such Founding Companies (the "Mergers").
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The more significant accounting policies followed by 3D are summarized
below:
Basis of Presentation
The consolidated financial statements include the accounts of 3D
Distribution Systems, Inc., MDH Couriers, Inc., Texas Package Express, Inc., 3D
Consolidation and Distribution Systems, Inc., 3D Freight, Inc. and 3D Package
Express, Inc. All significant intercompany accounts and transactions have been
eliminated in consolidation. The Company changed its fiscal year end from
October 31 to December 31 effective for the year ended December 31, 1993.
Therefore, the results of operations for the period from November 1, 1993
through December 31, 1993 have been recorded to retained earnings at December
31, 1993.
The following table shows comparative information for the two months ended
December 31, 1992 and 1993:
<TABLE>
<CAPTION>
TWO MONTHS ENDED
DECEMBER 31,
----------------------
1992 1993
----------- ------
(UNAUDITED)
<S> <C> <C>
Net revenues............................................ $1,948 $2,202
Gross profit............................................ 640 742
Provision (benefit) for income taxes.................... (11) 14
Net income (loss)....................................... (24) (12)
</TABLE>
Estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period, the most significant of which are related
to insurance accruals. Actual results could differ from those estimates.
F-114
<PAGE> 184
3D DISTRIBUTION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Disclosures About Fair Value of Financial Instruments
In preparing disclosures about the fair value of financial instruments, 3D
has assumed that the carrying amount approximates fair value for cash and cash
equivalents, accounts receivable, short-term debt and accounts payable. The fair
value of long-term debt instruments is based upon the current interest rate
environment and remaining term to maturity (see Note 5). 3D feels that the
carrying value of long-term debt approximates the fair value.
Property and Equipment
Property and equipment is recorded at cost. Additions and improvements are
capitalized while maintenance and repair costs are charged to expense as
incurred. 3D computes depreciation using the straight-line method over the
estimated useful lives of the assets, which range from three to twenty-five
years. The cost and accumulated depreciation of property retired or otherwise
disposed of are removed from the accounts and any gain or loss is included in
income.
Other Assets
Other assets consist principally of deposits.
Insurance Claims
3D is self-insured with respect to workers' compensation in Texas. The
accompanying financial statements include an insurance accrual based upon
management's evaluations of estimated future ultimate costs of outstanding
claims and an estimated liability for claims incurred but not reported on an
undiscounted basis. The ultimate cost of these claims will depend on the outcome
of individual claims given the potential for these claims to increase or
decrease over time.
Revenue
Revenue is recognized when the delivery is completed.
Income Taxes
Taxes on income are determined by using the liability method as prescribed
by Statement of Financial Accounting Standards No. 109 ("FAS 109"), "Accounting
for Income Taxes." This approach requires the recognition of deferred tax assets
and liabilities for the expected future tax consequences of events that have
been recognized in 3D's financial statements or tax returns. In estimating
future tax consequences, FAS 109 requires the consideration of all expected
future events other than enactments of changes in the tax laws or rates.
Reclassifications
Certain prior year amounts have been reclassified to conform with the
current presentation.
F-115
<PAGE> 185
3D DISTRIBUTION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
3. PROPERTY AND EQUIPMENT
<TABLE>
Property and equipment consists of the following:
<CAPTION>
DECEMBER 31,
-----------------
1993 1994
------ ------
<S> <C> <C>
Delivery vehicles.................................................. $ 868 $ 942
Equipment and furnishings.......................................... 207 164
Computer equipment................................................. 96 151
Leasehold improvements............................................. 147 147
------ ------
1,318 1,404
Less accumulated depreciation and amortization..................... (689) (969)
------ ------
$ 629 $ 435
====== ======
</TABLE>
4. ACCRUED LIABILITIES
<TABLE>
Accrued liabilities consists of the following:
<CAPTION>
DECEMBER 31,
-----------------
1993 1994
------ ------
<S> <C> <C>
Accrued payroll and related benefits............................... $165 $222
Accrued insurance.................................................. -- 233
Other accrued liabilities.......................................... 95 131
---- ----
$260 $586
==== ====
</TABLE>
5. DUE TO FORMER STOCKHOLDER AND LONG-TERM DEBT
<TABLE>
Due to former stockholder consists of the following:
<CAPTION>
DECEMBER 31,
-----------------
1993 1994
------ ------
<S> <C> <C>
Revolving line of credit with a variable rate of interest. See Note
8................................................................ $500 $500
Unsecured notes payable plus interest at prime rate (8.5% at
December 31, 1994) plus 2%. See Note 8........................... 75 75
---- ----
$575 $575
==== ====
</TABLE>
<TABLE>
Long-term debt consists of the following:
<CAPTION>
DECEMBER 31,
-----------------
1993 1994
------ ------
<S> <C> <C>
Notes payable for vehicles. This debt is collateralized by vehicles
and has varying interest rates of 8.5% to 11.5%.................. $ 481 $ 308
Other notes payable................................................ 4 3
----- -----
485 311
Less current portion............................................... (189) (174)
----- -----
$ 296 $ 137
===== =====
</TABLE>
F-116
<PAGE> 186
3D DISTRIBUTION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
Debt maturities are as follows:
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------
<S> <C>
1995............................................. $174
1996............................................. 127
1997............................................. 10
----
$311
====
</TABLE>
The line of credit and unsecured note payable are due from a related party
and are due on demand. Upon consummation of the Mergers, this debt will be
repaid.
6. INCOME TAXES
<TABLE>
The provision (benefit) for income taxes is as follows:
<CAPTION>
YEAR ENDED YEAR ENDED PERIOD ENDED
OCTOBER 31, DECEMBER 31, DECEMBER 19,
1993 1994 1995
----------- ------------ ------------
<S> <C> <C> <C>
Current tax provision (benefit):
Federal.......................................... $ 3 $16 $231
State............................................ -- -- 23
--- --- ---
3 16 254
Deferred tax (benefit) provision:
Federal.......................................... (4) (9) (88)
State............................................ -- -- (7)
--- --- ---
(4) (9) (95)
--- --- ---
Total (benefit) provision.......................... $(1) $ 7 $159
=== === ====
</TABLE>
The differences between taxable income for financial reporting and income
tax purposes are primarily attributable to depreciation expense.
<TABLE>
The deferred tax assets (liabilities) consist of the following:
<CAPTION>
DECEMBER 31,
-------------
1993 1994
---- ----
<S> <C> <C>
Deferred tax assets:
Insurance accrual................................................... $ -- $ 79
Other............................................................... 10 12
---- ----
10 91
---- ----
Deferred tax liabilities:
Accumulated depreciation............................................ (15) (8)
---- ----
Valuation allowance................................................... -- (79)
---- ----
$ (5) $ 4
==== ====
</TABLE>
F-117
<PAGE> 187
3D DISTRIBUTION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
The differences in income taxes provided and the amounts determined by
applying the federal statutory tax rate to income before income taxes result
from the following:
<CAPTION>
YEAR ENDED YEAR ENDED PERIOD ENDED
OCTOBER 31, DECEMBER 31, DECEMBER 19,
1993 1994 1995
----------- ------------ --------------
<S> <C> <C> <C>
Tax at federal statutory rate..................... $(22) $(71) $(23)
State income taxes, net of federal income tax
benefit......................................... -- -- 17
Nondeductible expenses............................ 19 7 244
Effect of graduated rates......................... (3) (11) --
Effect of rate change on deferred tax............. 5 3 --
Effect of valuation allowance..................... -- 79 (79)
---- ---- ----
$ (1) $ 7 $159
==== ==== ====
</TABLE>
7. COMMITMENTS AND CONTINGENCIES
Lease Commitments
<TABLE>
3D leases office and operating facilities and certain equipment under
noncancellable operating leases with terms in excess of one year. Future minimum
lease payments required by operating leases approximate the following:
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------
<S> <C>
1995................................................ $334
1996................................................ 171
1997................................................ 92
1998................................................ 9
----
$606
====
</TABLE>
Several operating lease agreements have provisions for escalation in rents
to approximate the change in the consumer price index. In addition, 3D leases
office and operating facilities and certain vehicles and equipment on a
month-to-month basis. Lease expense for the years ended October 31, 1993, and
December 31, 1994 and for the period ended December 19, 1995 was $686, $710 and
$751, respectively.
3D leases a number of its delivery vehicles under lease agreements bearing
a 12 month initial noncancellable lease term, at the end of which the agreements
are month-to-month. Operating lease expense related to these agreements and
included in total lease expense was $140, $179 and $201 for the years ended
October 31, 1993, December 31, 1994 and for the period ended December 19, 1995,
respectively.
Litigation
3D is, from time to time, a party to litigation arising in the normal
course of its business. Management believes that none of these actions will have
a material adverse effect on the financial position or results of operations of
3D.
8. RELATED PARTY TRANSACTIONS
3D has a revolving line of credit and notes payable with a former
stockholder and officer of 3D which are due upon demand. Both the revolving line
of credit and notes payable are to be paid in full upon consummation of the
Mergers.
3D pays consulting fees of approximately $95 per year to a former
stockholder and officer of 3D. The consulting fees are to be discontinued upon
completion of the Mergers.
F-118
<PAGE> 188
3D DISTRIBUTION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
9. CONCENTRATION OF CREDIT RISK
During the year ended October 31, 1993, one customer accounted for
approximately $1,300, or 10.1% of revenues. During the year ended December 31,
1994, no individual customer accounted for greater than 10% of revenues however,
four customers accounted for approximately 31% of revenues. During the period
ended December 19, 1995, one customer accounted for $1,634 or 10.7% of revenue.
Although 3D is affected by the creditworthiness of its customers,
management does not believe significant concentration of credit risk exists at
December 19, 1995. 3D generally does not require collateral. 3D does not
maintain reserves for potential credit losses as historically such losses have
been insignificant.
10. SUBSEQUENT EVENTS
On December 20, 1995, in exchange for shares of Common Stock and cash, 3D
merged with a wholly-owned subsidiary of the Company.
F-119
<PAGE> 189
(This page intentionally left blank)
F-120
<PAGE> 190
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Eddy Messenger Service, Inc.
We have audited the accompanying balance sheet of Eddy Messenger Service,
Inc. as of December 31, 1995, and the related statements of income, retained
earnings and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Eddy Messenger Service, Inc.
at December 31, 1995, and the results of its operations and its cash flows for
the year then ended, in conformity with generally accepted accounting
principles.
Ernst & Young LLP
White Plains, New York
May 1, 1996
F-121
<PAGE> 191
EDDY MESSENGER SERVICE, INC.
<TABLE>
BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<CAPTION>
DECEMBER 31, MARCH 31,
1995 1996
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................ $ 142 $ 161
Accounts receivable, less allowance for doubtful accounts of $78
and $78....................................................... 968 803
Loans receivable from employees.................................. 12 14
Deferred income taxes............................................ 265 265
Refundable income taxes.......................................... 236 615
Other current assets............................................. 2 --
------ ------
Total current assets............................................... 1,625 1,858
Fixed assets, at cost, net of accumulated depreciation of $451 and
720, respectively................................................ 272 45
Real estate held for sale, at net realizable value................. 100 100
Security deposits.................................................. 271 37
Deferred income taxes.............................................. 46 16
Other assets....................................................... 12 68
------ ------
$2,326 $2,124
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses............................ $ 678 $1,182
Due to stockholders.............................................. 207 124
Working capital borrowings....................................... 100 100
Current portion of long-term debt................................ 28 2
------ ------
Total current liabilities.......................................... 1,013 1,408
Long-term debt, less current portion............................... 101 88
Security deposits.................................................. 21 19
Stockholders' equity:
Common stock, no par value
200 shares authorized and issued; 190 shares outstanding (no
change from prior year)...................................... -- --
Retained earnings................................................ 1,207 625
Less: treasury stock, 10 shares; at cost (no change from prior
year)......................................................... (16) (16)
------ ------
Total stockholders' equity......................................... 1,191 609
------ ------
$2,326 $2,124
====== ======
</TABLE>
See accompanying notes.
F-122
<PAGE> 192
EDDY MESSENGER SERVICE, INC.
STATEMENTS OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED MARCH 31
DECEMBER 31, -----------------
1995 1995 1996
------------ ------ ------
(UNAUDITED)
<S> <C> <C> <C>
Revenue:
Messenger service.......................................... $ 12,181 $3,170 $2,838
Other...................................................... 307 96 104
-------- ------ ------
12,488 3,266 2,942
Costs and expenses:
Messenger service.......................................... 9,628 2,407 2,330
Selling, general and administrative, including interest
expense of $6, $0, and $3, respectively................. 2,716 813 1,551
-------- ------ ------
12,344 3,220 3,881
Income (loss) before income taxes............................ 144 46 (939)
Provision (benefit) for income taxes......................... (62) 17 (357)
-------- ------ ------
Net income (loss)............................................ $ 82 $ 29 $ (582)
======== ====== ======
</TABLE>
See accompanying notes.
F-123
<PAGE> 193
EDDY MESSENGER SERVICE, INC.
<TABLE>
STATEMENTS OF RETAINED EARNINGS
(IN THOUSANDS)
<S> <C>
Retained earnings at January 1, 1995, as initially reported......................... $1,347
Adjustment.......................................................................... (222)
------
Retained earnings at January 1, 1995, as restated................................... 1,125
Net income.......................................................................... 82
------
Retained earnings at December 31, 1995.............................................. 1,207
Net loss (unaudited)................................................................ (582)
------
Retained earnings at March 31, 1996 (unaudited)..................................... $ 625
======
</TABLE>
See accompanying notes.
F-124
<PAGE> 194
EDDY MESSENGER SERVICE, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED MARCH 31
DECEMBER 31, -----------------
1995 1995 1996
------------ ----- -----
(UNAUDITED)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)......................................... $ 82 $ 29 $(582)
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation and amortization........................... 251 177 270
Deferred income taxes................................... 74 (156) 30
Gain on sale of fixed asset............................. (2) -- --
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable........... (180) (228) 165
(Increase) decrease in due from stockholders......... 76 8 (57)
(Increase) decrease in loans receivable from
employees.......................................... 3 (7) (2)
Decrease in other current assets..................... 17 18 2
(Increase) decrease in security deposits
receivable......................................... (1) -- 234
Decrease in other assets............................. -- -- 1
Increase (decrease) in accounts payable and accrued
expenses........................................... 36 (2) 504
Increase (decrease) in due to stockholders........... 46 -- (83)
Increase (decrease) in income taxes.................. (415) 15 (379)
Increase (decrease) in security deposits payable..... 2 -- (2)
----- ----- -----
Net cash provided by (used in) operating activities....... (11) (146) 101
----- ----- -----
INVESTING ACTIVITIES
Purchases of fixed assets................................. (95) (51) (43)
Proceeds from sale of fixed assets........................ 7 -- --
----- ----- -----
Net cash used in investing activities..................... (88) (51) (43)
----- ----- -----
FINANCING ACTIVITIES
Proceeds from working capital borrowings.................. 100 -- --
Payments on long-term debt................................ (55) (14) (39)
Advances on long-term debt................................ -- 179 --
----- ----- -----
Net cash used in financing activities..................... 45 165 (39)
----- ----- -----
Increase (decrease) in cash and cash equivalents.......... (54) (32) 19
Cash and cash equivalents at beginning of period.......... 196 196 142
----- ----- -----
Cash and cash equivalents at end of period................ $ 142 $ 164 $ 161
===== ===== =====
</TABLE>
See accompanying notes.
F-125
<PAGE> 195
EDDY MESSENGER SERVICE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
The Company is in the business of providing package delivery services to
large and medium size companies in the New York Tri-State area, on either a
scheduled or emergency basis. Revenue is recognized as services are performed.
Credit is extended based on an evaluation of the customer's financial condition;
collateral is not required.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Depreciation and Amortization
Depreciation is computed principally on the straight-line method based on
estimated useful lives of the assets. Leasehold improvements are amortized over
the lesser of 10 years or the life of the lease.
Cash Equivalents
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
2. FIXED ASSETS
<TABLE>
Fixed assets consist of the following:
<S> <C>
Leasehold improvements........................................... $ 244,512
Machinery and equipment.......................................... 178,456
Automobiles and trucks........................................... 237,339
Furniture and fixtures........................................... 62,876
---------
723,183
Less: accumulated depreciation................................... (450,945)
---------
$ 272,238
=========
</TABLE>
Substantially all leasehold improvements have been incurred in connection
with properties leased from related parties which, through 1994, were being
amortized over periods of 10 to 40 years. In 1995, the Company adjusted the life
used to amortize such assets to the lesser of 10 years or the life of the lease.
This resulted in a net adjustment to the January 1, 1995 retained earnings of
$222,570.
F-126
<PAGE> 196
EDDY MESSENGER SERVICE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
3. LONG-TERM DEBT AND NOTES PAYABLE
<TABLE>
Long-term debt consists of the following:
<S> <C>
Secured note payable to a finance company, with interest at 8.2%, due in
monthly installments of principal and interest of $1,572 through October
1997.................................................................... $ 30,643
Secured mortgage note payable to a bank, with an adjustable rate of
interest (8.5% at December 31, 1995), due in monthly installments of
principal and interest ($719 at December 31, 1995) through October
2019.................................................................... 88,156
Secured note payable to bank, with interest at 10%, due in monthly
installments of principal and interest of $616 through October 1996..... 5,888
Unsecured note payable to a finance company, with interest at 2%, due in
monthly installments of principal and interest of $1,948 through
February 1996........................................................... 3,892
--------
128,579
Less: current portion..................................................... 27,947
--------
$100,632
========
</TABLE>
Substantially all of the assets of the Company are pledged as collateral
under certain of the above notes.
<TABLE>
Maturities of long-term debt for years subsequent to December 31, 1995 are
as follows:
<S> <C>
1996...................................................... $ 27,947
1997...................................................... 14,966
1998...................................................... 1,413
1999...................................................... 1,537
2000...................................................... 1,674
Thereafter................................................ 81,042
--------
$128,579
========
</TABLE>
During 1995, interest payments amounted to $6,217.
At December 31, 1995, the Company has $100,000 outstanding under a $350,000
line of credit to fund working capital needs. The borrowings are to be repaid
within one year and accrue interest at prime. The remaining $250,000 under this
line of credit accrues interest at prime plus 1 1/2%. There is no expiration
date on this line of credit. At December 31, 1995 the prime rate was 8 1/2%.
The carrying value of the Company's borrowings under its working capital
loans, long-term debt and notes payable approximate their fair value.
4. LEASES
The Company leases its offices, warehouse, certain trucks and other
equipment under various operating leases. Security deposits of $231,100 have
been paid to current stockholders.
The Company leases office space and certain warehouses from its current
stockholders and third parties on a month-to-month basis. Portions of the
warehouse space are subleased to third parties through
F-127
<PAGE> 197
EDDY MESSENGER SERVICE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
4. LEASES (CONTINUED)
<TABLE>
noncancelable subleases expiring on various dates through the year 2000 and
other various month-to-month subleases. The aggregate income on the three
noncancelable subleases is as follows:
<S> <C>
1996.............................................................. $129,000
1997.............................................................. 112,500
1998.............................................................. 112,500
1999.............................................................. 112,500
2000.............................................................. 84,000
</TABLE>
The Company intends to continue to lease the property from its current
stockholders for at least the period covered by the subleases. Included in costs
and expenses is approximately $477,000 of rent expense paid to current
stockholders. During 1995, income from all the subleases noted above amounted to
approximately $150,000 and has been recorded as other revenue.
<TABLE>
The Company has commitments under an operating lease for office and
warehouse space. The lease expires in 1998. The Company has two month-to-month
subleases which generate income of $5,000 per month. Total aggregate minimum
lease commitments are as follows:
<S> <C>
1996.............................................................. $42,000
1997.............................................................. 42,000
1998.............................................................. 7,000
-------
$91,000
=======
</TABLE>
5. INCOME TAXES
Deferred taxes are provided when items of income or expense are recognized
in different periods for tax purposes. Cumulative temporary differences of
approximately $737,000 relate to the allowance for bad debts, amortization of
leasehold improvements and various accrued liabilities which are being deducted
for book purposes on a current basis, but will not be deducted for tax purposes
until a later date.
<TABLE>
The provision (benefit) for income taxes consists of the following:
<CAPTION>
CURRENT DEFERRED TOTAL
-------- ------- -------
<S> <C> <C> <C>
Federal...................................... $(21,500) $65,700 $44,200
State........................................ 10,000 8,200 18,200
-------- ------- -------
$(11,500) $73,900 $62,400
======== ======= =======
</TABLE>
In addition to federal income taxes, the Company pays state taxes in New
York State, New York City, New Jersey and Connecticut. The difference between
income taxes expense resulting from applying domestic federal statutory rates to
pretax income and the reported amount of income tax expense is attributable to
state taxes.
During 1995, the Company made income tax payments of approximately
$403,700.
F-128
<PAGE> 198
EDDY MESSENGER SERVICE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
6. SUBSEQUENT EVENTS
Sales of Business
On April 5, 1996, the Company entered into a letter of intent with United
TransNet, Inc. ("UTN") relating to the sale of 100% of the common stock or
substantially all of the assets relating to the provision of courier services of
the Company (the "Sale"). The letter of intent stipulates that the Company may
write-off leasehold improvements and automobiles with a net carrying amount of
approximately $240,000 at December 31, 1995. In addition, the Company will
write-off $231,100 of security deposits due from current shareholders (see Note
4). The letter of intent shall terminate on May 24, 1996 if the Sale is not
consummated by that date.
Debt Guaranty
During February 1996, the Company agreed to act as guarantor in connection
with a $2.2 million mortgage loan of an affiliate. In addition, the Company
entered into an agreement with the affiliate to lease the related property in
the event of the affiliate's default on the mortgage.
F-129
<PAGE> 199
===============================================================================
2,000,000 SHARES
[LOGO]
COMMON STOCK
------------
PROSPECTUS
, 1996
------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.
===============================================================================
<PAGE> 200
PART I-B
UNITED TRANSNET, INC.
The Prospectus contained in this Part I-B may be used from time to time by
stockholders who seek to sell shares of Common Stock in transactions in which
they or the broker-dealers through whom such shares are sold may be deemed to be
underwriters under the Securities Act of 1933, as amended. The Prospectus will
consist of the same Prospectus contained in Part I, but with the alternate pages
included in this Part I-B.
<PAGE> 201
[ALTERNATE PAGE]
UNITED TRANSNET, INC.
CROSS REFERENCE SHEET
<TABLE>
PURSUANT TO ITEM 501(B) OF REGULATION S-K
<CAPTION>
ITEM
NO. DESCRIPTION IN FORM S-1 CAPTION OR LOCATION IN PROSPECTUS
- ---- ----------------------- ---------------------------------
<C> <S> <C>
1. Forepart of Registration Statement and Outside Front
Cover Page of Prospectus.............................. Outside front cover page
2. Inside Front and Outside Back Cover Pages of
Prospectus............................................ Inside front cover page; Outside
back cover page
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges............................. Prospectus Summary; Risk Factors
4. Use of Proceeds....................................... Not applicable
5. Determination of Offering Price....................... Outside front cover page
6. Dilution.............................................. Not applicable
7. Selling Security Holders.............................. Outside front cover page; Manner
of Offering
8. Plan of Distribution.................................. Outside front cover page; Manner
of Offering
9. Description of the Securities to be Registered........ Outside front cover page;
Description of Capital Stock
10. Interests of Named Experts and Counsel................ Validity of Shares
11. Information with Respect to Registrant................ Prospectus Summary; Risk Factors;
The Company; Dividend Policy;
Capitalization; Selected
Financial Data; Unaudited Pro
Forma Financial Information;
Management's Discussion and
Analysis; Business; Management;
Certain Transactions; Principal
Stockholders; Description of
Capital Stock; Shares Eligible
for Future Sale.
12. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities........................ Not applicable
</TABLE>
<PAGE> 202
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
[ALTERNATE PAGE]
SUBJECT TO COMPLETION, DATED MAY 23, 1996
PROSPECTUS
LOGO
COMMON STOCK
------------------
This Prospectus, as appropriately amended or supplemented, may be used from
time to time principally by persons who have received shares of Common Stock,
par value $.001 per share (the "Common Stock" or the "Shares"), of United
TransNet, Inc. (the "Company") in mergers or acquisitions of other businesses or
properties made by the Company (see "Business -- Acquisition Strategy"), or
their transferees ("Selling Stockholders"), and who wish to offer and sell such
Shares in transactions in which they and any broker-dealer through whom such
shares are sold may be deemed to be underwriters within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"), as more fully
described herein.
The Company currently has 9,686,905 shares of its Common Stock listed on
the New York Stock Exchange under the symbol of "UT", of which 4,668,573 are
registered and available for unrestricted trading in the public markets unless
owned by affiliates of the Company or unless such shares are subject to
restrictions on transfer under applicable federal tax law or by contract.
Applications have been and will be made to list the shares of Common Stock
offered hereby on the New York Stock Exchange in connection with each issuance
hereunder. On May 20, 1996, the closing price per share of the Common Stock, as
reported in a summary of composite transactions in The Wall Street Journal for
stocks listed on the New York Stock Exchange, was $27.75.
Any commissions paid or concessions allowed to any broker-dealer, and, if
any broker-dealer purchases such Shares as principal, any profits received on
the resale of such Shares, may be deemed to be underwriting discounts and
commissions under the Securities Act. Printing, certain legal, filing and other
similar expenses of this offering will be paid by the Company. Selling
Stockholders will bear all other expenses of this offering, including brokerage
fees, and any underwriting discounts or commissions. All references herein to
the Company refer to the Company and its subsidiaries.
------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------
The date of this Prospectus is , 1996.
<PAGE> 203
[ALTERNATE PAGE]
<TABLE>
TABLE OF CONTENTS
<CAPTION>
SECTION PAGE
------- ----
<S> <C>
Additional Information................ 2
Manner of Offering.................... 3
Prospectus Summary.................... 4
Risk Factors.......................... 10
The Company........................... 14
Price Range of Common Stock........... 15
Dividend Policy....................... 15
Capitalization........................ 16
Selected Combined Founding Companies
Financial Data...................... 17
Unaudited Pro Forma Financial
Information......................... 23
<CAPTION>
SECTION PAGE
------- ----
<S> <C>
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 30
Business.............................. 37
Management............................ 48
Certain Transactions.................. 58
Principal Stockholders................ 62
Description of Capital Stock.......... 63
Shares Eligible for Future Sale....... 67
Validity of Shares.................... 68
Experts............................... 68
Index to Financial Statements......... F-1
</TABLE>
------------------------
ADDITIONAL INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information may be inspected and copied at the public
reference facilities maintained by the Commission at Judiciary Plaza Building,
450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and its regional
offices located at 7 World Trade Center, 13th Floor, New York, New York 10048;
and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such materials may be obtained from the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates.
The Company has filed with the Commission in Washington, D.C. a
Registration Statement under the Securities Act with respect to the Common Stock
offered hereby. This Prospectus does not contain all the information set forth
in the Registration Statement and the exhibits and schedules thereto. For
further information with respect to the Company and such Common Stock, reference
is made to such Registration Statement and exhibits and schedules. A copy of the
Registration Statement on file with the Commission may be obtained from the
Commission's principal office in Washington, D.C., upon payment of the fees
prescribed by the Commission. Statements contained in this Prospectus as to the
contents of any contract or any other document to which reference is made are
not necessarily complete. Where such contract or other document is an exhibit to
the Registration Statement, each such statement is qualified in all respects by
the provisions of such exhibits.
The Common Stock is listed on the New York Stock Exchange. Reports, proxy
statements and other information concerning the Company may also be inspected at
the offices of the New York Stock Exchange, 20 Broad Street, New York, New York
10005.
2
<PAGE> 204
[ALTERNATE PAGE]
MANNER OF OFFERING
This Prospectus, as appropriately amended or supplemented, may be used from
time to time principally by persons who have received shares of Common Stock in
acquisitions made by the Company of other businesses or properties, or their
transferees, and who wish to offer and sell such Shares in transactions in which
they and any broker-dealer through whom such Shares are sold may be deemed to be
underwriters within the meaning of the Securities Act. The Company will receive
none of the proceeds from any such sales. There presently are no arrangements or
understandings, formal or informal, pertaining to the distribution of the Shares
described herein. Upon the Company being notified by a Selling Stockholder that
any material arrangement has been entered into with a broker-dealer for the sale
of Shares bought through a block trade, special offering, exchange distribution
or secondary distribution, a supplemented Prospectus will be filed, pursuant to
Rule 424(b) under the Securities Act, setting forth (i) the name of each Selling
Stockholder and the participating broker-dealer(s), (ii) the number of Shares
involved, (iii) the price at which the Shares were sold, (iv) the commission
paid or the discounts allowed to such broker-dealer(s), where applicable, (v)
that such broker-dealer(s) did not conduct any investigation to verify the
information set out in this Prospectus and (vi) other facts material to the
transaction.
Selling Stockholders may sell the Shares being offered hereby from time to
time in transactions (which may involve crosses and block transactions) on the
New York Stock Exchange in negotiated transactions or otherwise, at market
prices prevailing at the time of the sale or at negotiated prices. Selling
Stockholders may sell some or all of the Shares in transactions involving
broker-dealers, who may act solely as agent and/or may acquire Shares as
principal. Broker-dealers participating in such transactions as agent may
receive commissions from Selling Stockholders (and, if they act as agent for the
purchaser of such Shares, from such purchaser), such commissions computed in
appropriate cases in accordance with the applicable rules of the New York Stock
Exchange, which commissions may be at negotiated rates where permissible under
such rules. Participating broker-dealers may agree with Selling Stockholders to
sell a specified number of Shares at a stipulated price per share and, to the
extent such broker-dealer is unable to do so acting as an agent for the Selling
Stockholders, to purchase as principal any unsold Shares at the price required
to fulfill the broker-dealer's commitment to Selling Stockholders. In addition
or alternatively, Shares may be sold by Selling Stockholders and/or by or
through other broker-dealers in special offerings, exchange distributions or
secondary distributions pursuant to and in compliance with the governing rules
of the New York Stock Exchange. Broker-dealers who acquire Shares as principal
may thereafter resell such Shares from time to time in transactions (which may
involve crosses and block transactions and which may involve sales to or through
other broker-dealers, including transactions of the nature described in the
preceding two sentences) on the New York Stock Exchange, in negotiated
transactions or otherwise, at market prices prevailing at the time of sale or at
negotiated prices, and in connection with such resales may pay to receive
commissions from the purchase of such Shares.
The Company may agree to indemnify each Selling Stockholder as an
underwriter under the Securities Act against certain liabilities, including
liabilities arising under the Securities Act. Each Selling Stockholder may
indemnify any broker-dealer that participates in transactions involving sales of
the shares against certain liabilities, including liabilities arising under the
Securities Act.
3
<PAGE> 205
[ALTERNATE PAGE]
===============================================================================
[LOGO]
COMMON STOCK
------------
PROSPECTUS
, 1996
------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.
================================================================================
<PAGE> 206
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
The following are the estimated expenses in connection with the
distribution of the securities being registered hereunder, other than
underwriting discounts and commissions:
<S> <C>
Securities and Exchange Commission fee.................................. $ 10,172.41
New York Stock Exchange annual fee...................................... 16,170.00
Blue Sky fees and expenses*............................................. 1,000.00
Printing and engraving expenses*........................................ 100,000.00
Accounting fees and expenses*........................................... 10,000.00
Legal fees and expenses*................................................ 45,000.00
Transfer agent and registrar's fees*.................................... 10,000.00
Miscellaneous expenses*................................................. 22,657.59
-----------
Total......................................................... $215,000.00
===========
<FN>
- ---------------
* Estimated.
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law (the "DGCL") provides,
in effect, that any person made a party to any action by reason of the fact that
he is or was a director, officer, employee or agent of United TransNet, Inc.
(the "Company") may and, in certain cases, must be indemnified by the Company
against, in the case of a non-derivative action, judgments, fines, amounts paid
in settlement and reasonable expenses (including attorney's fees) incurred by
him as a result of such action, and in the case of a derivative action, against
expenses (including attorney's fees), if in either type of action he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Company and, in a non-derivative action, which involves a
criminal proceeding, in which such person had no reasonable cause to believe his
conduct was unlawful. This indemnification does not apply, in a derivative
action, to matters as to which it is adjudged that the director, officer,
employee or agent is liable to the Company, unless upon court order it is
determined that, despite such adjudication of liability, but in view of all the
circumstances of the case, he is fairly and reasonably entitled to indemnity for
expenses.
Article Eighth of the Company's Amended and Restated Certificate of
Incorporation in effect provides that the Company shall indemnify each person
who is or was an officer, director, employee or agent of the Company to the
fullest extent permitted by applicable law as it presently exists or may
hereafter be amended.
Article Ninth of the Company's Amended and Restated Certificate of
Incorporation states that no director of the Company shall be personally liable
to the Company or its stockholders for monetary damages for breach of fiduciary
duty as a director, except to the extent that exculpation of liability is not
permitted under the DGCL when such breach occurred.
The Company has entered into an indemnification agreement with each
director, effective as of the date of his or her appointment, pursuant to which
it has agreed to indemnify such director for monetary damages to the fullest
extent permitted under the DGCL. Reference is made to the Indemnification
Agreements filed as Exhibits 10.17 through 10.28 hereto. Additionally, the
Company maintains directors' and officers' liability insurance.
Reference is made to Section 7(c) of the Underwriting Agreement filed as
Exhibit 10.29 hereto, pursuant to which the underwriters named therein have
agreed to indemnify officers and directors of the Company against certain
liabilities in connection with the offering of securities described therein.
II-1
<PAGE> 207
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
In connection with the organization of the Company, 100 shares of Common
Stock were issued to each of Mr. Philip A. Belyew and Mr. Ronald J. Barowski for
a purchase price of $100 in transactions which were exempt from the registration
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
pursuant to Section 4(2) thereof. Each of Mr. Belyew and Mr. Barowski
represented that he was acquiring such shares for investment purposes and not
with a view to distribution within the meaning of the Securities Act. The stock
certificates representing such shares bore restrictive legends. Such shares were
redeemed and canceled in connection with the closing of the Mergers.
An aggregate of 4,692,222 shares of the Company's Common Stock were issued
in the Mergers to the stockholders and holders of convertible securities of CDG
Holding Corp., Tricor America, Inc., Film Transit, Incorporated, Lanter Courier
Corporation, Salmon Acquisition Corporation and 3D Distribution Systems, Inc. in
transactions which were exempt from the registration requirements of the
Securities Act pursuant to Section 4(2) thereof. Each holder represented that
he, she or it was acquiring its shares for investment purposes, and not with a
view to distribution within the meaning of the Securities Act. The stock
certificates issued to all of such holders bear restrictive legends.
In March 1996, Ms. Jennifer Upton, a former employee of the Company,
exercised options to purchase 3,399 shares of Common Stock in connection with
the termination of her employment. Such options had been issued to Ms. Upton in
connection with the closing of the Mergers upon conversion of Courier Dispatch
options into Company options. Upon the exercise of her options, the Company
issued an aggregate of 3,399 shares to Ms. Upton in a transaction exempt from
the registration requirements of the Securities Act pursuant to Section 4(2)
thereof. Ms. Upton represented that she was acquiring the shares for investment
purposes and not with a view to distribution within the meaning of the
Securities Act. The stock certificate issued to Ms. Upton bears a restrictive
legend.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
(a) EXHIBITS
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- -----------
<C> <S>
2.1 Agreement and Plan of Reorganization, dated as of October 13, 1995, among the
Company, CDG Acquisition Corp., CDG Holding Corp., Courier Dispatch Group, Inc.,
BancBoston Ventures Inc., Fleet Venture Resources, Inc., Fleet Venture Partners
III, Philip A. Belyew, Ronald J. Barowski, George G. Wagner and R. David England
(Exhibit 2.1 of the Registrant's Registration Statement on Form S-1 (File No.
33-98152), effective December 14, 1995, is hereby incorporated by reference)
2.11 Amendment No. 1 to Agreement and Plan of Reorganization, dated as of November 15,
1995, among the Company, CDG Acquisition Corp., CDG Holding Corp., Courier
Dispatch Group, Inc., BancBoston Ventures Inc., Fleet Venture Resources, Inc.,
Fleet Venture Partners III, Philip A. Belyew, Ronald J. Barowski, George G.
Wagner and R. David England (Exhibit 2.11 of the Registrant's Registration
Statement on Form S-1 (File No. 33-98152), effective December 14, 1995, is hereby
incorporated by reference)
2.12 Amendment No. 2 to Agreement and Plan of Reorganization, dated as of November 30,
1995, among the Company, CDG Acquisition Corp., CDG Holding Corp., Courier
Dispatch Group, Inc., BancBoston Ventures Inc., Fleet Venture Resources, Inc.,
Fleet Venture Partners III, Philip A. Belyew, Ronald J. Barowski, George G.
Wagner and R. David England (Exhibit 2.12 of the Registrant's Registration
Statement on Form S-1 (File No. 333-396), filed on January 18, 1996, is hereby
incorporated by reference)
</TABLE>
II-2
<PAGE> 208
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- -----------
<C> <S>
2.2 Agreement and Plan of Reorganization, dated as of October 13, 1995, among the
Company, Tricor Acquisition Corp., Tricor America, Inc., Chee B. Louie and
Christina K. Louie (Exhibit 2.2 of the Registrant's Registration Statement on
Form S-1 (File No. 33-98152), effective December 14, 1995, is hereby incorporated
by reference)
2.21 Amendment No. 1 to Agreement and Plan of Reorganization, dated as of November 30,
1995, among the Company, Tricor Acquisition Corp., Tricor America, Inc., Chee B.
Louie and Christina K. Louie (Exhibit 2.21 of the Registrant's Registration
Statement on Form S-1 (File No. 33-98152), effective December 14, 1995, is hereby
incorporated by reference)
2.3 Agreement and Plan of Reorganization, dated as of October 13, 1995, among the
Company, Film Transit Acquisition Corp., Film Transit, Incorporated, Guilbert L.
Brandon, Jr., Guilbert L. Brandon, Sr., Monnie Brandon, M. Stephen Brandon and R.
Wayne Mashburn (Exhibit 2.3 of the Registrant's Registration Statement on Form
S-1 (File No. 33-98152), effective December 14, 1995, is hereby incorporated by
reference)
2.31 Amendment No. 1 to Agreement and Plan of Reorganization, dated as of November 30,
1995, among the Company, Film Transit Acquisition Corp., Film Transit,
Incorporated, Guilbert L. Brandon, Jr., Guilbert L. Brandon, Sr., Monnie Brandon,
M. Stephen Brandon and R. Wayne Mashburn (Exhibit 2.31 of the Registrant's
Registration Statement on Form S-1 (File No. 33-98152), effective December 14,
1995, is hereby incorporated by reference)
2.4 Agreement and Plan of Reorganization, dated as of October 13, 1995, among the
Company, Lanter Courier Acquisition Corp., Lanter Courier Corporation, Steven W.
Lanter and Christopher D. Lanter (Exhibit 2.4 of the Registrant's Registration
Statement on Form S-1 (File No. 33-98152), effective December 14, 1995, is hereby
incorporated by reference)
2.41 Amendment No. 1 to Agreement and Plan of Reorganization, dated as of November 30,
1995, among the Company, Lanter Courier Acquisition Corp., Lanter Courier
Corporation, Steven W. Lanter and Christopher D. Lanter (Exhibit 2.41 of the
Registrant's Registration Statement on Form S-1 (File No. 33-98152), effective
December 14, 1995, is hereby incorporated by reference)
2.5 Agreement and Plan of Reorganization, dated as of October 13, 1995, among the
Company, Sunbelt Courier Acquisition Corp., Salmon Acquisition Corporation,
Sunbelt Courier, Inc., James G. Salmon, Karen K. Salmon, Martha Salmon Davis and
Dona Anne S. Boone (Exhibit 2.5 of the Registrant's Registration Statement on
Form S-1 (File No. 33-98152), effective December 14, 1995, is hereby incorporated
by reference)
2.51 Amended and Restated Agreement and Plan of Reorganization, dated as of October
13, 1995, among the Company, Sunbelt Courier Acquisition Corp., Salmon
Acquisition Corporation, Sunbelt Courier, Inc., James G. Salmon, Karen K. Salmon,
Martha Salmon Davis and Dona Anne S. Boone (Exhibit 2.51 of the Registrant's
Registration Statement on Form S-1 (File No. 33-98152), effective December 14,
1995, is hereby incorporated by reference)
2.52 Amendment No. 1 to Amended and Restated Agreement and Plan of Reorganization,
dated as of November 30, 1995, among the Company, Sunbelt Courier Acquisition
Corp., Salmon Acquisition Corporation, Sunbelt Courier, Inc., James G. Salmon,
Karen K. Salmon, Martha Salmon Davis and Dona Anne S. Boone (Exhibit 2.52 of the
Registrant's Registration Statement on Form S-1 (File No. 33-98152), effective
December 14, 1995, is hereby incorporated by reference)
2.6 Agreement and Plan of Reorganization, dated as of October 13, 1995, among
Company, 3D Distribution Systems Acquisition Corp., 3D Distribution Systems, Inc.
and Carolyn Draper (Exhibit 2.6 of the Registrant's Registration Statement on
Form S-1 (File No. 33-98152), effective December 14, 1995, is hereby incorporated
by reference)
</TABLE>
II-3
<PAGE> 209
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- -----------
<C> <S>
2.61 Amendment No. 1 to Agreement and Plan of Reorganization, dated as of November 15,
1995, among the Company, 3D Distribution Systems Acquisition Corp., 3D
Distribution Systems, Inc. and Carolyn Draper (Exhibit 2.61 of the Registrant's
Registration Statement on Form S-1 (File No. 33-98152), effective December 14,
1995, is hereby incorporated by reference)
2.62 Amendment No. 2 to Agreement and Plan of Reorganization, dated as of November 30,
1995, among the Company, 3D Distribution Systems Acquisition Corp., 3D
Distribution Systems, Inc. and Carolyn Draper (Exhibit 2.62 of the Registrant's
Registration Statement on Form S-1 (File No. 33-98152), effective December 14,
1995, is hereby incorporated by reference)
2.7 AGREEMENT AND PLAN OF REORGANIZATION, DATED AS OF MAY 14, 1996, BY AND AMONG THE
COMPANY, COOLIDGE ACQUISITION CORPORATION, EDDY MESSENGER SERVICE, INC. AND
ROBERT H. LOGAN, SR., ROBERT LOGAN, JR., MICHAEL J. LOGAN AND BRIAN MCARDLE
(FILED HEREWITH)
3.1 Certificate of Incorporation of the Company (Exhibit 3.1 of the Registrant's
Registration Statement on Form S-1 (File No. 33-98152), effective December 14,
1995, is hereby incorporated by reference)
3.11 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF THE COMPANY (FILED HEREWITH)
3.12 CERTIFICATE OF AMENDMENT TO AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF
THE COMPANY (FILED HEREWITH)
3.2 By-laws of the Company (Exhibit 3.2 of the Registrant's Registration Statement on
Form S-1 (File No. 33-98152), effective December 14, 1995, is hereby incorporated
by reference)
4 Specimen Temporary Stock Certificate (Exhibit 4 of the Registrant's Registration
Statement on Form S-1 (File No. 333-396), filed on January 18, 1996, is hereby
incorporated by reference)
5 Opinion of Sullivan & Worcester, a Registered Limited Liability Partnership
(Exhibit 5 of the Registrant's Registration Statement on Form S-1 (File No.
333-396), filed on January 18, 1996, is hereby incorporated by reference)
10.1 The Company's 1995 Stock Incentive Plan (Exhibit 10.1 of the Registrant's
Registration Statement on Form S-1 (File No. 333-396), filed on January 18, 1996,
is hereby incorporated by reference)
10.1(a) Amendment to the Company's 1995 Stock Incentive Plan (Exhibit 10.1(a) of the
Registrant's Annual Report on Form 10-K, filed on March 27, 1996, is hereby
incorporated by reference)
10.12 THE COMPANY'S 1996 STOCK AND OPTION PLAN FOR NON-EMPLOYEE DIRECTORS (FILED
HEREWITH)
10.2 Employment Agreement, dated as of December 20, 1995, between the Company and
Philip A. Belyew (Exhibit 10.2 of the Registrant's Registration Statement on Form
S-1 (File No. 333-396), filed on January 18, 1996, is hereby incorporated by
reference)
10.3 Employment Agreement, dated as of December 20, 1995, between the Company and
Ronald J. Barowski (Exhibit 10.3 of the Registrant's Registration Statement on
Form S-1 (File No. 333-396), filed on January 18, 1996, is hereby incorporated by
reference)
10.4 Employment Agreement, dated as of December 20, 1995, between the Company and R.
David England, Jr. (Exhibit 10.4 of the Registrant's Registration Statement on
Form S-1 (File No. 333-396), filed on January 18, 1996, is hereby incorporated by
reference)
10.5 Employment Agreement, dated as of December 20, 1995, between the Company and Chee
B. Louie (Exhibit 10.5 of the Registrant's Registration Statement on Form S-1
(File No. 333-396), filed on January 18, 1996, is hereby incorporated by
reference)
10.6 Employment Agreement, dated as of December 20, 1995, between the Company and
George G. Wagner (Exhibit 10.6 of the Registrant's Registration Statement on Form
S-1 (File No. 333-396), filed on January 18, 1996, is hereby incorporated by
reference)
</TABLE>
II-4
<PAGE> 210
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- -----------
<C> <S>
10.7 Employment Agreement, dated as of December 20, 1995, between the Company and
Guilbert L. Brandon, Jr. (Exhibit 10.7 of the Registrant's Registration Statement
on Form S-1 (File No. 333-396), filed on January 18, 1996, is hereby incorporated
by reference)
10.8 Employment Agreement, dated as of December 20, 1995, between the Company and
Carolyn Draper Giles (Exhibit 10.8 of the Registrant's Registration Statement on
Form S-1 (File No. 333-396), filed on January 18, 1996, is hereby incorporated by
reference)
10.9 Employment Agreement, dated as of December 20, 1995, between the Company and
James G. Salmon (Exhibit 10.9 of the Registrant's Registration Statement on Form
S-1 (File No. 333-396), filed on January 18, 1996, is hereby incorporated by
reference)
10.10 Non-Competition Agreement, dated as of December 20, 1995, between the Company and
Steven W. Lanter (Exhibit 10.10 of the Registrant's Registration Statement on
Form S-1 (File No. 333-396), filed on January 18, 1996, is hereby incorporated by
reference)
10.11 Agreement, dated as of April 28, 1988, between Courier Dispatch Group, Inc. and
Wheels, Inc. (Exhibit 10.11 of the Registrant's Registration Statement on Form
S-1 (File No. 33-98152), effective December 14, 1995, is hereby incorporated by
reference)
10.12 Stock Purchase and Non-Competition Agreement, dated as of March 15, 1994, among
Edward F. Semlitz as trustee of the Edward F. Semlitz revocable trust created U/A
dated June 8, 1988, Darlene Malmsjo, Edward F. Semlitz, individually, and Courier
Dispatch Group, Inc. (Exhibit 10.12 of the Registrant's Registration Statement on
Form S-1 (File No. 33-98152), effective December 14, 1995, is hereby incorporated
by reference)
10.13 Stock Purchase Agreement, dated as of June 30, 1994, between Courier Dispatch
Group, Inc. and Charles K. Weinmann with respect to the stock of Armstrong
Couriers, Inc. (Exhibit 10.13 of the Registrant's Registration Statement on Form
S-1 (File No. 33-98152), effective December 14, 1995, is hereby incorporated by
reference)
10.14 Stock Purchase Agreement, dated June 30, 1994, between Courier Dispatch Group,
Inc. and Jerry R. Coleman with respect to the stock of Commercial Courier
Express, Inc. (Exhibit 10.14 of the Registrant's Registration Statement on Form
S-1 (File No. 33-98152), effective December 14, 1995, is hereby incorporated by
reference)
10.15 Asset Purchase Agreement, dated as of April 21, 1994, among AirVantage,
Incorporated, Laurence Kelly, Brent Skillman and Courier Dispatch Group, Inc.
(Exhibit 10.15 of the Registrant's Registration Statement on Form S-1 (File No.
33-98152), effective December 14, 1995, is hereby incorporated by reference)
10.16 Stock Purchase Agreement, dated as of April 27, 1995, among AirVantage,
Incorporated, Susan Rinks, James Junger and Courier Dispatch Group, Inc. (Exhibit
10.16 of the Registrant's Registration Statement on Form S-1 (File No. 33-98152),
effective December 14, 1995, is hereby incorporated by reference)
10.17 Indemnification Agreement, dated as of October 5, 1995, between the Company and
Ronald J. Barowski (Exhibit 10.17 of the Registrant's Registration Statement on
Form S-1 (File No. 333-396), filed on January 18, 1996, is hereby incorporated by
reference)
10.18 Indemnification Agreement, dated as of October 5, 1995, between the Company and
Philip A. Belyew (Exhibit 10.18 of the Registrant's Registration Statement on
Form S-1 (File No. 333-396), filed on January 18, 1996, is hereby incorporated by
reference)
10.19 Indemnification Agreement, dated as of December 20, 1995, between the Company and
Harvey E. Bines (Exhibit 10.19 of the Registrant's Registration Statement on Form
S-1 (File No. 333-396), filed on January 18, 1996, is hereby incorporated by
reference)
</TABLE>
II-5
<PAGE> 211
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- -----------
<C> <S>
10.20 Indemnification Agreement, dated as of December 20, 1995, between the Company and
Guilbert L. Brandon, Jr. (Exhibit 10.20 of the Registrant's Registration
Statement on Form S-1 (File No. 333-396), filed on January 18, 1996, is hereby
incorporated by reference)
10.21 Indemnification Agreement, dated as of December 20, 1995, between the Company and
Craig H. Deery (Exhibit 10.21 of the Registrant's Registration Statement on Form
S-1 (File No. 333-396), filed on January 18, 1996, is hereby incorporated by
reference)
10.22 Indemnification Agreement, dated as of December 20, 1995, between the Company and
Carolyn A. Draper (Exhibit 10.22 of the Registrant's Registration Statement on
Form S-1 (File No. 333-396), filed on January 18, 1996, is hereby incorporated by
reference)
10.23 Indemnification Agreement, dated as of December 20, 1995, between the Company and
Habib Y. Gorgi (Exhibit 10.23 of the Registrant's Registration Statement on Form
S-1 (File No. 333-396), filed on January 18, 1996, is hereby incorporated by
reference)
10.24 Indemnification Agreement, dated as of December 20, 1995, between the Company and
Charles A. Krause (Exhibit 10.24 of the Registrant's Registration Statement on
Form S-1 (File No. 333-396), filed on January 18, 1996, is hereby incorporated by
reference)
10.25 Indemnification Agreement, dated as of December 20, 1995, between the Company and
Steven W. Lanter (Exhibit 10.25 of the Registrant's Registration Statement on
Form S-1 (File No. 333-396), filed on January 18, 1996, is hereby incorporated by
reference)
10.26 Indemnification Agreement, dated as of December 20, 1995, between the Company and
Chee B. Louie (Exhibit 10.26 of the Registrant's Registration Statement on Form
S-1 (File No. 333-396), filed on January 18, 1996, is hereby incorporated by
reference)
10.27 Indemnification Agreement, dated as of December 20, 1995, between the Company and
James G. Salmon (Exhibit 10.27 of the Registrant's Registration Statement on Form
S-1 (File No. 333-396), filed on January 18, 1996, is hereby incorporated by
reference)
10.28 Indemnification Agreement, dated as of December 20, 1995, between the Company and
Paul G. Taylor (Exhibit 10.28 of the Registrant's Registration Statement on Form
S-1 (File No. 333-396), filed on January 18, 1996, is hereby incorporated by
reference)
10.29 Underwriting Agreement, dated as of December 14, 1995, among the Company, Smith
Barney Inc. and Morgan Keegan & Company, Inc. (Exhibit 10.29 of the Registrant's
Registration Statement on Form S-1 (File No. 333-396), filed on January 18, 1996,
is hereby incorporated by reference)
10.30 Credit Agreement, dated as of December 20, 1995, among the Company, certain
subsidiaries of the Company named therein, certain lenders named therein and
First Union National Bank of Georgia, as agent (Exhibit 10.30 of the Registrant's
Registration Statement on Form S-1 (File No. 333-396), filed on January 18, 1996,
is hereby incorporated by reference)
10.31 Amended and Restated Credit Agreement, dated as of April 12, 1996, among the
Company, certain of the Company's subsidiaries, the lenders referred to therein
and First Union National Bank of Georgia, as agent (Exhibit 10.31 of the
Registrant's Current Report on Form 8-K, filed on April 15, 1996, is hereby
incorporated by reference)
11.1 Pro forma net income per share (Exhibit 11.1 of the Registrant's Annual Report on
Form 10-K, filed on March 27, 1996, is hereby incorporated by reference)
11.2 Net income per share (Exhibit 11.2 of the Registrant's Annual Report on Form
10-K, filed on March 27, 1996, is hereby incorporated by reference)
11.3 Statement regarding Computation of Per Share Earnings (Exhibit 11 of the
Registrant's Quarterly Report on Form 10-Q, filed on May 10, 1996, is hereby
incorporated by reference)
21 SUBSIDIARIES OF THE COMPANY (FILED HEREWITH)
23.1 CONSENT OF PRICE WATERHOUSE, LLP (FILED HEREWITH)
</TABLE>
II-6
<PAGE> 212
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- ---------------------------------------------------------------------------------
<C> <S>
23.3 Consent of Sullivan & Worcester, a Registered Limited Liability Partnership
(contained in Exhibit 5 of the Registrant's Registration Statement on Form S-1
(File No. 333-396), filed on January 18, 1996, which is hereby incorporated by
reference)
23.4 CONSENT OF ERNST & YOUNG LLP (FILED HEREWITH)
24 Power of Attorney (See signature pages to the Registrant's Registration Statement
on Form S-1 (File No. 333-396), filed on January 18, 1996, which are hereby
incorporated by reference)
27 Financial Data Schedule (Exhibit 27 of the Registrant's Quarterly Report on Form
10-Q, filed on May 10, 1996, is hereby incorporated by reference)
(b) FINANCIAL STATEMENT SCHEDULES
</TABLE>
Schedule I -- Combined Valuation and Qualifying Accounts
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the provisions of its Amended
and Restated Certificate of Incorporation, By-laws, the laws of the State of
Delaware or otherwise, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high and of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof; and
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
II-7
<PAGE> 213
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Roswell,
State of Georgia, on May 23, 1996.
UNITED TRANSNET, INC.
By: /s/ PHILIP A. BELYEW
------------------------------------
Philip A. Belyew
Chairman, President and
Chief Executive Officer
<TABLE>
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ PHILIP A. BELYEW Chairman, President, Chief May 23, 1996
- ------------------------------------------ Executive Officer and Director
Philip A. Belyew
* Executive Vice President, May 23, 1996
- ------------------------------------------ Treasurer and Chief Financial
Ronald J. Barowski Officer
* Executive Vice President, Air and May 23, 1996
- ------------------------------------------ Director
Chee B. Louie
* Vice President, Parcel and May 23, 1996
- ------------------------------------------ Director
Guilbert L. Brandon, Jr.
* Vice President, Secretary and May 23, 1996
- ------------------------------------------ Director
Carolyn Draper
* Vice President, Ground and May 23, 1996
- ------------------------------------------ Director
James G. Salmon
* Director May 23, 1996
- ------------------------------------------
Craig H. Deery
/s/ JOHN B. ELLIS Director May 23, 1996
- ------------------------------------------
John B. Ellis
* Director May 23, 1996
- ------------------------------------------
Habib Y. Gorgi
</TABLE>
II-8
<PAGE> 214
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Director May 23, 1996
- ------------------------------------------
Charles A. Krause
* Director May 23, 1996
- ------------------------------------------
Steven W. Lanter
*By: /s/ PHILIP A. BELYEW
-----------------------------------
Philip A. Belyew
Attorney-in-Fact for
such persons pursuant
to powers of attorney
dated January 18, 1996
</TABLE>
II-9
<PAGE> 215
<TABLE>
SCHEDULE I -- COMBINED VALUATION AND QUALIFYING ACCOUNTS
<CAPTION>
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END OF
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS PERIOD
----------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Year ended December 31, 1993
Allowance for Doubtful Accounts.................. $ 676 $ 270 $(374) $ 572
======= ====== ===== =======
Year ended December 31, 1994
Allowance for Doubtful Accounts.................. $ 572 $ 268 $(164) $ 676
======= ====== ===== =======
Year ended December 31, 1995
Allowance for Doubtful Accounts.................. $ 676 $ 220 $ 242 $ 654
======= ====== ===== =======
Year ended December 31, 1993
Allowance for Deferred Tax Asset................. $(1,825) $ (160) $ -- $(1,985)
======= ====== ===== =======
Year ended December 31, 1994
Allowance for Deferred Tax Asset................. $(1,985) $ 18 $ -- $(1,976)
======= ====== ===== =======
Year ended December 31, 1995
Allowance for Deferred Tax Asset................. $(1,967) $1,967 $ -- $ --
======= ====== ===== =======
</TABLE>
The notes to the combined financial statements are an integral part of this
schedule.
S-1
<PAGE> 216
<TABLE>
INDEX TO EXHIBITS
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- -----------
<C> <S>
2.1 Agreement and Plan of Reorganization, dated as of October 13, 1995,
among the Company, CDG Acquisition Corp., CDG Holding Corp., Courier
Dispatch Group, Inc., BancBoston Ventures Inc., Fleet Venture
Resources, Inc., Fleet Venture Partners III, Philip A. Belyew, Ronald
J. Barowski, George G. Wagner and R. David England (Exhibit 2.1 of
the Registrant's Registration Statement on Form S-1 (File No.
33-98152), effective December 14, 1995, is hereby incorporated by
reference)...........................................................
2.11 Amendment No. 1 to Agreement and Plan of Reorganization, dated as of
November 15, 1995, among the Company, CDG Acquisition Corp., CDG
Holding Corp., Courier Dispatch Group, Inc., BancBoston Ventures
Inc., Fleet Venture Resources, Inc., Fleet Venture Partners III,
Philip A. Belyew, Ronald J. Barowski, George G. Wagner and R. David
England (Exhibit 2.11 of the Registrant's Registration Statement on
Form S-1 (File No. 33-98152), effective December 14, 1995, is hereby
incorporated by reference)...........................................
2.12 Amendment No. 2 to Agreement and Plan of Reorganization, dated as of
November 30, 1995, among the Company, CDG Acquisition Corp., CDG
Holding Corp., Courier Dispatch Group, Inc., BancBoston Ventures
Inc., Fleet Venture Resources, Inc., Fleet Venture Partners III,
Philip A. Belyew, Ronald J. Barowski, George G. Wagner and R. David
England (Exhibit 2.12 of the Registrant's Registration Statement on
Form S-1 (File No. 333-396), filed on January 18, 1996, is hereby
incorporated by reference)...........................................
2.2 Agreement and Plan of Reorganization, dated as of October 13, 1995,
among the Company, Tricor Acquisition Corp., Tricor America, Inc.,
Chee B. Louie and Christina K. Louie (Exhibit 2.2 of the Registrant's
Registration Statement on Form S-1 (File No. 33-98152), effective
December 14, 1995, is hereby incorporated by reference)..............
2.21 Amendment No. 1 to Agreement and Plan of Reorganization, dated as of
November 30, 1995, among the Company, Tricor Acquisition Corp.,
Tricor America, Inc., Chee B. Louie and Christina K. Louie (Exhibit
2.21 of the Registrant's Registration Statement on Form S-1 (File No.
33-98152), effective December 14, 1995, is hereby incorporated by
reference)...........................................................
2.3 Agreement and Plan of Reorganization, dated as of October 13, 1995,
among the Company, Film Transit Acquisition Corp., Film Transit,
Incorporated, Guilbert L. Brandon, Jr., Guilbert L. Brandon, Sr.,
Monnie Brandon, M. Stephen Brandon and R. Wayne Mashburn (Exhibit 2.3
of the Registrant's Registration Statement on Form S-1 (File No.
33-98152), effective December 14, 1995, is hereby incorporated by
reference)...........................................................
2.31 Amendment No. 1 to Agreement and Plan of Reorganization, dated as of
November 30, 1995, among the Company, Film Transit Acquisition Corp.,
Film Transit, Incorporated, Guilbert L. Brandon, Jr., Guilbert L.
Brandon, Sr., Monnie Brandon, M. Stephen Brandon and R. Wayne
Mashburn (Exhibit 2.31 of the Registrant's Registration Statement on
Form S-1 (File No. 33-98152), effective December 14, 1995, is hereby
incorporated by reference)...........................................
</TABLE>
<PAGE> 217
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- -----------
<C> <S>
2.4 Agreement and Plan of Reorganization, dated as of October 13, 1995,
among the Company, Lanter Courier Acquisition Corp., Lanter Courier
Corporation, Steven W. Lanter and Christopher D. Lanter (Exhibit 2.4
of the Registrant's Registration Statement on Form S-1 (File No.
33-98152), effective December 14, 1995, is hereby incorporated by
reference)...........................................................
2.41 Amendment No. 1 to Agreement and Plan of Reorganization, dated as of
November 30, 1995, among the Company, Lanter Courier Acquisition
Corp., Lanter Courier Corporation, Steven W. Lanter and Christopher
D. Lanter (Exhibit 2.41 of the Registrant's Registration Statement on
Form S-1 (File No. 33-98152), effective December 14, 1995, is hereby
incorporated by reference)...........................................
2.5 Agreement and Plan of Reorganization, dated as of October 13, 1995,
among the Company, Sunbelt Courier Acquisition Corp., Salmon
Acquisition Corporation, Sunbelt Courier, Inc., James G. Salmon,
Karen K. Salmon, Martha Salmon Davis and Dona Anne S. Boone (Exhibit
2.5 of the Registrant's Registration Statement on Form S-1 (File No.
33-98152), effective December 14, 1995, is hereby incorporated by
reference)...........................................................
2.51 Amended and Restated Agreement and Plan of Reorganization, dated as
of October 13, 1995, among the Company, Sunbelt Courier Acquisition
Corp., Salmon Acquisition Corporation, Sunbelt Courier, Inc., James
G. Salmon, Karen K. Salmon, Martha Salmon Davis and Dona Anne S.
Boone (Exhibit 2.51 of the Registrant's Registration Statement on
Form S-1 (File No. 33-98152), effective December 14, 1995, is hereby
incorporated by reference)...........................................
2.52 Amendment No. 1 to Amended and Restated Agreement and Plan of
Reorganization, dated as of November 30, 1995, among the Company,
Sunbelt Courier Acquisition Corp., Salmon Acquisition Corporation,
Sunbelt Courier, Inc., James G. Salmon, Karen K. Salmon, Martha
Salmon Davis and Dona Anne S. Boone (Exhibit 2.52 of the Registrant's
Registration Statement on Form S-1 (File No. 33-98152), effective
December 14, 1995, is hereby incorporated by reference)..............
2.6 Agreement and Plan of Reorganization, dated as of October 13, 1995,
among Company, 3D Distribution Systems Acquisition Corp., 3D
Distribution Systems, Inc. and Carolyn Draper (Exhibit 2.6 of the
Registrant's Registration Statement on Form S-1 (File No. 33-98152),
effective December 14, 1995, is hereby incorporated by reference)....
2.61 Amendment No. 1 to Agreement and Plan of Reorganization, dated as of
November 15, 1995, among the Company, 3D Distribution Systems
Acquisition Corp., 3D Distribution Systems, Inc. and Carolyn Draper
(Exhibit 2.61 of the Registrant's Registration Statement on Form S-1
(File No. 33-98152), effective December 14, 1995, is hereby
incorporated by reference)...........................................
2.62 Amendment No. 2 to Agreement and Plan of Reorganization, dated as of
November 30, 1995, among the Company, 3D Distribution Systems
Acquisition Corp., 3D Distribution Systems, Inc. and Carolyn Draper
(Exhibit 2.62 of the Registrant's Registration Statement on Form S-1
(File No. 33-98152), effective December 14, 1995, is hereby
incorporated by reference)...........................................
2.7 AGREEMENT AND PLAN OF REORGANIZATION, DATED AS OF MAY 14, 1996, BY
AND AMONG THE COMPANY, COOLIDGE ACQUISITION CORPORATION, EDDY
MESSENGER SERVICE, INC. AND ROBERT H. LOGAN, SR., ROBERT LOGAN, JR.,
MICHAEL J. LOGAN AND BRIAN MCARDLE (FILED HEREWITH)..................
</TABLE>
<PAGE> 218
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- -----------
<C> <S>
3.1 Certificate of Incorporation of the Company (Exhibit 3.1 of the
Registrant's Registration Statement on Form S-1 (File No. 33-98152),
effective December 14, 1995, is hereby incorporated by reference)....
3.11 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF THE COMPANY
(FILED HEREWITH).....................................................
3.12 CERTIFICATE OF AMENDMENT TO AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION OF THE COMPANY (FILED HEREWITH)........................
3.2 By-laws of the Company (Exhibit 3.2 of the Registrant's Registration
Statement on Form S-1 (File No. 33-98152), effective December 14,
1995, is hereby incorporated by reference)...........................
4 Specimen Temporary Stock Certificate (Exhibit 4 of the Registrant's
Registration Statement on Form S-1 (File No. 333-396), filed on
January 18, 1996, is hereby incorporated by reference)...............
5 Opinion of Sullivan & Worcester, a Registered Limited Liability
Partnership (Exhibit 5 of the Registrant's Registration Statement on
Form S-1 (File No. 333-396), filed on January 18, 1996, is hereby
incorporated by reference)...........................................
10.1 The Company's 1995 Stock Incentive Plan (Exhibit 10.1 of the
Registrant's Registration Statement on Form S-1 (File No. 333-396),
filed on January 18, 1996, is hereby incorporated by reference)......
10.1(a) Amendment to the Company's 1995 Stock Incentive Plan (Exhibit 10.1(a)
of the Registrant's Annual Report on Form 10-K, filed on March 27,
1996, is hereby incorporated by reference)...........................
10.12 THE COMPANY'S 1996 STOCK AND OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
(FILED HEREWITH).....................................................
10.2 Employment Agreement, dated as of December 20, 1995, between the
Company and Philip A. Belyew (Exhibit 10.2 of the Registrant's
Registration Statement on Form S-1 (File No. 333-396), filed on
January 18, 1996, is hereby incorporated by reference)...............
10.3 Employment Agreement, dated as of December 20, 1995, between the
Company and Ronald J. Barowski (Exhibit 10.3 of the Registrant's
Registration Statement on Form S-1 (File No. 333-396), filed on
January 18, 1996, is hereby incorporated by reference)...............
10.4 Employment Agreement, dated as of December 20, 1995, between the
Company and R. David England, Jr. (Exhibit 10.4 of the Registrant's
Registration Statement on Form S-1 (File No. 333-396), filed on
January 18, 1996, is hereby incorporated by reference)...............
10.5 Employment Agreement, dated as of December 20, 1995, between the
Company and Chee B. Louie (Exhibit 10.5 of the Registrant's
Registration Statement on Form S-1 (File No. 333-396), filed on
January 18, 1996, is hereby incorporated by reference)...............
10.6 Employment Agreement, dated as of December 20, 1995, between the
Company and George G. Wagner (Exhibit 10.6 of the Registrant's
Registration Statement on Form S-1 (File No. 333-396), filed on
January 18, 1996, is hereby incorporated by reference)...............
</TABLE>
<PAGE> 219
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- -----------
<C> <S>
10.7 Employment Agreement, dated as of December 20, 1995, between the
Company and Guilbert L. Brandon, Jr. (Exhibit 10.7 of the
Registrant's Registration Statement on Form S-1 (File No. 333-396),
filed on January 18, 1996, is hereby incorporated by reference)......
10.8 Employment Agreement, dated as of December 20, 1995, between the
Company and Carolyn Draper Giles (Exhibit 10.8 of the Registrant's
Registration Statement on Form S-1 (File No. 333-396), filed on
January 18, 1996, is hereby incorporated by reference)...............
10.9 Employment Agreement, dated as of December 20, 1995, between the
Company and James G. Salmon (Exhibit 10.9 of the Registrant's
Registration Statement on Form S-1 (File No. 333-396), filed on
January 18, 1996, is hereby incorporated by reference)...............
10.10 Non-Competition Agreement, dated as of December 20, 1995, between the
Company and Steven W. Lanter (Exhibit 10.10 of the Registrant's
Registration Statement on Form S-1 (File No. 333-396), filed on
January 18, 1996, is hereby incorporated by reference)...............
10.11 Agreement, dated as of April 28, 1988, between Courier Dispatch
Group, Inc. and Wheels, Inc. (Exhibit 10.11 of the Registrant's
Registration Statement on Form S-1 (File No. 33-98152), effective
December 14, 1995, is hereby incorporated by reference)..............
10.12 Stock Purchase and Non-Competition Agreement, dated as of March 15,
1994, among Edward F. Semlitz as trustee of the Edward F. Semlitz
revocable trust created U/A dated June 8, 1988, Darlene Malmsjo,
Edward F. Semlitz, individually, and Courier Dispatch Group, Inc.
(Exhibit 10.12 of the Registrant's Registration Statement on Form S-1
(File No. 33-98152), effective December 14, 1995, is hereby
incorporated by reference)...........................................
10.13 Stock Purchase Agreement, dated as of June 30, 1994, between Courier
Dispatch Group, Inc. and Charles K. Weinmann with respect to the
stock of Armstrong Couriers, Inc. (Exhibit 10.13 of the Registrant's
Registration Statement on Form S-1 (File No. 33-98152), effective
December 14, 1995, is hereby incorporated by reference)..............
10.14 Stock Purchase Agreement, dated June 30, 1994, between Courier
Dispatch Group, Inc. and Jerry R. Coleman with respect to the stock
of Commercial Courier Express, Inc. (Exhibit 10.14 of the
Registrant's Registration Statement on Form S-1 (File No. 33-98152),
effective December 14, 1995, is hereby incorporated by reference)....
10.15 Asset Purchase Agreement, dated as of April 21, 1994, among
AirVantage, Incorporated, Laurence Kelly, Brent Skillman and Courier
Dispatch Group, Inc. (Exhibit 10.15 of the Registrant's Registration
Statement on Form S-1 (File No. 33-98152), effective December 14,
1995, is hereby incorporated by reference)...........................
10.16 Stock Purchase Agreement, dated as of April 27, 1995, among
AirVantage, Incorporated, Susan Rinks, James Junger and Courier
Dispatch Group, Inc. (Exhibit 10.16 of the Registrant's Registration
Statement on Form S-1 (File No. 33-98152), effective December 14,
1995, is hereby incorporated by reference)...........................
10.17 Indemnification Agreement, dated as of October 5, 1995, between the
Company and Ronald J. Barowski (Exhibit 10.17 of the Registrant's
Registration Statement on Form S-1 (File No. 333-396), filed on
January 18, 1996, is hereby incorporated by reference)...............
</TABLE>
<PAGE> 220
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- -----------
<C> <S>
10.18 Indemnification Agreement, dated as of October 5, 1995, between the
Company and Philip A. Belyew (Exhibit 10.18 of the Registrant's
Registration Statement on Form S-1 (File No. 333-396), filed on
January 18, 1996, is hereby incorporated by reference)...............
10.19 Indemnification Agreement, dated as of December 20, 1995, between the
Company and Harvey E. Bines (Exhibit 10.19 of the Registrant's
Registration Statement on Form S-1 (File No. 333-396), filed on
January 18, 1996, is hereby incorporated by reference)...............
10.20 Indemnification Agreement, dated as of December 20, 1995, between the
Company and Guilbert L. Brandon, Jr. (Exhibit 10.20 of the
Registrant's Registration Statement on Form S-1 (File No. 333-396),
filed on January 18, 1996, is hereby incorporated by reference)......
10.21 Indemnification Agreement, dated as of December 20, 1995, between the
Company and Craig H. Deery (Exhibit 10.21 of the Registrant's
Registration Statement on Form S-1 (File No. 333-396), filed on
January 18, 1996, is hereby incorporated by reference)...............
10.22 Indemnification Agreement, dated as of December 20, 1995, between the
Company and Carolyn A. Draper (Exhibit 10.22 of the Registrant's
Registration Statement on Form S-1 (File No. 333-396), filed on
January 18, 1996, is hereby incorporated by reference)...............
10.23 Indemnification Agreement, dated as of December 20, 1995, between the
Company and Habib Y. Gorgi (Exhibit 10.23 of the Registrant's
Registration Statement on Form S-1 (File No. 333-396), filed on
January 18, 1996, is hereby incorporated by reference)...............
10.24 Indemnification Agreement, dated as of December 20, 1995, between the
Company and Charles A. Krause (Exhibit 10.24 of the Registrant's
Registration Statement on Form S-1 (File No. 333-396), filed on
January 18, 1996, is hereby incorporated by reference)...............
10.25 Indemnification Agreement, dated as of December 20, 1995, between the
Company and Steven W. Lanter (Exhibit 10.25 of the Registrant's
Registration Statement on Form S-1 (File No. 333-396), filed on
January 18, 1996, is hereby incorporated by reference)...............
10.26 Indemnification Agreement, dated as of December 20, 1995, between the
Company and Chee B. Louie (Exhibit 10.26 of the Registrant's
Registration Statement on Form S-1 (File No. 333-396), filed on
January 18, 1996, is hereby incorporated by reference)...............
10.27 Indemnification Agreement, dated as of December 20, 1995, between the
Company and James G. Salmon (Exhibit 10.27 of the Registrant's
Registration Statement on Form S-1 (File No. 333-396), filed on
January 18, 1996, is hereby incorporated by reference)...............
10.28 Indemnification Agreement, dated as of December 20, 1995, between the
Company and Paul G. Taylor (Exhibit 10.28 of the Registrant's
Registration Statement on Form S-1 (File No. 333-396), filed on
January 18, 1996, is hereby incorporated by reference)...............
10.29 Underwriting Agreement, dated as of December 14, 1995, among the
Company, Smith Barney Inc. and Morgan Keegan & Company, Inc. (Exhibit
10.29 of the Registrant's Registration Statement on Form S-1 (File
No. 333-396), filed on January 18, 1996, is hereby incorporated by
reference)...........................................................
</TABLE>
<PAGE> 221
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- ---------------------------------------------------------------------
<C> <S>
10.30 Credit Agreement, dated as of December 20, 1995, among the Company,
certain subsidiaries of the Company named therein, certain lenders
named therein and First Union National Bank of Georgia, as agent
(Exhibit 10.30 of the Registrant's Registration Statement on Form S-1
(File No. 333-396), filed on January 18, 1996, is hereby incorporated
by reference)........................................................
10.31 Amended and Restated Credit Agreement, dated as of April 12, 1996,
among the Company, certain of the Company's subsidiaries, the lenders
referred to therein and First Union National Bank of Georgia, as
agent (Exhibit 10.31 of the Registrant's Current Report on Form 8-K,
filed on April 15, 1996, is hereby incorporated by reference)........
11.1 Pro forma net income per share (Exhibit 11.1 of the Registrant's
Annual Report on Form 10-K, filed on March 27, 1996, is hereby
incorporated by reference)...........................................
11.2 Net income per share (Exhibit 11.2 of the Registrant's Annual Report
on Form 10-K, filed on March 27, 1996, is hereby incorporated by
reference)...........................................................
11.3 Statement regarding Computation of Per Share Earnings (Exhibit 11 of
the Registrant's Quarterly Report on Form 10-Q, filed on May 10,
1996, is hereby incorporated by reference)...........................
21 SUBSIDIARIES OF THE COMPANY (FILED HEREWITH).........................
23.1 CONSENT OF PRICE WATERHOUSE, LLP (FILED HEREWITH)....................
23.3 Consent of Sullivan & Worcester, a Registered Limited Liability
Partnership (contained in Exhibit 5 of the Registrant's Registration
Statement on Form S-1 (File No. 333-396), filed on January 18, 1996,
which is hereby incorporated by reference)...........................
23.4 CONSENT OF ERNST & YOUNG LLP (FILED HEREWITH)........................
24 Power of Attorney (See signature pages to the Registrant's
Registration Statement on Form S-1 (File No. 333-396), filed on
January 18, 1996, which are hereby incorporated by reference)........
27 Financial Data Schedule (Exhibit 27 of the Registrant's Quarterly
Report on Form 10-Q, filed on May 10, 1996, is hereby incorporated by
reference)...........................................................
</TABLE>
<PAGE> 1
EXHIBIT 2.7
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF MAY 14, 1996
BY AND AMONG THE COMPANY,
COOLIDGE ACQUISITION CORPORATION,
EDDY MESSENGER SERVICE, INC.
AND ROBERT H. LOGAN, SR.,
ROBERT LOGAN, JR., MICHAEL
J. LOGAN AND BRIAN MCARDLE
<PAGE> 2
-i-
TABLE OF CONTENTS
ARTICLE 1 THE MERGER.......................................................-2-
SECTION 1.1 The Merger..............................................-2-
SECTION 1.2 Action by Stockholders..................................-2-
SECTION 1.3 Closing.................................................-3-
SECTION 1.4 Effective Time..........................................-3-
SECTION 1.5 Effect of the Merger....................................-3-
SECTION 1.6 Certificate of Incorporation............................-3-
SECTION 1.7 Bylaws..................................................-3-
SECTION 1.8 Directors and Officers..................................-3-
ARTICLE 2 CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES..............-3-
SECTION 2.1 Conversion of Securities................................-3-
SECTION 2.2 Exchange of Certificates; Exchange Agent and Exchange
Procedures..............................................-4-
SECTION 2.3 Stock Transfer Books....................................-6-
SECTION 2.4 Option Securities and Convertible Securities;
Payment Rights..........................................-6-
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY...................-7-
SECTION 3.1 Organization and Business; Power and Authority; Effect
of Transaction..........................................-7-
SECTION 3.2 Financial and Other Information.........................-9-
SECTION 3.3 Changes in Condition...................................-10-
SECTION 3.4 Liabilities............................................-10-
SECTION 3.5 Title to Properties; Leases............................-10-
SECTION 3.6 Compliance with Private Authorizations.................-11-
SECTION 3.7 Compliance with Governmental Authorizations and
Applicable Law.........................................-12-
SECTION 3.8 Intangible Assets......................................-13-
SECTION 3.9 Related Transactions...................................-13-
SECTION 3.10 Insurance.............................................-13-
SECTION 3.11 Tax Matters...........................................-13-
SECTION 3.12 Employee Retirement Income Security Act of 1974.......-14-
SECTION 3.13 Absence of Sensitive Payments.........................-16-
SECTION 3.14 Inapplicability of Specified Statutes.................-16-
SECTION 3.15 Authorized and Outstanding Capital Stock..............-16-
SECTION 3.16 Employment Arrangements...............................-17-
SECTION 3.17 Material Agreements...................................-17-
SECTION 3.18 Ordinary Course of Business...........................-18-
SECTION 3.19 Bank Accounts, Etc....................................-19-
SECTION 3.20 Adverse Restrictions..................................-19-
SECTION 3.21 Broker or Finder......................................-20-
SECTION 3.22 Personal Injury or Property Damage; Warranty
Claims; Etc...........................................-20-
SECTION 3.23 Environmental Matters.................................-20-
SECTION 3.24 Materiality...........................................-21-
SECTION 3.25 Solvency..............................................-21-
SECTION 3.26 ......................................................-22-
SECTION 3.27 Compliance with Regulations Relating to
Securities Credit.....................................-22-
SECTION 3.28 .......................................................-22-
SECTION 3.29 Certain State Statutes Inapplicable...................-22-
SECTION 3.30 Continuing Representations and Warranties.............-22-
<PAGE> 3
-ii-
SECTION 3.31 ......................................................-22-
SECTION 3.32 Predecessor Status; etc...............................-22-
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS..............-23-
SECTION 4.1 Organization...........................................-23-
SECTION 4.2 Power and Authority.. .................................-23-
SECTION 4.3 Enforceability.... ....................................-23-
SECTION 4.4 Title to Shares........................................-23-
SECTION 4.5 No Conflict; Required Filings and Consents.............-23-
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF UTN
AND UTN MERGER SUBSIDIARY.......................................-24-
SECTION 5.1 Organization and Qualification.........................-24-
SECTION 5.2 Power and Authority....................................-24-
SECTION 5.3 No Conflict; Required Filings and Consents.............-24-
SECTION 5.4 Financing..............................................-25-
SECTION 5.5 Brokers................................................-25-
SECTION 5.6 Prior Activities of UTN and UTN Merger Subsidiary......-25-
SECTION 5.7 Capitalization of UTN or UTN Merger Subsidiary.........-25-
SECTION 5.8 .......................................................-26-
SECTION 5.9 .......................................................-26-
ARTICLE 6 ADDITIONAL COVENANTS...........................................-26-
SECTION 6.1 Access to Information; Confidentiality.................-26-
SECTION 6.2 Agreement to Cooperate.................................-27-
SECTION 6.3 Assignment of Contracts and Rights.....................-28-
SECTION 6.4 Compliance with the Securities Act.....................-28-
SECTION 6.5 Tax Certification......................................-29-
SECTION 6.6 No Solicitation........................................-29-
SECTION 6.7 Directors' and Officers' Indemnification and Insurance.-29-
SECTION 6.8 Notification of Certain Matters........................-30-
SECTION 6.9 Public Announcements...................................-30-
SECTION 6.10 Conveyance Taxes......................................-30-
SECTION 6.11 Obligations of UTN....................................-30-
SECTION 6.12 Employee Benefits; Severance Policy...................-31-
SECTION 6.13 Certain Actions Concerning Business Combinations......-31-
SECTION 6.14 Termination of Option Securities and Convertible
Securities............................................-31-
SECTION 6.15 ......................................................-32-
SECTION 6.17 Distributions, Liabilities, Etc.......................-32-
SECTION 6.18 Certain Terminal Leases...............................-32-
ARTICLE 7 CLOSING CONDITIONS.............................................-33-
SECTION 7.1 Conditions to Obligations of Each Party to Effect
the Merger............................................-33-
SECTION 7.2 Conditions to Obligations of UTN and UTN Merger
Subsidiary............................................-34-
SECTION 7.3 Conditions to Obligations of the Company..............-39-
<PAGE> 4
-iii-
ARTICLE 8 TERMINATION, AMENDMENT AND WAIVER..............................-40-
SECTION 8.1 Termination............................................-40-
SECTION 8.2 Effect of Termination..................................-43-
SECTION 8.3 Amendment..............................................-43-
SECTION 8.4 Waiver.................................................-43-
SECTION 8.5 Fees, Expenses and Other Payments......................-43-
SECTION 8.6 Effect of Investigation. ..............................-44-
ARTICLE 9 FEDERAL SECURITIES ACT AND OTHER
RESTRICTIONS ON UTN STOCK......................................-44-
SECTION 9.1 Shares not Registered..................................-44-
SECTION 9.2 Economic Risk; Sophistication..........................-44-
SECTION 9.3 Restrictions on Resale; Legends........................-45-
ARTICLE 10 INDEMNIFICATION................................................-49-
SECTION 10.1 Indemnification.......................................-49-
SECTION 10.2 Procedures Concerning Claims by Third Parties; Payment
of Damages; etc. .....................................-50-
SECTION 10.3........................................................-51-
ARTICLE 11 GENERAL PROVISIONS............................................-51-
SECTION 11.1 Effectiveness of Representations, etc.................-51-
SECTION 11.2 Notices...............................................-52-
SECTION 11.3 Headings..............................................-53-
SECTION 11.4 Severability..........................................-53-
SECTION 11.5 Entire Agreement......................................-53-
SECTION 11.6 Assignment............................................-53-
SECTION 11.7 Parties in Interest...................................-53-
SECTION 11.8 Governing Law.........................................-53-
SECTION 11.9 Enforcement of the Agreement..........................-53-
SECTION 11.10 Counterparts.........................................-54-
SECTION 11.11 Mutual Drafting......................................-54-
SECTION 11.12 Disclosure Supplements. ............................-54-
ARTICLE 12 DEFINITIONS...................................................-54-
<PAGE> 5
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION, dated as of May 14, 1996, between
UNITED TRANSNET, INC., a Delaware corporation ("UTN"), Coolidge Acquisition
Corporation, a New York corporation and wholly owned subsidiary of UTN ("UTN
Merger Subsidiary"), Eddy Messenger Service, Inc., a New York corporation (the
"Company"), and Robert H. Logan, Sr., Robert Logan, Jr., Michael J. Logan, and
Brian McCardle (the "Stockholders").
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions of this Agreement,
in accordance with the business corporation laws of the State of New York (the
"NYBCL"), the Company and UTN Merger Subsidiary will carry out a business
combination transaction pursuant to which, on the Closing Date the Company will
merge with and into the UTN Merger Subsidiary (the "Merger") and the
Stockholders of the Company will convert their holdings into the sum of (i) $5.9
million worth of shares of the common stock, par value $.001 per share, of UTN
("UTN Stock") the value of a share of UTN Stock being equal to the Closing Price
of UTN's Common Stock on the NYSE on May 13, 1996 and (ii) cash in the aggregate
amount of $3,100,000, and (iii) on the first, second, and third anniversary of
the Closing Date, respectively, cash in the amount of $1,750,000, $1,500,000,
and $400,000, multiplied, in each case, by the Performance Quotient as set forth
herein, and;
WHEREAS, the Board of Directors of the Company has unanimously determined
that the Merger is fair to, and in the best interests of, the Company and the
Stockholders and has approved and adopted this Agreement as a plan of
reorganization within the provisions of Sections 368(a)(1)(A) and 368(a)(2)(D)
of the Internal Revenue Code of 1986, as amended (the "Code"), has approved this
Agreement, the Merger and the Transactions and has recommended approval and
adoption of this Agreement, the Merger and the Transactions by the Stockholders;
and
WHEREAS, the Board of Directors of UTN has approved and adopted this
Agreement and has approved the Merger and the Transactions as the sole
stockholder of UTN Merger Subsidiary;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto agree as follows:
ARTICLE 1
THE MERGER
SECTION 1.1 THE MERGER. (a) Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with the NYBCL at the Effective
Time, the Company shall be merged with
<PAGE> 6
and into the UTN Merger Subsidiary. As a result of the Merger, the separate
existence of the Company shall cease and UTN Merger Subsidiary shall continue as
the surviving corporation of the Merger (the "Surviving Corporation").
(b) The Company hereby represents that its Board of Directors, at a
meeting duly called and held at which a quorum was present and acting
throughout, has unanimously (i) determined that this Agreement, the Merger and
the Transactions are fair to and in the best interest of the Stockholders, (ii)
approved this Agreement, the Merger and the Transactions, which approval
satisfies in full the requirements of the NYBCL and New York law, and (iii)
resolved to recommend approval and adoption by the Stockholders of this
Agreement, the Merger and the Transactions to the extent required and in a
manner permitted by Applicable Law.
SECTION 1.2 ACTION BY STOCKHOLDERS. (a) The Company, acting through its
Board of Directors, has, in accordance with Applicable Law and its Organic
Documents: (i) duly called, given notice of, convened and conducted a special
meeting of, or to the extent permitted by Applicable Law submit for approval and
adoption by written consent by, Stockholders for the purpose of adopting and
approving this Agreement, the Merger and the Transactions (the "Special
Meeting"). The Board has approved this Agreement, the Merger and the
Transactions and recommended that the Stockholders vote in favor of the approval
and adoption of this Agreement, the Merger and the Transactions. The
Stockholders agreed to and have voted all shares of Company Stock owned by them
or as to which they have the unqualified right to vote in favor of approval and
adoption of this Agreement, the Merger, and the Transactions.
(b) UTN Merger Subsidiary, has submitted to UTN this Agreement, the Merger
and the Transactions for approval and adoption by written consent as the sole
stockholder, and UTN has taken all additional actions as such sole stockholder
deemed necessary to adopt and approve this Agreement, the Merger and the
Transactions.
SECTION 1.3 CLOSING. Unless this Agreement shall have been terminated
pursuant to Section 8.1 hereof and the Merger and the Transactions shall have
been abandoned, and subject to the satisfaction or, if permissible, waiver of
the conditions set forth in Article 7, the closing of the Merger (the "Closing")
will take place, on the Closing Date, at the offices of Sullivan & Worcester
LLP, One Post Office Square, Boston, Massachusetts, unless another date, time or
place is agreed to in writing by the Parties.
SECTION 1.4 EFFECTIVE TIME. As promptly as practicable after the
satisfaction or, if permissible, waiver of the conditions set forth in Article 7
(but subject to Section 1.3 hereof), the Parties shall cause the Merger to be
consummated by filing a certificate of merger with the Secretary of State of the
State of New York, and by making any related filings required under the NYBCL.
The Merger shall become effective at such time (but not prior to the Closing
Date) as such certificate is duly filed with the Secretary of State of New York,
or at such later time as is specified in such certificates (the "Effective
Time").
SECTION 1.5 EFFECT OF THE MERGER. From and after the Effective Time, the
Surviving Corporation shall possess all the rights, privileges, powers and
franchises and be subject to all of the restrictions, disabilities and duties of
the Company and UTN Merger Subsidiary, and the Merger shall otherwise have the
effects, all as provided under the NYBCL.
SECTION 1.6 CERTIFICATE OF INCORPORATION. From and after the Effective
Time, the Certificate of Incorporation of the Surviving Corporation shall be
substantially in the form attached hereto as Exhibit
<PAGE> 7
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1.6, until amended in accordance with Applicable Law, and the name of the
Surviving Corporation shall be the name of the Company or such other name as UTN
may elect.
SECTION 1.7 BYLAWS. From and after the Effective Time, the bylaws of the
Surviving Corporation shall be substantially in the form attached hereto as
Exhibit 1.7, until amended in accordance with Applicable Law.
SECTION 1.8 DIRECTORS AND OFFICERS. From and after the Effective Time,
until successors are duly elected or appointed and qualified (or their earlier
resignation or removal) in accordance with Applicable Law (i) the directors of
UTN Merger Subsidiary at the Effective Time shall be the directors of the
Surviving Corporation and (ii) the officers of UTN Merger Subsidiary at the
Effective Time shall be the officers of the Surviving Corporation.
ARTICLE 2
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.1 CONVERSION OF SECURITIES. At the Effective Time, by virtue of
the Merger and without any action on the part of UTN Merger Subsidiary, the
Company or the holders of any of the following securities:
(a) Each share of Common Stock, no par value per share, of the Company
(the "Company Stock") issued and outstanding immediately prior to the Effective
Time (other than any shares of Company Stock to be cancelled pursuant to Section
2.1(b), shall be converted into the right to receive (A) 1194.331983806 shares
of UTN Stock (the "Stock Merger Consideration"), and (B) cash in an amount equal
to $16,315.78947368 (the "Cash Merger Consideration", and together with the
Stock Merger Consideration, the "Merger Consideration"), and (C)(i) on the first
anniversary of the Closing Date, cash in an amount equal to .0052631579
multiplied by the product of $1,750,000 and the Performance Quotient, and
(C)(ii) on the second anniversary of the Closing Date, cash in an amount equal
to .0052631579 multiplied by the product of $1,500,000 and the Performance
Quotient, and (C)(iii) on the third anniversary of the Closing Date, cash in an
amount equal to .0052631579 multiplied by the product of $400,000 and the
Performance Quotient (the sum of (C)(i), (ii), and (iii) being referred to
herein as the "Performance Merger Consideration"). At the Effective Time, all
shares of Company Stock (the "Shares") shall no longer be outstanding and shall
automatically be cancelled and retired and shall cease to exist, and
certificates previously evidencing any such Shares (each, a "Certificate" and
collectively the "Certificates") shall thereafter represent the right to
receive, upon the surrender of such Certificate in accordance with the
provisions of Section 2.2, the number of Shares represented by such Certificate
multiplied by (i) the Stock Merger Consideration plus (ii) the Cash Merger
Consideration (the "Exchange Merger Consideration"), (iii) plus the Performance
Merger Consideration, if any, as determined on the first, second, and third
anniversary of the Closing Date in accordance with this Section 2.1(a), and a
holder of more than one Certificate shall have the right to receive the Stock
Merger Consideration, the Cash Merger Consideration, and the Performance Merger
Consideration (if any), multiplied by the number of Shares represented by all
such Certificates. The holders of such Certificates previously evidencing such
Shares outstanding immediately prior to the Effective Time shall cease to have
any rights with respect to such Shares except as otherwise provided herein or by
Applicable Law.
(b) Each Share held in the treasury of the Company or by any direct or
indirect wholly-owned Subsidiary thereof and each Share owned by UTN or any
direct or indirect Subsidiary of UTN
<PAGE> 8
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immediately prior to the Effective Time shall automatically be cancelled and
extinguished without any conversion thereof and no payment shall be made with
respect thereto.
(c) Each share of common stock of UTN Merger Subsidiary outstanding
immediately prior to the Effective Time shall be converted into and become one
share of common stock of the Surviving Corporation with the same rights, powers
and privileges as the shares so converted and shall constitute the only
outstanding shares of capital stock of the Surviving Corporation.
(d) In lieu of issuing fractional shares, UTN may convert a holder's right
to receive shares of UTN Stock pursuant to Section 2.1(a) into a right to
receive the highest whole number of shares of UTN Stock constituting the
non-cash portion of the Exchange Merger Consideration plus cash equal to the
fraction of a share of UTN Stock to which the holder would otherwise be entitled
multiplied by the Closing Price per share of UTN Stock, and the Exchange Merger
Consideration to which a holder is entitled shall be deemed to be such number of
shares of UTN Stock plus such cash plus the cash portion of the Exchange Merger
Consideration. For purposes of carrying out the intent of this Section 2.1(d),
UTN may aggregate Certificates so that fractional shares of UTN Stock due in
exchange for multiple Certificates may be combined to yield a number of whole
shares thereof plus a single fraction.
(e) In the event of a Change of Control of UTN within three years of the
Closing Date, then each Stockholder's right to any remaining payments of the
Performance Merger Consideration as set forth in Section 2.1(a) shall be
extinguished and converted into the right to receive from UTN, within 60 days of
such Change of Control, cash in an amount equal to $3,650,000 less any
Performance Merger Consideration payments previously made pursuant to Sections
2.1(a), and less any Performance Merger Consideration withheld pursuant to
Section and 10.1(e), divided by the total number of shares of Company Stock
converted pursuant to Section 2.1(a), then multiplied by the number of shares of
the Company Stock converted by such Stockholder pursuant to Section 2.1(a).
SECTION 2.2 Exchange of Certificates and Procedures.
----------------------------------------
(a) At the Effective Time, UTN shall exchange, in accordance with this
Article, the stock portion of the Merger Consideration, multiplied by the number
of all Shares issued and outstanding immediately prior to the Effective Time
(other than Shares to be cancelled pursuant to Section 2.1(b)) (said number of
Shares less said Shares to be cancelled hereafter to be referred to as the "Net
Shares"), plus cash in an amount sufficient to make payment for fractional
shares, for all of the outstanding Shares, and contemporaneously with the
Closing, a check or checks representing next day funds in an amount equal to the
Cash Merger Consideration multiplied by the number of Net Shares.
(b) As soon as reasonably practicable after the date as of which the
Stockholders act to approve and adopt this Agreement, the Merger and the
Transactions, the Company shall notify UTN thereof and UTN shall issue, for the
purpose of accepting Certificates for exchange on the terms provided in Section
2.1(a) at the Effective Time, and subject to withdrawal of Certificates by their
holders prior thereto, (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon proper delivery of the Certificates and shall be in such form
and have such other provisions as UTN may reasonably specify) and (ii)
instructions to effect the surrender of the Certificates in exchange for the
Exchange Merger Consideration. Otherwise, as soon as reasonably practicable
after the Effective Time, UTN will issue (by instructions from each holder of
record reasonably satisfactory to UTN, and otherwise by mail to the most recent
address of such holder as shown on the Company's books and records) to such
holder of a Certificate or Certificates which immediately prior to the Effective
Time evidenced outstanding Shares (other than Shares to be cancelled pursuant to
Section 2.1(b)), (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of
<PAGE> 9
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loss and title to the Certificates shall pass, only upon proper delivery of the
Certificates and shall be in such form and have such other provisions as UTN may
reasonably specify) and (ii) instructions to effect the surrender of the
Certificates in exchange for the Exchange Merger Consideration. Upon surrender
of a Certificate for cancellation to such agent or agents as may be appointed by
UTN together with such letter of transmittal, duly executed, and such other
customary documents as may be reasonably required pursuant to such instructions
(collectively, the "Transmittal Documents"), the holder of such Certificate
shall be entitled to receive in exchange therefor the Exchange Merger
Consideration which such holder has the right to receive pursuant to Sections
2.1(a) and 2.1(d), and the Certificate so surrendered shall forthwith be
cancelled. In the event of a transfer of ownership of Shares which is not
registered in the transfer records of the Company, the Exchange Merger
Consideration may be issued and paid in accordance with this Article to a
transferee if the Certificate evidencing such Shares is presented, accompanied
by all documents reasonably required to evidence and effect such transfer and by
evidence that any applicable stock transfer taxes have been paid. The Exchange
Merger Consideration will be delivered on the Closing Date, or such greater
period not to exceed one business day following surrender of a Certificate and
the related Transmittal Documents, and cash payments for fractional shares and
the cash portion of the Exchange Merger Consideration may be made by check or,
pursuant to instructions, by wire transfer. No interest will be payable on the
Exchange Merger Consideration regardless of any delay in making payments. Until
surrendered as contemplated by this Section, each Certificate shall be deemed at
any time after the Effective Time to evidence only the right to receive, upon
such surrender, the Exchange Merger Consideration, without interest.
(c) Subject to Section 10.1(e), as soon as the relevant information
becomes available, and no later than 30 days after the first, second, and third
anniversary of the Closing Date, respectively, UTN shall determine the amount of
the Performance Merger Consideration, if any, due to the Stockholders in
accordance with Section 2.1(a) (the "Performance Determination"). At such time
UTN will promptly notify the Stockholders of the Performance Determination,
together with reasonable details thereof. Robert Logan, Jr. ("Logan"), as agent
for the Stockholders with respect to matters contemplated by this Section
2.2(c), may dispute the Performance Determination within 14 days of receipt
thereof, by so notifying UTN, whereupon UTN will deposit cash in escrow in an
amount equal to the Performance Merger Consideration due on the first, second,
and third anniversary of the Closing Date, as the case may be, calculated in
each case, with the Performance Quotient equal to one, with a bank selected by
or reasonably satisfactory to UTN to act as escrow agent. UTN shall authorize
the bank to maintain the funds held in escrow in an interest bearing overnight
depositary account. Further, upon receipt of such notice, UTN shall promptly
cause the Accountants to determine the Consolidated Net Revenues generated by
the Company during the relevant Measuring Period and to calculate the
Performance Merger Consideration, whereupon if no further dispute exists, UTN
shall cause the bank to distribute the amount of Performance Merger
Consideration due, together with the net interest earned on such amount, to the
Stockholders as provided in Section 2.1(a). If, however, Logan disputes the
Performance Determination made by the Accountants and UTN and Logan cannot
resolve the dispute within fourteen (14) days thereafter, then Logan will cause
his accountants to calculate the Performance Determination. In the event of a
discrepancy between the Performance Determination made by the Accountants and
the Performance Determination made by Logan's accountants, the Accountants and
Logan's accountants shall, within ten (10) days, attempt to resolve the
discrepancy, and any joint resolution of the Accountants and Logan's accountants
with respect to the Performance Determination shall be final and conclusive for
all purposes. In the event the Accountants and Logan's accountants are unable to
reach a joint resolution as to the Performance Determination then the
Accountants and Logan's accountants shall select the principal New York City
office of a "Big Six" accounting firm to make the Performance Determination. The
determination of such "Big Six" firm with respect to the Performance Merger
Consideration due shall be final. If the Performance Merger Consideration as
determined by UTN, equals or exceeds the final Performance Determination reached
according to the above procedures, the Stockholders will bear the
<PAGE> 10
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reasonable fees and expenses incurred in reaching the final Performance
Determination, and such amount may be deducted from the Performance Merger
Consideration prior to distribution thereof by the bank, otherwise UTN will bear
such reasonable fees and expenses. The bank shall be authorized to deduct its
fees and expenses from the interest earned on the amount deposited in escrow.
Any amount remaining in escrow after payment of the Performance Merger
Consideration shall be returned to UTN by the bank upon instruction from UTN.
(d) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person claiming
such Certificate to be lost, stolen or destroyed and subject to such other
conditions as UTN or UTN Merger Subsidiary may impose, the Surviving Corporation
shall issue in exchange for such lost, stolen or destroyed Certificate the
Exchange Merger Consideration deliverable in respect thereof as determined in
accordance with Sections 2.1(a) and 2.1(d). Each of UTN and UTN Merger
Subsidiary may, in its discretion and as a condition precedent to authorizing
the issuance thereof by the Surviving Corporation, require the owner of such
lost, stolen or destroyed Certificate to provide a bond or other surety to UTN
and the Surviving Corporation in such sum as UTN may reasonably direct as
indemnity against any claim that may be made against UTN, UTN Merger Subsidiary
or the Surviving Corporation (and their Affiliates) with respect to the
Certificate alleged to have been lost, stolen or destroyed.
(e) None of UTN, UTN Merger Subsidiary, the Company or the Surviving
Corporation shall be liable to any holder of Shares for any shares of UTN Stock
or cash delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law.
(f) Each of UTN and the Surviving Corporation shall be entitled to deduct
and withhold from the consideration otherwise payable pursuant to this Agreement
to any holder of Shares such amounts as UTN or the Surviving Corporation is
required to deduct and withhold with respect to the making of such payment under
the Code, or any provision of federal, state, local or foreign tax law. To the
extent that amounts are so withheld by UTN or the Surviving Corporation, such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the holder of the Shares in respect of which such deduction and
withholding was made by UTN, and the Surviving Corporation.
(g) Notwithstanding the provisions of Section 2.1(a), the Company and the
Stockholders by unanimous written instructions to UTN, may reallocate the Cash
Merger Consideration and the Stock Merger Consideration or any portion thereof
among (and only among) the Stockholders, so long as such reallocation does not
change the aggregate amount of the Cash Merger Consideration and the Stock
Merger Consideration.
SECTION 2.3 STOCK TRANSFER BOOKS. At the Effective Time, the stock
transfer books of the Company shall be closed, and there shall be no further
registration of transfers of Shares thereafter on the records of the Company
other than to UTN. On or after the Effective Time, any Certificate presented to
the Surviving Corporation shall be converted into the Exchange Merger
Consideration.
SECTION 2.4 OPTION SECURITIES AND CONVERTIBLE SECURITIES; PAYMENT RIGHTS.
At the Effective Time, (i) each outstanding Option Security and each outstanding
Convertible Security exercisable or convertible to purchase Shares as of
immediately prior to the Effective Time, shall be cancelled and the holder
thereof shall be entitled to receive, and shall receive, upon payment of the
consideration required to exercise or convert, or debit of such consideration
against the Merger Consideration otherwise due, and termination of such holder's
rights to exercise or convert, as the case may be, all other Option Securities
or Convertible Securities issued to such holder, Merger Consideration in the
form of shares of UTN Stock issuable and cash payable with respect to the number
of Shares issuable pursuant to such
<PAGE> 11
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Option Security or Convertible Security so exercised or converted, as the case
may be, as provided in Section 2.1(a), plus cash in lieu of receipt of a
fractional share in an amount determined as provided in Section 2.1(d), and (ii)
each Option Security outstanding not then exercisable or exercised and the
conversion rights of each Convertible Security outstanding not then convertible
or converted shall be cancelled.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents, warrants and covenants to, and agrees with,
UTN and UTN Merger Subsidiary as follows:
SECTION 3.1 ORGANIZATION AND BUSINESS; POWER AND AUTHORITY; EFFECT OF
TRANSACTION.
(a) The Company:
(i) is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation as set
forth in Section 3.1(a)(i) of the Disclosure Schedule,
(ii) has all requisite power and authority (corporate and other) to own
or hold under lease its properties and to conduct its business as
now conducted, and has in full force and effect all Governmental
Authorizations and Private Authorizations and has made all
Governmental Filings, to the extent required for such ownership and
lease of its property and conduct of its business, and
(iii) has duly qualified and is authorized to do business and is in good
standing as a foreign corporation in each jurisdiction (a true and
correct list of which is set forth in Section 3.1(a)(iii) of the
Disclosure Schedule) in which the character of its property or the
nature of its business or operations requires such qualification or
authorization, except to the extent the failure so to qualify or to
maintain such authorizations would not have an Adverse Effect.
(b) The Company has all requisite power and authority (corporate and
other) and has in full force and effect all Governmental Authorizations and
Private Authorizations in order to enable it to execute and deliver, and to
perform its obligations under, this Agreement and each Collateral Document
executed or required to be executed by it pursuant hereto or thereto and to
consummate the Merger and the Transactions, and the execution, delivery and
performance of this Agreement and each Collateral Document executed or required
to be executed pursuant hereto or thereto have been duly authorized by all
requisite corporate or other action (other than that of the Stockholders). This
Agreement has been duly authorized, executed and delivered by the Company and
constitutes, and each Collateral Document executed or required to be executed
pursuant hereto or thereto or to consummate the Merger and the Transactions,
when executed and delivered by the Company or an Affiliate of the Company will
constitute, legal, valid and binding obligations of the Company or such
Affiliate, enforceable in accordance with their respective terms, except as such
enforceability may be subject to bankruptcy, moratorium, insolvency,
reorganization, arrangement, voidable preference, fraudulent conveyance and
other similar laws relating to or affecting the rights of creditors and except
as the same may be subject
<PAGE> 12
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to the effect of general principles of equity. The affirmative vote or action by
written consent of two-thirds of the votes the holders of the outstanding shares
of the Company are entitled to cast is the only vote of the holders of any class
or series of the capital stock of the Company necessary to approve this
Agreement, the Merger and the Transactions under Applicable Law and the
Company's Organic Documents.
(c) Except as set forth in Section 3.1(c) of the Disclosure Schedule,
neither the execution and delivery of this Agreement or any Collateral Document
executed or required to be executed pursuant hereto or thereto, nor the
consummation of the Transactions, nor compliance with the terms, conditions and
provisions hereof or thereof by the Company or any of the other parties hereto
or thereto which is Affiliated with the Company:
(i) will conflict with, or result in a breach or violation of, or
constitute a default under, any Applicable Law on the part of the
Company or any Subsidiary or will conflict with, or result in a
breach or violation of, or constitute a default under, or permit the
acceleration of any obligation or liability in, or but for any
requirement of giving of notice or passage of time or both would
constitute such a conflict with, breach or violation of, or default
under, or permit any such acceleration in, any Contractual
Obligation of the Company or any Subsidiary,
(ii) will result in or permit the creation or imposition of any Lien
(except to the extent set forth in Section 3.1(c) of the Disclosure
Schedule) upon any property now owned or leased by the Company or
any such other party, or
(iii) will require any Governmental Authorization or Governmental Filing
or Private Authorization, except for filing requirements under
Applicable Law in connection with the Merger and the Transactions
and as the Securities Act and applicable state securities laws may
apply to compliance by the Company with the provisions of this
Agreement relating to the Registered Stock.
(d) The Company does not have any Subsidiaries other than those set forth
on Section 3.1(d) of the Disclosure Schedule, each of which is wholly-owned, is
a corporation which is duly organized, validly existing and in good standing
under the laws of the respective state of incorporation set forth opposite its
name on Section 3.1(d) of the Disclosure Schedule, and is duly qualified and in
good standing as a foreign corporation in each other jurisdiction (as shown in
Section 3.1(d) of the Disclosure Schedule) in which the character of its
property or the nature of its business or operations requires such qualification
or authorization, with full power and authority (corporate and other) to carry
on the business in which it is engaged. Each Subsidiary has in full force and
effect all Governmental Authorizations and Private Authorizations and has made
all Governmental Filings, to the extent required for such ownership and lease of
its property and conduct of its business. The Company owns all of the
outstanding capital stock (as shown on Section 3.1(d) of the Disclosure
Schedule) of each Subsidiary, free and clear of all Liens (except to the extent
set forth in Section 3.1(d) of the Disclosure Schedule), and all such stock has
been duly authorized and validly issued and is fully paid and nonassessable.
There are no outstanding Option Securities or Convertible Securities, or
agreements or understandings with respect to any of the foregoing, of any nature
whatsoever relating to the authorized and unissued or the outstanding capital
stock of any Subsidiary.
SECTION 3.2 FINANCIAL AND OTHER INFORMATION. (A) The Company has
heretofore furnished to UTN copies of the financial statements of the Company
and its Subsidiaries listed in Section 3.2(a) of the Disclosure Schedule (the
"Financial Statements"). The Financial Statements, including in each case the
<PAGE> 13
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notes thereto, have been prepared in accordance with GAAP applied on a
consistent basis throughout the periods covered thereby, except as otherwise
noted therein, are true, correct and complete, do not contain any untrue
statement of a material fact or omit to state a material fact required by GAAP
to be stated therein or necessary in order to make the statements contained
therein not misleading, and fairly present the financial condition and results
of operations of the Company and its Subsidiaries, on the bases therein stated,
as of the respective dates thereof, and for the respective periods covered
thereby subject, in the case of unaudited financial statements to normal
nonmaterial year-end audit adjustments and accruals.
(b) Neither the Disclosure Schedule, the Financial Statements, this
Agreement nor any Collateral Document furnished or to be furnished by or on
behalf of the Company or any of the Stockholders pursuant to this Agreement or
any Collateral Document executed or required to be executed by or on behalf of
the Company or the Stockholders pursuant hereto or thereto or to consummate the
Merger and the Transactions, contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact required to be
stated in such document by its terms or necessary in order to make the
statements contained herein or therein not misleading and all such Collateral
Documents are and will be true, correct and complete, provided that:
(i) with respect to projections, if any, contained or referred to in
the Disclosure Schedule, the Company represents and warrants only that
such projections were prepared in good faith on the basis of the past
business of the Company and other information and assumptions which the
Company and the Stockholders believe to be reasonable,
(ii) each such Collateral Document shall not be deemed misleading by
virtue of the absence of factual recitations or references not germane
thereto and necessary to the purpose thereof, and
(iii) responses to due diligence requests shall not be subject to
this Section 3.2(b) except to the extent that, to the Company's knowledge,
such response is materially misleading.
(c) The Company does not own any capital stock or equity or proprietary
interest in any other Entity or enterprise, however organized and however such
interest may be denominated or evidenced, except as set forth in Sections 3.1(d)
or 3.2(c) of the Disclosure Schedule. None of the Entities, if any, so set forth
in Section 3.2(c) of the Disclosure Schedule is a Subsidiary of the Company
except as so set forth. The Company owns all of the outstanding capital stock or
equity or proprietary interests (as shown on Section 3.2(c) of the Disclosure
Schedule) of each such Entity or other enterprise, free and clear of all Liens
(except to the extent set forth in Section 3.2(c) of the Disclosure Schedule),
and all of such stock or equity or proprietary interests have been duly
authorized and validly issued and are fully paid and nonassessable. There are no
outstanding Option Securities or Convertible Securities, or agreements or
understandings with respect to any of the foregoing, of any nature whatsoever,
except as described in Section 3.2(c) of the Disclosure Schedule.
SECTION 3.3 CHANGES IN CONDITION. Since the date of the most recent
financial statements forming part of the Financial Statements, except to the
extent specifically described in Section 3.3 of the Disclosure Schedule, there
has been no Adverse change in the Company or the Company and its Subsidiaries
taken as a whole. There is no Event known to the Company which Adversely
Affects, or in the future might (so far as the Company or any Stockholder can
now reasonably foresee) Adversely Affect, the Company or the Company and its
Subsidiaries taken as a whole, or the ability of the Company to perform any of
the obligations set forth in this Agreement or any Collateral Document executed
or required to be executed pursuant hereto or thereto except for changes in
general economic conditions and to the extent set forth in Section 3.3 of the
Disclosure Schedule.
<PAGE> 14
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SECTION 3.4 LIABILITIES. At the date of the most recent balance sheet
forming part of the Financial Statements, neither the Company nor any Subsidiary
had any obligations or liabilities, past, present or deferred, accrued or
unaccrued, fixed, absolute, contingent or other, except as disclosed in such
balance sheet, or the notes thereto, and since such date neither the Company nor
any Subsidiary has incurred any such obligations or liabilities, other than
obligations and liabilities incurred in the ordinary course of business
consistent with past practice of the Company and its Subsidiaries, which do not
and, to the Company's knowledge, will not, in the aggregate, Adversely Affect
the Company or the Company and its Subsidiaries taken as a whole except to the
extent set forth in Section 3.4 of the Disclosure Schedule.
Neither the Company nor any Subsidiary has Guaranteed or is otherwise
primarily or secondarily liable in respect of any obligation or liability of any
other Person material to the Company or the Company and its Subsidiaries, except
for endorsements of negotiable instruments for deposit in the ordinary course of
business, consistent with prior practice, or as disclosed in the most recent
balance sheet, or the notes thereto, forming part of the Financial Statements or
in Section 3.4 of the Disclosure Schedule.
SECTION 3.5 TITLE TO PROPERTIES; LEASES. (a) Each of the Company and its
Subsidiaries has good legal and insurable title, with respect to all real
property owned or leased (in fee simple if owned and leasehold if leased) and
marketable title if owned (in fee simple), if any, reflected as an asset on the
most recent balance sheet forming part of the Financial Statements, or held by
the Company or any of its Subsidiaries for use in its business if not so
reflected, and good indefeasible and merchantable title to all other assets,
tangible and intangible, reflected on such balance sheet, or (excluding leased
real estate) held by the Company or any of its Subsidiaries for use in its
business if not so reflected, or purported to have been acquired by the Company
or any of its Subsidiaries since such date, except inventory sold or depleted,
or property, plant and other equipment used up or retired, since such date, in
each case in the ordinary course of business consistent with past practice of
the Company and its Subsidiaries, free and clear of all Liens, except such as
are reflected in the most recent balance sheet, or the notes thereto, forming
part of the Financial Statements or set forth in Section 3.5(a) of the
Disclosure Schedule. Except for financing statements evidencing Liens referred
to in the preceding sentence (a true, correct and complete list and description
of which is set forth in Section 3.5(a) of the Disclosure Schedule), to the
Company's and each Subsidiary's knowledge, no financing statements under the
Uniform Commercial Code and no other filing which names the Company or any of
its Subsidiaries as debtor or which covers or purports to cover any of the
property of the Company or any of its Subsidiaries is on file in any state or
other jurisdiction, and neither the Company nor any Subsidiary has signed or
agreed to sign any such financing statement or filing or any agreement
authorizing any secured party thereunder to file any such financing statement or
filing. Each Lease or other occupancy or other agreement under which the Company
or any of its Subsidiaries holds real or personal property has been duly
authorized, executed and delivered by the Company or a Subsidiary, as the case
may be, and, to the Company's and each such Subsidiary's knowledge, by each of
the parties thereto; each such Lease is a legal, valid and binding obligation of
the Company or a Subsidiary, as the case may be, and, to the Company's and each
such Subsidiary's knowledge, of each other party thereto, enforceable in
accordance with its terms. Each of the Company and its Subsidiaries has a valid
leasehold interest in and enjoys peaceful and undisturbed possession under all
Leases pursuant to which it holds any real property or tangible personal
property, none of which contains any provision which would impair the Company's
ability to use such property as it is currently used by the Company, except as
described in Section 3.5(a) of the Disclosure Schedule. All of such Leases are
valid and subsisting and in full force and effect; and neither the Company nor
any of its Subsidiaries nor, to the Company's and each such Subsidiary's
knowledge, any other party thereto, is in default in the performance, observance
or fulfillment of any obligation, covenant or condition contained in any such
Lease.
<PAGE> 15
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(b) Section 3.5(b) of the Disclosure Schedule contains a true, correct and
complete description of all real estate owned or leased by the Company or any of
its Subsidiaries and all Leases and an identification of all material items of
fixed assets and machinery and equipment. None of the fixed assets and machinery
and equipment is subject to contracts of sale, and none is held by the Company
or any of its Subsidiaries as lessee or as conditional sales vendee under any
Lease or conditional sales contract and none is subject to any title retention
agreement, except as set forth in Section 3.5(b) of the Disclosure Schedule. The
real property (other than land), fixtures, fixed assets and machinery and
equipment are in a state of good repair and maintenance and are in good
operating condition, reasonable wear and tear excepted.
(c) Except as set forth in Section 3.5(c) of the Disclosure Schedule:
(i) all real property owned or leased by the Company or any of its
Subsidiaries conforms to and complies with all applicable title covenants,
conditions, restrictions and reservations and all Environmental Laws and
all applicable zoning, wetlands, land use and other Applicable Laws; and
(ii) neither the Company nor any Subsidiary, nor, to the knowledge
of the Company or any Subsidiary, any landlord, tenant or other occupant
or user of any such real property, has used such real property for the
storage or disposal of Hazardous Materials or engaged in the business of
storing or disposing of Hazardous Materials, except for use in the
ordinary course of business, consistent with prior practice.
SECTION 3.6 COMPLIANCE WITH PRIVATE AUTHORIZATIONS. Section 3.6 of the
Disclosure Schedule sets forth a true, correct and complete list and description
of each Private Authorization which individually is material to the Company or
the Company and its Subsidiaries taken as a whole, all of which are in full
force and effect. Each of the Company and each Subsidiary has obtained all
Private Authorizations which are necessary for the ownership by the Company or
each Subsidiary of its properties and the conduct of its business as now
conducted or as presently proposed to be conducted or which, if not obtained and
maintained, could, singly or in the aggregate, Adversely Affect the Company or
the Company and its Subsidiaries taken as a whole. Neither the Company nor any
Subsidiary is in breach or violation of, or is in default in the performance,
observance or fulfillment of, any Private Authorization, and no Event exists or
has occurred, which constitutes, or but for any requirement of giving of notice
or passage of time or both would constitute, such a breach, violation or
default, under any Contractual Obligation or Private Authorization, except for
such defaults, breaches or violations, as do not and, to the Company's
knowledge, will not in the aggregate have any Adverse Effect on the Company or
the Company and its Subsidiaries taken as a whole or the ability of the Company
to perform any of the obligations set forth in this Agreement or any Collateral
Document executed or required to be executed pursuant hereto or thereto or to
consummate the Merger and the Transactions. No Private Authorization is the
subject of any pending or, to the Company's knowledge, threatened attack,
revocation or termination.
SECTION 3.7 COMPLIANCE WITH GOVERNMENTAL AUTHORIZATIONS AND APPLICABLE
LAW. (a) Section 3.7(a) of the Disclosure Schedule contains a description of:
(i) all Legal Actions which are pending or, other than those finally
adjudicated or settled on or before December 31, 1992, in which the
Company or any of its Subsidiaries, or any of its officers or directors in
connection therewith, is, or at any time since its organization has been,
engaged, or which involves, or at any time during such period involved,
the business, operations or properties of the Company or any of its
Subsidiaries or, to the Company's or any Subsidiary's
<PAGE> 16
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knowledge, which is threatened or contemplated against, or in any other
manner relates Adversely to, the Company or any of its Subsidiaries or the
business, operations or properties, or the officers or directors, of any
of them in connection therewith; and
(ii) each Governmental Authorization to which the Company or any
Subsidiary is subject and which relates to the business, operations,
properties, prospects, condition (financial or other), or results of
operations of the Company or the Company and its Subsidiaries taken as a
whole, all of which are in full force and effect.
(b) Each of the Company and each of its Subsidiaries has obtained all
Governmental Authorizations which are necessary for the ownership or uses of its
properties and the conduct of its business as now conducted or as presently
proposed to be conducted by the Company or which, if not obtained and
maintained, could singly or in the aggregate, have any Adverse Effect on the
Company or the Company and its Subsidiaries taken as a whole. No Governmental
Authorization is the subject of any pending or, to the Company's or any
Subsidiary's knowledge, threatened attack, revocation or termination. Neither
the Company nor any Subsidiary nor any officer or director (in connection with
the business, operations and properties of the Company or any Subsidiary) is or
at any time since December 31, 1992, has been, or is or has during such time
been charged with, or to the Company's or any subsidiary's knowledge, is
threatened or under investigation with respect to any material breach or
violation of, or in default in the performance, observance or fulfillment of,
any Governmental Authorization or any Applicable Law, and no Event exists or has
occurred, which constitutes, or but for any requirement of giving of notice or
passage of time or both would constitute, such a breach, violation or default,
under
(x) any Governmental Authorization or any Applicable Law, except for
such breaches, violations or defaults as do not and, to the
Company's knowledge, will not have in the aggregate any Adverse
Effect on the Company or the Company and its Subsidiaries taken as a
whole or the ability of the Company to perform any of the
obligations set forth in this Agreement or any Collateral Document
executed or required to be executed pursuant hereto or thereto, or
to consummate the Merger and the Transactions, or
(y) any requirement of any insurance carrier, applicable to its
business, operations or properties,
except as otherwise specifically described in Section 3.7(b) of the Disclosure
Schedule.
(c) With respect to matters, if any, of a nature referred to in Sections
3.7(a) or 3.7(b) of the Disclosure Schedule, all such information and matters
set forth in the Disclosure Schedule, individually and in the aggregate, if
adversely determined against the Company or any Subsidiary, will not Adversely
Affect the Company or the Company and its Subsidiaries taken as a whole, or the
ability of the Company to perform its obligations under this Agreement or any
Collateral Documents executed or required to be executed pursuant hereto or
thereto or to consummate the Merger and the Transactions.
SECTION 3.8 INTANGIBLE ASSETS. (a) Each of the Company and each Subsidiary
owns or possesses or otherwise has the right to use all Governmental
Authorizations and other Intangible Assets necessary for the present conduct of
its business, without any conflict with the rights of others. The present and
planned future conduct of business by the Company and each Subsidiary is not
dependent upon any one or more, or all, of such Governmental Authorizations and
other Intangible Assets or rights with respect to any of the foregoing, except
as set forth on Section 3.8(a) of the Disclosure Schedule.
<PAGE> 17
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(b) Section 3.8(b) of the Disclosure Schedule sets forth a true, correct
and complete description of all of such Governmental Authorizations and other
Intangible Assets or rights with respect thereto, including without limitation
the nature of the Company's and each Subsidiary's interest in each and the
extent to which the same have been duly registered in the offices as indicated
therein.
SECTION 3.9 RELATED TRANSACTIONS. Section 3.9 of the Disclosure Schedule
sets forth a true, correct and complete description of any Contractual
Obligation or transaction, not fully discharged or consummated, as the case may
be, on or before December 31, 1992, between the Company or any of its
Subsidiaries and any of its officers, directors, employees, stockholders, or any
Affiliate of any thereof (other than reasonable compensation for services as
officers, directors and employees and reimbursement for out-of-pocket expenses
reasonably incurred in support of the Company's business), now existing or
which, at any time since its organization, existed or occurred, including
without limitation any providing for the furnishing of services to or by,
providing for rental of property, real, personal or mixed, to or from, or
providing for the lending or borrowing of money to or from or otherwise
requiring payments to or from, any officer, director, stockholder or employee,
or any Affiliate of any thereof. All such Contractual Obligations and
transactions were and are on terms and conditions no less favorable to the
Company or any of its Subsidiaries than would be customary for such between
Persons who are not Affiliates or upon terms and conditions on which similar
Contractual Obligations and transactions with Persons who are not Affiliates
could fairly and reasonably be expected to be entered into, except as otherwise
set forth in Section 3.9 of the Disclosure Schedule.
SECTION 3.10 INSURANCE. (a) Section 3.10(a) of the Disclosure Schedule
lists all insurance policies maintained by the Company or any Subsidiary and
includes the insurers' names, policy numbers, expiration dates, risks insured
against, amounts of coverage, the annual premiums, exclusions, deductibles and
self-insured retention and describes in reasonable detail any retrospective
rating plan, fronting arrangement or any other self-insurance or risk assumption
agreed to by the Company or any Subsidiary or imposed upon the Company or any
Subsidiary by any such insurers, as well as any self-insurance program that is
in effect.
(b) Neither the Company nor any Subsidiary is in breach or violation of or
in default under any such policy, and all premiums due thereon have been paid,
and each such policy or a comparable replacement policy will continue to be in
force and effect up to and including the Closing Date. The insurance policies so
listed and identified are of a nature and scope and in such amounts as are
customary for the Company's or any Subsidiary's business, operations and
properties (and, in any event, in amounts sufficient to prevent the Company or
any Subsidiary from becoming a coinsurer within the terms of such policies).
Except as set forth in Section 3.10(a) of the Disclosure Schedule, neither the
Company nor any Subsidiary has, within the past five (5) years, been refused
insurance by any insurance carrier to which it has applied for insurance.
SECTION 3.11 TAX MATTERS. (a) Each of the Company and each Subsidiary has
in accordance with all Applicable Laws filed all Tax Returns which are required
to be filed, and has paid, or made adequate provision for the payment of, all
Taxes which have or may become due and payable pursuant to said Returns and all
other governmental charges and assessments received to date. The Tax Returns of
the Company and each Subsidiary have been prepared in accordance with all
Applicable Laws and generally accepted principles applicable to taxation
consistently applied. All Taxes which the Company and each Subsidiary are
required by law to withhold and collect have been duly withheld and collected,
and have been paid over, in a timely manner, to the proper Authorities to the
extent due and payable. Neither the Company nor any Subsidiary has executed any
waiver to extend, or otherwise taken or failed to take any action that would
have the effect of extending, the applicable statute of limitations in respect
of any Tax liabilities of the Company or any Subsidiary for the fiscal years
prior to and including the
<PAGE> 18
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most recent fiscal year. Adequate provision has been made on the most recent
balance sheet forming part of the Financial Statements for all Taxes of any
kind, including interest and penalties in respect thereof, whether disputed or
not, and whether past, current or deferred, accrued or unaccrued, fixed,
contingent, absolute or other, and to the knowledge of the Company and each
Subsidiary there are no transactions or matters or any basis which might or
could result in additional Taxes of any nature to the Company or any such
Subsidiary for which an adequate reserve has not been provided on such balance
sheet. Neither the Company nor any Subsidiary is a "consenting corporation"
within the meaning of Section 341(f) of the Code. Each of the Company and each
Subsidiary has at all times been taxable as a Subchapter C corporation under the
Code, except as otherwise set forth in Section 3.11(a) of the Disclosure
Schedule. Neither the Company nor any Subsidiary has ever been a member of any
consolidated group (other than exclusively with the Company and its
Subsidiaries) for Tax purposes, except as set forth in Schedule 3.11(a) of the
Disclosure Schedule.
(b) Each of the Company and each Subsidiary has paid all Taxes which have
become due pursuant to its Returns and has paid all installments (to the extent
required to avoid material underpayment penalties) of estimated Taxes due and
payable.
(c) From the end of its most recent fiscal year to the date hereof,
neither the Company nor any Subsidiary has made any payment on account of any
Taxes except regular payments required in the ordinary course of business,
consistent with prior practice, with respect to current operations or property
presently owned.
(d) The information shown on the federal income Tax Returns of the Company
and its Subsidiaries (true, correct and complete copies of which have been
furnished by the Company to UTN) is true, correct and complete and fairly and
accurately reflects the information purported to be shown. Federal and state
income Tax Returns of the Company and its Subsidiaries have been examined by the
IRS or applicable state Authority through the taxable periods set forth in
Section 3.11(d) of the Disclosure Schedules, and neither the Company nor any
Subsidiary has been notified regarding any pending examination, except as shown
in Section 3.11(d) of the Disclosure Schedule.
(e) Neither the Company nor any Subsidiary is a party to any tax sharing
agreement or arrangement, except as set forth in Section 3.11(e) of the
Disclosure Schedule.
(f) Neither the Company nor any Subsidiary is, or within five years of the
date hereof has been, a "United States real property holding corporation" as
defined in Section 897 of the Code.
(g) The Company makes no representation as to the amount of any tax refund
that the Company may ultimately receive for the tax period ended December 31,
1995.
SECTION 3.12 EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974. (a) Neither
the Company nor any of its Subsidiaries (which for purposes of this Section 3.12
shall include any ERISA Affiliate with respect to any Plan subject to Title IV
of ERISA) contributes to any Plan or sponsors any Plan or Benefit Arrangement or
has contributed to or sponsored any Plan or Benefit Arrangement, except as set
forth in Section 3.12(a) of the Disclosure Schedule. As to all Plans and Benefit
Arrangements listed in Section 3.12(a) of the Disclosure Schedule, and except as
disclosed in such Section 3.12(a) of the Disclosure Schedule:
(i) all Plans and Benefit Arrangements comply and have been
administered in all material respects in form and in operation with all
Applicable Laws, and neither the Company nor any of
<PAGE> 19
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its Subsidiaries has received any outstanding notice from any Authority
questioning or challenging such compliance;
(ii) all Plans maintained or previously maintained by the Company or
any of its Subsidiaries that are or were intended to comply with Section
401 of the Code comply and complied in form and in operation with all
applicable requirements of such Section, and no event has occurred which
will or could reasonably be expected to give rise to disqualification of
any such Plan under such Section or to a tax under Section 511 of the
Code;
(iii) none of the assets of any Plan are invested in employer
securities or employer real property;
(iv) there are no "prohibited transactions" (as described in Section
406 of ERISA or Section 4975 of the Code) with respect to any Plan for
which the Company or any of its Subsidiaries has any liability;
(v) there have been no acts or omissions by the Company or any of
its Subsidiaries which have given rise to or may reasonably be expected to
give rise to fines, penalties, taxes or related charges under Sections
502(c), 502(i) or 4071 of ERISA or Chapter 43 of the Code for which the
Company or any of its Subsidiaries may be liable;
(vi) there are no Claims (other than routine claims for benefits)
pending or threatened involving Plans or the assets of Plans;
(vii) no Plan is subject to Title IV of ERISA, or if subject, there
have been no "reportable events" (as described in Section 4043 of ERISA)
as to which there is any material risk of termination of such Plan, and no
steps have been taken to terminate any such Plan;
(viii) to the extent that the most recent balance sheet forming part
of the Financial Statements do not include a pro rata amount of the
contributions which would otherwise have been made in accordance with past
practices for the Plan years which include the Closing Date, such amounts
are set forth in Section 3.12(a) of the Disclosure Schedule;
(ix) neither the Company nor any of its Subsidiaries nor any of its
respective directors, officers, employees or any other fiduciary has
committed any breach of fiduciary responsibility imposed by ERISA that
would subject the Company or any of its Subsidiaries or any of its
respective directors, officers or employees to liability under ERISA;
(x) no Plan which is subject to Part 3 of Subtitle B of Title I of
ERISA or Section 412 of the Code had an accumulated funding deficiency (as
defined in Section 302 of ERISA and Section 412 of the Code), whether or
not waived, as of the last day of the most recently completed fiscal year
of such Plan;
(xi) no material liability to the PBGC has been or is expected by
the Company to be incurred by the Company or any of its Subsidiaries with
respect to any Plan, and there has been no event or condition which
presents a material risk of termination of any Plan by the PBGC;
(xii) except as set forth in Section 3.12(a)(xii) of the Disclosure
Schedule (which entry, if applicable, shall indicate the present value of
accumulated plan liabilities calculated in a manner consistent with FAS
106 and actual annual expense for such benefits for each of the last two
(2)
<PAGE> 20
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years) and pursuant to the provisions of COBRA, neither the Company nor
any of its Subsidiaries maintains any Plan that provides benefits
described in Section 3(1) of ERISA to any former employees or retirees of
the Company or any of its Subsidiaries; and
(xiii) the Company has made available to UTN a copy of the two most
recently filed Federal Form 5500 series and accountant's opinion, if
applicable, for each Plan (and the two most recent actuarial valuation
reports for each Plan, if any, that is subject to Title IV of ERISA), and
all information provided by the Company to any actuary in connection with
the preparation of any such actuarial valuation report was true, correct
and complete in all material respects.
(b) Neither the Company nor any of its Subsidiaries is or ever has been a
party to any Multiemployer Plan or made contributions to any such plan.
(c) Section 3.12(c) of the Disclosure Schedule sets forth the basis of
funding, and the current status of, any past service liability with respect to
each Employment Arrangement to which the same is applicable.
SECTION 3.13 ABSENCE OF SENSITIVE PAYMENTS. The Company has not, nor has
any Subsidiary, or, to the Company's or any Subsidiary's knowledge, any of its
or any Subsidiary's officers, directors, employees or Representatives, (i) made
any contributions, payments or gifts to or for the private use of any
governmental official, employee or agent where either the payment or the purpose
of such contribution, payment or gift is illegal under the laws of the United
States or the jurisdiction in which made, (ii) established or maintained any
unrecorded fund or asset for any purpose or made any false or artificial entries
on its books, or (iii) made any payments to any person with the intention or
understanding that any part of such payment was to be used for any purpose other
than that described in the documents supporting the payment.
SECTION 3.14 INAPPLICABILITY OF SPECIFIED STATUTES. Neither the Company
nor any Subsidiary is a "holding company", or a "subsidiary company" or an
"affiliate" of a "holding company", as such terms are defined in the Public
Utility Holding Company Act of 1935, as amended, or an "investment company" or a
company "controlled" by or acting on behalf of an "investment company", as
defined in the Investment Company Act of 1940, as amended.
SECTION 3.15 AUTHORIZED AND OUTSTANDING CAPITAL STOCK. (a) The authorized
and outstanding capital stock of the Company is as set forth in Section 3.15(a)
of the Disclosure Schedule. All of such outstanding capital stock has been duly
authorized and validly issued, is fully paid and nonassessable and is not
subject to any preemptive or similar rights. Except as set forth in Section
3.15(a) of the Disclosure Schedule, (i) there is neither outstanding nor has the
Company or any Subsidiary agreed to grant or issue any shares of its capital
stock or any Option Security or Convertible Security, and (ii) neither the
Company nor any Subsidiary is a party to or is bound by any agreement, put or
commitment pursuant to which it is obligated to purchase, redeem or otherwise
acquire any shares of capital stock or any Option Security or Convertible
Security. Between the date hereof and the Closing, the Company will not, and
will not permit any Subsidiary to, issue, sell or purchase or agree to issue,
sell or purchase any capital stock or any Option Security or Convertible
Security of the Company or any Subsidiary. As of the Effective Time, the rights
of the holders of all Option Securities and Convertible Securities issued by the
Company to exercise or convert such Securities shall have been terminated
pursuant to the terms thereof.
<PAGE> 21
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(b) All of the outstanding capital stock of the Company is owned by the
Stockholders as set forth in Section 3.15(b) of the Disclosure Schedule, and is,
to the Company's knowledge, free and clear of all Liens, except as set forth in
Section 3.15(b) of the Disclosure Schedule.
SECTION 3.16 EMPLOYMENT ARRANGEMENTS. (a) Neither the Company nor any
Subsidiary has any obligation or liability, contingent or other, under any
Employment Arrangement (whether or not listed in Section 3.12(a) of the
Disclosure Schedule), other than those listed or described in Section 3.16(a) of
the Disclosure Schedule. Neither the Company nor any Subsidiary is now or during
the past five (5) years has been subject to or involved in or, to the Company's
knowledge, threatened with any union elections, petitions therefor or other
organizational activities, except as described in Section 3.16(a) of the
Disclosure Schedule. None of the employees of the Company or any Subsidiary are
now, or during the past five (5) years have been, represented by any labor union
or other employee collective bargaining organization or are parties to any labor
or other collective bargaining agreement, and there are no pending grievances,
disputes or controversies with any union or any other employee collective
bargaining organization of such employees, or, to the Company's or any
Subsidiary's knowledge, threats of strikes, work stoppages or slowdowns or any
pending demands for collective bargaining by any union or other such
organization, and the Company is not, nor is any Subsidiary or any employee of
the Company or any Subsidiary, now subject to or involved in, and during the
past five (5) years none of them has been, subject to or involved in or, to the
Company's or any Subsidiary's knowledge, threatened with, any union elections,
petitions therefor, or other organizational or recruiting activities. The
Company and each Subsidiary have performed all obligations required to be
performed under all Employment Arrangements and are not in breach or violation
of or in default or arrears under any of the terms, provisions or conditions
thereof.
(b) Except as set forth in Section 3.16(b) of the Disclosure Schedule, no
employee shall accrue or receive additional benefits, service or accelerated
rights to payments of benefits under any Employment Arrangement, including the
right to receive any parachute payment, as defined in Section 280G of the Code,
or become entitled to severance, termination allowance or similar payments as a
direct result of this Agreement, the Merger or the Transactions.
(c) The Company considers its and each Subsidiary's relationships with
employees to be good, and except as set forth in Section 3.16(c) of the
Disclosure Schedule, since December 31, 1991, neither the Company nor any
Subsidiary has experienced a work slowdown or stoppage due to labor problems.
SECTION 3.17 MATERIAL AGREEMENTS. (a) Listed on Section 3.17(a) of the
Disclosure Schedule are all Material Agreements relating to the ownership or
operation of the business and property of the Company or any Subsidiary
presently held or used by the Company or any Subsidiary or to which the Company
or any Subsidiary is a party or to which it or any of its property is subject or
bound. True, complete and correct copies of each of the Material Agreements have
been furnished by the Company to UTN (or true, complete and correct descriptions
thereof have been set forth in Section 3.17(a) of the Disclosure Schedule, if
any such Material Agreements are oral). All of the Material Agreements are
valid, binding and legally enforceable obligations of the parties thereto
(except as such enforceability may be subject to bankruptcy, moratorium,
insolvency, reorganization, arrangement, voidable preference, fraudulent
conveyance and other similar laws relating to or affecting the rights of
creditors and except as the same may be subject to the effect of general
principles of equity), and the Company or one of its Subsidiaries is validly and
lawfully operating its business and owning its property under each of the
Material Agreements. The Company and each Subsidiary have duly complied with all
of the terms and conditions of each Material Agreement and have not done or
performed, or failed to do or perform (and there is no pending or, to the
knowledge of the Company and each Subsidiary, threatened Claim that the Company
or any such Subsidiary has not so complied, done and performed or fail to do and
perform)
<PAGE> 22
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any act the effect of which would be to invalidate or provide grounds for the
other party thereto to terminate (with or without notice, passage of time or
both) such Material Agreement or impair the rights or benefits, or increase the
costs, of the Company or any Subsidiary, under any of the Material Agreements.
(b) Each Material Agreement, if any, set forth in Section 3.17(a) of the
Disclosure Schedule calling for the delivery of goods or merchandise or the
performance of services can be satisfied or performed by the Company or one of
its Subsidiaries at margins providing an operating profit, except as set forth
in Section 3.17(b) of the Disclosure Schedule. No Material Agreement calls for
the delivery of goods or merchandise in which the Company or any Subsidiary has
an interest.
SECTION 3.18 ORDINARY COURSE OF BUSINESS. (a) The Company and each
Subsidiary, from the date of the most recent balance sheet forming part of the
financial statements to the date hereof, and until the Closing Date, except as
may be described on Section 3.18(a) of the Disclosure Schedule or as may be
required expressly by the terms of this Agreement:
(i) has operated, and will continue to operate, its business in the
normal, usual and customary manner in the ordinary course of
business, consistent with prior practice;
(ii) has maintained, and will continue to maintain its Deposit Accounts
in the ordinary course of business, consistent with prior practice;
(iii) has not sold or otherwise disposed of, or contracted to sell or
otherwise dispose of, and will not sell or otherwise dispose of or
contract to sell or otherwise dispose of, any of its properties or
assets, other than in the ordinary course of business, or with the
consent of UTN;
(iv) except in each case in the ordinary course of business, consistent
with prior practice, or as detailed as transactions not in the
ordinary course in the Company's business plan set forth as Section
3.18(a)(iii) of the Disclosure Schedule, and except as expressly
otherwise contemplated hereby,
(A) has not incurred and will not incur any obligations or
liabilities (fixed, contingent or other);
(B) has not entered and will not enter into any commitments; and
(C) has not cancelled and will not cancel any debts or claims;
(v) has not made or committed to make, and will not make or commit to
make, any additions to its property or any purchases of machinery or
equipment, except for normal maintenance and replacements;
(vi) has not discharged or satisfied, and will not discharge or satisfy,
any Lien and has not paid and will not pay any obligation or
liability (absolute or contingent) other than current liabilities or
obligations under contracts then existing or thereafter entered into
in the ordinary course of business, consistent with prior practice,
and commitments under Leases existing on that date or incurred since
that date in the ordinary course of business;
<PAGE> 23
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(vii) has not created or permitted to be created, and will not create or
permit to be created any Lien on any of its tangible property;
(viii) has not transferred or created, or permitted to be created, and
will not transfer or create, or permit to be created, any Lien on
any Intangible Assets;
(ix) except in the ordinary course of business, consistent with prior
practice, has not increased and will not increase the compensation
payable or to become payable to any of its directors, officers,
employees, advisers, consultants, salesmen or agents or otherwise
alter, modify or change the terms of their employment or
engagement;
(x) has not suffered any material damage, destruction or loss
(whether or not covered by insurance) or any acquisition or
taking of property by any Authority;
(xi) has not waived, and will not waive, any rights of material value
without fair and adequate consideration;
(xii) has not experienced any work stoppage;
(xiii) has not entered into, amended or terminated and will not enter
into, amend or terminate any Lease, Governmental Authorization,
Private Authorization, Material Agreement or Employment
Arrangement or any Contractual Obligation or transaction with any
Affiliate, except for terminations in the ordinary course of
business, consistent with prior practice, in accordance with the
terms thereof;
(xiv) has not amended or terminated and will not amend or terminate, and
has kept and will keep in full force and effect including without
limitation renewing to the extent the same would otherwise expire
or terminate, all insurance policies and coverage; and
(xv) has not entered into, and will not enter into, any other
transaction or series of related transactions which individually
or in the aggregate is material to the Company or the Company and
its Subsidiaries taken as a whole, except in the ordinary course
of business, consistent with prior practice.
(b) From the end of its most recent fiscal year to the date hereof, except
as described in Section 3.18(b) of the Disclosure Schedule, neither the Company
nor any Subsidiary has, or on or prior to the Closing Date will have, declared,
made or paid, or agreed to declare, make or pay, any Distribution.
SECTION 3.19 BANK ACCOUNTS, ETC. Section 3.19 of the Disclosure Schedule
contains a true and correct and complete list as of the date hereof of all
banks, trust companies, savings and loan associations and brokerage firms in
which the Company or any Subsidiary has an account or a safe deposit box
(collectively, "Deposit Accounts") and the names of all Persons authorized to
draw thereon, to have access thereto, or to authorize transactions therein, the
names of all Persons, if any, holding powers of attorney from the Company or any
Subsidiary and a summary statement as to the terms thereof.
SECTION 3.20 ADVERSE RESTRICTIONS. Neither the Company nor any Subsidiary
is a party to or subject to, nor is any of its property subject to, any
Applicable Law, Governmental Authorization, Contractual Obligation, Employment
Arrangement, Material Agreement or Private Authorization, or any other
obligation or restriction of any kind or character, or any aggregation thereof,
which impairs the Company's ability to conduct its business as it is currently
being conducted or which could have any
<PAGE> 24
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Adverse Effect on the Company or the Company and its Subsidiaries taken as a
whole, except as set forth in Section 3.20 of the Disclosure Schedule.
SECTION 3.21 BROKER OR FINDER. No Person assisted in or brought about the
negotiation of this Agreement, the Merger or the subject matter of the
Transactions in the capacity of broker, agent or finder or in any similar
capacity on behalf of the Company or any Stockholder.
SECTION 3.22 PERSONAL INJURY OR PROPERTY DAMAGE; WARRANTY CLAIMS; ETC.
Except as set forth in Section 3.22 of the Disclosure Schedule, neither the
Company nor any Subsidiary or any Person acting for or on its behalf including
without limitation any insurance carrier has at any time since December 31,
1995, paid, and there is not now pending or, to the knowledge of the Company or
any Subsidiary, threatened any Claim (or any basis for any such Claim) relating
to, any damages to any third party for injuries to Persons or damage to
property, or for breach of warranty, which, in the case of pending or threatened
Claims, if determined Adversely to the Company or any Subsidiary, individually
or in the aggregate (taking into account unasserted Claims of a similar nature),
could have any Adverse Effect on the Company or the Company and its Subsidiaries
taken as a whole.
SECTION 3.23 Environmental Matters.
----------------------
(a) Except as set forth in Section 3.23(a) of the Disclosure Schedule,
the Company and each Subsidiary:
(i) is in compliance in all material respects with all Environmental
Laws and has not been notified that it is potentially liable, has not
received any request for information or other correspondence concerning
any site or facility, and is not a "potentially responsible party" under
the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended, the Resource Conservation Recovery Act, as amended,
or any similar state law;
(ii) has not entered into or received any consent decree,
compliance order, or administrative order relating to Environmental
Requirements;
(iii) is not a party in interest or in default under any judgment,
order, writ, injunction or decree of any final order relating to
Environmental Requirements; and
(iv) has obtained all material Governmental Authorizations and
Private Authorizations (including without limitation all Environmental
Permits) and made all Governmental Filings which are required to be filed
by the Company and each Subsidiary for the ownership of its property,
facilities and assets and the operation of its businesses under all
Environmental Laws, is and at all times since its organization has been in
material compliance with the terms and conditions of all such required
Governmental and Private Authorizations and all Environmental
Requirements, and is not the subject of or, to the Company's or any
Subsidiary's knowledge, threatened with any Legal Action involving a
demand for damages or other potential liability with respect to violations
or breaches of any Environmental Requirement.
(b) Except as set forth in Section 3.23(b) of the Disclosure Schedule:
(i) no disposal, release, burial or placement of Hazardous Materials
has occurred on any property or facility owned, leased, operated or
occupied by the Company or any Subsidiary during the period that such
facilities and properties were owned, leased, operated or occupied by it
or, to the knowledge of the Company or any Subsidiary, at any other time
or at any other
<PAGE> 25
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facility or site to which Hazardous Materials from or generated by the
Company or any Subsidiary may have been taken at any time in the past;
(ii) there has been no disposal, release, burial or placement of
Hazardous Materials on any property which could reasonably be expected to
result or has resulted in contamination of or beneath any properties or
facilities owned, leased, operated or occupied by the Company or any
Subsidiary during the period that such facilities and properties were
owned, leased, operated or occupied by it (or, to the knowledge of the
Company or any Subsidiary, at any other time); and
(iii) no notice has been received by the Company or any Subsidiary
and no Lien has arisen on its or any Subsidiary's properties or facilities
under Environmental Law.
(c) Except as set forth in Section 3.23(c) of the Disclosure Schedule,
neither the Company nor any Subsidiary has any above-ground or underground fuel
storage tanks on property owned, leased, operated or occupied by it.
(d) There has not been, and on or prior to the Closing Date, there shall
not be, any past or present Events or plans of the Company or any Subsidiary or
any of its predecessors, which, individually or in the aggregate, constitute a
breach of any Environmental Requirements or which, individually or in the
aggregate, may interfere with or prevent continued compliance with all
Environmental Requirements, or which, individually or in the aggregate, may give
rise to any common law, statutory or other legal liability, or otherwise form
the basis of any Claim, clean-up cost, fine, penalty or assessment based on or
related to the transportation, transmission, gathering, processing,
distribution, use, treatment, storage, disposal or handling, or the emission,
discharge, release or threatened release into the environment, of any Hazardous
Material with respect to the Company or any Subsidiary or any of its
predecessors or its or any of their business, operations or property which could
have any Adverse Effect on the Company or the Company and its Subsidiaries taken
as a whole.
(e) Except as set forth in Section 3.23(e) of the Disclosure Schedule,
neither the Company nor any Subsidiary has used any Hazardous Materials in the
conduct of its business. To the extent that any Hazardous Materials are so set
forth, Section 3.23(e) of the Disclosure Schedule also sets forth (i) a
description of Hazardous Materials used, (ii) the annual volume of Hazardous
Materials used, (iii) the years during which such use occurred, and (iv) the
Persons to whom such Hazardous Materials were transferred after such use.
(f) Section 3.23(f) of the Disclosure Schedule contains a complete and
correct description of all waste products generated by the Company or any
Subsidiary which are not set forth in Section 3.23(e), the approximate annual
volumes of such waste products, and all Persons to whom such waste products have
been transferred.
(g) No site assessment, audit or other investigation has been conducted by
or on behalf of the Company or any Subsidiary as to environmental matters at any
property owned, leased, operated or occupied by the Company or any Subsidiary,
except as set forth in Section 3.23(g) of the Disclosure Schedule.
SECTION 3.24 MATERIALITY. The matters and items excluded from the
representations and warranties set forth in this Article by operation of the
materiality exceptions and materiality qualifications contained in such
representations and warranties, in the aggregate for all such excluded matters
and items, are not and could not reasonably be expected to be Adverse to the
Company or the Company and its Subsidiaries taken as a whole.
<PAGE> 26
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SECTION 3.25 SOLVENCY. As of the execution and delivery of this Agreement,
the Company and the Company and its Subsidiaries taken as a whole are and, as of
the Closing Date, will be solvent.
SECTION 3.26 [Intentionally Omitted]
SECTION 3.27 COMPLIANCE WITH REGULATIONS RELATING TO SECURITIES CREDIT.
None of the borrowings, if any, of the Company were incurred or used for the
purpose of purchasing or carrying any security which at the date of its
acquisition was, or any security which now is, margin stock or other margin
security within the meaning of Regulation T of the Margin Rules or a "security
that is publicly held," within the meaning of the Margin Rules, and the cash
portion of the proceeds from the consummation of the Transactions will not be
used for the purpose of purchasing or carrying any margin stock or other margin
security, or a "security that is publicly held", or any security issued by UTN,
or in any way which would involve the Company in any violation of the Margin
Rules, and neither the Company nor any Subsidiary owns any margin stock or other
margin security, or a "security that is publicly held", and neither the Company
nor any Subsidiary has any present intention of acquiring any margin stock or
other margin security, or any "security that is publicly held".
SECTION 3.28 [Intentionally Omitted.]
SECTION 3.29 CERTAIN STATE STATUTES INAPPLICABLE. The provisions of
applicable New York takeover laws, if any, will not apply to this Agreement, the
Merger or the Transactions.
SECTION 3.30 CONTINUING REPRESENTATIONS AND WARRANTIES. Except for those
representations and warranties which speak as of a specific date, all of the
representations and warranties of the Company set forth in this Article shall be
true and correct on the Closing Date with the same force and effect as though
made on and as of that date and those, if any, which speak as of a specific date
shall be true and correct as of such date on the Closing Date.
SECTION 3.31 REGISTRATION STATEMENT. (a) All information furnished by or
on behalf of the Company or any Stockholder in writing specifically for use in
the Registration Statement and the Prospectus is true, correct and complete and
does not contain any untrue statement of material fact or omit to state any
material fact necessary to make such statements, in the light of the
circumstances in which they were made, not misleading.
(b) With respect to information furnished prior to the Effective Time the
Company and the Stockholders have reviewed or have had reviewed on their behalf,
and are familiar with the information concerning the Company and the
Stockholder(s) (or any of them) in the Prospectus, furnished to them pursuant to
this Transaction, and have no knowledge of any material fact, condition or
information concerning the Company and the Stockholder(s) misstated or not
disclosed in such Prospectus.
SECTION 3.32 PREDECESSOR STATUS; ETC. Set forth in Schedule 3.32 of the
Disclosure Schedule is a listing of all names of all predecessor companies of
the Company and the names of any Entities from which, since April 30, 1990, the
Company previously acquired material properties or assets. Except as disclosed
in Schedule 3.32 of the Disclosure Schedule, the Company has never been a
Subsidiary or division of another Entity, nor a part of an acquisition which was
later rescinded. None of the Company, the Stockholders or any Subsidiary has
ever owned any capital stock of UTN nor, except as set forth in Schedule 3.32 of
the Disclosure Schedule, has there been, since April 30, 1990, any sale or
spin-off of material assets by the Company or any Subsidiary.
<PAGE> 27
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF
THE STOCKHOLDERS
Each of the Stockholders, severally and not jointly, represents, warrants
and covenants to, and agrees with, UTN and UTN Merger Subsidiary as follows:
SECTION 4.1 ORGANIZATION. Such Stockholder (if other than an individual)
is an Entity duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization.
SECTION 4.2 POWER AND AUTHORITY. Such Stockholder (if other than an
individual) has adequate power and authority (corporate, partnership, trust or
other) and all necessary Governmental Authorizations and Private Authorizations
in order to enable it to execute and deliver, and to perform its obligations
under, this Agreement and each other Collateral Document executed or required to
be executed pursuant hereto or thereto; and the execution, delivery and
performance of this Agreement and each other Collateral Document executed or
required to be executed pursuant hereto or thereto have, to the extent
applicable, been duly authorized by all requisite corporate, partnership, trust
or other action, including that, if required, of such Stockholder's stockholders
or partners.
SECTION 4.3 ENFORCEABILITY. This Agreement has been duly executed and
delivered by such Stockholder and constitutes, and each Collateral Document
executed or required to be executed by such Stockholder pursuant hereto or
thereto when executed and delivered by such Stockholder will constitute, legal,
valid and binding obligations of such Stockholder, enforceable in accordance
with their respective terms, except as such enforceability may be subject to
bankruptcy, moratorium, insolvency, reorganization, arrangement, voidable
preference, fraudulent conveyance and other similar laws relating to or
affecting the rights of creditors and except as the same may be subject to the
effect of general principles of equity.
SECTION 4.4 TITLE TO SHARES. Except as set forth in Section 4.4 of the
Disclosure Schedule (all of which exceptions shall be removed, satisfied or
discharged no later than the Closing), such Stockholder owns and has good and
merchantable title to the Shares to be exchanged pursuant to this Agreement,
free and clear of all Liens.
SECTION 4.5 NO CONFLICT; REQUIRED FILINGS AND CONSENTS. Neither the
execution and delivery of this Agreement or any Collateral Document executed or
required to be executed pursuant hereto or thereto, nor the consummation of the
Merger and the Transactions, nor compliance with the terms, conditions and
provisions hereof or thereof by such Stockholder:
(i) will materially conflict with, or result in a breach or
violation of, or constitute a default under, any Applicable Law on the
part of such Stockholder or will conflict with, or result in a breach or
violation of, or constitute a default in the performance, observance or
fulfillment of, or a default under, or permit the acceleration of any
obligation or liability in, or but for any requirement of giving of notice
or passage of time or both would constitute such a conflict with, breach
or violation of, or default under, or permit any such acceleration in, any
Contractual Obligation of such Stockholder;
(ii) will result in or permit the creation or imposition of any Lien
upon any property or asset of such Stockholder used or now contemplated to
be used by the Company; or
<PAGE> 28
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(iii) will require any Governmental Authorization or Governmental
Filing or Private Authorization, except for filing requirements in
connection with the Merger and the Transactions and as the Securities Act
or applicable state securities laws may apply to compliance by such
Stockholder with the provisions of this Agreement relating to the
Registered Stock except as set forth in Section 4.5(iii) of the Disclosure
Schedule.
SECTION 4.6 PROSPECTUS DELIVERY; QUESTIONNAIRE. Such Stockholder has
received the Prospectus and has had an opportunity to review it and to ask
questions of and to receive answers from the officers of UTN concerning the
information contained therein. If UTN has requested such Stockholder to complete
a Directors' and Officers' Questionnaire, such Stockholder has completed and
duly executed such Questionnaire and all of the information provided by such
Stockholder therein is true, complete and correct and does not contain any
untrue statement of material fact which would make such information misleading
in light of the circumstances in which it was given.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF UTN
AND UTN MERGER SUBSIDIARY
UTN and UTN Merger Subsidiary, jointly and severally, represent, warrant
and covenant to, and agree with, the Company as follows:
SECTION 5.1 ORGANIZATION AND QUALIFICATION. UTN and UTN Merger Subsidiary
is a corporation duly incorporated, validly existing and in good standing under
the laws of Delaware, and New York, respectively, and qualified to do business
as a foreign corporation in such jurisdictions as necessary according to
Applicable Law.
SECTION 5.2 POWER AND AUTHORITY. Except for such consents of Authorities
as may be necessary in connection with change-of-control transactions with
respect to the Governmental Authorizations listed in Section 3.1(c) of the
Disclosure Schedule, each of UTN and UTN Merger Subsidiary has all requisite
power and authority (corporate and other) and has in full force and effect all
Governmental Authorizations and Private Authorizations in order to enable it to
execute and deliver, and to perform its obligations under, this Agreement and
each Collateral Document executed or required to be executed pursuant hereto or
thereto and to consummate the Merger and the Transactions; and the execution,
delivery and performance of this Agreement and each Collateral Document executed
or required to be executed pursuant hereto or thereto have been duly authorized
by all requisite corporate or other action. This Agreement has been duly
authorized, executed and delivered by each of UTN and UTN Merger Subsidiary and
constitutes, and each Collateral Document executed or required to be executed
pursuant hereto or thereto when executed and delivered by it will constitute,
legal, valid and binding obligations of UTN and UTN Merger Subsidiary,
respectively, enforceable in accordance with their respective terms, except as
such enforceability may be subject to bankruptcy, moratorium, insolvency,
reorganization, arrangement, voidable preference, fraudulent conveyance and
other similar laws relating to or affecting the rights of creditors and except
as the same may be subject to the effect of general principles of equity.
SECTION 5.3 NO CONFLICT; REQUIRED FILINGS AND CONSENTS. Except for such
consents of Authorities as may be necessary in connection with change-of-control
transactions with respect to the Governmental Authorizations listed in Section
3.1(c) of the Disclosure Schedule, neither the execution and delivery of this
Agreement or any Collateral Document executed or required to be executed
pursuant
<PAGE> 29
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hereto or thereto, nor the consummation of the Transactions, nor compliance with
the terms, conditions and provisions hereof or thereof by each of UTN and UTN
Merger Subsidiary:
(i) will conflict with, or result in a breach or violation of, or
constitute a default under, any Applicable Law on the part of UTN or
UTN Merger Subsidiary or will conflict with, or result in a breach or
violation of, or constitute a default under, or permit the
acceleration of any obligation or liability in, or but for any
requirement of giving of notice or passage of time or both would
constitute such a conflict with, breach or violation of, or default
under, or permit any such acceleration in, any Contractual Obligation
of UTN or UTN Merger Subsidiary, or
(ii) will require any Governmental Authorization or Governmental Filing or
Private Authorization, except for filing requirements under Applicable
Law in connection with the Merger and the Transactions and as the
Securities Act and applicable state securities laws may apply to
compliance by UTN with the provisions of this Agreement relating to
the Registered Stock.
SECTION 5.4 FINANCING. UTN has or will have sufficient funds or available
financing to enable the Surviving Corporation (i) to pay the Merger
Consideration for all Shares of the Company Stock as provided in Sections 2.1(a)
and 2.1(d), the consideration for each Option Security and each Convertible
Security as provided in Section 2.4, and all fees and expenses related to the
Merger and the Transactions, and (ii) to repay in its entirety the Designated
Indebtedness set forth in Schedule 5.4.
SECTION 5.5 BROKERS. No Person assisted in or brought about the
negotiation of this Agreement, the Merger or the subject matter of the
Transactions in the capacity of broker, agent or finder or in any similar
capacity on behalf of UTN or UTN Merger Subsidiary.
SECTION 5.6 PRIOR ACTIVITIES OF UTN MERGER SUBSIDIARY. UTN Merger
Subsidiary has not incurred any liabilities or Contractual Obligations, except
those incurred in connection with its organization, the negotiation of this
Agreement and the performance hereof the performance of all Governmental
Filings, and the financing of the foregoing. Except as contemplated by the
foregoing, UTN Merger Subsidiary has not engaged in any business activities of
any type or kind whatsoever, nor entered into any agreements or arrangements
with any Person, nor is it subject to or bound by any obligation or undertaking.
SECTION 5.7 CAPITALIZATION OF UTN OR UTN MERGER SUBSIDIARY. The authorized
and outstanding capital stock of each of UTN and UTN Merger Subsidiary is as set
forth in Schedule 5.7 hereto. All of such outstanding capital stock has been
duly authorized and validly issued, is fully paid and nonassessable and is not
subject to any preemptive or similar rights. Between the date hereof and the
Closing, except as contemplated by this Agreement, UTN Merger Subsidiary will
not issue or sell or purchase or agree to issue or sell or purchase any capital
stock or any Option Security or Convertible Security. All shares of common stock
of UTN Merger Subsidiary held by UTN have been duly authorized and validly
issued to UTN and are fully paid and non-assessable and are not subject to any
preemptive or similar rights. As of the date hereof, except for this Agreement,
there are not any outstanding or authorized subscriptions, options, warrants,
calls, rights, commitments or any other agreements of any character obligating
UTN Merger Subsidiary to issue any shares of capital stock of UTN Merger
Subsidiary, or any other securities convertible into or evidencing the right to
subscribe for any such shares. When issued in connection with the Merger, the
UTN Stock will be duly authorized, validly issued, fully paid and nonassessable
and will not be subject to any preemptive or similar rights.
<PAGE> 30
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SECTION 5.8 REGISTRATION STATEMENT. (i) As of the Closing Date, the
Registration Statement and any amendments thereto will comply in all material
respects with the provisions of the Securities Act and will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading;
and (ii) the Prospectus will not as of the issue date thereof contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, except that the representations and
warranties contained in this Section 5.8 shall not apply to statements or
omissions in the Registration Statement or the Prospectus based on information
relating to the Company or the Stockholders furnished to UTN in writing by the
Company or any of the Stockholders. UTN has furnished the Company with a copy of
the Registration Statement as on file on the date hereof, will furnish the
Company with a copy of each amendment thereto until the Closing and thereafter
will furnish the Stockholders with each amendment thereto and to the Prospectus.
SECTION 5.9 SOLVENCY. After the Effective Time, and upon the consummation
of the Merger and the Transactions, UTN and its Subsidiaries, individually and
taken as a whole, shall be solvent.
ARTICLE 6
ADDITIONAL COVENANTS
SECTION 6.1 ACCESS TO INFORMATION; Confidentiality. (a) The Company shall
afford to UTN and the Representatives of UTN full access during normal business
hours throughout the period prior to the Effective Time to all of its (and its
Subsidiaries') properties, books, contracts, commitments and records (including
without limitation Tax Returns) and, during such period, shall furnish promptly
upon request (i) a copy of each report, schedule and other document filed or
received by any of them pursuant to the requirements of any Applicable Law
(including without limitation federal or state securities laws) or filed by any
of them with any Authority in connection with the Transactions or which may have
a material effect on their respective businesses, operations, properties,
prospects, personnel, condition (financial or other), or results of operations,
(ii) to the extent not provided for pursuant to the preceding clause, (Y) all
financial records, ledgers, workpapers and other sources of financial
information possessed or controlled by the Company or its accountants necessary
or useful for the purpose of performing an audit of the Company and the Company
and its Subsidiaries taken as a whole and certifying financial statements and
financial information and (Z) all other information relating to the Company, its
Subsidiaries and Stockholders that UTN or any of its Representatives requires,
and (iii) such other information concerning any of the foregoing as UTN shall
reasonably request. Subject to the terms and conditions of the Confidentiality
Letter (as defined below), which are expressly incorporated herein by reference
thereto for the benefit of the parties hereto, UTN shall hold and shall use its
best efforts to cause the Representatives of UTN to hold, and the Company shall
hold and shall use its best efforts to cause the Representatives of the Company
to hold, in strict confidence all non-public documents and information furnished
(whether prior or subsequent hereto) to UTN or to the Company, as the case may
be, in connection with this Agreement, the Merger and the Transactions.
(b) Subject to the terms and conditions of the Confidentiality Letter, UTN
and the Company may disclose such information as may be necessary in connection
with seeking all Governmental and Private Authorizations or that is required by
Applicable Law to be disclosed. In the event that this Agreement is terminated
in accordance with its terms, UTN and the Company shall each promptly redeliver
all non-public written material provided pursuant to this Section or any other
provision of this Agreement or otherwise in connection with the Merger and the
Transactions and shall not retain any
<PAGE> 31
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copies, extracts or other reproductions in whole or in part of such written
material other than one copy thereof which shall be delivered to independent
counsel for such party.
(c) The Company and UTN acknowledge that the Company and UTN have
heretofore executed a confidentiality letter, dated January 4, 1996 (the
"Confidentiality Letter"), which separately and as incorporated herein shall
remain in full force and effect after and notwithstanding the execution and
delivery of this Agreement, and that information obtained from the Company by
UTN or its Representatives or by the Company or its Representatives from UTN,
pursuant to Section 6.1(a), the Confidentiality Letter or otherwise shall be
subject to the provisions of the Confidentiality Letter.
(d) No investigation pursuant to this Section 6.1 shall affect any
representation or warranty in this Agreement of any Party hereto or any
condition to the obligations of the Parties hereto.
SECTION 6.2 AGREEMENT TO COOPERATE. (a) Each of the Parties shall use its
best efforts to take, or cause to be taken, all actions and to do, or cause to
be done, all things necessary, proper or advisable under Applicable Law to
consummate the Merger and make effective the Transactions, including using its
best efforts (i) to prepare and file with the applicable Authorities as promptly
as practicable after the execution of this Agreement all requisite applications
and amendments thereto, together with related information, data and exhibits,
necessary to request issuance of orders approving the Merger and the
Transactions by all such applicable Authorities, each of which must be obtained
or become final in order to satisfy the condition applicable to it set forth in
Section 7.1(iii); (ii) to obtain all necessary or appropriate waivers, consents
and approvals, (iii) to effect all necessary registrations, filings and
submissions (including without limitation filings under federal or state
securities laws and any other submissions requested by the SEC and (iv) to lift
any injunction or other legal bar to the Merger and the Transactions (and, in
such case, to proceed with the Merger and the Transactions as expeditiously as
possible), subject, however, to the requisite votes of the Stockholders.
(b) Each of the Parties agrees to take such actions as may be necessary to
obtain any Governmental Authorizations legally required for the consummation of
the Merger and the Transactions, including the making of any Governmental
Filings, publications and requests for extensions and waivers.
(c) The Company will use its best efforts on or prior to the Closing Date
(i) to obtain the satisfaction of the conditions specified in Sections 7.1 and
7.2; (ii) if requested by UTN, to obtain the consents (to the extent required)
to the continued existence in accordance with its then-stated terms of all
long-term debt of each of the Company and each of its Subsidiaries; and (iii) to
attempt to cause those key employees of the Company and its Subsidiaries
designated by UTN that are not Stockholders to execute and deliver
non-competition agreements substantially conforming in form and substance to the
non-competition agreements currently maintained by UTN with its key employees.
Each of UTN and UTN Merger Subsidiary will use its best efforts on or prior to
the Closing Date to obtain the satisfaction of the conditions applicable to it
specified in Sections 7.1 and 7.3. The Stockholders will use their best efforts
to obtain the satisfaction of the conditions applicable to them in Sections 7.1
and 7.2.
(d) The Company agrees that, except as permitted pursuant to Section 3.18
hereof, prior to the Closing Date it will not make or permit to be made any
material change affecting any bank, trust company, savings and loan association,
brokerage firm or safe deposit box or in the names of the Persons authorized to
draw thereon, to have access thereto or to authorize transactions therein or in
such powers of attorney, or open any additional accounts or boxes or grant any
additional powers of attorney, without in each case obtaining the prior written
consent of UTN, which consent UTN will not unreasonably withhold.
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(e) The Company shall take such steps as are necessary and appropriate to
obtain, and shall promptly obtain, satisfaction and discharge of all Liens set
forth in Section 3.15(b) of the Disclosure Schedule.
SECTION 6.3 ASSIGNMENT OF CONTRACTS AND RIGHTS. Anything in this
Agreement to the contrary notwithstanding, this Agreement shall not constitute
an agreement to assign any Claim, Contractual Obligation, Governmental
Authorization, Lease, Private Authorization, commitment, sales, service or
purchase order, or any claim, right or benefit arising thereunder or resulting
therefrom, if the Merger or the Transactions would be deemed an attempted
assignment thereof without the required consent of a third party thereto and
would constitute a breach thereof or in any way affect the rights of UTN, UTN
Merger Subsidiary or the Company thereunder. If such consent is not obtained, or
if consummation of the Merger and the Transactions would affect the rights of
the Company thereunder so that the Surviving Corporation would not in fact
receive all such rights, the Company shall cooperate with UTN in any arrangement
designed to provide for the benefits thereof to the Surviving Corporation,
including subcontracting, sublicensing or subleasing to the Surviving
Corporation or enforcement for the benefit of the Surviving Corporation of any
and all rights of the Company or its Subsidiaries against a third party thereto
arising out of the breach or cancellation by such third party or otherwise; and
any assumption by the Surviving Corporation of the Company's rights thereunder
by operation of law in connection with the Merger which shall require the
consent or approval of any third party shall be made subject to such consent or
approval being obtained.
SECTION 6.4 Intentionally Omitted
SECTION 6.5 TAX CERTIFICATION. At any time during the period beginning on
the date hereof and ending on the Effective Time, the Company shall provide to
UTN, within two business days of a request by UTN, a certificate signed by the
Company certifying that the representation and warranty in Section 3.11(f) is
true and accurate.
SECTION 6.6 NO SOLICITATION. The Company shall not, nor shall it permit
any Subsidiary, or any of the Company's or any Subsidiary's Representatives
(including, without limitation, any investment banker, attorney or accountant
retained by it) to, initiate, solicit or facilitate, directly or indirectly, any
inquiries or the making of any proposal with respect to an Other Transaction (as
defined below), engage in any discussions or negotiations concerning, or provide
to any other person any information or data relating to, it or any Subsidiary
for the purposes of, or otherwise cooperate in any way with or assist or
participate in, or facilitate any inquiries or the making of any proposal which
constitutes, or may reasonably be expected to lead to, a proposal to seek or
effect an Other Transaction, or agree to or endorse any Other Transaction;
provided, however, that nothing contained in this Section shall prohibit the
Company or its Board of Directors from making any disclosure to Stockholders
that, in the reasonable judgment of its Board of Directors in accordance with,
and based upon the written advice of, outside counsel, is required under
Applicable Law. The Company shall promptly advise UTN of, and communicate the
material terms of, any proposal it may receive, or any inquiries it receives
which may reasonably be expected to lead to such a proposal relating to an Other
Transaction, and the identity of the Person making it. The Company shall further
advise UTN of the status and changes in the material terms of any such proposal
or inquiry (or any amendment to any of them). During the term of this Agreement,
the Company shall not enter into any agreement oral or written, and whether or
not legally binding, with any Person that provides for, or in any way
facilitates, an Other Transaction, or affects any other obligation of the
Company under this Agreement.
SECTION 6.7 DIRECTORS' AND OFFICERS' INDEMNIFICATION. From and after the
Effective Time, the Surviving Corporation shall indemnify, defend and hold
harmless the present and former officers and
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directors of the Company, except to the extent that he has an interest as a
plaintiff or aggrieved party in a Claim, against all Claims or amounts that,
with the approval of the Surviving Corporation, are paid in settlement of or
otherwise in connection with any Claim based in whole or in part on the fact
that such Person is or was a director or officer of the Company and arising out
of actions or omissions occurring at or prior to the Effective Time (including,
without limitation, the Merger and the Transactions), in each case to the
fullest extent permitted under the NYBCL (and shall pay any expenses in advance
of the final disposition of any such action or proceeding to each such Person to
the fullest extent permitted under the NYBCL, upon receipt from the Person to
whom expenses are advanced of an undertaking to repay such advances only to the
extent required under the NYBCL).
SECTION 6.8 NOTIFICATION OF CERTAIN MATTERS. The Company shall give prompt
notice to UTN, and UTN shall give prompt notice to the Company, of (a) the
occurrence or non-occurrence of any Event the occurrence or non-occurrence of
which would be likely to cause in any material respect (i) any representation or
warranty of the Company or UTN, as the case may be, contained in this Agreement
to be untrue or inaccurate, or (ii) in the case of the Company or any
Stockholder, any change to be made in the Disclosure Schedule and (b) any
failure of the Company or UTN, as the case may be, to comply with or satisfy, or
be able to comply with or satisfy, any material covenant, condition or agreement
to be complied with or satisfied by it hereunder; provided, however, that the
delivery of any notice pursuant to this Section 6.8 shall not limit or otherwise
affect the remedies available hereunder to the Party receiving such notice.
SECTION 6.9 PUBLIC ANNOUNCEMENTS. Until the Closing, or in the event of
termination of this Agreement, the Company shall not, without the consent of
UTN, issue any press release or otherwise make any public statement with respect
to this Agreement, the Merger or any Transaction (including the termination of
this Agreement in such event) and shall not issue any such press release or make
any such public statement without the prior consent of UTN. The Company
acknowledges and agrees that UTN may, without the prior consent of the Company,
issue such press release or make such public statement as it deems advisable or
as may be required by Applicable Law or any listing agreement or arrangement to
which UTN is a party with a national securities exchange or the National
Association of Securities Dealers, Inc. Automated Quotation System, or as
recommended by outside counsel. UTN will exercise best efforts to furnish the
Company a copy of any press release prior to its publication and will furnish a
copy of any press release so issued as soon as practicable after its
publication, but any failure on UTN's part to do so shall not be deemed a breach
of or default under this Agreement.
SECTION 6.10 CONVEYANCE TAXES. The Parties shall cooperate with one
another in the preparation, execution and filing of all Returns, questionnaires,
applications, or other documents regarding any real property transfer or gains,
sales, use, transfer, value added, stock transfer and stamp Taxes, any transfer,
recording, registration and other fees, and any similar Taxes which become
payable in connection with the Transactions that are required or permitted to be
filed on or before the Effective Time.
SECTION 6.11 OBLIGATIONS OF UTN. UTN agrees to take all action necessary
to cause UTN Merger Subsidiary and the Surviving Corporation to perform their
respective obligations under this Agreement and shall use its best efforts to
consummate, and cause UTN Merger Subsidiary to consummate, the Merger on the
terms and conditions set forth in this Agreement. UTN shall be liable as
provided herein for any breach of any representation, warranty, covenant or
agreement of UTN Merger Subsidiary and for any breach of this covenant.
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SECTION 6.12 EMPLOYEE BENEFITS; SEVERANCE POLICY. The Surviving
Corporation may, in its sole discretion, substitute employee compensation,
benefit and severance programs for those of the Company as are consistent with
the programs provided to UTN's employees and the employees of UTN's
Subsidiaries.
SECTION 6.13 CERTAIN ACTIONS CONCERNING BUSINESS COMBINATIONS. (a) None of
the Stockholders or any Representative thereof will, during the period
commencing on the date hereof and ending with the earlier to occur of the
Closing or the termination of this Agreement in accordance with its terms,
directly or indirectly (i) solicit or initiate the submission of proposals or
offers from any Person for, (ii) participate in any discussions pertaining to,
or (iii) furnish any information to any Person other than UTN relating to, any
acquisition or purchase of any Shares or all or a material amount of the assets
of, or any equity interest in, the Company or a merger, consolidation or
business combination of the Company or any Subsidiary or any Other Transaction
(other than the Merger).
(b) The Company will not apply, and will not take any action resulting in
the application of, or otherwise elect to apply, the provisions of applicable
New York takeover laws, if any, with respect to or as a result of the Merger or
the Transactions.
SECTION 6.14 TERMINATION OF OPTION SECURITIES AND CONVERTIBLE SECURITIES.
The Company will take all action necessary to terminate the exercise rights of
all outstanding Option Securities and the conversion rights of all Convertible
Securities issued by the Company as of the Effective Time to the extent such
option and conversion rights are not exercised prior to the Closing, and to
provide timely notice to all holders of Option Securities and Convertible
Securities notifying them of such termination. Without the prior written consent
of UTN, except as set forth in Section 3.15(a) of the Disclosure Schedule, (i)
such termination or notice will not cause an acceleration of the exercise,
conversion or vesting schedule of any Option Security or of any Convertible
Security, and (ii) the Company will not otherwise accelerate, or cause an
acceleration of, the exercise, conversion or vesting schedule of any Option
Security or Convertible Security. Prior to Closing, the Company shall issue
Certificates to all holders of properly exercised Option Securities and properly
converted Convertible Securities; such Certificates shall accurately represent
the number of Shares to which such holder is entitled by virtue of such exercise
or conversion and the Company shall amend Section 3.15(b) of the Disclosure
Schedule accordingly.
SECTION 6.15 TAX RETURNS. The Stockholders shall cause all Tax Returns of
the Company and its Subsidiaries with respect to taxable periods ending on or
before the Effective Time to be prepared in a manner consistent with past
practices. UTN shall file such Tax Returns promptly upon receipt thereof from
the Stockholders, shall bear the reasonable expenses incurred in connection with
the preparation thereof, and shall be solely responsible for any tax period
ending after the Effective Time. At least thirty days before the due date
(including any extensions) for any such Tax Returns, the Stockholders shall
provide drafts of such Tax Returns to UTN for its review and comment (which
reasonable comments shall be incorporated into the final Tax Returns), and UTN
shall cooperate with the Stockholders and provide the Stockholders with access
to any books and records reasonably necessary for their preparation of such
draft Tax Returns. UTN shall file no amended Tax Returns with respect to the
Company and the Subsidiaries for any taxable period ending on or before the
Effective Time if the Stockholders reasonably object thereto and furnish UTN
with indemnification satisfactory in form and substance to it, including without
limitation, indemnification for all interest, penalties and Expenses resulting
from the failure to amend such Tax Returns and all proceedings in connection
therewith.
SECTION 6.16 EMPLOYMENT AND NONCOMPETITION. On or before the Closing Date,
Robert Logan, Jr., Michael J. Logan, and Brian McCardle shall execute and
deliver to UTN the employment
<PAGE> 35
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agreements contemplated by Section 7.2(xix). From and after the Closing Date,
the Stockholders shall not compete with UTN or any of its Subsidiaries except to
the extent not prohibited by Exhibit 7.2(xix).
SECTION 6.17 DISTRIBUTIONS, LIABILITIES, ETC. The Company and UTN
acknowledge and agree that the Company contemplates that, prior to Closing, it
will make certain Distributions to Stockholders, that, no later than Closing, it
will cause certain Liens to be discharged in their entirety (with financing
statement terminations properly recorded) and that, as of Closing, it will
indemnify UTN for certain liabilities (except to the extent obligees with
respect thereto release the Company and its Affiliates therefrom), in each case
as set forth in the Disclosure Schedule. Schedule 6.17 lists each such
Distribution, Lien and liability. The Company agrees that Distributions not
permitted pursuant to Section 3.18(a) shall be made only to the extent provided
in Schedule 6.17. The Company further agrees that, notwithstanding anything to
the contrary in Section 10.1, it will indemnify UTN and UTN Merger Subsidiary
against all Claims and Expenses incurred by UTN and UTN Merger Subsidiary (or
either of them) by virtue of any failure on the Company's part to secure the
discharges from Liens contemplated by Schedule 6.17 or any damage or harm
attributable to a liability to be indemnified against as contemplated by
Schedule 6.17.
SECTION 6.18 CERTAIN TERMINAL LEASES The Company and UTN contemplate that
certain real properties in which certain Stockholders have an interest will be
leased to the Surviving Corporation for terminal operations and other purposes.
Schedule 6.18 sets forth each of the real properties to be leased, periodic
rental payments and term.
SECTION 6.19 OPTION PLAN. UTN shall, subject to the terms and conditions
of its established 1995 Stock Incentive Plan, as amended, set aside options to
acquire 16,958 shares of UTN Stock to be awarded, subject to vesting based on
continued employment over four years, to certain managers of the Company, as
designated by the Company and UTN.
SECTION 6.20 COMPANY AUDIT. The Company shall cause its accountants to
conduct an audit of the Company, certified as to fairness of presentation and in
accordance with GAAP, for the fiscal year ended December 31, 1995 and addressed
to the Company and UTN.
SECTION 6.21 REAL ESTATE DIVESTMENT AND ASSIGNMENT. Except for the leases
set forth in Schedule 6.18, as soon as practicable, the Company and the
Stockholders will terminate or assign, or otherwise divest of any and all
interests, rights and duties, the Company holds, may hold, or is purported to
hold in any lease of real property, service agreement, or warehouse agreement,
and take whatever actions and execute whatever instruments, contracts, and
releases, either on their own behalf or on behalf of any Entity in which they
may have an interest, as UTN may direct in its sole discretion, to effect such
terminations or assignments. The Stockholders shall be solely responsible for
any and all costs incurred in connection with actions contemplated by this
Section 6.21.
SECTION 6.22 LISTING OF SHARES. As soon as practicable after the Effective
Time, UTN will take all commercially reasonable steps necessary to list with the
NYSE the shares of UTN Stock issued to the Stockholders pursuant to this
Agreement and Plan of Reorganization.
SECTION 6.23 SEC FILINGS. As soon as practicable after the Effective Time,
UTN will take all commercially reasonable steps necessary to promptly make any
filings with the SEC required under the Securities Act as a result of the Merger
and the Transactions.
<PAGE> 36
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ARTICLE 7
CLOSING CONDITIONS
SECTION 7.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER.
The respective obligations of each Party to effect the Merger shall be subject
to the satisfaction at or prior to the Effective Time of the following
conditions, any or all of which may be waived, in whole or in part, to the
extent permitted by Applicable Law:
(i) This Agreement, the Merger and the Transactions shall have been
approved and adopted in accordance with the NYBCL by the affirmative vote,
or to the extent permitted by Law, by written consent, of the Stockholders
holding at least the minimum number of shares of the Company Stock then
issued and outstanding as are required by Applicable Law and the Company's
Organic Documents for such approval and adoption;
(ii) No proceeding before any Authority or Claim by any Person shall
be pending challenging or seeking to make illegal, to delay materially or
otherwise directly or indirectly to restrain or prohibit the consummation
of the Merger, or seeking material damages or imposing any Adverse
conditions in connection therewith;
(iii) Other than the filing of merger documents in accordance with
the NYBCL, all authorizations, consents, waivers, orders or approvals
required to be obtained, and all filings, submissions, registrations,
notices or declarations required to be made, by UTN or UTN Merger
Subsidiary and the Company prior to the consummation of the Merger and the
Transactions shall have been obtained from, and made with, all required
Authorities, except for such authorizations, consents, waivers, orders,
approvals, filings, registrations, notices or declarations the failure to
obtain or make would not, assuming consummation of the Merger, have an
Adverse Effect on the Company and the Company and its Subsidiaries taken
as a whole;
(iv) The Registration Statement (including any post-effective
amendment thereto and supplements to the prospectus which is a part
thereof) shall be effective and shall contain no untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading.
SECTION 7.2 CONDITIONS TO OBLIGATIONS OF UTN AND UTN MERGER SUBSIDIARY.
The obligations of UTN and UTN Merger Subsidiary to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of the following
conditions, any or all of which may be waived, in whole or in part, to the
extent permitted by Applicable Law:
(i) The aggregate consideration payable pursuant to Section 2.1(a),
Section 2.1(d) and Section 2.4 of this Agreement in exchange for each
Share exchanged in connection with the Merger shall be equal to, and in no
circumstances greater than, the Merger Consideration, and the aggregate
number of shares of UTN Stock and the aggregate amount of cash required to
be exchanged on the Closing Date pursuant thereto shall not exceed $5.9
million worth of shares of UTN Stock valued as set forth in the first
whereas clause and $3,100,000 and cash determined in accordance with
Section 2.1(d);
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(ii) The Company shall have complied with its agreements herein
contained, the certificates to be furnished to UTN pursuant to this
Section shall be true, correct and complete, all Collateral Documents
shall be reasonably satisfactory in form, scope and substance to UTN and
its counsel, and UTN and its counsel shall have received all information
and copies of all documents, including records of corporate proceedings,
which they may reasonably request in connection therewith, such documents
where appropriate to be certified by proper corporate officers;
(iii) The Company shall have furnished UTN with, and, at UTN's
request, the Bank may rely on, favorable opinions, dated the Closing Date
of Smith, Ranscht, Connors, Mutino, Nordell & Sirignano, counsel for the
Company, that shall address the following:
(1) Due organization, valid existence and good standing of the
Company and each Subsidiary, together with an opinion as to foreign
qualifications;
(2) Requisite corporate power and authority and all, to such
counsel's knowledge, necessary Governmental Authorizations for the
Company and each Subsidiary to own, lease and operate its properties
and to carry on its business as it is now being conducted;
(3) In respect of the Company and each Subsidiary, the number
of shares of capital stock or other voting securities authorized,
issued, reserved for issuance or outstanding as of the date hereof
and the Effective Time and number of Option Securities and amount of
Convertible Securities outstanding as of such dates;
(4) Due authorization, valid issuance, full payment and
nonassessability of outstanding shares of capital stock of the
Company and each Subsidiary and (upon issuance on the terms and
conditions specified in the Option Securities and Convertible
Securities pursuant to which they are issuable) all shares of such
capital stock subject to issuance and absence of preemptive rights
with respect thereto;
(5) To the knowledge of counsel, (i) there are no Contractual
Obligations to repurchase, redeem or otherwise acquire any shares of
Company Stock or any stock of any Subsidiary, or any Option
Securities and Convertible Securities, (ii) the Merger will not
cause an acceleration of the exercise or vesting schedule of any
Option Securities and Convertible Securities and (iii) all
outstanding shares of stock of each Subsidiary are owned by the
Company or by another Subsidiary, free and clear of any Lien (except
as set forth in Section 3.1(d) of the Disclosure Schedule);
(6) Corporate power and authority of the Company to execute
and deliver the Agreement and all Collateral Documents executed or
required to be executed pursuant thereto or to consummate the
Merger, to perform its obligations thereunder and to consummate the
Merger;
(7) Due and valid authorization by the Company and the
Stockholders by all necessary corporate (and other) action of the
execution, delivery and performance of the Agreement and all
Collateral Documents executed or required to be executed pursuant
thereto or to consummate the Merger and the consummation by the
Company of the Merger;
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(8) Due and valid execution and delivery by, and
enforceability against, the Company and the Stockholders of the
Agreement and all Collateral Documents executed or required to be
executed pursuant hereto or thereto or to consummate the Merger and
the Transactions except (i) as such enforceability may be subject to
bankruptcy, moratorium, insolvency, reorganization, arrangement,
voidable preference, fraudulent conveyance and other similar laws
relating to or affecting the rights of creditors and to the effect
of general principles of equity and (ii) that no opinion need be
expressed as to the enforceability of indemnification and
noncompetition provisions included herein;
(9) The execution and delivery of the Agreement and all
Collateral Documents executed or required to be executed pursuant
thereto or to consummate the Merger by the Company do not, and the
performance of the Agreement and all Collateral Documents executed
or required to be executed pursuant thereto or to consummate the
Merger and the consummation of the Transactions by the Company will
not, (i) conflict with or violate the Organic Documents of the
Company or any Subsidiary, (ii) conflict with or violate any
Applicable Law, or (iii) to counsel's knowledge, constitute a breach
or default under, or give to others any right of termination,
amendment, acceleration, increased payments or cancellation of, or
result in the creation of a Lien on any property or asset of the
Company or any Subsidiary pursuant to, any Material Agreement to
which the Company or any Subsidiary is a party or by which the
Company or any Subsidiary or any property or asset of the Company or
any Subsidiary is bound or affected;
(10) No consents from or filings with any Governmental
Authority (other than filings of certificates of merger) are
required for the execution and delivery of the Agreement by the
Company and the performance of the Agreement and all Collateral
Documents executed or required to be executed pursuant thereto or to
consummate the Merger and the consummation of the Merger by the
Company;
(11) Required filings with the Secretary of State of New
York have been made;
(12) To the knowledge of counsel, absence of pending or
threatened material Legal Action;
(13) Nonapplicability of Section 1601 et. seq. and any other
anti-takeover provisions of the NYBCL; and
(14) qualification of the Merger and the Transactions under
Sections 368(a)(1)(A) and 368 (a)(2)(D) of the Code;
and such other customary matters, including matters concerning the
Stockholders, as may reasonably be requested by UTN or its counsel in
connection with the Registration Statement and the Prospectus;
(iv) No Legal Action or other Claim shall be pending or threatened
at any time prior to or on the Closing Date before or by any Authority or
by any other Person seeking to restrain or prohibit, or damages or other
relief in connection with, the execution and delivery of this Agreement or
the consummation of the Merger and the Transactions or which might in the
judgment of UTN have any Adverse Effect on the Company or the Company and
its Subsidiaries taken as a whole or, assuming consummation of the Merger,
UTN and its Subsidiaries taken as a whole;
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(v) UTN shall have received from its Accountants, a certificate or
letter, dated the Closing Date, to the effect that, on the basis of a
limited review in accordance with the standards for such reviews
promulgated by the American Institute of Certified Public Accountants as
outlined in Statement of Standards of Accounting and Review Services No.
1, they have no reason to believe that the unaudited financial statements
set forth in the Registration Statement were not prepared in accordance
with GAAP and practices consistent with those followed in the preparation
of the audited financial statements audited by the Accountants as
contemplated by Section 6.1(a) hereof, or that any material modifications
of such unaudited financial statements are required for a fair
presentation of the financial position or results of operations or changes
in financial position of the Company;
(vi) The representations, warranties, covenants and agreements of
the Company contained in this Agreement or otherwise made in writing by it
or on its behalf pursuant hereto or otherwise made in connection with the
Merger and the Transactions shall be true and correct in all material
respects at and as of the Closing Date with the same force and effect as
though made on and as of such date except those which speak as of a
certain date which shall continue to be true and correct as of such date
on the Closing Date; each and all of the agreements and conditions to be
performed or satisfied by the Company hereunder at or prior to the Closing
Date shall have been duly performed or satisfied in all material respects;
and the Company shall have furnished UTN with such certificates and other
documents evidencing the truth of such representations, warranties,
covenants and agreements and the performance of such agreements or
conditions as UTN shall have requested;
(vii) All actions taken by the Stockholders to approve and adopt
this Agreement, the Merger and the Transactions shall comply in all
respects with and shall be legal, valid, binding, enforceable and
effective under the Law of the jurisdiction of incorporation of the
Company, its Organic Documents and all Material Agreements to which it or
any of its Subsidiaries is a party or by which it or any of them or any of
its or any of their property or assets is bound;
(viii) The Company shall have obtained consents to the assignment
and continuation of all Material Agreements which, in the judgment of UTN
or its counsel, require such consents, including appropriate binders or
consents as to policies of insurance to be assigned to UTN or the
Surviving Corporation hereunder. The Company shall have obtained
satisfaction and discharge of all Liens set forth in Section 3.15(b) of
the Disclosure Schedule, and shall have obtained, on terms and conditions
satisfactory to UTN, all Governmental Authorizations and Private
Authorizations, and all modifications of Contractual Obligations relating
to Indebtedness, which UTN deems, in its sole discretion, necessary or
desirable in order to own and operate and conduct the business of the
Surviving Corporation, substantially on the basis heretofore owned,
operated and conducted by the Company and proposed to be owned, operated
and conducted by UTN;
(ix) Between the date hereof and the Closing Date, there shall not
have occurred and be continuing any Adverse Change affecting the Company
or the Company and its Subsidiaries taken as a whole from the condition
thereof (financial and other) reflected in the Financial Statements or in
the audited financial statements prepared by the Company's accountants as
contemplated by Sections 6.1(a) and 6.20 or in the most recent financial
statements set forth in the Registration Statement;
(x) No Law shall have been enacted or made by or on behalf of any
Authority nor shall any legislation have been introduced and favorably
reported for passage to either House of
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Congress by any committee, nor shall have any Legal Action by any
Authority been commenced or threatened, nor shall any decision, order or
other action of any Authority have been rendered or taken, which in UTN's
judgment, could have any Adverse Effect on the Company or the Company and
its Subsidiaries taken as a whole, or could restrain, prevent or change
the Merger or the Transactions or Adversely Affect the ability of the
Stockholders to perform their obligations hereunder, or the ability of UTN
to continue to own, operate and conduct the business of the Surviving
Corporation, substantially on the basis heretofore owned, operated and
conducted by the Company and as proposed to be owned, operated and
conducted by the Surviving Corporation;
(xi) UTN shall have received such environmental audits as it deems
appropriate in respect of all real property owned or leased by the Company
or any of its Subsidiaries completed by UTN, or, in UTN's sole discretion
and at its sole expense, an independent environmental engineer acceptable
to or selected by UTN, and the results thereof shall not be inconsistent
with the representations and warranties set forth in Section 3.23;
(xii) Each of the officers and directors of the Company and each of
its Subsidiaries and each trustee under each Plan shall have submitted his
or her unqualified written resignation, dated as of the Closing Date, from
all such positions held with the Company and each of its Subsidiaries and
as a trustee for each such Plan;
(xiii) The Bank shall have consented to the Merger and the
Transactions;
(xiv) Each of the Stockholders shall have delivered to UTN an
agreement, substantially in the form of Exhibit 7.2(xiv), dated the
Closing Date, releasing the Company and its Subsidiaries from any and all
Claims (other than Claims arising from such Stockholders having acted as a
director or officer of the Company or such Subsidiary as contemplated by
Section 6.7 hereof);
(xv) Each of the Stockholders shall have executed and delivered an
agreement substantially in the form of Exhibit 7.2(xv) hereto;
(xvi) The Company shall not have suffered any material damage,
destruction or loss (whether or not covered by insurance) or any
acquisition or taking of property by any Authority, nor shall it have
experienced any work stoppage;
(xvii) Except for such leases and other Contractual Obligations as
are set forth on Schedule 7.2(xvii) and are executed, delivered and
effective as of the Effective Time, all Contractual Obligations set forth
in Schedule 3.9 of the Disclosure Schedule shall have been satisfied and
discharged as of the Closing Date;
(xviii) The representations, warranties, covenants and agreements of
the Stockholders contained in this Agreement or otherwise made in writing
by them or on their behalf pursuant hereto or otherwise made in connection
with the Merger and the Transactions shall be true and correct in all
material respects at and as of the Closing Date with the same force and
effect as though made on and as of such date except those which speak as
of a certain date which shall continue to be true and correct as of such
date on the Closing Date; each and all of the agreements and conditions to
be performed or satisfied by the Stockholders hereunder at or prior to the
Closing Date shall have been duly performed or satisfied in all material
respects; and the Stockholders shall have furnished UTN with such
certificates and other documents evidencing the
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truth of such representations, warranties, covenants and agreements and
the performance of such agreements or conditions as UTN or its counsel
shall have reasonably requested;
(xix) Robert Logan, Jr., Michael J. Logan, Brian McArdle shall have
executed and delivered to UTN an employment and noncompetition
agreements, substantially in the form of Exhibit 7.2(xix) hereto;
(xx) The Merger and the Transactions shall have satisfied the
requirements of Sections 368(a)(1)(A) and 368(a)(2)(D) of the Code.
(xxi) The price of UTN Stock on the Closing Date shall be equal to
or greater than $18.00 per share;
(xxii) The Company shall have entered into the facility leases
contemplated by Section 6.18 substantially on the terms and conditions
provided for therein;
(xxiii) The Company's accountants, pursuant to Rule 436(a),(b) of
the Securities Act, shall have given their written consent to UTN permitting the
filing with the SEC of the audited report prepared by them pursuant to Section
6.20, as part of the Registration Statement, together with a copy of such
consent attached as an exhibit thereto, and such accountants shall have agreed
to consent to such additional filings thereafter as UTN deems necessary.
(xxiv) Each Stockholder (other than a Stockholder executing and
delivering the agreement contemplated by Section 7.2(xix)) and other Person
listed on Schedule 7.2(xxiv) hereto shall have executed and delivered to UTN a
noncompetition agreement, substantially in the form of Exhibit 7.2(xxiv) hereto;
SECTION 7.3 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligations of
the Company to effect the Merger shall be subject to the satisfaction at or
prior to the Effective Time of the following conditions, any or all of which may
be waived, in whole or in part to the extent permitted by Applicable Law:
(i) UTN shall have furnished the Company and the Stockholders with
the favorable opinion of Sullivan & Worcester LLP, counsel to UTN,
addressing the following:
(1) Due organization, valid existence and good standing of
UTN and UTN Merger Subsidiary;
(2) Due authorization and valid execution and delivery by, and
enforceability against, UTN and UTN Merger Subsidiary of the
Agreement except as such enforceability may be subject to
bankruptcy, moratorium, insolvency, reorganization, arrangement,
voidable preference, fraudulent conveyance and other similar laws
relating to or affecting the rights of creditors and except (X) as
the same may be subject to the effect of general principles of
equity and (Y) that no opinion need be expressed as to the
enforceability of indemnification provisions included herein;
(3) Due authorization, valid issuance, full payment and
nonassessability of and absence of preemptive rights with respect to
the shares of UTN Stock to be received by the Stockholders on the
Closing Date;
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(4) The Registration Statement has become effective under the
Securities Act, and to such counsel's knowledge, no stop order
suspending its effectiveness has been issued and no proceedings for
that purpose have been instituted or threatened by the SEC;
(5) The execution and delivery of the Agreement by UTN and UTN
Merger Subsidiary and all Collateral Documents executed or required
to be executed pursuant thereto or to consummate the Merger by them
do not, and the performance of the Agreement and all Collateral
Documents executed or required to be executed pursuant thereto or to
consummate the Merger and the consummation of the Merger by them
will not, (i) conflict with or violate the Organic Documents of UTN
or UTN Merger Subsidiary, (ii) conflict with or violate any
Applicable Law, or (iii) to counsel's knowledge, constitute a
default under, or give to others any right of termination,
amendment, acceleration, increased payments or cancellation of, or
result in the creation of a Lien on any property or assets of UTN or
UTN Merger Subsidiary pursuant to, any Material Agreement to which
either is a party or by which either or any property or asset of
either is bound or affected;
(6) No consents from or filings with any Governmental
Authority (other than filings of certificates of merger) are
required for the execution and delivery of the Agreement by UTN and
UTN Merger Subsidiary and the performance of the Agreement and all
Collateral Documents executed or required to be executed pursuant
thereto or to consummate the Merger and the consummation of the
Merger by them;
(7) Effectiveness of Merger upon making of required filing
with Secretary of State of New York.
(8) qualification of the Merger and the Transactions under
Sections 368(a)(1)(A) and 368 (a)(2)(D) of the Code; and
(ii) Each of UTN and UTN Merger Subsidiary shall have complied with
its agreements herein contained, all agreements and other Collateral
Documents shall be reasonably satisfactory in form, scope and substance to
the Company and its counsel, and the Company and its counsel shall have
received all information and copies of all documents, including records of
corporate proceedings, which they may reasonably request in connection
therewith, such documents where appropriate to be certified by proper
corporate officers;
(iii) The representations, warranties, covenants and agreements of
each of UTN and UTN Merger Subsidiary contained in this Agreement or
otherwise made in writing by it or on its behalf pursuant hereto or
otherwise made in connection with the Transactions shall be true and
correct in all material respects at and as of the Closing Date with the
same force and effect as though made on and as of such date except those
which speak as of a certain date which shall continue to be true and
correct as of such date on the Closing Date; each and all of the
agreements and conditions to be performed or satisfied by each of UTN and
UTN Merger Subsidiary hereunder at or prior to the Closing Date shall have
been duly performed or satisfied in all material respects; and each of UTN
and UTN Merger Subsidiary shall have furnished the Company with such
certificates and other documents evidencing the truth of such
representations, warranties, covenants and agreements and the performance
of such agreements or conditions as the Company shall have requested;
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(iv) If executed and delivered to UTN by the Closing, the employment
agreements contemplated by Section 7.2(xix) shall have been executed and
delivered by UTN to [names omitted];
(v) The aggregate consideration payable pursuant to Section 2.1(a),
Section 2.1(d) and Section 2.4 of this Agreement in exchange for each
Share exchanged in connection with the Merger shall be equal to, and in no
circumstances less than, the Merger Consideration, and the aggregate
number of shares of UTN Stock and the aggregate amount of cash required to
be exchanged on the Closing Date pursuant thereto shall not be less than
$5.9 million worth of shares of UTN Stock valued as set forth in the first
whereas clause of the Agreement and $3,100,000 and the amount of cash
determined in accordance with Section 2.1(d).
ARTICLE 8
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.1 TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval of this Agreement,
the Merger and the Transactions by the Stockholders:
(a) by mutual consent of UTN and the Company;
(b) by either UTN or the Company,
(i) if any permanent injunction, decree or judgment by any Authority
preventing the consummation of the Merger shall have become final and
nonappealable, or if UTN shall determine in its sole discretion that the
Merger has become inadvisable or impracticable by reason of the
institution by any Authority or other Person of material Legal Action; or
(ii) if the Closing shall not occur on or before the Termination
Date.
(c) by the Company:
(i) in the event of a breach of this Agreement by UTN or UTN Merger
Subsidiary that has not been cured, or if any representation or warranty
of UTN or UTN Merger Subsidiary shall have become untrue in any material
respect, in either case such that such breach or untruth is incapable of
being cured by the Effective Date or will prevent or delay consummation of
the Merger by or beyond the Termination Date; or
(ii) in the event UTN effects a stock split or stock dividend
without a substantially commensurate adjustment in the number of shares of
UTN Stock constituting the Stock Merger Consideration.
(d) by UTN:
(i) if the Merger and the Transactions fail to receive the approval
required by Applicable Law, by vote (or to the extent permitted by
Applicable Law, by consent) of the Stockholders;
(ii) if the consolidated pro forma net worth of the Company, set
forth in the balance sheet as of December 31, 1995 certified by the
Company's accountants as to fairness of
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presentation and compliance with GAAP pursuant to Section 6.20, or if the
consolidated net worth of the Company as so adjusted as of the Closing as
determined by UTN in good faith or the Accountants, whether pursuant to
investigation contemplated by Section 6.1(a) hereof or otherwise, shall be
less than $1.5 million, less Distributions (including cash) to
Shareholders as set forth in Schedule 8.1(d)(ii), and less the amounts set
forth in Schedule 8.1(d)(ii)(a), plus consolidated net income earned
subsequent to December 31, 1995 through such close (as determined by UTN
in good faith or the Accountants);
(iii) if the consolidated net income before interest, and taxes
("EBIT") of the Company for the twelve-month period ended December 31,
1995 set forth in the statement of income, certified by the Company's
accountants as to fairness of presentation and compliance with GAAP
pursuant to Section 6.20, or if the EBIT of the Company as of a
twelve-month period ending the close of any calendar month thereafter as
determined by UTN in good faith or the Accountants, whether pursuant to
investigation contemplated by Section 6.1(a) hereof or otherwise, shall be
less than $1.8 million;
(iv) if it shall determine in its sole discretion that the Merger or
the Transactions has or have become inadvisable or impracticable by reason
of the threat by any Authority, or any other Person of material Legal
Action or proceedings against either or both of the Company and UTN (or
UTN Merger Subsidiary or a Subsidiary), it being understood and agreed
that a written request by governmental authorities for information with
respect to the Merger or the Transactions, which information could
reasonably be used in connection with such Legal Action or proceedings,
may be deemed by UTN to be a threat of material Legal Action or
proceedings;
(v) if arrangements satisfactory to UTN cannot be made for the
assumption by the Surviving Corporation substantially on the terms and
conditions in effect as of the date hereof, or for the prepayment without
premium, of all outstanding Indebtedness of the Company for borrowed
money;
(vi) if the business, assets, prospects, management, condition
(financial or other) or results of operation of the Company or the Company
and its Subsidiaries taken as a whole have been Adversely Affected,
whether by reason of changes or developments in the economy or industry
generally or operations in the ordinary course of business or otherwise;
(vii) if the Company shall not have received, without the imposition
of any burdensome condition or material cost, all Governmental
Authorizations and Private Authorizations, or if any Authority or other
Person shall withdraw any such Governmental Authorizations or Private
Authorizations;
(viii) if the Company shall have suffered any material damage,
destruction or loss (whether or not covered by insurance) or any material
acquisition or taking of property by any Authority, or if it or any of its
Subsidiaries shall have suffered a work stoppage; or
(ix) in the event of a breach of this Agreement by the Company or
any Stockholder that has not been cured, or if any representation or
warranty of the Company or any Stockholder shall have become untrue in any
material respect, in either case such that such breach or untruth is
incapable of being cured by the Closing Date or will prevent or delay
consummation of the Merger by or beyond the Termination Date, or if any
condition to UTN's obligation to close hereunder shall not have been
satisfied.
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(e) by UTN if (i) the Board of Directors of the Company shall withdraw,
modify or change its recommendation so that it is not in favor of this
Agreement, the Merger or the Transactions, or shall have resolved to do any of
the foregoing (it being agreed and understood that nothing in this clause (i)
obliges the Company to effect the Merger if the conditions set forth in Section
7.1 and Section 7.3 are not satisfied or limits the rights of the Company to
consent to terminate this Agreement pursuant to Section 8.1(a) or to terminate
the Agreement pursuant to Section 8.1(b) or Section 8.1(c)), (ii) the Board of
Directors of the Company shall have recommended or resolved to recommend to the
Stockholders an Other Transaction, (iii) the Company, the Board of Directors of
the Company or the Stockholders shall have taken any action in contravention of
Sections 6.6 or 6.13 or (iv) any of the Stockholders shall fail to vote to
approve and adopt this Agreement, the Merger and the Transactions.
SECTION 8.2 EFFECT OF TERMINATION. Except as provided in Sections 2.2(a),
6.1(b), 6.1(c), 6.9 and 8.5, in the event of the termination of this Agreement
pursuant to Section 8.1, this Agreement shall forthwith become void, there shall
be no liability on the part of any Party, or any of their respective officers or
directors, to the other and all rights and obligations of any Party shall cease;
provided, however, that such termination shall not relieve any Party from
liability for the willful breach of any of its representations, warranties,
covenants or agreements set forth in this Agreement.
SECTION 8.3 AMENDMENT. This Agreement may be amended by the Parties by
action taken by or on behalf of the respective Boards of Directors thereof and
by the Stockholders at any time prior to the Effective Time; provided, however,
that, after approval of this Agreement and the Merger by the Stockholders, no
amendment, which under Applicable Law may not be made without the approval of
the Stockholders, may be made without such approval. This Agreement may not be
amended to impose any additional material obligation on a Party or to burden or
limit a material right of such Party except by an agreement in writing signed by
the Party so affected.
SECTION 8.4 WAIVER. At any time prior to the Effective Time, except to the
extent Applicable Law does not permit, either UTN or UTN Merger Subsidiary and
the Company may (a) extend the time for the performance of any of the
obligations or other acts of the other, subject, however, to the terms and
conditions of Section 8.1, (b) waive any inaccuracies in the representations and
warranties of the other contained herein or in any document delivered pursuant
hereto and (c) waive compliance by the other with any of the agreements,
covenants or conditions contained herein. Any such extension or waiver shall be
valid only if set forth in an agreement in writing signed by the Party or
Parties to be bound thereby.
SECTION 8.5 FEES, EXPENSES AND OTHER PAYMENTS. (a) In the event of
termination of this Agreement, all costs and expenses, incurred in connection
with this Agreement, the Merger and the Transactions, and compliance with
Applicable Law and Contractual Obligations as a consequence hereof and thereof,
including, without limitation, fees and disbursements of counsel, financial
advisors and accountants, incurred by the Parties shall be borne solely and
entirely by the Party which has incurred such costs and expenses (with respect
to such Party, its "Expenses"), provided, however, that if the Merger and
Transactions fail to close and the audited financial statements for the Company
for the fiscal year ended December 31, 1995 report consolidated pro forma net
worth of no less than $1.5 million and a consolidated pro forma income before
interest and taxes of no less than $1.8 million, respectively, as calculated
pursuant to Section 8.1, UTN will reimburse the Company for the measurable fees
of the Company's accountants incurred in performing such audit. UTN acknowledges
and agrees that the Company has disclosed that it is obligated and will become
further obligated for Expenses (including fees and expenses of its counsel, its
independent accountants, and its financial advisor) incurred by it in connection
with this Agreement, the Merger and the Transactions. It is understood and
agreed that certain of such Expenses may be paid by the Company prior to the
execution of this Agreement, and
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UTN agrees to refrain from taking any action which would prevent or delay the
payment of reasonable Expenses by the Company. Subsequent to the Effective Time,
any Expenses incurred and not paid shall constitute liabilities of the Company.
UTN agrees to take all action necessary to cause the Surviving Corporation to
pay promptly any of the foregoing reasonable Expenses incurred, but not paid, by
the Company prior to the Effective Time.
(b) The Company agrees that if this Agreement shall be terminated by UTN
pursuant to Section 8.1(e) (except as set forth in the parenthetical in Section
8.1(e)(i)), then the Company will pay to UTN an amount equal to $500,000, which
amount is in recognition of, among other things, the out-of-pocket Expenses of
UTN related to this Agreement, the reliance of UTN on the Company's fulfillment
of its obligations hereunder, the costs in delayed opportunity to UTN, and the
benefit to the Company, which heretofore has been a private closely-held
business, in establishing a market price for it. Any payment required to be made
pursuant to this Section 8.5(b) shall be made as promptly as practicable but not
later than two business days after termination of this Agreement and, in any
such case, shall be made by wire transfer of immediately available funds to an
account designated by UTN, irrespective of whether UTN is then in material
breach of this Agreement unless such breach cannot reasonably be expected to be
cured by the Termination Date.
SECTION 8.6 EFFECT OF INVESTIGATION. The right of any Party to terminate
this Agreement pursuant to Section 8.1 shall remain operative and in full force
and effect regardless of any investigation made by or on behalf of any Party,
any Person controlling any such party or any of their respective Representatives
whether prior to or after the execution of this Agreement.
ARTICLE 9
FEDERAL SECURITIES ACT AND OTHER
RESTRICTIONS ON UTN STOCK
SECTION 9.1 RESALE OF REGISTERED SHARES. Each of the Stockholders
severally, but not jointly, covenants and agrees that the shares of Registered
Stock of UTN Stock to be acquired by the Stockholders pursuant to this Agreement
may only be sold in compliance with the restrictions set forth in Sections
9.3(c) and 9.3(d).
SECTION 9.2 ECONOMIC RISK; SOPHISTICATION. The Stockholders severally, but
not jointly, represent and warrant that they and the other Stockholders are able
to bear the economic risk of an investment in the UTN Stock acquired pursuant to
this Agreement and can afford to sustain a total loss on such investment and
have such knowledge and experience in financial and business matters that they
are capable of evaluating the merits and risks of the proposed investment and
therefore have the capacity to protect their own interests in connection with
the acquisition of the UTN Stock. The Stockholders acknowledge that UTN has
provided copies of the Registration Statement to the Company for distribution to
the Stockholders and has responded to due diligence and information requests
made on behalf of the Company. The Stockholders have had an adequate opportunity
to ask questions and receive answers from the officers of UTN concerning any and
all matters relating to this Agreement, the Merger, the Transactions, and the
Registration Statement, and have read and understood the matters described in
the copies of the Registration Statement provided to them including, without
limitation, the background and experience of the officers and directors of UTN,
the plans for the operations of the business of UTN, the potential dilutive
effects of the Merger and the Transactions and future acquisitions and projected
uses of its assets and credit facilities. The Stockholders have asked any and
all questions in the nature
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described in the preceding sentence or otherwise of interest to them in
connection with the exchange of UTN Stock for Shares as provided herein, and all
questions have been answered to their satisfaction.
SECTION 9.3 RESTRICTIONS ON RESALE; LEGENDS. (a) Each Stockholder agrees
not to offer, sell, assign, exchange, transfer, encumber, pledge, distribute or
otherwise dispose of the UTN Stock to be acquired by them pursuant to this
Agreement except after full compliance with all of the applicable provisions of
the Securities Act and applicable state securities Laws, and any attempt by a
Stockholder to do so shall be treated as ineffective for all purposes.
(b) Intentionally Omitted.
(c) UTN has informed the Stockholders that it would not enter into this
Agreement unless the transactions contemplated hereby qualify as a tax-free
reorganization for federal income tax purposes. In support thereof, the
Stockholders and UTN, respectively, hereby make the representations and
warranties attached as Exhibit 9.3(c). For a period of two years from the
Effective Date, no Stockholder shall sell, assign, exchange, transfer, encumber,
pledge, distribute, appoint, or otherwise dispose of (a) any shares of UTN Stock
received by Stockholders in the Merger, or (b) any interest in (including
without limitation, an option to buy or sell) any such shares of UTN Stock, in
whole or in part, and no such attempted transfer shall be treated as effective
for any purpose. The certificates evidencing the UTN Stock delivered to the
Stockholders pursuant to Section 2.1(a) restricted for resale pursuant to this
Section 9.3(c) shall bear the following legend substantially as set forth:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED,
EXCHANGED, TRANSFERRED, ENCUMBERED, PLEDGED, DISTRIBUTED, APPOINTED OR
OTHERWISE DISPOSED OF, AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT
TO ANY ATTEMPTED SALE, ASSIGNMENT, EXCHANGE, TRANSFER, LIEN, PLEDGE,
DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION PRIOR TO MAY 14, 1998. UPON
THE WRITTEN REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES
TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE
TRANSFER AGENT) AFTER THE DATE SPECIFIED ABOVE.
Notwithstanding any of the foregoing, in the event a Stockholder obtains a
private letter ruling from the Internal Revenue Service stating, to the
reasonable satisfaction of UTN in its sole discretion, that a proposed sale,
assignment, exchange, transfer, encumbrance, pledge, distribution, appointment,
or other disposition of (a) any shares of UTN Stock received by Stockholders in
the Merger, or (b) any interest in (including without limitation, an option to
buy or sell) any such shares of UTN Stock, in whole or in part (the "Proposed
Disposition"), will not, in any respect whatsoever, affect the qualification of
the Merger and the Transactions contemplated hereby as a tax-free reorganization
within the meaning of Sections 368(a)(1)(A), and 368(a)(2)(D), then UTN will
grant its consent to such Proposed Disposition.
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(d) UTN has informed the Stockholders, and the Stockholders acknowledge,
that from time to time, events will occur which will render the Registration
Statement ineffective for purposes of the Securities Act until it has been
updated or amended and declared re-effective by the SEC. Each Stockholder agrees
that in the event such Stockholder wishes to offer, sell, assign, exchange,
transfer or otherwise dispose of (each a "RESALE") shares of Registered Stock
under the Registration Statement, which such Stockholder is not otherwise
restricted from reselling pursuant to this Agreement or a Collateral Document,
such Stockholder shall give UTN prior written notice of his, her or its
intention to effect a Resale under the Registration Statement and, with
reasonable particularity, describing the proposed Resale. If the Registration
Statement will be effective and the information therein will be current at the
time such Stockholder wishes to effect a Resale, UTN shall give such Stockholder
written notice that the proposed Resale may proceed. In the event the
Registration Statement will not be effective or will otherwise contain material
inaccuracies or omissions at the time the Stockholder wishes to effect the
Resale, UTN shall so inform the Stockholder and undertake to correct any
omissions or material inaccuracies and inform the Stockholder in writing when
the Registration Statement will again be available for Resales thereunder. Each
Stockholder agrees that under no circumstances will any Stockholder effect a
Resale under the Registration Statement without UTN's prior written approval,
such approval not to be unreasonably withheld. Each Stockholder further agrees
that in the event the Stockholder effects a resale in a manner other than under
the Registration Statement, the Stockholder shall effect such resale in
compliance with Rule 145 under the Securities Act and shall give UTN prior
written notice thereof.
ARTICLE 10
INDEMNIFICATION
SECTION 10.1 INDEMNIFICATION. (a) Except as provided in Section 11.1
hereof, each of the Stockholders hereby agrees, severally and not jointly, to
make whole, indemnify and hold UTN, UTN Merger Subsidiary, the Surviving
Corporation, and their respective Affiliates, agents, successors and assigns
(collectively, the "UTN Indemnified Parties") harmless as a result of, from or
against:
(i) any and all Claims of the UTN Indemnified Parties or other
Persons based upon, attributable to or resulting from any inaccuracy in or
breach of any representation or warranty on the part of any one or more of
the Company or the Stockholders under this Agreement or any Collateral
Document;
(ii) any and all Claims of the UTN Indemnified Parties or other
Persons based upon, attributable to or resulting from the breach of any
covenant or other agreement on the part of any one or more of the Company
or the Stockholders under this Agreement or any Collateral Document;
(iii) all Expenses incurred by the Company as provided in Section
8.5(a) hereof; in excess of $250,000;
(iv) any claims arising from the employment of a broker or finder in
the event this Agreement is terminated in accordance with Section 8, or
the Merger and the Transactions contemplated herein are otherwise not
consummated;
(v) any and all Claims or costs of the UTN Indemnified Parties or
other Persons, notwithstanding anything to the contrary contained herein,
arising in connection the Company's guaranty of any obligations of
Messenger Realty, a New York General Partnership, including
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without limitation, the General Security Agreement dated March 7, 1996
between the Company, Messenger Realty, and First Union National Bank, or
any other guaranty by the Company entered into prior to the Effective
Time, made for the benefit of any Stockholder or Entity in which a
Stockholder holds or has held an interest, as well as any and all Claims
or costs of the UTN Indemnified Parties or other Persons arising in
connection with any lease of real property, warehouse contract, or service
agreement, (except those set forth in Schedule 6.18), in which the Company
had, or is purported to have an interest, right, or duty, as lessor,
sub-lessor, tenant, sub-tenant, surety, or guarantor, or assignee of or
successor to any of the foregoing rights, interests or duties, prior to
the Effective Time, including without limitation, the certain Lease
Agreement dated January 26, 1996 between the Company and the County of
Westchester, the certain Agreement dated November 10, 1994 between the
Company and AT&T, the certain Lease Agreement dated October 11, 1995
between the Company and Pirro Electrical Contracting, Inc., d/b/a Atlas
Electric, the certain Agreement dated April 8, 1994 between the Company
and Brunscwig & Fils, Inc., and the Agreement dated September 27, 1995
between the Company and MasterCard International, Inc.; and
(vi) any Claims or costs of the UTN Indemnified Parties arising in
the event any Authority imposes or assesses any cost, tax, fee, penalty or other
or liability on the Company (or the Surviving Corporation or any Affiliate) for
any period prior to the Effective Time, to the extent attributable or resulting
from the Company's characterizing certain persons used in the conduct of its
business as independent contractors, or otherwise failing to characterize them
as employees.
(vii) any and all Claims of the UTN Indemnified Parties or other
Persons incident to the foregoing or to the enforcement of this Section.
(b) Except as provided in Section 11.1 hereof, UTN hereby agrees to make
whole, indemnify and hold each of the Stockholders (and each Stockholder that
delivers the agreements contemplated by Section 6.4 and Section 9.3) and their
respective Affiliates, agents, heirs, successors and assigns (collectively, the
"Company Indemnified Parties") harmless as a result of, from or against:
(i) any and all Claims of the Company Indemnified Parties or other
Persons based upon, attributable to or resulting from any inaccuracy in or
breach of any representation or warranty on the part of UTN or UTN Merger
Subsidiary under this Agreement or any Collateral Document;
(ii) any and all Claims of the Company Indemnified Parties or other
Persons based upon, attributable to or resulting from the breach of any
covenant or other agreement on the part of UTN or UTN Merger Subsidiary;
(iii) any claims arising from the employment of a broker or finder
in the event this Agreement is terminated in accordance with Section 8, or
the Merger and the Transactions contemplated herein are otherwise not
consummated; and
(iv) any and all Claims of the Company Indemnified Parties or other
Persons incident to the foregoing or to the enforcement of this Section.
(c) No Stockholder shall be required to pay to the UTN Indemnified Parties
an aggregate amount in excess of an amount equal to the cash received by such
Stockholder as the cash portion of the
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Exchange Merger Consideration pursuant to Sections 2.1(a) and 2.4, cash received
by such Stockholder pursuant to Section 2.1(d) plus, with respect to shares of
UTN Stock issued to such Stockholder as the stock portion of the Exchange Merger
Consideration pursuant to Section 2.1(a) and Section 2.4 hereof, the Indemnity
Value thereof. UTN shall not be required to pay to the Company Indemnified
Parties an aggregate amount in excess of an amount equal to the Exchange Merger
Consideration delivered to the Stockholders pursuant to Sections 2.1(a) and
2.1(d) and 2.4. No Claim for indemnification may be commenced beyond the period
applicable to such Claim set forth in Section 11.1.
(d) Notwithstanding the foregoing and subject to the proviso below, except
as to claims arising under Sections 10.1(a)(iv) and 10.1(a)(v), in which case
the Stockholders shall be required to pay all Claims and costs, no Stockholder
shall be required to pay any amount for indemnification to the UTN Indemnified
Parties except to the extent the aggregate amount of Claims under this Section
10.1 (exclusive of Expenses allowed pursuant to Section 10.1(a)(iii)) asserted
against one or more of the Stockholders exceeds $50,000, PROVIDED, HOWEVER, that
in the case of claims arising under Section 10.1(a)(vi) no Stockholder shall be
required to pay any amount for indemnification to the UTN Indemnified Parties
except to the extent the aggregate amount of Claims or costs exceeds $100,000.
(e) Notwithstanding anything to the contrary contained herein, UTN may in
its sole discretion, deduct from the Performance Merger Consideration, and the
Shareholders shall thereby forfeit absolutely and for all time any right or
claim to, amounts equal to any and all Claims or costs of the UTN Indemnified
Parties or other Persons arising under Section 10.1(a)(v) if not otherwise made
whole by the Stockholders, such remedy to be in addition to and not exclusive of
any other rights or remedies under this Article 10.
SECTION 10.2 PROCEDURES CONCERNING CLAIMS BY THIRD PARTIES; PAYMENT OF
DAMAGES; ETC. (a) In the event that any Legal Action shall be instituted or
asserted by any Person other than such indemnified party in respect of which
payment may be sought hereunder, the indemnified party shall reasonably and
promptly cause written notice of the assertion of any Legal Action of which it
has knowledge which is covered by the indemnities under Section 10.1 to be
forwarded to the indemnifying party. In such event, the indemnifying party shall
have the right, at its sole option and expense, to be represented by counsel of
its choice, which must be reasonably satisfactory to the indemnified party, and
to defend against, negotiate, settle or otherwise deal with any Legal Action
which relates to any Claims instituted or asserted by any Person other than such
indemnified party and indemnified against hereunder; provided, however, that no
settlement thereof shall be made without the prior written consent of the
indemnified party, which consent shall not be unreasonably withheld, conditioned
or delayed. If the indemnifying party elects to defend against, negotiate,
settle or otherwise deal with any Legal Action which relates to any such Claims,
it shall within thirty (30) days (or sooner, if the nature of the Legal Action
so requires) notify the indemnified party of its intent to do so. If the
indemnifying party elects not to defend against, negotiate, settle or otherwise
deal with any Legal Action which relates to any such Claims, fails to notify the
indemnified party of its election as herein provided or contests its obligation
to indemnify the indemnified party for such Claims under this Agreement, the
indemnified party may defend against, negotiate, settle or otherwise deal with
such Legal Action. If the indemnified party defends any Legal Action, then the
indemnifying party shall reimburse the indemnified party for Claims incurred in
defending such Legal Action upon submission of periodic bills. The indemnified
party may not settle any Legal Action without the prior written consent of the
indemnifying party, which consent shall not be unreasonably withheld,
conditioned or delayed. If the indemnifying party shall assume the defense of
any Legal Action instituted or asserted by any Person other than an indemnified
party, the indemnified party may participate, at such party's own expense, in
the defense of such Legal Action.
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(b) After any final judgment or award shall have been rendered by a court,
arbitration board (which may be engaged as required by law or contract or upon
the consent of each of the indemnifying party and the indemnified parties) or
administrative agency of competent jurisdiction and the expiration of the time
in which to appeal therefrom, or a settlement shall have been consummated, or
the indemnified party and the indemnifying party shall have arrived at a
mutually binding agreement with respect to a Legal Action hereunder, the
indemnifying party shall pay all of the sums due and owing to the indemnified
party by wire transfer of immediately available funds, or by delivery of shares
of UTN Stock, as permitted pursuant to the definition of Indemnity Value in
Article 12 hereof, within five business days after the date of notice of such
judgment or award.
(c) The failure of the indemnified party to give reasonably prompt notice
of any Legal Action instituted or asserted by any Person other than such
indemnified party and indemnified against hereunder shall not release, waive or
otherwise affect the indemnifying party's obligations with respect thereto
except to the extent that the indemnifying party can demonstrate actual loss or
material prejudice as a result of such failure. Except as to items set forth in
the Disclosure Schedules, the indemnified parties shall not be deemed to have
notice of any Legal Action by virtue of knowledge acquired on or prior to the
Closing Date by an employee or other Representative of the Company, or UTN.
(d) No Legal Action to enforce a claim for indemnity shall be stayed or
dismissed for failure to join one or more indemnifying parties or to permit an
indemnifying party to cross-claim against another indemnifying party, nor shall
the failure to join an indemnifying party be deemed grounds for preventing a
separate or subsequent Legal Action to enforce a Claim for indemnification
against such party, each such Legal Action being deemed a separate and
independent Claim for indemnification. A Legal Action to enforce a Claim for
indemnity hereunder may be instituted in the State of New York, or to the
jurisdiction of which each party hereto consents.
ARTICLE 11
GENERAL PROVISIONS
SECTION 11.1 EFFECTIVENESS OF REPRESENTATIONS, ETC. (a) Regardless of any
investigation made by or on behalf of any other party hereto, any Person
controlling such party or any of their respective Representatives whether prior
to or after the execution and consummation of this Agreement, the
representations, warranties, covenants and agreements in Article 3, Article 4
and Article 5 contained shall survive the Merger and remain operative and in
full force and effect as follows:
(i) Section 3.11, Section 3.12 and Section 3.21 until ten (10) days
after the applicable statute of limitations has terminated;
(ii) Section 3.23, until the sixth anniversary date of this
Agreement; and
(iii) all other Sections, thirty six months, after the Closing
Date.
(b) Except as set forth in Section 8.2, and except for the
representations, warranties, covenants and agreements in Article 3, Article 4
and Article 5 contained, the representations, warranties, covenants and
agreements of each Party shall survive and remain operative and in full force
and effect, regardless of any investigation made by or on behalf of any other
party hereto, any Person controlling any such
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party or any of their respective Representatives whether prior to or after the
execution and consummation of this Agreement.
SECTION 11.2 NOTICES. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date delivered or transmitted, and shall be effective upon
receipt, if delivered personally, mailed by registered or certified mail
(postage prepaid, return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
changes of address) or sent by electronic transmission to the telecopier number
specified below:
(a) If to UTN or UTN Merger Subsidiary:
United TransNet, Inc.
1080 Holcomb Bridge Road
Building 200, Suite 140
Roswell, Georgia 30076
Attention: Chief Financial Officer
Telecopier No.: (404) 518-2587
with a copy to:
Sullivan & Worcester LLP
One Post Office Square
Boston, MA 02109
Attention: Harvey E. Bines, Esq.
Telecopier No.: (617) 338-2880
(b) If to the Company:
Eddy Messenger Service, Inc.
155 Lafayette Avenue
White Plains, NY 10603
Attention: Robert Logan, Jr.
Telecopier No.: 914-287-0292
with a copy to:
Smith, Ranscht, Connors, Mutino, Nordell & Sirignano, P.C.
235 Main Street
White Plains, NY 10601
Attention: Michael Nordell, Esq.
Telecopier No.: (914) 946-8861
SECTION 11.3 HEADINGS. The headings contained in this Agreement are for
purposes of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 11.4 SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the Transactions is not affected in any manner Adverse to any
party. Upon determination
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that any term or other provision is invalid, illegal or incapable of being
enforced, UTN and the Company shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the Parties as closely as
possible to the fullest extent permitted by Applicable Law in an acceptable
manner to the end that the Transactions are fulfilled to the extent possible.
The Stockholders consent hereby to any such modification.
SECTION 11.5 ENTIRE AGREEMENT. This Agreement (together with the
Disclosure Schedule, the Confidentiality Agreement and the other Collateral
Documents delivered in connection herewith), constitutes the entire agreement of
the Parties and supersede all prior agreements (other than the Confidentiality
Agreement) and undertakings, both written and oral, between the Parties, or any
of them, with respect to the subject matter hereof, including without limitation
that certain letter of intent, dated April 9, 1996, between the Company and UTN.
SECTION 11.6 ASSIGNMENT. This Agreement shall not be assigned by operation
of law or otherwise and any purported assignment shall be null and void,
provided that UTN may cause a wholly owned Subsidiary of UTN or UTN Merger
Subsidiary to be substituted for UTN Merger Subsidiary as the party to the
Merger and may, in addition, assign the other rights, but not its obligations,
including, without limitation, its obligation to pay the Merger Consideration,
under this Agreement to such Subsidiary.
SECTION 11.7 PARTIES IN INTEREST. This Agreement shall be binding upon and
inure solely to the benefit of each Party, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any Person any right,
benefit or remedy of any nature whatsoever under or by reason of this Agreement.
SECTION 11.8 GOVERNING LAW. Except to the extent that Delaware Law may be
applicable to the Merger, this Agreement shall be governed by, and construed in
accordance with, the substantive laws of New York governing contracts made and
to be performed in such jurisdiction, regardless of the laws that might
otherwise govern under applicable principles of conflicts of law.
SECTION 11.9 ENFORCEMENT OF THE AGREEMENT. Each Party recognizes and
agrees that each other Party's remedy at law for any breach of the provisions of
this Agreement would be inadequate and agrees that for breach of such
provisions, such Party shall, in addition to such other remedies as may be
available to it at law or in equity or as provided in this Agreement, be
entitled to injunctive relief and to enforce its rights by an action for
specific performance to the extent permitted by Applicable Law. Each Party
hereby waives any requirement for security or the posting of any bond or other
surety in connection with any temporary or permanent award of injunctive,
mandatory or other equitable relief. Nothing herein contained shall be construed
as prohibiting a Party from pursuing any other remedies available to such Party
for any breach or threatened breach hereof or failure to take or refrain from
any action as required hereunder to consummate the Merger and carry out the
Transactions.
SECTION 11.10 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the different Parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
SECTION 11.11 MUTUAL DRAFTING. This Agreement is the result of the joint
efforts of UTN and the Company, and each provision hereof has been subject to
the mutual consultation, negotiation and agreement of the parties and there
shall be no construction against any Party based on any presumption of that
Party's involvement in the drafting thereof.
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SECTION 11.12 DISCLOSURE SUPPLEMENTS. From time to time prior to the
Closing Date, the Company will promptly supplement or amend the Disclosure
Schedule delivered in connection herewith with respect to any matter which, if
existing, occurring or known at the date of this Agreement, would have been
required to be set forth or described in such Disclosure Schedule or which is
necessary to correct any information in such Disclosure Schedule which has been
rendered inaccurate thereby. The making of any such amendment shall not
otherwise affect the rights of a Party.
ARTICLE 12
DEFINITIONS
As used herein, unless the context otherwise requires, the following terms
(or any variant in the form thereof) have the following respective meanings.
Terms defined in the singular shall have a comparable meaning when used in the
plural, and VICE VERSA, and the reference to any gender shall be deemed to
include all genders. Unless otherwise defined or the context otherwise clearly
requires, terms for which meanings are provided herein shall have such meanings
when used in the Disclosure Schedule and each Collateral Document, notice,
certificate, communication, opinion or other document executed or required to be
executed pursuant hereto or thereto or otherwise delivered, from time to time,
pursuant hereto or thereto.
ACCOUNTANTS shall mean Price Waterhouse LLP, or such other Accounting firm
selected by or satisfactory to UTN.
ADVERSE, ADVERSELY, when used alone or in conjunction with other terms
(including without limitation "Affect," "Change" and "Effect") shall mean, with
respect to the Company or any of its Subsidiaries, any Event which could
reasonably be expected to (a) adversely affect the validity or enforceability of
this Agreement or any Collateral Document executed or required to be executed
pursuant hereto or thereto, or (b) adversely affect the business, operations,
management, properties or the condition, (financial or other), or results of
operation of the Company or the Company and its Subsidiaries taken as a whole,
or (c) impair the Company's ability to fulfill its obligations under the terms
of this Agreement or any Collateral Document executed or required to be executed
pursuant hereto or thereto, or (d) adversely affect the aggregate rights and
remedies of UTN under this Agreement or any Collateral Document executed or
required to be executed pursuant hereto or thereto, in all cases, unless
otherwise specifically set forth, in a material respect or manner or to a
material degree.
AFFILIATE, AFFILIATED shall mean, with respect to any Person, (a) any
other Person at the time directly or indirectly controlling, controlled by or
under direct or indirect common control with such Person, (b) any other Person
of which such Person at the time owns, or has the right to acquire, directly or
indirectly, twenty percent (20%) or more of any class of the capital stock or
beneficial interest, (c) any other Person which at the time owns, or has the
right to acquire, directly or indirectly, twenty percent (20%) or more of any
class of the capital stock or beneficial interest of such Person, (d) any
executive officer or director of such Person, (e) with respect to any
partnership, joint venture or similar Entity, any general partner thereof, and
(f) when used with respect to an individual, shall include any member of such
individual's immediate family or a family trust.
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AGREEMENT shall mean this Agreement as originally in effect, including
unless the context otherwise specifically requires, all schedules, including the
Disclosure Schedule and exhibits hereto, and as the same may from time to time
be supplemented, amended, modified or restated in the manner herein or therein
provided.
APPLICABLE LAW shall mean any Law of any Authority, whether domestic or
foreign, including without limitation all federal and state securities laws and
Environmental Laws, to or by which a Person or it or any of its business or
operations is subject or any of its property or assets is bound.
AUTHORITY shall mean any governmental or quasi-governmental authority,
whether administrative, executive, judicial, legislative or other, or any
combination thereof, including without limitation any federal, state,
territorial, county, municipal or other government or governmental or
quasi-governmental agency, arbitrator, authority, board, body, branch, bureau,
central bank or comparable agency or Entity, commission, corporation, court,
department, instrumentality, master, mediator, panel, referee, system or other
political unit or subdivision or other Entity of any of the foregoing, whether
domestic or foreign.
BANK shall mean First Union National Bank of Georgia.
BENEFIT ARRANGEMENT shall mean any material benefit arrangement that is
not a Plan, including (i) any employment or consulting agreement (ii) any
arrangement providing for insurance coverage or workers' compensation benefits,
(iii) any incentive bonus or deferred bonus arrangement, (iv) any arrangement
providing termination allowance, severance or similar benefits, (v) any equity
compensation plan, (vi) any deferred compensation plan and (vii) any
compensation policy and practice.
CASH MERGER CONSIDERATION shall have the meaning given to it in Section
2.1(a).
CERTIFICATE shall have the meaning given to it in Section 2.1(a).
CHANGE OF CONTROL shall occur if any Person shall have acquired beneficial
ownership (within the meaning of Rule 13d-3 promulgated by the Securities and
Exchange Commission under said Act) of fifty-one percent (51%) or more of the
outstanding shares of common stock of UTN; or during any period of twelve
consecutive calendar months, individuals who were directors of UTN on the first
day of such period cease to constitute a majority of the board of directors of
UTN.
CLAIMS shall mean any and all debts, liabilities, obligations, losses,
damages, deficiencies, assessments and penalties, together with all Legal
Actions, pending or threatened, claims and judgments of whatever kind and nature
relating thereto, and all fees, costs, expenses and disbursements (including
without limitation reasonable attorneys' and other legal fees, costs and
expenses) relating to any of the foregoing.
CLOSING shall have the meaning given to it in Section 1.3.
CLOSING DATE shall mean May 14, 1996.
CLOSING PRICE shall mean the $26.00 per share.
COBRA shall mean the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended, as set forth in Section 4980B of the Code and Part 6 of Title
I of ERISA.
<PAGE> 56
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CODE shall have the meaning given to it in the Preamble.
COLLATERAL DOCUMENT shall mean any agreement, instrument, certificate,
opinion, memorandum, schedule or other document delivered by a Party or a
Stockholder pursuant to this Agreement or in connection with the Merger and the
Transactions. For purposes of the representations, warranties, covenants and
agreements of the Company and the Stockholders, on the one hand, or UTN and UTN
Merger Subsidiary on the other, hereunder and with respect to opinions to be
delivered herewith, except to the extent of a Party's actual knowledge, the
Company and the Stockholders or UTN and UTN Merger Subsidiary, as the case may
be, assume no responsibility for the authority of or genuineness of signatures
relating to the others as counterparties or their representations, warranties,
covenants and agreements.
COMPANY shall have the meaning given to it in the Preamble.
COMPANY INDEMNIFIED PARTIES shall have the meaning given to it in Section
10.1(b).
THE COMPANY'S KNOWLEDGE (including the term "to the knowledge of the
Company") means the knowledge, information or belief of any Company director,
executive officer or any Stockholder; and that such director, executive officer
or Stockholder, after reasonable investigation, shall have reason to believe and
shall believe that the subject representation or warranty is true and accurate
as stated.
COMPANY STOCK shall have the meaning given to it in Section 2.1(a).
CONFIDENTIALITY LETTER shall have the meaning given to it in Section
6.1(b).
CONSOLIDATED NET REVENUES Consolidated Net Revenues for any March Quarter
(i.e., the March Quarter 1996 and each Measuring Period) means the consolidated
net revenues (i) of the Company and its subsidiaries for the calendar quarter
ending March 31, 1996 ("March Quarter 1996") with respect to the business being
retained by UTN Business only (i.e., excluding real estate revenues) and (ii) of
the Subject Business for the Measuring Period, in each case as set forth in the
statement of income of the Company or (post-closing) of the business being
retained by UTN, prepared in accordance with GAAP (as defined below). The
Measuring Period is the fiscal quarter of the business being retained by UTN
ending March 1997, March 1998 or March 1999, as the case may be.
CONTRACT, CONTRACTUAL OBLIGATION shall mean any term, condition,
provision, representation, warranty, agreement, covenant, undertaking,
commitment, indemnity or other obligation set forth in the Organic Documents of
the obligee or which is outstanding or existing under any instrument, contract,
lease or other contractual undertaking (including without limitation any
instrument relating to or evidencing any Indebtedness) to which the obligee is a
party or by which it or any of its business is subject or property or assets is
bound.
CONTROL (including the terms "controlled," "controlled by" and "under
common control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the management or
policies of a Person, or the disposition of such Person's assets or properties,
whether through the ownership of stock, equity or other ownership, by contract,
arrangement or understanding, or as trustee or executor, by contract or credit
arrangement or otherwise.
CONVERTIBLE SECURITIES shall mean any evidences of indebtedness, shares of
capital stock (other than common stock) or other securities directly or
indirectly convertible into or exchangeable for Shares, whether or not the right
to convert or exchange thereunder is immediately exercisable or is conditioned
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upon the passage of time, the occurrence or non-occurrence or existence or
non-existence of some other Event, or both.
DEPOSIT ACCOUNTS shall have the meaning given to it in Section 3.19.
DESIGNATED INDEBTEDNESS shall mean the Indebtedness of the Company set
forth in Schedule 5.4.
DISCLOSURE SCHEDULE shall mean the disclosure schedule dated as of the
date of this Agreement delivered by the Company to UTN.
DISTRIBUTION shall mean, with respect to the Company or any of its
Subsidiaries: (a) the declaration or payment of any dividend (except dividends
payable in common stock of the Company) on or in respect of any shares of any
class of capital stock of the Company or any shares of capital stock of any
Subsidiary owned by a Person other than the Company or a Subsidiary, (b) the
purchase, redemption or other retirement of any shares of any class of capital
stock of the Company or any shares of capital stock of any Subsidiary owned by a
Person other than the Company or a Subsidiary, and (c) any other distribution on
or in respect of any shares of any class of capital stock of the Company or any
shares of capital stock of any Subsidiary owned by a Person other than the
Company or a Subsidiary.
EBIT shall have the meaning set forth in Section 8.1(d)(iii).
EFFECTIVE TIME shall have the meaning given to it in Section 1.4.
EMPLOYMENT ARRANGEMENT shall mean, with respect to any Person, any
employment, consulting, retainer, severance or similar contract, agreement,
plan, arrangement or policy (exclusive of any which is terminable within thirty
(30) days without liability, penalty or payment of any kind by such Person or
any Affiliate), or providing for severance, termination payments, insurance
coverage (including any self-insured arrangements), workers compensation,
disability benefits, life, health, medical, dental or hospitalization benefits,
supplemental unemployment benefits, vacation or sick leave benefits, pension or
retirement benefits or for deferred compensation, profit-sharing, bonuses, stock
options, stock purchase or appreciation rights or other forms of incentive
compensation or post-retirement insurance, compensation or benefits, or any
collective bargaining or other labor agreement, whether or not any of the
foregoing is subject to the provisions of ERISA.
ENCUMBER shall mean to suffer, accept, agree to or permit the imposition
of any Lien.
ENTITY shall mean any corporation, firm, unincorporated organization,
association, partnership, limited liability company, trust (inter vivos or
testamentary), estate of a deceased, insane or incompetent individual, business
trust, joint stock company, joint venture or other organization, entity or
business, whether acting in an individual, fiduciary or other capacity, or any
Authority.
ENVIRONMENTAL LAW shall mean any Law relating to or otherwise imposing
liability or standards of conduct concerning pollution or protection of the
environment or occupational health and safety, including without limitation Laws
relating to emissions, discharges, releases or threatened releases of Hazardous
Materials or other pollutants, contaminants, chemicals, noises, odors or
industrial, toxic or hazardous substances, materials or wastes, whether as
matter or energy, into the environment (including, without limitation, ambient
air, surface water, ground water, mining or reclamation or mined land, land
surface or subsurface strata) or otherwise relating to the manufacture,
processing, generation, distribution, use, treatment, storage, disposal,
cleanup, transport or handling of pollutants, contaminants, chemicals or
industrial, toxic or hazardous substances, materials or wastes. Environmental
Laws shall include
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without limitation the Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C. Section 9601 ET SEQ.), the Hazardous Material
Transportation Act (49 U.S.C. Section 1801 ET SEQ.), the Resource Conservation
and Recovery Act (42 U.S.C. Section 6901 ET SEQ.), the Federal Water Pollution
Control Act (33 U.S.C. Section 1251 ET SEQ.), the Clean Air Act (42 U.S.C.
Section 7401 ET SEQ.), the Toxic Substances Control Act (15 U.S.C. Section 2601
ET SEQ.), the Occupational Safety and Health Act (29 U.S.C. Section 651 ET
SEQ.), the Federal Insecticide Fungicide and Rodenticide Act (7 U.S.C. Section
136 ET SEQ.), and the Surface Mining Control and Reclamation Act of 1977 (30
U.S.C. Section 1201 ET SEQ.), and any analogous future federal, or present or
future state, local or foreign, Laws, and the rules and regulations promulgated
thereunder all as from time to time in effect, and any reference to any
statutory or regulatory provision shall be deemed to be a reference to any
successor statutory or regulatory provision.
ENVIRONMENTAL PERMIT shall mean any Governmental Authorization required by
or pursuant to any Environmental Law.
ENVIRONMENTAL REQUIREMENTS shall mean all applicable present and future
Governmental Authorizations, Private Authorizations or other requirements
(including without limitation those pertaining to reporting, licensing and
permitting) relating to or required by or pursuant to any Environmental Law,
including without limitation all requirements pertaining or relating to:
(a) the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of, or the remediation, emission,
discharge or release into the air, surface water, groundwater or
land of, Hazardous Materials;
(b) the protection of the health and safety of employees or the public;
(c) the reclamation or restoration of land; and
(d) the ownership or operation of underground storage tanks.
ERISA shall mean the Employee Retirement Income Security Act of 1974, and
the rules and regulations thereunder, all as from time to time in effect, or any
successor law, rules or regulations, and any reference to any statutory or
regulatory provision shall be deemed to be a reference to any successor
statutory or regulatory provision.
ERISA AFFILIATE shall mean any Person that is treated as a single employer
with the Company or any of its Subsidiaries under Sections 414(b), (c), (m) or
(o) of the Code or Section 4001(b)(1) of ERISA.
EVENT shall mean the occurrence or existence of any act, action, activity,
circumstance, condition, event, fact, failure to act, omission, incident or
practice, or any set or combination of any of the foregoing.
EXCHANGE MERGER CONSIDERATION shall have the meaning given to it in
Section 2.1(a).
EXPENSE REIMBURSEMENT shall mean those Expenses incurred by the Company in
connection with the Merger and the Transactions, not to exceed $250,000.
EXPENSES shall have the meaning set forth in Section 8.5.
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FINAL DETERMINATION (a) shall mean with respect to federal Taxes, a
"determination" as defined in Section 1313(a) of the Code or execution of an IRS
Form 870AD and, with respect to Taxes other than federal Taxes, any final
determination of liability in respect of a Tax which, under Applicable Law, is
not subject to further appeal, review or modification through proceedings or
otherwise, including without limitation the expiration of a statute of
limitations or a period for the filing of claims for refunds, amended returns or
appeals from adverse determinations; and (b) shall include the payment of Tax by
the Company or whichever Party is responsible for payment of such Tax under
Applicable Law, with respect to any item disallowed or adjusted by a Taxing
Authority, provided that the other party is notified of such payment and the
party that is responsible for such Tax under this Agreement determines that no
action should be taken to recoup such payment from such Taxing Authority.
FINANCIAL STATEMENTS shall have the meaning given to it in Section 3.2.
GAAP shall mean generally accepted accounting principles as in effect from
time to time in the United States of America.
GOVERNMENTAL AUTHORIZATIONS shall mean all approvals, concessions,
consents, franchises, licenses, permits, plans, registrations and other
authorizations of all Authorities.
GOVERNMENTAL FILINGS shall mean all filings, including franchise and
similar Tax filings, and the payment of all fees, assessments, interest and
penalties associated with such filings, with all Authorities.
GUARANTY OR GUARANTEED shall mean any agreement, undertaking or
arrangement by which the Company or any of its Subsidiaries guarantees, endorses
or otherwise becomes or is liable, directly or indirectly, contingently or
otherwise, upon any Indebtedness of any other Person including without
limitation the payment of amounts drawn down by beneficiaries of letters of
credit (other than by endorsements of negotiable instruments for deposit or
collection in the ordinary course of business). The amount of the obligor's
obligation under any Guaranty shall be deemed to be the outstanding amount (or
maximum permitted amount, if larger) of the Indebtedness directly or indirectly
guaranteed thereby (subject to any limitation set forth therein).
HAZARDOUS MATERIALS shall mean any substance (in whatever state of
matter): (a) the presence of which requires investigation or remediation under
any Environmental Law; (b) that is defined as a "hazardous waste", "hazardous
material" or "hazardous substance" under any Environmental Law; (c) that is
toxic, explosive, corrosive, pollutive, contaminating, flammable, infectious,
radioactive, carcinogenic, mutagenic or otherwise hazardous and is regulated by
any Authority; (d) that contains or consists of petroleum or petroleum products,
or (e) that contains or consists of PCBs, asbestos, or urea formaldehyde foam
insulation.
HOLDING shall have the meaning given to it in the Preamble.
INDEBTEDNESS shall mean, with respect to the Company or any of its
Subsidiaries, (a) all items, except items of capital stock or of surplus or of
general contingency or deferred tax reserves or any minority interest in any
Subsidiary to the extent such interest is treated as a liability with
indeterminate term on the consolidated balance sheet of the Company, which in
accordance with GAAP would be included in determining total liabilities as shown
on the liability side of a balance sheet of the Company or such Subsidiary, (b)
all obligations secured by any Lien to which any property or asset owned or held
by the Company or any Subsidiary is subject, whether or not the obligation
secured thereby shall have been assumed, and (iii) to the extent not otherwise
included, all Contractual Obligations of the Company
<PAGE> 60
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or any Subsidiary constituting capitalized leases and all obligations of the
Company or any Subsidiary with respect to Leases constituting part of a sale and
leaseback arrangement.
INDEMNITY VALUE shall mean with respect to each share of UTN Stock issued
to a Stockholder pursuant to the Merger, the Closing Price.
INTANGIBLE ASSETS shall mean all assets and property lacking physical
properties the evidence of ownership of which must customarily be maintained by
independent registration, documentation, certification, recordation or other
means.
LAW shall mean any (a) administrative, judicial, legislative or other
action, code, consent decree, constitution, decree, directive, enactment,
finding, guideline, law, injunction, interpretation, judgment, order, ordinance,
policy statement, proclamation, promulgation, regulation, requirement, rule,
rule of law, rule of public policy, settlement agreement, statute, or writ or
any Authority, domestic or foreign; (b) the common law, or other legal or
quasi-legal precedent; or (c) arbitrator's, mediator's or referee's award,
decision, finding or recommendation; including, in each such case or instance,
any interpretation, directive, guideline or request, whether or not having the
force of law including, in all cases, without limitation any particular section,
part or provision thereof.
LEASE shall mean any lease of property, whether real, personal or mixed,
and all amendments thereto.
LEGAL ACTION shall mean any litigation or legal or other actions,
arbitrations, counterclaims, investigations, proceedings, requests for material
information by or pursuant to the order of any Authority, or suits, at law or in
arbitration, equity or admiralty commenced by any Person, whether or not
purported to be brought on behalf of a party hereto affecting such party or any
of such party's business, property or assets.
LIEN shall mean any of the following: mortgage; lien (statutory or other);
preference, priority or other security agreement, arrangement or interest;
hypothecation, pledge or other deposit arrangement; assignment; charge; levy;
executory seizure; attachment; garnishment; encumbrance (including any easement,
exception, variance, reservation or limitation, right of way, zoning
restriction, building or use restriction, and the like); conditional sale, title
retention or other similar agreement, arrangement, device or restriction;
preemptive or similar right; any financing lease involving substantially the
same economic effect as any of the foregoing; the filing of any financing
statement under the Uniform Commercial Code or comparable law of any
jurisdiction; restriction on sale, transfer, assignment, disposition or other
alienation; or any option, equity, claim or right of or obligation to, any other
Person, of whatever kind and character.
MARGIN RULES shall mean Regulations G, T, U or X of the Board of Governors
of the Federal Reserve System, 12 C.F.R., parts 207, 220, 221 and 224, as now in
effect.
MATERIAL OR MATERIALITY for the purposes of this Agreement, shall, unless
specifically stated to the contrary, be determined without regard to the fact
that various provisions of this Agreement set forth specific dollar amounts.
MATERIAL AGREEMENT OR MATERIAL COMMITMENT shall mean, with respect to the
Company or UTN, any of its Subsidiaries, any Contractual Obligation which (a)
was not entered into in the ordinary course of business, (b) was entered into in
the ordinary course of business which (i) involves the purchase, sale or lease
of goods or materials or performance of services aggregating more than
Twenty-five Thousand
<PAGE> 61
-57-
Dollars ($25,000), and (ii) is not terminable on thirty (30) days or less notice
without penalty or other payment, (c) involves Indebtedness for money borrowed
in excess of One Hundred Thousand Dollars ($100,000), (d) is or otherwise
constitutes a written agency, dealer, license, distributorship, sales
representative or similar written agreement, or (e) would account for more than
five percent (5%) of purchases or sales projected to be made by the Company and
its Subsidiaries during its current fiscal year.
MEASURING PERIOD The Measuring Period is the fiscal quarter of the Subject
Business ending March 1997, March 1998 or March 1999, as the case may be.
MERGER shall have the meaning given to it in the Preamble.
MERGER CONSIDERATION shall have the meaning given to it in Section 2.1.
MULTIEMPLOYER PLAN shall mean a "multiemployer plan" within the meaning of
Section 4001(a)3 of ERISA.
NET SHARES shall have the meaning given to it in Section 2.2(a).
NYBCL shall have the meaning given to it in the Preamble.
OPTION SECURITIES shall mean all rights, options and warrants, and calls
or commitments evidencing the right, to subscribe for, purchase or otherwise
acquire Shares or Convertible Securities, whether or not the right to subscribe
for, purchase or otherwise acquire is immediately exercisable or is conditioned
upon the passage of time, the occurrence or non-occurrence or the existence or
non-existence of some other Event.
ORGANIC DOCUMENT shall mean, with respect to a Person which is a
corporation, its charter, its by-laws and all stockholder agreements, voting
trusts and similar arrangements applicable to any of its capital stock and, with
respect to a Person which is a partnership, its agreement and certificate of
partnership, any agreements among partners, and any management and similar
agreements between the partnership and any general partners (or any Affiliate
thereof).
OTHER TRANSACTION shall mean a transaction or series of related
transactions (other than the Merger) resulting in (a) any change in control of
the Company, (b) any merger or consolidation of the Company or any of its
Subsidiaries, regardless of whether the Company or such Subsidiary is the
surviving Entity, (c) any tender offer or exchange offer for, or any acquisition
of, any securities of the Company, or (d) any sale or other disposition of
assets of the Company or any Subsidiary not otherwise permitted under Section
3.18 hereof.
PARTY shall mean a signatory to this Agreement.
PBGC shall mean the Pension Benefit Guaranty Corporation and any Entity
succeeding to any or all of its functions under ERISA.
PERFORMANCE DETERMINATION shall mean the calculation, by UTN or the
Accountants, of the Company's Consolidated Net Revenues during the relevant
Measuring Period for purposes of determining the Performance Merger
Consideration.
PERFORMANCE MERGER CONSIDERATION shall have the meaning assigned to it in
Section 2.1(a).
<PAGE> 62
-58-
PERFORMANCE QUOTIENT The Performance Quotient shall be: (i) one, if
Consolidated Net Revenues earned in the Measuring Period equals or exceeds (.75)
* (March Quarter 1996 Consolidated Net Revenues), (ii) zero, if Consolidated Net
Revenues earned in the Measuring Period equals or is less than (.5) * (March
Quarter 1996 Consolidated Net Revenues), and (iii) in all other cases, a
fraction the numerator of which is Consolidated Net Revenues earned in the
Measuring Period and the denominator of which is (.75) * (March Quarter 1996
Consolidated Net Revenues).
PERSON shall mean any natural individual or any Entity.
PLAN shall mean, with respect to the Company or any Subsidiary and at a
particular time, any employee benefit plan which is covered by ERISA and in
respect of which the Company, such Subsidiary or, in the case of any such plan
subject to Title IV of ERISA, an ERISA Affiliate (as defined in Section 3.12) is
(or, if such plan were terminated at such time, would under Section 4069 of
ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA, other
than a Multiemployer Plan.
STOCKHOLDER shall have the meaning given to it in the Preamble.
PRIVATE AUTHORIZATIONS shall mean all approvals, concessions, consents,
franchises, licenses, permits, and other authorizations of all Persons (other
than Authorities) including without limitation those with respect to patents,
trademarks, service marks, trade names, copyrights, computer software programs,
technology and know-how.
PROPOSED DISPOSITION shall have the meaning given to it in Section 9.3(c).
PROSPECTUS shall mean the form of prospectus in the Registration Statement
as filed the date hereof, any preliminary prospectus and the prospectus filed
pursuant to Rule 424(b) under the Securities Act and any supplements or
amendments thereto filed with the SEC prior to the termination of the
Registration Statement.
REGISTERED STOCK shall mean that portion of the Merger Consideration
consisting of shares of UTN Stock registered pursuant to the Securities Act and
state securities laws.
REGISTRATION STATEMENT shall mean the registration statement (including
the Prospectus, exhibits, financial statements and schedules included therein),
and all amendments thereof (including post-effective amendments and supplements
to the Prospectus which is a part thereof), filed under the Securities Act
registering the shares of UTN Stock to be delivered to the Stockholders pursuant
to Section 2.2.
REPRESENTATIVES (of a Party) shall mean the officers, directors,
employees, accountants, counsel, financial advisors, consultants and other
representatives (of such Party).
SEC shall mean the Securities and Exchange Commission of the United States
or any successor Authority.
SECURITIES ACT shall mean the Securities Act of 1933, and the rules and
regulations of the Commission thereunder, all as from time to time in effect, or
any successor law, rules or regulations, and any reference to any statutory or
regulatory provision shall be deemed to be a reference to any successor
statutory or regulatory provision.
SHARES shall have the meaning given to it in Section 2.1(a).
<PAGE> 63
-59-
STOCKHOLDERS shall mean the Stockholders and all other Persons entitled to
Merger Consideration pursuant to Sections 2.1(a) or (to the extent Persons
holding Option Securities or Convertible Securities exercise their rights to
acquire Shares prior to the Effective Time, from and after the time they acquire
such Shares) 2.4.
STOCK MERGER CONSIDERATION shall have the meaning given to it in Section
2.1(a).
SUBSIDIARY shall mean, with respect to a Person, any Entity a majority of
the capital stock ordinarily entitled to vote for the election of directors of
which, or if no such voting stock is outstanding, a majority of the equity
interests of which, is owned directly or indirectly, legally or beneficially, by
such Person or any other Person controlled by such Person.
SURVIVING CORPORATION shall have the meaning given to it in Section 1.1
TAX (and "Taxable", which shall mean subject to Tax), shall mean, with
respect to the Company or any of its Subsidiaries, (a) all taxes (domestic or
foreign), including without limitation any income (net, gross or other including
recapture of any tax items such as investment tax credits), alternative or
add-on minimum tax, gross income, gross receipts, gains, sales, use, leasing,
lease, user, ad valorem, transfer, recording, franchise, profits, property (real
or personal, tangible or intangible), fuel, license, withholding on amounts paid
to or by the Company or any of its Subsidiaries, payroll, employment,
unemployment, social security, excise, severance, stamp, occupation, premium,
environmental or windfall profit tax, custom, duty or other tax, governmental
fee or other like assessment or charge of any kind whatsoever, together with any
interest, levies, assessments, charges, penalties, addition to tax or additional
amount imposed by any Taxing Authority, (b) any joint or several liability of
the Company or any of its Subsidiaries with any other Person for the payment of
any amounts of the type described in (a), and (c) any liability of the Company
or any of its Subsidiaries for the payment of any amounts of the type described
in (a) as a result of any express or implied obligation to indemnify any other
Person.
TAX CLAIM shall mean any Claim which relates to Taxes, including without
limitation the representations and warranties set forth in Section 3.11.
TAX RETURN OR RETURNS shall mean all returns, consolidated or otherwise
(including without limitation information returns), required to be filed with
any Authority with respect to Taxes.
TAXING AUTHORITY shall mean any Authority responsible for the imposition
of any Tax.
TERMINATION DATE shall mean June 14, 1996 or such later date as UTN shall
designate.
TRANSACTIONS shall mean the other transactions contemplated by this
Agreement or the Merger or by any Collateral Document executed or required to be
executed in connection herewith or therewith.
TRANSMITTAL DOCUMENTS shall have the meaning given to it in Section
2.2(b).
UTN shall have the meaning given to it in the Preamble.
UTN INDEMNIFIED PARTIES shall have the meaning given to it in Section
10.1(a).
UTN MERGER SUBSIDIARY shall have the meaning given to in the Preamble.
UTN STOCK shall have the meaning given to it in the Preamble.
<PAGE> 64
-60-
<PAGE> 65
-61-
[THIS SPACE IS INTENTIONALLY LEFT BLANK]
<PAGE> 66
IN WITNESS WHEREOF, UTN, UTN Merger Subsidiary, the Company and the
Stockholders have caused this Agreement to be executed as of the date first
written above by their respective officers thereunto duly authorized.
UNITED TRANSNET, INC.
a Delaware Corporation
By: /s/ Ronald J. Barowski
-----------------------------------
Name: Ronald J. Barowski
Title: Vice President and
Chief Financial Officer
COOLIDGE ACQUISITION CORP.
a New York Corporation
By: /s/ Ronald J. Barowski
-----------------------------------
Name: Ronald J. Barowski
Title: Vice President and
Chief Financial Officer
EDDY MESSENGER SERVICE, INC.
a New York Corporation
By: /s/ Robert Logan, Jr.
-----------------------------------
Name: Robert Logan, Jr.
Title: President
THE STOCKHOLDERS
/s/ Robert H. Logan, Sr.
-----------------------------------
Name: Robert H. Logan, Sr.
/s/ Robert Logan, Jr.
-----------------------------------
Name: Robert Logan, Jr.
/s/ Michael J. Logan
-----------------------------------
Name: Michael J. Logan
/s/ Brian McArdle
-----------------------------------
Name: Brian McArdle
<PAGE> 67
EXHIBIT 1.6
CERTIFICATE OF INCORPORATION
----------------------------
OF
COOLIDGE ACQUISITION CORP.
--------------------------
Under Section 402 of the Business Corporation Law
The undersigned, being a natural person of at least 18 years
of age and acting as the incorporator of the corporation hereby being formed
under the Business Corporation Law, certifies that:
FIRST: The name of the corporation is Coolidge Acquisition
Corp.
SECOND: The corporation is formed for the following purpose
or purposes:
To engage in any lawful act or activity for which corporations
may be organized under the Business Corporation Law, provided that the
corporation is not formed to engage in any act or activity requiring
the consent or approval of any state official, department, board,
agency, or other body without such consent or approval first being
obtained.
To carry on a general mercantile, industrial, investing, and
trading business in all its branches; to devise, invent, manufacture,
fabricate, assemble, install, service, maintain, alter, buy, sell,
import, export, license as licensor or licensee, lease as lessor or
lessee, distribute, job, enter into, negotiate, execute, acquire, and
assign contracts in respect of, acquire, receive, grant, and assign
licensing arrangements, options, franchises, and other rights in
respect of, and generally deal in and with, at wholesale and retail, as
principal, and as sales, business, special, or general agent,
representative, broker, factor, merchant, distributor, jobber, advisor,
and in any other lawful capacity, goods, wares, merchandise,
commodities, and unimproved, improved, finished, processed, and other
real, personal, and mixed property of any and all kinds, together with
the components, resultants, and by-products thereof; to acquire by
purchase or otherwise own, hold, lease, mortgage, sell, or otherwise
dispose of, erect, construct, make, alter, enlarge, improve, and to aid
or subscribe toward the construction, acquisition, or improvement of
any factories, shops, storehouses, buildings, and commercial and retail
establishments of every character, including all equipment, fixtures,
machinery, implements, and supplies necessary, or incidental to, or
connected with, any of the purposes or business of the corporation; and
generally to perform any and all acts connected therewith or arising
therefrom or incidental thereto, and all acts proper or necessary for
the purpose of the business.
<PAGE> 68
To engage generally in the real estate business as principal,
agent, broker, and in any lawful capacity, and generally to take,
lease, purchase, or otherwise acquire, and to own, use, hold, sell,
convey, exchange, lease, mortgage, work, clear, improve, develop,
divide, and otherwise handle, manage, operate, deal in, and dispose of
real estate, real property, lands, multiple-dwelling structures,
houses, buildings, and other works, and any interest or right therein;
to take, lease, purchase, or otherwise acquire, and to own, use, hold,
sell, convey, exchange, hire, lease, pledge, mortgage, and otherwise
handle, and deal in and dispose of, as principal, agent, broker, and in
any lawful capacity, such personal property, chattels, chattels real,
rights, easements, privileges, choses in action, notes, bonds,
mortgages, and securities as may lawfully be acquired, held, or
disposed of; and to acquire, purchase, sell, assign, transfer, dispose
of, and generally deal in and with, as principal, agent, broker, and in
any lawful capacity, mortgages and other interests in real, personal,
and mixed properties; to carry on a general construction, contracting,
building, and realty management business as principal, agent,
representative, contractor, subcontractor, and in any other lawful
capacity.
To apply for, register, obtain, purchase, lease, take licenses
in respect of or otherwise acquire, and to hold, own, use, operate,
develop, enjoy, turn to account, grant licenses and immunities in
respect of, manufacture under, and to introduce, sell, assign,
mortgage, pledge or otherwise dispose of, and in any manner deal with
and contract with reference to:
(a) inventions, devices, formulae, processes, and any
improvements and modifications thereof;
(b) letters patent, patent rights, patented
processes, copyrights, designs, and similar rights,
trade-marks, trade symbols, and other indications of original
and ownership granted by or recognized under the laws of the
United States of America or of any state or subdivision
thereof, or of any foreign country or subdivision thereof, and
all rights connected therewith or appertaining thereunto;
(c) franchises, licenses, grants, and concessions.
To have, in furtherance of the corporate purposes, all of the
powers conferred upon corporations organized under the Business
Corporation Law subject to any limitations thereof contained in this
certificate of incorporation or in the laws of the State of New York.
THIRD: The office of the corporation is to be located in the
County of Albany, State of New York.
FOURTH: The aggregate number of shares which the corporation
shall have authority to issue 3,000, all of which are of a par value of
0.01 dollars each, and all of which are of the same class.
<PAGE> 69
No holder of any of the shares of any class of the corporation
shall be entitled as of right to subscribe for, purchase, or otherwise
acquire any shares of any class of the corporation which the
corporation proposes to issue or any rights or options which the
corporation proposes to grant of the purchase of shares of any class of
the corporation or for the purchase of any shares, bonds, securities,
or obligations of the corporation which are convertible into or
exchangeable for, or which carry any rights, to subscribe for,
purchase, or otherwise acquire shares of any class of the corporation;
and any and all of such shares, bonds, securities, or obligations of
the corporation, whether now or hereafter authorized or created, may be
issued, or may be reissued or transferred if the same have been
reacquired and have treasury status, and any and all of such rights and
options may be granted by the Board of Directors to such persons,
firms, corporations, and associations, and for such lawful
consideration, and on such terms, as the Board of Directors in its
discretion may determine, without first offering the same, or any
thereof, to any said holder. Without limiting the generality of the
foregoing stated denial of any and all preemptive rights, no holder of
shares of any class of the corporation shall have any preemptive rights
in respect of the matters, proceedings, or transactions specified in
subparagraphs (1) to (6), inclusive, of paragraph (e) of Section 622 of
the Business Corporation Law.
FIFTH: The Secretary of State is designated as the agent of
the corporation upon whom process against the corporation may be
served. The post office address within the State of New York to which
the Secretary of State shall mail a copy of any process against the
corporation served upon him is: c/o Corporation Service Company, 500
Central Avenue, Albany, New York 12206-2290.
SIXTH: The duration of the corporation is to be perpetual.
-----
SEVENTH: The corporation shall, to the fullest extent
permitted by Article 7 of the Business Corporation Law, as the same may
be amended and supplemented, indemnify any and all persons whom it
shall have power to indemnify under said Article from and against any
and all of the expenses, liabilities, or other matters referred to in
or covered by said
<TABLE>
The name and address within the State of New York of
the registered agent of the corporation is as follows:
<CAPTION>
NAME ADDRESS
---- -------
<S> <C>
Corporation Service Company 500 Central Avenue
Albany, New York 12206-2290
</TABLE>
Said registered agent is to be the agent of the corporation
upon whom or upon which process against the corporation may be served.
Article, and the indemnification provided for herein shall not be
deemed exclusive of any other rights to which any person may be
entitled under any By-Law, resolution of shareholders, resolution of
directors, agreement, or otherwise, as permitted by said Article, as to
action in any capacity in which he served at the request of the
corporation.
<PAGE> 70
EIGHTH: The personal liability of the directors of the
corporation is eliminated to the fullest extent permitted by the
provisions of paragraph (b) of Section 402 of the Business Corporation
Law, as the same may be amended and supplemented.
Signed on May 9, 1996.
-----------------------------------
Gregory P. G. Wharton, Incorporator
c/o Sullivan & Worcester
One Post Office Square
Boston, MA 02109
STATE OF MASSACHUSETTS
SS.:
COUNTY OF SUFFOLK
On the date hereinafter set forth, before me came Gregory P.
G. Wharton, to me known to be the individual who is described in, and who signed
the foregoing certificate of incorporation, and he acknowledged to me that he
signed the same.
Signed on May 9, 1996.
----------------------------------
Beth-Jean McCurdy - Notary Public
<PAGE> 71
EXHIBIT 1.7
BY - LAWS
-- ----
OF
--
Coolidge Acquisition Corp.
----------
ARTICLE I
---------
SHAREHOLDERS
------------
1. CERTIFICATES REPRESENTING SHARES. Certificates representing
shares shall set forth thereon the statements prescribed by Section 508, and,
where applicable, by Sections 505, 616, 620, 709, and 1002, of the Business
Corporation Law and by any other applicable provision of law and shall be signed
by the Chairman or a Vice-Chairman of the Board of Directors, if any, or by the
President or a Vice-President and by the Secretary or an Assistant Secretary or
the Treasurer or an Assistant Treasurer and may be sealed with the corporate
seal or a facsimile thereof. The signatures of the officers upon a certificate
may be facsimiles if the certificate is countersigned by a transfer agent or
registered by a registrar other than the corporation itself or its employee, or
if the shares are listed on a registered national security exchange. In case any
officer who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer before such certificate is
issued, it may be issued by the corporation with the same effect as if he were
such officer at the date of its issue.
A certificate representing shares shall not be issued until
the full amount of consideration therefor has been paid except as Section 504 of
the Business Corporation Law may otherwise permit.
The corporation may issue a new certificate for shares in
place of any certificate theretofore issued by it, alleged to have been lost or
destroyed, and the Board of Directors may require the owner of any lost or
destroyed certificate, or his legal representative, to give the corporation a
bond sufficient to indemnity the corporation against any claim that may be made
against it on account of the alleged loss or destruction of any such certificate
or the issuance of any such new certificate.
2. FRACTIONAL SHARE INTERESTS. The corporation may issue
certificates for fractions of a share where necessary to effect transactions
authorized by the Business Corporation Law which shall entitle the holder, in
proportion to his fractional holdings, to exercise voting rights, receive
dividends, and participate in liquidating distributions; or it may pay in cash
the fair value of fractions of a share as of the time when those entitled to
receive such fractions are determined; or it may issue scrip in registered or
bearer form over the manual or
<PAGE> 72
facsimile signature of an officer of the corporation or of its agent,
exchangeable as therein provided for full shares, but such scrip shall not
entitle the holder to any rights of a shareholder except as therein provided.
3. SHARE TRANSFERS. Upon compliance with provisions
restricting the transferability of shares, if any, transfers of shares of the
corporation shall be made only on the share record of the corporation by the
registered holder thereof, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary of the corporation or with a
transfer agent or a registrar, if any, and on surrender of the certificate or
certificates for such shares properly endorsed and the payment of all taxes due
thereon.
4. RECORD DATE FOR SHAREHOLDERS. For the purpose of
determining the shareholders entitled to notice of or to vote at any meeting of
shareholders or any adjournment thereof, or to express consent to or dissent
from any proposal without a meeting, or for the purpose of determining
shareholders entitled to receive payment of any dividend or the allotment of any
rights, or for the purpose of any other action, the directors may fix, in
advance, a date as the record date for any such determination of shareholders.
Such date shall not be more than fifty days nor less than ten days before the
date of such meeting, nor more than fifty days prior to any other action. If no
record date is fixed, the record date for the determination of shareholders
entitled to notice of or to vote at a meeting shareholders shall be at the close
of the business on the day next preceding the day on which notice is given, or,
if no notice is given, the day on which the meeting is held; the record date for
determining shareholders for any purpose other than that specified in the
preceding clause shall be at the close of business on the day on which the
resolution of the directors relating thereto is adopted. When a determination of
shareholders of record entitled to notice of or to vote at any meeting of
shareholders has been made as provided in this paragraph, such determination
shall apply to any adjournment thereof, unless directors fix a new record date
under this paragraph for the adjourned meeting.
5. MEANING OF CERTAIN TERMS. As used herein in respect of the
right to notice of a meeting of shareholders or a waiver thereof or to
participate or vote thereat or to consent or dissent in writing in lieu of a
meeting, as the case may be, the term "share" or "shares" or "shareholder" or
"shareholders" refers to an outstanding share or shares and to a holder or
holders of record of outstanding shares when the corporation is authorized to
issue only one class of shares, and said reference is also intended to include
any outstanding share or shares and any holder or holders of record of
outstanding shares of any class upon which or upon whom the Certificate of
Incorporation confers such rights where there are two or more classes or series
of shares or upon which or upon whom the Business Corporation Law confers such
rights notwithstanding that the Certificate of Incorporation may provide for
more than one class or series of shares, one or more of which are limited or
denied such rights thereunder.
6. SHAREHOLDER MEETINGS.
--------------------
- TIME. The annual meeting shall be held on the date fixed,
from time to time, by the directors, provided, that the first annual meeting
shall be held on a date within thirteen months after the formation of the
corporation, and each successive annual meeting shall be held on a date within
thirteen months after the date of the preceding annual meeting. A special
meeting shall be held on the date fixed by the directors except when the
Business Corporation Law confers the right to fix the date upon shareholders.
<PAGE> 73
- PLACE. Annual meetings and special meetings shall be held at
such place, within or without the State of New York, as the directors may, from
time to time, fix. Whenever the directors shall fail to fix such place, or,
whenever shareholders entitled to call a special meeting shall call the same,
the meeting shall be held at the office of the corporation in the State of New
York.
- CALL. Annual meetings may be called by the directors or by
any officer instructed by the directors to call the meeting. Special meetings
may be called in like manner except when the directors are required by the
Business Corporation Law to call a meeting, or except when the shareholders are
entitled by said Law to demand the call of a meeting.
- NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER OF NOTICE. Written
notice of all meetings shall be given, stating the place, date, and hour of the
meeting, and, unless it is an annual meeting, indicating that it is being issued
by or at the direction of the person or persons calling the meeting. The notice
of an annual meeting shall state that the meeting is called for the election of
directors and for the transaction of other business which may properly come
before the meeting, and shall (if any other action which could be taken at a
special meeting is to be taken as such annual meeting) state the purpose or
purposes. The notice of a special meeting shall in all instances state the
purpose or purposes for which the meeting is called; and, at any such meeting,
only such business may be transacted which is related to the purpose or purposes
set forth in the notice. If the directors shall adopt, amend, or repeal a By-Law
requiring an impending election of directors, the notice of the next meeting for
election of directors shall contain the statements prescribed by Section 601(b)
of the Business Corporation Law. If any action is proposed to be taken which
would, if taken, entitle shareholders to receive payment for their shares, the
notice shall include a statement of that purpose and to that effect and shall be
accompanied by a copy of Section 623 of the Business Corporation Law or an
outline of its material terms. A copy of the notice of any meeting shall be
given, personally or by first class mail, not less than ten days nor more than
fifty days before the date of the meeting, unless the lapse of the prescribed
period of time shall have been waived, to each shareholder at his record address
or at such other address which he may have furnished by request in writing to
the Secretary of the corporation. In lieu of giving a copy of such notice
personally or by first class mail as aforesaid, a copy of such notice may be
given by third class mail not fewer than twenty-four nor more than fifty days
before the date of the meeting. Notice by mail shall be deemed to be given when
deposited, with postage thereon prepaid, in a post office or official depository
under the exclusive care and custody of the United States post office
department. If a meeting is adjourned to another time or place, and, if any
announcement of the adjourned time or place is made at the meeting, it shall not
be necessary to give notice of the adjourned meeting unless the directors, after
adjournment, fix a new record date for the adjourned meeting. Notice of a
meeting need not be given to any shareholder who submits a signed waiver of
notice before or after the meeting. The attendance of a shareholder at a meeting
without protesting prior to the conclusion of the meeting the lack of notice of
such meeting shall constitute a waiver of notice by him.
- SHAREHOLDER LIST AND CHALLENGE. A list of shareholders as of
the record date, certified by the Secretary or other officer responsible for its
preparation or by the transfer agent, if any, shall be produced at any meeting
of shareholders upon the request thereat or prior thereto of any shareholder. If
the right to vote at any meeting is challenged, the inspectors of election, if
any, or the person presiding thereat, shall require such list of shareholders to
be produced as evidence of the right of the persons challenged to vote at such
meeting, and all
<PAGE> 74
persons who appear from such list to be shareholders entitled to vote thereat
may vote at such meeting.
- CONDUCT OF MEETING. Meetings of the shareholders shall be
presided over by one of the following officers in the order of seniority and if
present and acting - the Chairman of the Board, if any, the Vice-Chairman of the
Board, if any, the President, a Vice-President, or, if none of the foregoing is
in office and present and acting, by a chairman to be chosen by the
shareholders. The Secretary of the corporation, or in his absence, an Assistant
Secretary, shall act as secretary of every meeting, but if neither the Secretary
nor an Assistant Secretary is present the chairman of the meeting shall appoint
a secretary of the meeting.
- PROXY REPRESENTATION. Every shareholder may authorize
another person or persons to act for him by proxy in all matters in which a
shareholder is entitled to participate, whether by waiving notice of any
meeting, voting or participating at a meeting, or expressing consent or dissent
without a meeting. Every proxy must be signed by the shareholder or his
attorney-in-fact. No proxy shall be valid after the expiration of eleven months
from the date thereof unless otherwise provided in the proxy. Every proxy shall
be revocable at the pleasure of the shareholder executing it, except as
otherwise provided by the Business Corporation Law.
- INSPECTORS - APPOINTMENT. The directors, in advance of any
meeting may, but need not, appoint one or more inspectors to act at the meeting
or any adjournment thereof. If an inspector or inspectors are not appointed, the
person presiding at the meeting may, but need not, appoint one or more
inspectors. In case any person who may be appointed as an inspector fails to
appear or act, the vacancy may be filled by appointment made by the directors in
advance of the meeting or at the meeting by the person presiding thereat. Each
inspector, if any, before entering upon the discharge of his duties, shall take
and sign an oath faithfully to execute the duties of inspector at such meeting
with strict impartiality and according to the best of his ability. The
inspectors, if any, shall determine the number of shares outstanding and the
voting power of each, the shares represented at the meeting, the existence of a
quorum, the validity and effect of proxies, and shall receive votes, ballots, or
consents, hear and determine all challenges and questions arising in connection
with the right to vote, count and tabulate all votes, ballots, or consents,
determine the result, and do such acts as are proper to conduct the election or
vote with fairness to all shareholders. ON request of the person presiding at
the meeting or any shareholder, the inspector or inspectors, if any, shall make
a report in writing of any challenge, question or matter determined by him or
them and execute a certificate of any fact found by him or them.
- QUORUM. Except for a special election of directors pursuant
to Section 603(b) of the Business Corporation Law, and except as herein
otherwise provided, the holders of a majority of the outstanding shares shall
constitute a quorum at a meeting of shareholders for the transaction of any
business. When a quorum is once present to organize a meeting, it is not broken
by the subsequent withdrawal of any shareholders. The shareholders present may
adjourn the meeting despite the absence of a quorum.
- VOTING. Each share shall entitle the holder thereof to one
vote. In the election of directors, a plurality of the votes cast shall elect.
Any other action shall be authorized by a majority of the votes cast except
where the Business Corporation Law prescribes a different proportion of votes.
<PAGE> 75
7. SHAREHOLDER ACTION WITHOUT MEETINGS. Whenever shareholders
are required or permitted to take any action by vote, such action may be taken
without a meeting on written consent, setting forth the action so taken, signed
by the holders of all shares.
ARTICLE II
----------
GOVERNING BOARD
---------------
1. FUNCTIONS AND DEFINITIONS. The business of the corporation
shall be managed under the direction of a governing board, which is herein
referred to as the "Board of Directors" or "directors" notwithstanding that the
members thereof may otherwise bear the titles of trustees, managers, or
governors or any other designated title, and notwithstanding that only one
director legally constitutes the Board. The word "director"
2. QUALIFICATIONS AND NUMBER. Each director shall be at least
eighteen years of age. A director need not be a shareholder, a citizen of the
United States, or a resident of the State of New York. The initial Board of
Directors shall consist of two persons. Thereafter, the number of directors
constituting the entire board shall be at least three, except that, where all
the shares are owned beneficially and of record by less than three shareholders,
the number of directors may be less than three but not less than the number of
such shareholders. Subject to the foregoing limitation and except for the first
Board of Directors, such number may be fixed from time to time by action of the
shareholders or of the directors, or, if the number is not so fixed, the number
shall be two. The number of directors may be increased or decreased by action of
shareholders or of the directors, provided that any action of the directors to
effect such increase or decrease shall require the vote of a majority of the
entire Board. No decrease shall shorten the term of any incumbent director.
3. ELECTION AND TERM. The first Board of Directors shall be
elected by the incorporator or incorporators and shall hold office until the
first annual meeting of shareholders and until their successors have been
elected and qualified. Thereafter, directors who are elected at an annual
meeting of shareholders, and directors who are elected in the interim by the
shareholders to fill vacancies and newly created directorships, shall hold
office until the next annual meeting of shareholders and until their successors
have been elected and qualified; and directors who are elected in the interim by
the directors to fill vacancies and newly created directorships shall hold
office until the next meeting of shareholders at which the election of directors
is in the regular order of business and until their successors have been elected
and qualified. In the interim between annual meetings of shareholders or of
special meetings of shareholders called for the election of directors, newly
created directorships and any vacancies in the Board of Directors, including
vacancies resulting from the removal of directors for cause or without cause,
may be filled by the vote of the remaining directors then in office, although
less than a quorum exists.
4. MEETINGS.
--------
- TIME. Meetings shall be held at such place within or without
the State of New York as shall be fixed by the Board.
<PAGE> 76
- CALL. No call shall be required for regular meetings for
which the time and place have been fixed. Special meetings may be called by or
at the direction of the Chairman of the Board, if any, of the President, or of a
majority of the directors in office.
- NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. No notice shall be
required for regular meetings for which the time and place have been fixed.
Written, oral, or any other mode of notice of the time and place shall be given
for special meetings in sufficient time for the convenient assembly of the
directors thereat. The notice of any meeting need not specify the purpose of the
meeting. Any requirement of furnishing a notice shall be waived by any director
who signs a waiver of notice before or after the meeting, or who attends the
meeting without protesting, prior thereto or at its commencement, the lack of
notice to him.
- QUORUM AND ACTION. A majority of the entire Board shall
constitute a quorum except when a vacancy or vacancies prevents such majority,
whereupon a majority of the directors in office shall constitute a quorum,
provided such majority shall constitute at least one-third of the entire Board.
A majority of the directors present, whether or not a quorum is present, may
adjourn a meeting to another time and place. Except as herein otherwise
provided, the act of the Board shall be the act, at a meeting duly assembled, by
vote of a majority of the directors present at the time of the vote, a quorum
being present at such time.
Any one or more members of the Board of Directors or of any
committee thereof may participate in a meeting of said Board or of any such
committee by means of a conference telephone or similar communications equipment
allowing all persons participating in the meeting to hear each other at the same
time, and participation by such means shall constitute presence in person at the
meeting.
5. REMOVAL OF DIRECTORS. Any or all of the directors may be
removed for cause or without cause by the shareholders. One or more of the
directors may be removed for cause by the Board of Directors.
6. COMMITTEES. Whenever the Board of Directors shall consist
of more than three members, the Board of Directors, by resolution adopted by a
majority of the entire Board of Directors, may designate from their number three
or more directors to constitute an Executive Committee and other committees,
each of which, to the extent provided in the resolution designating it, shall
have the authority of the Board of Directors with the exception of any authority
the delegation of which is prohibited by Section 712 of the Business Corporation
Law.
7. WRITTEN ACTION. Any action required or permitted to be
taken by the Board of Directors or by any committee thereof may be taken without
a meeting if all of the members of the Board of Directors or of any committee
thereof consent in writing to the adoption of a resolution authorizing the
action. The resolution and the written consents thereto by the members of the
Board or of any such committee shall be filed with the minutes of the
proceedings of the Board of Directors or of any such committee.
ARTICLE III
-----------
OFFICERS
--------
<PAGE> 77
The directors may elect or appoint a Chairman of the Board of
Directors, a President, one or more Assistant Treasurers, a Secretary, one or
more Assistant Secretaries, a Treasurer, one or more Assistant Treasurers, and
such other officers as they may determine. The President may but need not be a
director. Any two or more offices may be held by the same person except the
offices of President and Secretary; or, when all of the issued and outstanding
shares of the corporation are owned by one person, such person may hold all or
any combination of offices.
Unless otherwise provided in the resolution of election or
appointment, each officer shall hold office until the meeting of the Board of
Directors following the next annual meeting of shareholders and until his
successor has been elected and qualified.
Officers shall have the powers and duties defined in the
resolutions appointing them.
The Board of Directors may remove any officer for cause or
without cause.
ARTICLE IV
----------
STATUTORY NOTICES TO SHAREHOLDERS
---------------------------------
The directors may appoint the Treasurer or other fiscal
officer and/or the Secretary or any other officer to cause to be prepared and
furnished to shareholders entitled thereto any special financial notice and/or
any financial statement, as the case may be, which may be required by any
provisions of law, and which, more specifically, may be required by Sections
510, 511, 515, 516, 517, 519 and 520 of the Business Corporation Law.
ARTICLE V
---------
BOOKS AND RECORDS
-----------------
The corporation shall keep correct and complete books and
records of account and shall keep minutes of the proceedings of the
shareholders, of the Board of Directors, and/of any committee which the
directors may appoint, and shall keep at the office of the corporation in the
State of New York or at the office of the transfer agent or registrar, if any,
in said State, a record containing the names and addresses of all shareholders,
the number and class of shares held by each, and the dates when they
respectively became the owners of record thereof. Any of the foregoing books,
minutes, or records may be in written form or in any other form capable of being
converted into written form within a reasonable time.
ARTICLE VI
----------
CORPORATE SEAL
--------------
The corporate seal, if any, shall be in such form as the Board
of Directors shall prescribe.
ARTICLE VII
-----------
<PAGE> 78
FISCAL YEAR
-----------
The fiscal year of the corporation shall be fixed, and shall
be subject to change from time to time, by the Board of Directors.
ARTICLE VIII
------------
CONTROL OVER BY-LAWS
--------------------
The shareholders entitled to vote in the election of directors
or the directors upon compliance with any statutory requisite may amend or
repeal the By-Laws and may adopt new By-Laws, except that the directors may not
amend or repeal any By-Law or adopt any new By-Law, the statutory control over
which is vested exclusively in the said shareholders or in the incorporators.
By-Laws adopted by the incorporators or directors may be amended or repealed by
the said shareholders.
******
The undersigned incorporator certifies that he has examined
the foregoing By-Laws and has adopted the same as the first By-Laws of the
corporation; that said By-Laws contain specific and general provisions, which,
in order to be operative, must be adopted by the incorporator or incorporators
or the shareholders entitled to vote in the election of directors; and that he
has adopted each of said specific and general provisions in accordance with the
requirements of the Business Corporation Law.
Dated: May 9, 1996
-----------------------------------
Gregory P. G. Wharton, Incorporator of
Coolidge Acquisition Corp.
I HEREBY CERTIFY that the foregoing is a full, true, and
correct copy of the By-Laws of Coolidge Acquisition Corp. , a New York
corporation, as in effect on the date hereof.
WITNESS my hand and the seal of the corporation.
Dated: May 9, 1996
----------------------------------
Ronald J. Barowski, Secretary of
Coolidge Acquisition Corp.
(SEAL)
<PAGE> 79
EXHIBIT 7.2(XIV)
----------------
__________ __, 1996
[name of Company]
[name of Company's subsidiaries]
[address]
United TransNet, Inc.
1080 Holcomb Bridge Road
Building 200, Suite 140
Roswell, GA 30076
Ladies and Gentlemen:
Reference is hereby made to that certain Agreement and Plan of
Reorganization, dated as of May __, 1996 (the "Merger Agreement"), between
United TransNet, Inc. ("UTN"), Coolidge Acquisition Corp. ("UTN Acquisition
Subsidiary"), Coolidge, Inc. (the "Company"), the undersigned and the other
Stockholders of and other persons holding equity interests in the Company.
Capitalized terms used herein without definition shall have the meanings
prescribed therefor in the Merger Agreement.
In order to induce UTN and UTN Acquisition Subsidiary to effect the
Merger and the Transactions, the undersigned does hereby release the Company and
its Subsidiaries from any and all Claims the undersigned now has or ever had
against them (other than Claims arising from the undersigned's having acted as a
director or officer of the Company as contemplated by Section 6.7 of the Merger
Agreement).
Very truly yours,
---------------------------
Print Name:
<PAGE> 80
The foregoing is accepted:
UNITED TRANSNET, INC.
By:______________________
Title:
[NAME OF COMPANY]
By:______________________
Title:
<PAGE> 81
EXHIBIT 7.2(XIX)
----------------
EMPLOYMENT AGREEMENT
--------------------
This Agreement is entered into this ____ day of May, 1996, by and
between United TransNet, Inc., a corporation with its principal place of
business at 1080 Holcomb Bridge Road, Roswell, Georgia (the "Company"), and
____________, an individual residing _____________________________________
("Employee").
WHEREAS, as a result of a merger (the "Merger"), Eddy Messenger
Service, Inc. has become a wholly-owned subsidiary of the Company pursuant to an
Agreement and Plan of Reorganization dated as of May 14, 1996 (the "Merger
Agreement"); and
WHEREAS, Employee has realized, and will continue to realize,
substantial value as a result of the Merger; and
WHEREAS, the Company desires to employ Employee as an employee of the
Company with the duties, responsibilities, rights and obligations set forth
below; and
WHEREAS, Employee desires to be so employed; and
WHEREAS, in Employee's capacity as an Employee of the Company, Employee
will obtain access to, and be in a position to adversely affect, the
confidential information and good will of the Company and the subsidiaries of
the Company (the "Subsidiaries") (the
<PAGE> 82
-2-
Company and the Subsidiaries collectively and each individually referred to as
the "UTN Group");
NOW THEREFORE, the Company and the Employee hereby agree as follows:
1. TERM. The term of this Agreement shall commence on the Closing Date,
as that term is defined in the Merger Agreement (the "Effective Date"), and
shall continue for three (3) years from the Effective Date unless sooner
terminated in accordance with the provisions of paragraph 6 of this Agreement
(the "Term").
2. DUTIES AND RESPONSIBILITIES. The Company agrees to employ Employee,
and Employee agrees to be employed, as [TITLE], and Employee shall perform all
of the duties and responsibilities of said office, subject to direction by the
Chief Executive Officer and the Board of Directors of the Company. In addition,
Employee shall perform such other specific tasks and responsibilities,
consistent with Employee's position as [TITLE], as may be assigned to him from
time to time by Chief Executive Officer and the Board of Directors of the
Company. The Company shall have the right to reassign Employee to such other
positions as the Company may determine so long as such other positions involve a
substantially similar level of compensation, authority and responsibility as the
position of [TITLE]; PROVIDED, HOWEVER, that Employee shall not be required to
locate outside the New York area without Employee's consent. Employee shall
devote substantially all of Employee's business time, labor, skill and best
efforts to carrying out Employee's duties and responsibilities under this
Agreement; PROVIDED, HOWEVER, that Employee may engage in side business
activities so long as (i) Employee does not otherwise violate any other
provision of
<PAGE> 83
-3-
this Agreement, and (ii) such side business activities do not interfere with
Employee's ability to carry out Employee's duties and responsibilities under
this Agreement. Employee shall travel to whatever extent may be reasonably
necessary in the conduct of the UTN Group's business and Employee's duties and
responsibilities hereunder.
3. COMPENSATION. Subject to Employee's adherence to Employee's
responsibilities and obligations hereunder, the Company agrees to pay
______________________ Dollars ($ , ) per year, and such compensation as may be
mutually agreed upon from time to time by the Company and Employee, and Employee
shall be eligible for such increases (but not decreases) in base compensation,
and to participate in such bonus and/or incentive compensation plans, as shall
be made available from time to time to similarly situated employees of the
Company.
4. BENEFITS AND VACATION. During the Term of this Agreement, Employee
shall be eligible to participate in and/or receive such group insurance plans
and other fringe benefit plans as the Company shall make available to similarly
situated employees. Employee shall receive ____ (_) weeks of vacation each year.
Employee shall receive a monthly automobile allowance of $____.
5. EXPENSE REIMBURSEMENT. Employee shall be entitled to reimbursement
for business-related expenses incurred by him in connection with the performance
of Employee's duties and responsibilities under this Agreement upon submission
of documentation thereof in accordance with such procedures as the Company may
establish from time to time.
<PAGE> 84
-4-
6. TERMINATION. Notwithstanding any other provision of this Agreement,
the Company may terminate Employee's employment at any time during the Term for
any reason as follows:
a. BY THE COMPANY FOR CAUSE. The Company shall have the right
to terminate Employee's employment hereunder immediately for "Cause". For
purposes of this Agreement only, the term "Cause" shall mean material breach of
any provision of this Agreement; material wilful misconduct in the performance
of Employee's duties or responsibilities; material wilful nonperformance of
Employee's duties or responsibilities other than by reason of disability;
conviction of, or written admission to, a felony or other crime involving moral
turpitude; imprisonment for any crime constituting a felony; any act involving
theft, embezzlement or fraud; or a material violation of any written policy of
the Company. Notwithstanding any other provision of this Agreement, in the event
of a termination of Employee's employment during the Term for Cause pursuant to
this subparagraph, the Company shall only be obligated to pay Employee his base
compensation through the date of such termination for cause, together with such
other benefits or payments to which Employee may be entitled (in the event of a
Cause termination) by law or pursuant to benefit plans of the Company then in
effect, and Employee shall remain bound by Employee's obligations under
paragraphs 7, 8 and 9 of this Agreement.
b. DISABILITY. The Company shall have the right to terminate
Employee's employment hereunder in the event that Employee shall be prevented,
by illness, accident, disability or any other physical or mental condition from
substantially performing Employee's duties and responsibilities hereunder for
one or more periods totaling one hundred fifty (150) days in any (12) month
period. In the event of a termination pursuant to this section,
<PAGE> 85
-5-
Employee shall be entitled to receive such base compensation and group insurance
benefits as Employee would have received (at such times as Employee would have
received them) during a period equal to the greater of (i) one (1) year, or (ii)
the remainder of the Term had Employee remained employed by the Company, which
amount shall be reduced by only the amount actually received by Employee under
any disability plans maintained by the Company. Employee shall also be entitled
to receive such payments or benefits to which Employee may be entitled by law or
pursuant to benefit plans of the Company then in effect, and Employee shall
remain bound by Employee's obligations under paragraphs 7, 8 and 9 of this
Agreement.
c. DEATH. In the event of a termination of Employee's
employment hereunder by reason of Employee's death, the Company shall pay to
Employee's estate, designated beneficiary, or legal representative such base
compensation and group insurance benefits as Employee would have received (at
such times as Employee would have received them) during a period equal to the
greater of (i) one (1) year, or (ii) the remainder of the Term had Employee
remained employed by the Company, together with such other benefits or payments
to which Employee may be entitled by law or pursuant to benefit plans of the
Company then in effect.
d. RESIGNATION AND TERMINATION BY THE COMPANY OTHER THAN FOR
CAUSE, DISABILITY OR DEATH. The Company and Employee shall each have the right
to terminate Employee's employment hereunder other than for Cause, disability or
death upon thirty (30) days' prior written notice. In the event of a termination
of Employee's employment pursuant to this subparagraph during the Term, Employee
shall be entitled to receive such base compensation and group insurance benefits
as Employee would have received (at such times as Employee would have received
them) during a period equal to the greater of (i) one (1)
<PAGE> 86
-6-
year or (ii) the remainder of the Term had Employee remained employed by the
Company (which period shall be referred to as the "Severance Period"), together
with such other payments and benefits to which Employee may be entitled by law
or pursuant to benefit plans of the Company then in effect. In the event of such
a termination, Employee shall remain bound by Employee's obligations under
paragraphs 7, 8 and 9 of this Agreement.
7. CONFIDENTIALITY. Employee agrees that he will not at any time,
during, or for two (2) years after the termination of Employee's employment with
the Company for any reason, without the Company's prior written consent, reveal
or disclose to any person outside of the UTN Group, or use for his own benefit
or the benefit of any other person or entity, any confidential information
concerning the business or affairs of the UTN Group, or concerning the
customers, clients or employees of the UTN Group ("Confidential Information").
For purposes of this Agreement, Confidential Information shall include, but
shall not be limited to, financial information or plans; sales and marketing
information or plans; business or strategic plans; salary, bonus or other
personnel information of any type; information concerning methods of operation;
proprietary systems or software; legal or regulatory information; cost and
pricing information or policies; information concerning new or potential
products or markets; models, practices, procedures, strategies or related
information; research and/or analysis; and information concerning new or
potential investors, customers, or clients. Confidential Information shall not
include Confidential Information already available to the public through no act
of Employee's, nor shall it include salary, bonus or other personnel information
specific to Employee.
Employee further understands and agrees that all such Confidential
Information, however or whenever produced, shall be the UTN Group's sole
property, and shall not be
<PAGE> 87
-7-
removed by Employee (or anyone acting at Employee's direction or on his behalf)
from the UTN Group's custody or premises without the Company's prior written
consent. Upon the termination of Employee's employment, Employee will promptly
deliver to the Company all copies of all documents, equipment, property or
materials of any type in his possession, custody or control, that belong to the
UTN Group, and/or that contain, in whole or in part, any Confidential
Information.
8. INVENTIONS. During the Term of this Agreement, Employee shall
promptly disclose to the Company or any successor or assign, and grant to the
Company and its successors and assigns (without any separate remuneration or
compensation other than that received by Employee in the course of his
employment), Employee's entire right, title and interest in and to any and all
inventions, developments, discoveries, models, or any other intellectual
property of any type or nature whatsoever ("Intellectual Property") developed
during the Term of this Agreement, whether developed by Employee during or after
business hours, or alone or in connection with others, reasonably related to the
business of the Company, the Subsidiaries and their respective successors or
assigns, determined as such business is constituted at the time of the
invention. Employee agrees, at the Company's expense, to take all steps
necessary or proper to vest title to all such Intellectual Property in the
Company, its affiliates, successors, assigns, nominees or designees, and to
cooperate fully and assist the UTN Group in any litigation or other proceedings
involving any such Intellectual Property.
9. RESTRICTIVE COVENANTS. During the Restricted Period (as defined
below), Employee shall not, directly or indirectly, for Employee's own account
or for or on behalf of
<PAGE> 88
-8-
any other person or entity, whether as an officer, director, employee, partner,
principal, joint venturer, consultant, investor, shareholder, independent
contractor or otherwise:
a. engage in any business in competition with the then
business of the UTN Group, or in competition with any business that the UTN
Group, to the Employee's knowledge, actively was planning to enter at the time
of the termination of Employee's employment hereunder; or
b. solicit or accept business in competition with the UTN
Group from any (i) clients of the UTN Group who were clients of the UTN Group at
the time of the termination of Employee's employment hereunder, or who were
clients during the one (1) year period preceding such termination, or (ii) any
prospective clients of the UTN Group who, within one (1) year prior to such
termination, had been solicited directly by Employee or where Employee
supervised or participated in such solicitation activities; or
c. solicit or induce, or attempt to solicit or induce, any of
the UTN Group's employees,(other than drivers, unless Employee shall engage or
participate in a pattern of hiring or employing, or attempting to hire or
employ, such drivers), consultants, clients, customers, vendors, suppliers, or
independent contractors to terminate their relationship with the UTN Group; or
d. speak or act in any manner that is intended to, or does in
fact, damage the goodwill or the business or reputation of the UTN Group.
For purposes of this Agreement, the Restricted Period shall be a period
beginning on the Closing Date, as that term is defined in the Merger Agreement,
and ending two years after the earlier of (i) the expiration of the Term
(including any subsequent extensions thereof) or (ii) termination in accordance
with the provisions of paragraph 6 above.
<PAGE> 89
-9-
Nothing in this paragraph 9 shall prohibit Employee from owning not
more than 5 percent of any class of securities registered pursuant to the
Securities Exchange Act of 1934, as amended, of any corporation engaged in
competition with the UTN Group so long as Employee does not otherwise (i)
participate in the management or operation of any such business, or (ii) violate
any other provision of this Agreement.
Employee understands and agrees that, by virtue of his position with
the Company, he will have substantial access to and impact on the good will,
confidential information and other legitimate business interests of the UTN
Group, and that, therefore, Employee is in a position to have a substantial
adverse impact on the UTN Group's business interests should Employee engage in
business in competition with the UTN Group after his employment with the Company
terminates. Employee further understands and agrees that his adherence to the
restrictive covenants set forth in this paragraph is an important and
substantial part of the consideration that the Company is receiving under this
Agreement, and further agrees that the restrictive covenants in this paragraph
are enforceable in all respects. Employee consents to the entry of the
injunctive relief to enforce such covenants, in addition to such other relief to
which the Company may be entitled by law.
10. SPECIFIC PERFORMANCE. Employee recognizes and agrees that the UTN
Group's remedy at law for breach of paragraphs 7, 8 and 9 of this Agreement
would be inadequate, and further agrees that, for breach of such provisions, the
UTN Group shall be entitled to injunctive relief and to enforce its rights by an
action for specific performance.
11. CHOICE OF LAW. This Agreement, and all disputes arising under or
related to it, shall be governed by the law of the State of New York.
<PAGE> 90
-10-
12. CHOICE OF FORUM. All disputes arising under or out of this
Agreement shall be brought in courts of competent jurisdiction located within
the state of New York.
13. ASSIGNMENT. This Agreement, and the rights and obligations of
Employee and the Company hereunder, shall inure to the benefit of and shall be
binding upon, Employee, his heirs and representatives, and upon the Company, the
Subsidiaries and their respective successors and assigns. This Agreement may not
be assigned by Employee.
14. NOTICES. All notices required by this Agreement shall be in writing
and shall be deemed to have been duly delivered when delivered in person or when
mailed by certified mail, return receipt requested, as follows:
A. If to Employee:
If to the Company:
UNITED TRANSNET, INC.
1080 Holcomb Bridge Road
Building 200, Suite 140
Roswell, Georgia 30076
or to such other address as a party hereto shall specify in writing given in
accordance with this section.
15. SEVERABILITY. In the event that any one or more of the provisions
of this Agreement shall be held to be invalid, illegal or unenforceable, the
validity, legality and
<PAGE> 91
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enforceability of the remaining provisions shall not in any way be affected or
impaired thereby. Moreover, if any one or more of the provisions contained in
this Agreement shall be held to be excessively broad as to duration, activity or
subject, such provision shall be construed by limiting or reducing them so as to
be enforceable to the maximum extent compatible with applicable law.
16. CONSULTATION WITH COUNSEL; NO REPRESENTATIONS. Employee agrees and
acknowledges that he has had a full and complete opportunity to consult with
counsel of his own choosing concerning the terms, enforceability and
implications of this Agreement, and that the Company has made no representations
or warranties to him concerning the terms, enforceability or implications of
this Agreement other than are as reflected in this Agreement.
Signed under seal this ____ day of ___________, 1996.
EMPLOYEE UNITED TRANSNET, INC.
______________________________ By:__________________________
Title:
<PAGE> 92
Exhibit 9.3(c)
REPRESENTATIONS OF UNITED TRANSNET, INC.
In connection with the Agreement and Plan of Reorganization dated as of
May 14, 1996, by and among United TransNet, Inc., a Delaware corporation
("UTN"), Coolidge Acquisition Corporation, a New York corporation (the
"Acquisition Corporation"), Eddy Messenger Service, Inc., a New York Corporation
("EMS"), and Mr. Robert H. Logan, Sr., Mr. Robert Logan, Jr., Mr. Michael J.
Logan, and Mr. Brian McArdle, the undersigned hereby represents the matters set
forth herein. The Agreement and Plan of Reorganization, as amended, and all
other agreements expressly contemplated thereby, are collectively referred to
herein as the "Merger Agreement". Capitalized terms herein have the same meaning
they have in the Merger Agreement, except as otherwise defined herein. As used
herein, "control" means the ownership of stock possessing at least eighty
percent (80%) of the total combined voting power of all classes of stock
entitled to vote and at least eighty percent (80%) of the total number of shares
of all other classes (and each other class) of stock of a corporation.
The undersigned recognizes, acknowledges and agrees that the other
parties to the Merger Agreement are relying upon the representations set forth
herein for the purpose of treating the Merger as a reorganization within the
meaning of Sections 368(a)(1)(A) and 368(a)(2)(D) of the Internal Revenue Code
of 1986, as amended (the "Code"), and that Sullivan & Worcester LLP is relying
upon the representations set forth herein for purposes of rendering its tax
opinion that the Merger is a reorganization within the meaning of Sections
368(a)(1)(A) and 368(a)(2)(D) of the Code.
The following representations are made by UTN on behalf of itself and
the Acquisition Corporation. Where a representation is made that the Acquisition
Corporation has no plan or intention to take certain actions, it shall be deemed
to include a representation that UTN has no plan or intention to cause or to
permit the Acquisition Corporation to take such actions.
A. Following the Merger, the Acquisition Corporation shall hold at
least ninety percent (90%) of the fair market value of the net assets of EMS and
at least seventy percent (70%) of the fair market value of the gross assets of
EMS held immediately prior to the Effective Time. For purposes of this
representation, amounts paid by EMS to dissenters, amounts paid
<PAGE> 93
by EMS to stockholders who receive cash or other property, amounts used by EMS
to pay reorganization expenses, and all redemptions and distributions made by
EMS immediately preceding the Merger (except for regular, normal dividends) are
included as assets of EMS immediately prior to the Effective Time. Moreover,
liabilities of EMS to pay reorganization expenses are excluded from the
computation of the fair market value of its net assets immediately prior to the
Effective Time.
B. At the time of the Merger, the Acquisition Corporation has no plan
or intention to issue additional shares of stock that would result in UTN losing
control of the Acquisition Corporation.
C. At the time of the Merger, the Acquisition Corporation has no plan
or intention to issue any warrants, options, convertible securities, or any
other type of right pursuant to which any person could acquire stock in the
Acquisition Corporation that, if exercised or converted, would result in UTN
losing control of the Acquisition Corporation.
D. At the time of the Merger, UTN has no plan or intention to reacquire
any of its stock issued in the Merger.
E. At the time of the Merger, UTN has no plan or intention to liquidate
the Acquisition Corporation.
F. At the time of the Merger, UTN has no plan or intention to merge the
Acquisition Corporation with or into another corporation.
G. At the time of the Merger, the Acquisition Corporation has no plan
or intention to sell or otherwise dispose of any of the assets of EMS acquired
in the Merger, except for dispositions made in the ordinary course of business
or transfers described in Section 368(a)(2)(C) of the Code.
H. At the time of the Merger, UTN has no plan or intention to sell or
otherwise dispose of any of the stock of the Acquisition Corporation.
I. UTN is in control of the Acquisition Corporation and will be in
control of the Acquisition Corporation at the Effective Time.
J. No stock of the Acquisition Corporation will be issued in the
Merger.
K. Except as expressly provided for in Section 8.5 of the Merger
Agreement, UTN and the Acquisition Corporation have paid
-2-
<PAGE> 94
and will pay their respective expenses incurred in connection with the Merger.
L. No expenses or liabilities of the stockholders of EMS have been or
will be assumed, paid, or reimbursed by UTN or the Acquisition Corporation,
except as expressly provided for in Section 8.5 of the Merger Agreement.
M. No consideration for the Merger has been or will be provided by UTN
or the Acquisition Corporation to EMS or the stockholders of EMS, other than as
expressly provided for in the Merger Agreement.
N. After the Merger, the Acquisition Corporation will continue to
conduct the historic business of EMS or use a significant portion of EMS's
historic business assets in a business.
O. UTN is not, and prior to the Effective Time will not be, an
investment company as defined in Sections 368(a)(2)(F)(iii) and (iv) of the
Code.
P. There is no intercorporate indebtedness existing between UTN and
EMS, or between the Acquisition Corporation and EMS, that was issued, acquired,
settled or will be settled at a discount.
Q. Any compensation paid by UTN or the Acquisition Corporation to any
shareholder-employee of EMS will be for services actually rendered and will be
commensurate with amounts paid to third parties bargaining at arm's length for
similar services. None of the compensation paid to any such shareholderemployee
will be separate consideration for, or allocable to, any of his EMS shares. None
of the UTN shares or other consideration received by any such shareholder-
employee in the Merger will be separate consideration for, or allocable to, any
employment agreement.
IN WITNESS WHEREOF, the undersigned has executed these representations,
acting by and through its duly authorized officer, this ____ day of May, 1996.
UNITED TRANSNET, INC.
By:______________________________
Title:___________________________
-3-
<PAGE> 95
Exhibit 9.3(c)
REPRESENTATIONS OF [INDIVIDUAL SHAREHOLDER]
In connection with the Agreement and Plan of Reorganization dated as of
May ___, 1996, by and among United TransNet, Inc., a Delaware corporation
("UTN"), Coolidge Acquisition Corporation, a New York corporation (the
"Acquisition Corporation"), Eddy Messenger Service, Inc., a New York Corporation
("EMS"), and Mr. Robert H. Logan, Sr., Mr. Robert Logan, Jr., Mr. Michael J.
Logan, and Mr. Brian McArdle, the undersigned hereby represents the matters set
forth herein. The Agreement and Plan of Reorganization, as amended, and all
other agreements expressly contemplated thereby, are collectively referred to
herein as the "Merger Agreement". Capitalized terms herein have the same meaning
they have in the Merger Agreement, except as otherwise defined herein.
The undersigned recognizes, acknowledges and agrees that the other
parties to the Merger Agreement are relying upon the representations set forth
herein for the purpose of treating the Merger as a reorganization within the
meaning of Sections 368(a)(1)(A) and 368(a)(2)(D) of the Internal Revenue Code
of 1986, as amended (the "Code"), that EMS is relying upon the representations
set forth herein for purposes of rendering its representations to the other
parties to the Merger Agreement and to Sullivan & Worcester LLP, and that
Sullivan & Worcester LLP is relying upon the representations set forth herein
for purposes of rendering its tax opinion that the Merger is a reorganization
within the meaning of Sections 368(a)(1)(A) and 368(a)(2)(D) of the Code.
A. The fair market value of the UTN common stock and other
consideration received by the undersigned will be approximately equal to the
fair market value of the EMS shares surrendered by the undersigned in the
Merger.
B. Any compensation paid to the undersigned by UTN, the Acquisition
Corporation, or EMS will be for services actually rendered and will be
commensurate with amounts paid to third parties bargaining at arm's length for
similar services. None of the compensation paid to the undersigned will be
separate consideration for, or allocable to, any of his EMS shares. None of the
UTN shares or other consideration received by the undersigned in the Merger will
be separate consideration for, or allocable to, any employment agreement.
C. The undersigned has no plan or intention to sell, exchange, or
otherwise dispose of any shares of UTN common stock
<PAGE> 96
received in the Merger. For purposes of this representation, shares of EMS stock
and shares of UTN stock held by the undersigned and otherwise sold, redeemed, or
disposed of prior or subsequent to the Merger will be considered in making this
representation.
D. Except as expressly provided for in Section 8.5 of the Merger
Agreement, neither UTN, the Acquisition Corporation, EMS nor any other
stockholder of EMS will pay any of the undersigned's expenses incurred in
connection with the Merger, and the undersigned will not pay any of their
expenses incurred in connection with the Merger.
IN WITNESS WHEREOF, the undersigned has executed these representations
this ___ day of May, 1996.
[Individual Shareholder]
By:___________________________________
-2-
<PAGE> 97
Exhibit 9.3(c)
REPRESENTATIONS OF EDDY MESSENGER SERVICE, INC.
In connection with the Agreement and Plan of Reorganization dated as of
May 14, 1996, by and among United TransNet, Inc., a Delaware corporation
("UTN"), Coolidge Acquisition Corporation, a New York corporation (the
"Acquisition Corporation"), Eddy Messenger Service, Inc., a New York Corporation
("EMS"), and Mr. Robert H. Logan, Sr., Mr. Robert Logan, Jr., Mr. Michael J.
Logan, and Mr. Brian McArdle, the undersigned hereby represents the matters set
forth herein. The Agreement and Plan of Reorganization, as amended, and all
other agreements expressly contemplated thereby, are collectively referred to
herein as the "Merger Agreement". Capitalized terms herein have the same meaning
they have in the Merger Agreement, except as otherwise defined herein.
The undersigned recognizes, acknowledges and agrees that the other
parties to the Merger Agreement are relying upon the representations set forth
herein for the purpose of treating the Merger as a reorganization within the
meaning of Sections 368(a)(1)(A) and 368(a)(2)(D) of the Internal Revenue Code
of 1986, as amended (the "Code"), and that Sullivan & Worcester LLP is relying
upon the representations set forth herein for purposes of rendering its tax
opinion that the Merger is a reorganization within the meaning of Sections
368(a)(1)(A) and 368(a)(2)(D) of the Code.
A. The exchange ratio and terms of the Merger are fair and reasonable
and will result in each holder of EMS stock receiving value in the Merger that
is approximately equal to the fair market value of his EMS shares surrendered.
B. There is no plan or intention on the part of the shareholders of EMS
to sell, exchange, or otherwise dispose of any shares of UTN common stock
received in the Merger. For purposes of this representation, shares of EMS stock
and shares of UTN stock held by EMS shareholders and otherwise sold, redeemed,
or disposed of prior or subsequent to the Merger will be considered in making
this representation.
C. In the Merger, the Acquisition Corporation will acquire at least
ninety percent (90%) of the fair market value of the net
<PAGE> 98
-2-
assets and at least seventy percent (70%) of the fair market value of the gross
assets held by EMS immediately prior to the Merger. For purposes of this
representation, amounts paid by EMS to dissenters, amounts paid by EMS to
shareholders who receive cash or other property, amounts used by EMS to pay
reorganization expenses, and all redemptions and distributions made by EMS
immediately preceding the Merger (except for regular, normal dividends) will be
included as assets of EMS held immediately prior to the Merger. Moreover,
liabilities of EMS to pay reorganization expenses will be excluded from the
computation of the fair market value of its net assets immediately prior to the
Merger.
D. Except as expressly provided for in Section 8.5 of the Merger
Agreement, EMS and the stockholders of EMS will pay their respective expenses,
if any, incurred in connection with the Merger.
E. There is no intercorporate indebtedness existing between UTN and
EMS, or between the Acquisition Corporation and EMS, that was issued, acquired,
settled, or will be settled at a discount.
F. EMS is not an investment company as defined in Sections
368(a)(2)(F)(iii) and (iv) of the Code.
G. EMS is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code.
H. No consideration for the Merger has been or will be provided by UTN
or any UTN Subsidiary to EMS or the stockholders of EMS, other than as expressly
provided for in the Merger Agreement.
I. No dividends or distributions have been or will be made with respect
to any stock of EMS immediately prior to the transactions described in the
Merger Agreement.
J. On the date of the Merger, the fair market value of the assets of
EMS transferred to the Acquisition Corporation in the Merger will exceed the sum
of liabilities to be assumed by the Acquisition Corporation, plus the amount of
liabilities, if any, to which such transferred assets are subject.
K. The liabilities of EMS assumed by the Acquisition Corporation, and
the liabilities to which the assets of EMS transferred in the Merger are
subject, were incurred by EMS in the ordinary course of business.
<PAGE> 99
-3-
L. Any compensation paid by EMS to any shareholder-employee of EMS will
be for services actually rendered and will be commensurate with amounts paid to
third parties bargaining at arm's length for similar services. None of the
compensation paid to any such shareholder-employee will be separate
consideration for, or allocable to, any of his EMS shares. None of the UTN
shares or other consideration received by any such shareholder-employee in the
Merger will be separate consideration for, or allocable to, any employment
agreement.
M. Apart from the four persons listed on Schedule A attached hereto,
there are no stockholders of EMS.
IN WITNESS WHEREOF, the undersigned has executed these representations,
acting by and through its duly authorized officer, this ____ day of May, 1996.
EDDY MESSENGER SERVICE, INC.
By:______________________________
Title:___________________________
<PAGE> 100
-4-
SCHEDULE A
----------
Stockholders of Eddy Messenger Service, Inc.:
Mr. Robert H. Logan, Sr.
Mr. Robert Logan, Jr.
Mr. Michael J. Logan
Mr. Brian McArdle
<PAGE> 101
UNITED TRANSNET, INC.
LOCK-UP LETTER
May ___, 1996
SMITH BARNEY INC.
MORGAN KEEGAN & COMPANY, INC.
c/o SMITH BARNEY INC.
388 Greenwich Street
New York, NY 10013
Dear Sirs:
The undersigned understands that you and certain other firms (the
"Underwriters") have entered into an Underwriting Agreement dated as of December
14, 1995 (the "Underwriting Agreement") providing for the purchase by the
Underwriters of shares (the "Shares") of Common Stock, par value $.001 per share
(the "Common Stock"), of United TransNet, Inc., a Delaware corporation (the
"Company"), and that the Underwriters have reoffered the Shares to the public.
For good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, the undersigned hereby irrevocably agrees that without
the prior written consent of Smith Barney Inc. the undersigned will not sell,
offer to sell, solicit an offer to buy, contract to sell, grant any option to
purchase, or otherwise transfer or dispose of, any shares of Common Stock, or
any securities convertible into or exercisable or exchangeable for Common Stock
(collectively "Related Securities"), until after June 11, 1996 (the period from
the date of this letter to and including June 11, 1996, the "Lock-Up Period"),
provided, however, that the undersigned may, without Smith Barney's prior
written consent, transfer shares of Common Stock or Related Securities to a
member of the undersigned's immediate family or to a trust of which the
undersigned or an immediate family member is the beneficiary (either one a
"Transferee") provided that upon any such transfer, the Transferee shall sign a
letter substantially similar to this letter agreement agreeing not to sell,
grant any option to purchase, or otherwise transfer or dispose of any such
Common Stock or Related Securities for the remainder of the Lock-Up Period.
<PAGE> 102
-2-
The undersigned agrees that the provisions of this agreement shall be
binding also upon the successors, assigns, heirs and personal representatives of
the undersigned.
In furtherance of the foregoing, the Company and The First Union
National Bank of North Carolina, its Transfer Agent, are hereby authorized to
decline to make any transfer of securities if such transfer would constitute a
violation or breach of this letter agreement.
Very truly yours,
X___________________________
Print Name:
<PAGE> 103
NONCOMPETITION AND CONFIDENTIALITY AGREEMENT
--------------------------------------------
This Agreement is entered into this ____ day of May, 1996, by and
between United TransNet, Inc., a corporation with its principal place of
business at 1080 Holcomb Bridge Road, Roswell, Georgia (the "Company"), and
Robert H. Logan, Sr., an individual residing at One Saratoga Court, Nanuet, New
York 10954 ("Shareholder").
WHEREAS, as a result of a merger (the "Merger"), Eddy Messenger
Service, Inc. has become a wholly owned subsidiary of the Company pursuant to an
Agreement and Plan of Reorganization dated as of May __, 1996 (the "Merger
Agreement"); and
WHEREAS, Shareholder has realized, and will continue to realize,
substantial value as a result of the Merger; and
WHEREAS, Shareholder will obtain access to, and be in a position to
adversely affect, the confidential information and good will of the Company and
the subsidiaries of the Company (the "Subsidiaries") (the Company and the
Subsidiaries collectively and each individually referred to as the "UTN Group");
NOW THEREFORE, the Company and the Shareholder hereby agree as follows:
<PAGE> 104
-2-
1. CONFIDENTIALITY. Except for the business of corporate event planning
services, and warehousing and relating activities, Shareholder agrees that he
will not at any time, without the Company's prior written consent, reveal or
disclose to any person outside of the UTN Group, or use for his own benefit or
the benefit of any other person or entity, any confidential information
concerning the business or affairs of the UTN Group, or concerning the UTN
Group's customers, clients or employees ("Confidential Information"). For
purposes of this Agreement, Confidential Information shall include, but shall
not be limited to, financial information or plans; sales and marketing
information or plans; business or strategic plans; salary, bonus or other
personnel information of any type; information concerning methods of operation;
proprietary systems or software; legal or regulatory information; cost and
pricing information or policies; information concerning new or potential
products or markets; models, practices, procedures, strategies or related
information; research and/or analysis; and information concerning new or
potential investors, customers, or clients. Confidential Information shall not
include Confidential Information already available to the public through no act
of Shareholder's.
Shareholder further understands and agrees that all such Confidential
Information, however or whenever produced, shall be the sole property of the UTN
Group, and shall not be removed by Shareholder (or anyone acting at
Shareholder's direction or on his behalf) from the custody or premises of the
UTN Group without the Company's prior written consent.
2. RESTRICTIVE COVENANTS. During the Restricted Period (as defined
below), Shareholder shall not, directly or indirectly, for Shareholder's own
account or for or on behalf of any other person or entity, whether as an
officer, director, employee, partner,
<PAGE> 105
-3-
principal, joint venturer, consultant, investor, shareholder, independent
contractor or otherwise:
a. solicit or accept business in competition with the Company
from any (i) clients of the UTN Group, or (ii) any prospective clients of the
UTN Group if the persons solicited become customers of UTN (or an affiliate)
within three months of the Closing Date;
b. solicit or induce, or attempt to solicit or induce, any of
the UTN Group's employees,(other than drivers, unless Shareholder shall engage
or participate in a pattern of hiring or employing, or attempting to hire or
employ, such drivers), consultants, clients, customers, vendors, suppliers, or
independent contractors to terminate their relationship with the UTN Group; or
c. speak or act in any manner that is intended to, or does in
fact, damage the goodwill or the business or reputation of the UTN Group.
For purposes of this Agreement, the Restricted Period shall be a period
of two (2) years after the Closing Date, as that term is defined in the Merger
Agreement.
Nothing in this paragraph 2 shall prohibit Shareholder from owning not
more than 5 percent of any class of securities registered pursuant to the
Securities Exchange Act of 1934, as amended, of any corporation engaged in
competition with the UTN Group so long as Shareholder does not otherwise (i)
participate in the management or operation of any such business, or (ii) violate
any other provision of this Agreement.
Shareholder understands and agrees that, by virtue of his association
with the UTN Group, he will have substantial access to and impact on the good
will, confidential information and other legitimate business interests of the
UTN Group, and that, therefore, Shareholder is in a position to have a
substantial adverse impact on the UTN Group's
<PAGE> 106
-4-
business interests should Shareholder engage in business in competition with the
Company. Shareholder further understands and agrees that he is receiving
valuable and substantial consideration for entering into this Agreement, and
further agrees that the restrictive covenants in this paragraph 2 are
enforceable in all respects. Shareholder consents to the entry of the injunctive
relief to enforce such covenants, in addition to such other relief to which the
UTN Group may be entitled by law.
None of the foregoing shall preclude Shareholder from engaging in the
business of warehousing or related activities.
3. SPECIFIC PERFORMANCE. Shareholder recognizes and agrees that the UTN
Group's remedy at law for breach of paragraphs 1 and 2 of this Agreement would
be inadequate, and further agrees that, for breach of such provisions, the UTN
Group shall be entitled to injunctive relief and to enforce its rights by an
action for specific performance.
4. CHOICE OF LAW. This Agreement, and all disputes arising under or
related to it, shall be governed by the law of the State of New York.
5. CHOICE OF FORUM. All disputes arising under or out of this Agreement
shall be brought in courts of competent jurisdiction located within the State of
New York.
6. ASSIGNMENT. This Agreement, and the rights and obligations of
Shareholder and the UTN Group hereunder, shall inure to the benefit of and shall
be binding upon, Shareholder, his heirs and representatives, and upon the
Company, the Subsidiaries and their respective successors and assigns. This
Agreement may not be assigned by the Shareholder.
<PAGE> 107
-5-
7. SEVERABILITY. In the event that any one or more of the provisions of
this Agreement shall be held to be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby. Moreover, if any one or more of the
provisions contained in this Agreement shall be held to be excessively broad as
to duration, activity or subject, such provision shall be construed by limiting
or reducing them so as to be enforceable to the maximum extent compatible with
applicable law.
8. CONSULTATION WITH COUNSEL; NO REPRESENTATIONS. Shareholder agrees
and acknowledges that he has had a full and complete opportunity to consult with
counsel of his own choosing concerning the terms, enforceability and
implications of this Agreement, and that the Company has made no representations
or warranties to him concerning the terms, enforceability or implications of
this Agreement other than as are reflected in this Agreement.
Signed under seal this ____ day of May, 1996.
ROBERT H. LOGAN, SR. UNITED TRANSNET, INC.
- ------------------------------ --------------------------
Philip A. Belyew
President & CEO
<PAGE> 108
Omitted Schedules
-----------------
The following schedules to the Agreement and Plan of Reorganization,
dated as of May 14, 1996, among United TransNet, Inc., Coolidge Acquisition
Corp., Eddy Messenger Service, Inc. and Robert H. Logan, Sr., Robert H. Logan,
Jr., Michael L. Logan and Brian McArdle, have been omitted pursuant to Item
601(b)(2) of Regulation S-K under the Securities Act of 1933, as amended:
Schedule Number Schedule Title
- --------------- --------------
5.4(ii) Designated Indebtedness
5.7 Capitalization of United TransNet, Inc. and Coolidge
Acquisition Corp.
7.2(xvii) Exceptions to Discharge of Related Transactions
7.2(xxiv) Persons Signing Noncompete Agreements
8.1(d)(ii) Distributions to Stockholders
8.1(d)(ii)(a) Net Worth Balance Sheet Adjustments
Disclosure Schedule, including company and subsidiary information regarding:
- -------------------
Section Number Information Contained Therein
- ------------- -----------------------------
3.1(a)(i) Jurisdiction of Incorporation
3.1(a)(iii) Foreign Qualification
3.1(c) Lien
3.1(d) Subsidiary Company
3.2(a) Financial and Other Information
3.2(c) Financial and Other Information
3.3 Changes in Condition
3.4 Liabilities
3.5(a) Leases
3.5(b) Real estate Owned/Leased
3.6 Compliance with Private Authorizations
3.7(a)(i) Legal Actions
3.7(b) Governmental Authorization
3.8(a) Intangible assets and Governmental Authorizations
3.8(b) Intangible assets and Governmental Authorizations
3.9 Related Transactions
3.10(a) Insurance
3.11(a) Tax Matters
3.11(d) Tax Matters
3.11(e) Tax Matters
3.12 Employee Retirement Income Security Act of 1974
3.12(a)(xii) Accumulated Plan Liabilities
<PAGE> 109
2
3.15(a) Outstanding Capital Stock
3.15(b) Ownership/Liens on Outstanding Capital Stock
3.16(a) Employment Arrangement
3.16(b) Employment Arrangement
3.16(c) Work Stoppage/Slowdown
3.17(a) Material Agreements
3.17(b) Material Agreements
3.18(a) Ordinary Course of Business
3.18(a)(iv) Ordinary Course of Business
3.18(b) Distribution
3.19 Bank Accounts, Etc.
3.20 Adverse Restrictions
3.22 Property Damage; Warranty Claims, etc.
3.23(a) Environmental Matters
3.23(b) Environmental Matters
3.23(c) Above Ground or Underground Fuel Storage Tanks
3.23(e) Use of Hazardous Materials
3.23(g) Site Assessments
3.32 Predecessor Status
4.4 Title to Shares
4.5(iii) No Conflicts, Required Filings & Consents
The registrant agrees to furnish supplementally a copy of the foregoing
omitted schedules to the Securities and Exchange Commission upon request.
<PAGE> 1
EXHIBIT 3.11
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
UNITED TRANSNET, INC.
Under Sections 242 and 245
of the
Delaware General Corporation Law
United TransNet, Inc. (hereinafter the "Corporation"), a corporation
organized and existing under the laws of the State of Delaware, hereby certifies
as follows:
FIRST: The name of the Corporation is United TransNet, Inc.
SECOND: The original Certificate of Incorporation of the Corporation was
filed with the Secretary of State, Dover, Delaware, on October 5, 1995.
THIRD: This Restated Certificate of Incorporation restates, integrates and
further amends the provisions of the Certificate of Incorporation of the
Corporation as heretofore amended, restated or supplemented.
FOURTH: This Restated Certificate of Incorporation is intended to amend
paragraph (d) of Article EIGHTH of the original Certificate of Incorporation,
with regard to determinations of indemnification, and to restate the entire
certificate, as so amended.
FIFTH: This Restated Certificate of Incorporation was duly adopted by the
Board of Directors and stockholders of the Corporation pursuant to Sections 242
and 245 of the Delaware General Corporation Law.
SIXTH: The text of this Restated Certificate of Incorporation of the
Corporation as amended, restated and supplemented is hereby restated and further
amended to read in its entirety as follows:
<PAGE> 2
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
United TransNet, Inc.
FIRST: The name of the Corporation is United TransNet, Inc.
SECOND: The address of the Corporation's registered office in the State
of Delaware is 1013 Centre Road in the City of Wilmington, County of New Castle.
The name of the Corporation's registered agent at such address is Corporation
Service Company.
THIRD: The nature of the business or purposes to be conducted or
promoted by the Corporation are to engage in any lawful act or activity for
which corporations may be organized under the General Corporation Law of
Delaware.
FOURTH: The aggregate number of shares of all classes of capital stock
which the Corporation has authority to issue is 26,000,000 shares divided into
two classes as follows:
25,000,000 shares of Common Stock, par value $.001 per share
(the "COMMON STOCK"); and
1,000,000 shares of Preferred Stock, par value $.001 per share
(the "PREFERRED STOCK").
A. GENERAL
1. Any and all shares of any class or series issued for which the full
consideration has been paid or delivered, shall be deemed fully paid stock and
the holders of such shares shall not be liable for any further call or
assessment or any other payment thereon.
2. No holder of any of the shares of stock of the Corporation, whether
now or hereafter authorized or issued, shall be entitled as of right to purchase
or subscribe for (i) any unissued stock of any class, or (ii) any additional
share of any class to be issued by reason of any increase of the authorized
stock of the Corporation of any class, or (iii) bonds, certificates of
indebtedness, debentures or other securities convertible into or exchangeable
for, or carrying any right to purchase or otherwise acquire, stock of any class
of the Corporation.
3. The Board of Directors of the Corporation may from time to time
authorize by resolution the issuance of any or all shares of the Common Stock
and the Preferred Stock herein authorized or any class or series of capital
stock hereafter authorized, together with any additional shares of any class or
series to be issued by reason of any increase of the authorized stock of the
<PAGE> 3
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Corporation of any class or series, or bonds, certificates of indebtedness,
debentures or other securities convertible into or exchangeable for, or carrying
any right to purchase or otherwise acquire, stock of any class or series of the
Corporation, for such purposes, in such amounts, to such Persons, for such
consideration and, in the case of the Preferred Stock, in one or more series or
classes, all as the Board of Directors in its sole and absolute discretion may
from time to time determine and without any vote, approval, consent or other
action by the stockholders, except as otherwise required by Applicable Law.
4. The designations and the powers, preferences and rights, of the
capital stock of the Corporation and the qualifications, limitations and
restrictions thereof, shall be as set forth in Sections B, C and D below.
B. COMMON STOCK
1. VOTING RIGHTS. Except as otherwise required by Law or this
Certificate of Incorporation, on all matters to be voted on by stockholders of
the Corporation each holder of Common Stock shall have one vote in respect of
each share of Common Stock held of record by such holder on the books of the
Corporation. Except as otherwise required by Law or provided herein or
determined by the Board of Directors pursuant to Section C below, holders of
Common Stock shall vote together as a single class with holders of Preferred
Stock having voting rights, subject to any special or preferential voting rights
of any series of Preferred Stock from time to time outstanding.
2. DIVIDENDS. Whenever dividends upon the Preferred Stock at the time
outstanding, to the extent of any preference to which such Preferred Stock is
entitled, shall have been paid in full or declared and set apart for payment for
all past dividend periods, and after the provisions for any sinking or purchase
fund or funds for any series of Preferred Stock shall have been complied with,
the Board of Directors may declare and pay dividends on the Common Stock,
payable in cash, or otherwise, and the holders of shares of Preferred Stock
shall not be entitled to share therein, subject to the provisions of the
resolution or resolutions creating any series of Preferred Stock.
3. LIQUIDATION RIGHTS. In the event of any liquidation, dissolution, or
winding up of the Corporation or upon the distribution of the assets of the
Corporation, whether voluntary or otherwise, all assets and funds of the
Corporation remaining, after the payment to the holders of the Preferred Stock
of the full preferential amounts to which they shall be entitled as provided in
the resolution or resolutions creating any series thereof, shall be divided and
distributed to the holders of Common Stock (ratably among such holders based
upon the number of shares of Common Stock in each case held by each such holder
as of the time of such liquidating distribution), subject to the provisions, if
any, of the resolution or resolutions creating any series of Preferred Stock
that would allow the holders of such series to participate in distributions to
which the holders of Common Stock are entitled.
C. PREFERRED STOCK
<PAGE> 4
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Authority is hereby expressly granted to the Board of Directors from
time to time to issue the Preferred Stock as Preferred Stock of one or more
classes or series and in connection with the creation of any such class or
series to fix by the resolution or resolutions providing for the issue of shares
thereof the designation, voting powers, preferences, and relative,
participating, optional, or other special rights of such class or series, and
the qualifications, limitations, or restrictions thereof. Such authority of the
Board of Directors with respect to each such class or series shall include, but
not be limited to, the determination of the following:
1. The distinctive designation of, and the number of shares
comprising, such class or series, which number may be increased (except
where otherwise provided by the Board of Directors in creating such
class or series) or decreased (but not below the number of shares
thereof then outstanding) from time to time by like action of the Board
of Directors;
2. The dividend rate or amount for such class or series, the
conditions and dates upon which such dividends shall be payable, the
form in which such dividends shall be payable, the relation which such
dividends shall bear to the dividends payable on any other class or
classes or any other series of the same or any other class or classes
of stock, and whether or not such dividends shall be cumulative, and if
so, from which date or dates for such class or series;
3. Whether or not the shares of such class or series shall be
subject to redemption by the Corporation or the holders thereof and the
times, prices, and other terms and conditions of such redemption;
4. Whether or not the shares of such series shall be subject
to the operation of a sinking fund or purchase fund to be applied to
the redemption or purchase of such shares and if such a fund be
established, the amount thereof and the terms and provisions relative
to the application thereof;
5. Whether or not the shares of such series shall be
convertible into or exchangeable for shares of any other class or
classes, or of any other series of any class or classes, of stock of
the Corporation or any other Entity and if provision be made for
conversion or exchange, the times, prices, rates, adjustments, and
other terms and conditions of such conversion or exchange;
6. Whether or not the shares of such class or series shall
have voting rights, in addition to the voting rights provided by Law,
and if they are to have such additional voting rights, the extent
thereof;
7. The rights of the shares of such class or series in the
event of any voluntary or involuntary liquidation, dissolution, or
winding up of the Corporation or upon any distribution of its assets,
and the relative rights of priority, if any, of payment of such shares;
and
<PAGE> 5
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8. Any other powers, preferences, and relative, participating,
optional, or other special rights of the shares of such class or
series, and the qualifications, limitations, or restrictions thereof,
to the full extent now or hereafter permitted by Law and not
inconsistent with the rights or provisions of any other class or series
of Common Stock or Preferred Stock of the Corporation.
D. CERTAIN DEFINITIONS
For purposes of this Certificate of Incorporation, unless the context
otherwise requires, the following terms (or any variant in the form thereof)
have the following respective meanings. Terms defined in the singular shall have
a comparable meaning when used in the plural, and vice versa, and the reference
to any gender shall be deemed to include all genders.
The term "APPLICABLE LAW" shall mean any Law of any Authority,
whether domestic or foreign, including without limitation all federal
and state Laws, to which the Person in question is subject or by which
it or any of its business or operations is subject or any of its
property is bound.
The term "AUTHORITY" shall mean any governmental or
quasi-governmental authority, whether administrative, executive,
judicial, legislative or other, or any combination thereof, including
without limitation any federal, state, territorial, county, municipal
or other government or governmental or quasi-governmental agency,
authority, board, body, branch, bureau, central bank or comparable
agency or Entity, commission, court, department, instrumentality or
other political unit or subdivision or other Entity of any of the
foregoing, whether domestic or foreign.
"CERTIFICATE OF INCORPORATION" means this Amended and Restated
Certificate of Incorporation of the Corporation and any other document
which pursuant to the Delaware General Corporation Law constitutes a
part of the Corporation's Certificate of Incorporation, including any
further amendment or restatement thereof and any certificate of
designation in respect of any particular class or series of Preferred
Stock from time to time in effect.
The term "ENTITY" shall mean any corporation, firm, limited
liability company, unincorporated organization, association,
partnership, trust, business trust, joint stock company, joint venture
or other organization, entity or business, whether acting in an
individual, fiduciary or other capacity, or any governmental or
quasi-governmental authority, whether domestic or foreign and whether
administrative, executive, judicial, legislative or other, or any
combination thereof.
The term "LAW" shall mean any administrative, judicial,
legislative or other action, code, consent decree, constitution,
decree, directive, enactment, finding, guideline, law, injunction,
interpretation, judgment, order, ordinance, policy statement,
proclamation, promulgation, regulation, requirement, rule, rule of law,
rule of public policy, settlement agreement, statute, or writ, or the
common law, or any particular section, part or
<PAGE> 6
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provision thereof, or any interpretation, directive, guideline or
request (having the force of law), of any Authority.
The term "PERSON" shall mean any natural individual or any
Entity.
FIFTH: The name and mailing address of the sole incorporator is as
follows:
NAME MAILING ADDRESS
Peter G. Johannsen c/o Sullivan & Worcester
One Post Office Square
Boston, Massachusetts 02109
SIXTH: The names and mailing addresses of the persons who are to serve
as directors of the Corporation until the first annual meeting of stockholders,
or until their successors are elected and qualify are:
NAME MAILING ADDRESS
Philip A. Belyew 1080 Holcomb Bridge Road,
Building 200, Suite 140
Roswell, Georgia 30076
Ronald J. Barowski 1080 Holcomb Bridge Road,
Building 200, Suite 140
Roswell, Georgia 30076
SEVENTH: For the management of the business and for the
conduct of the affairs of the Corporation, and in further definition, limitation
and regulation of the powers of the Corporation and of its directors and
stockholders, it is further provided that:
(a) The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors. In addition to the powers and
authorities herein or by statute expressly conferred upon it, the Board of
Directors may exercise all such powers and do all such acts and things as may be
exercised or done by the Corporation, subject, nevertheless, to the provisions
of the laws of the State of Delaware, of this Certificate of Incorporation and
the By-Laws of the Corporation. Except as otherwise provided by the Delaware
General Corporation Law, any committee of the Board of Directors shall have and
may exercise, to the extent provided in the By-Laws of the Corporation or by the
resolutions of the Board of Directors, all of the powers and authority of the
Board of Directors of the Corporation in the management of the business and
affairs of the Corporation;
(b) The number of directors of the Corporation which shall constitute
the entire Board
<PAGE> 7
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of Directors shall be fixed from time to time by the vote of a majority of the
entire Board of Directors within the limits provided in the By-Laws. Any such
determination made by the Board of Directors shall continue in effect unless and
until changed by the Board of Directors, but no such changes shall affect the
term of any director then in office.
(c) Newly created directorships resulting from any increase in the
authorized number of directors or any vacancy in the Board of Directors
resulting from death, resignation, retirement, disqualification, removal from
office or otherwise shall be filled only by a majority vote of the directors
then in office, though less than a quorum, or by a sole remaining director, and
directors so chosen shall hold office for a term expiring at the annual meeting
of stockholders. If there are no directors in office, any officer or stockholder
may call a special meeting of stockholders in accordance with the provisions of
the By-Laws of the Corporation, at which meeting such vacancies shall be filled.
No decrease in the authorized number of directors shall shorten the term of any
incumbent director;
(d) Unless and except to the extent that the By-Laws of the Corporation
shall so require, the election of directors of the Corporation need not be by
written ballot. Directors need not be stockholders;
(e) In the election of directors the principle of cumulative voting
shall not apply;
(f) Subject to the rights of the holders of shares of any class or
series of Preferred Stock in respect of actions to be taken by the holders of
such shares, any action required or permitted to be taken by the stockholders of
the Corporation must be effected at a duly called annual or special meeting of
stockholders of the Corporation and may not be effected by any consent in
writing by the stockholders;
(g) Subject to the rights of the holders of shares of any class or
series of Preferred Stock in respect of meetings of the holders of such shares,
meetings of stockholders of the Corporation may be called only by the Board of
Directors pursuant to a resolution adopted by the Board of Directors; and
(h) Notwithstanding the foregoing, whenever the holders of any class or
series of Preferred Stock shall have the right, voting separately by class or
series, to elect directors at an annual or special meeting of stockholders, the
election, term of office, filling of vacancies and other features of such
directorships shall be governed by the terms of this Certificate of
Incorporation specifically applicable thereto.
EIGHTH:
(a) The Corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that he or she is or was a director, trustee, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director,
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partner, trustee, officer, employee or agent of another corporation,
partnership, limited liability company, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him or her in
connection with such action, suit or proceeding if he or she acted in good faith
and in a manner he or she reasonably believed to be in or not opposed to the
best interests of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he or she reasonably believed to be in or not
opposed to the best interest of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his or her
conduct was unlawful.
(b) The Corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action
or suit by or in the right of the Corporation to procure a judgment in its favor
by reason of the fact that he or she is or was a director, trustee, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, partner, trustee, officer, employee or agent of
another corporation, partnership, limited liability company, joint venture,
trust or other enterprise against expenses (including attorneys' fees) actually
and reasonably incurred by him or her in connection with the defense or
settlement of such action or suit if he or she acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best
interests of the Corporation and except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Corporation unless and only to the extent that the
Court of Chancery of the State of Delaware or the court in which such action or
suit was brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court of
Chancery of the State of Delaware or such other court shall deem proper.
(c) To the extent that any person referred to in paragraphs (a) and (b)
of this Article EIGHTH has been successful on the merits or otherwise in defense
of any action, suit or proceeding referred to therein, or in defense of any
claim, issue or matter therein, he or she shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him or her in
connection therewith.
(d) Any indemnification under paragraphs (a) and (b) of this Article
EIGHTH (unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification of the
director, trustee, partner, officer, employee or agent is proper in the
circumstances because he or she has met the applicable standard of conduct set
forth in such paragraphs (a) and (b) of this Article EIGHTH. Such determination
shall be made (1) by a majority vote of the directors who are not parties to
such action, suit or proceeding, even though less than a quorum, or (2) if there
are no such directors, or if such directors so direct, by independent legal
counsel in a written opinion, or (3) by the stockholders.
<PAGE> 9
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(e) Expenses (including attorney's fees) incurred by an officer or
director of the Corporation in defending any civil, criminal, administrative or
investigative action, suit or proceeding shall be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that he or she is not entitled to be
indemnified by the Corporation as authorized in this Article EIGHTH. Such
expenses (including attorney's fees) incurred by other persons referred to in
paragraphs (a) and (b) of this Article EIGHTH may be so paid upon such terms and
conditions, if any, as the Board of Directors deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other paragraphs of this Article EIGHTH shall not be
deemed exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any statute, by-law, agreement,
vote of stockholders or disinterested directors or otherwise, both as to action
in his or her official capacity and as to action in another capacity while
holding such office.
(g) The Corporation shall have the power to purchase and maintain
insurance on behalf of any person who is or was a director, trustee, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, trustee, partner, officer, employee or agent of
another corporation, partnership, limited liability company, joint venture,
trust or other enterprise against any liability asserted against him or her and
incurred by him or her in any such capacity, or arising out of his or her status
as such, whether or not the Corporation would have the power to indemnify such
person against such liability under the provisions of this Article EIGHTH.
(h) For purposes of this Article EIGHTH, references to "the
Corporation" include, in addition to the resulting Corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued would
have had power and authority to indemnify its directors, officers, trustees,
employees or agents so that any person who is or was a director, officer,
trustee, employee or agent of such constituent corporation, or is or was serving
at the request of such constituent corporation as a director, trustee, partner,
officer, employee or agent of another corporation, partnership, limited
liability company, joint venture, trust or other enterprise, shall stand in the
same position under the provisions of this Article EIGHTH with respect to the
resulting or surviving corporation as he or she would have with respect to such
constituent corporation if its separate existence had continued.
(i) For purposes of this Article EIGHTH, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of the Corporation"
shall include any service as a director, trustee, officer, employee or agent of
the Corporation which imposes duties on, or involves services by, such director,
trustee, officer, employee, or agent with respect to an employee benefit plan,
its participants, or beneficiaries; and a person who acted in good faith and in
a manner he or she reasonably believed to be in the interest of the participants
and beneficiaries of an employee benefit plan shall be deemed to have
<PAGE> 10
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acted in a manner "not opposed to the best interests of the Corporation" as
referred to in this Article EIGHTH.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article EIGHTH shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, partner, trustee, employee or agent and shall inure to the benefit of
the heirs, executors and administrators of such a person.
(k) The Corporation's obligation, if any, to indemnify any person who
was or is serving at its request as a director, trustee, partner, officer,
employee or agent of another corporation, partnership, limited liability
company, joint venture, trust or other enterprise shall be reduced by any amount
such person may collect as indemnification from such other corporation,
partnership, limited liability company, joint venture, trust or other enterprise
or from insurance.
(l) No amendment or repeal of the provisions of this Article EIGHTH
shall adversely affect any right or protection hereunder of any person in
respect of any act or omission occurring prior to the time of such amendment or
repeal.
NINTH: A director of the Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except to the extent that exculpation from liability is not
permitted under the General Corporation Law of Delaware as in effect when such
breach occurred. Neither the amendment or repeal of this Article NINTH, nor the
adoption of any provision of this Certificate of Incorporation inconsistent with
this Article NINTH, shall eliminate, reduce or adversely affect the effect of
this Article NINTH in respect of any act or omission occurring, or any cause of
action, suit or claim that, but for this Article NINTH, would accrue or arise,
prior to such amendment, repeal or adoption of an inconsistent provision.
TENTH: In furtherance and not in limitation of the powers conferred by
the Laws of the State of Delaware, the Board of Directors is expressly
authorized and empowered to make, alter, amend, and repeal the By-Laws. The
By-Laws of the Corporation may be amended, altered, changed or repealed, and a
provision or provisions inconsistent with the provisions of the ByLaws as they
exist from time to time may be adopted, only by the majority of the entire Board
of Directors or with the approval of the holders of not less than sixty-six and
two thirds percent (66-2/3%) of the voting power of all outstanding shares of
capital stock of the Corporation entitled to vote generally in the election of
directors.
ELEVENTH: Except for the provisions in Articles SEVENTH through TENTH,
both inclusive, and this Article ELEVENTH and Section C of Article FOURTH and
the authorization of the Corporation to issue up to 1,000,000 shares of
Preferred Stock, par value $.001 share, none of which provisions or
authorization shall be amended, altered, changed or repealed except with the
approval of the holders of not less than sixty-six and two-thirds percent
(66-2/3%) of the voting power of all outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors, voting
together as a single class; the Corporation reserves the right at any time and
from time to time to amend, alter, change or repeal any provision
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contained in this Certificate of Incorporation (including provisions as may
hereafter be added or inserted in this Certificate of Incorporation as
authorized by the Laws of the State of Delaware) in the manner now or hereafter
prescribed by Law. All rights, preferences and privileges of whatsoever nature
conferred upon stockholders, directors or any other person whomsoever by and
pursuant to this Certificate of Incorporation in its present form or as
hereafter amended are granted subject to the rights reserved in this Article.
Notwithstanding the foregoing, no such amendment, alteration, change,
repeal or waiver of any provision of Article SEVENTH that relates directly to
any terms or provisions of any class or series of the Preferred Stock or of
Common Stock that adversely affects such class or series of the Preferred Stock
or of Common Stock shall be effective without the prior written approval of the
holders of not less than sixty-six and two-thirds percent (66 2/3%) of the then
outstanding shares of such class or series of the Preferred Stock or of Common
Stock, as the case may be, except as may otherwise be provided in any
certificate of designation with respect to any class or series of Preferred
Stock.
IN WITNESS WHEREOF, United TransNet, Inc. has caused this Amended and
Restated Certificate of Incorporation to be duly executed in its corporate name
on this 9th day of November, 1995.
United TransNet, Inc.
By: /s/ PHILIP A. BELYEW
---------------------------
Philip A. Belyew, President
<PAGE> 1
EXHIBIT 3.12
CERTIFICATE OF AMENDMENT
TO
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
UNITED TRANSNET, INC.
United TransNet, Inc., a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), does hereby certify that the following amendments to the Amended
and Restated Certificate of Incorporation of the Corporation (the "Restated
Certificate") were duly adopted in accordance with the applicable provisions of
Section 242 of the General Corporation Law of the State of Delaware:
1. ARTICLE FOURTH, subparagraph A.3 of the Restated
Certificate is hereby deleted and in lieu of said Article, the
following new ARTICLE FOURTH, subparagraph A.3 is hereby inserted:
"3. The Board of Directors of the Corporation, or any
committee of the Board of Directors to which the Board of
Directors may from time to time grant such authority, may
from time to time authorize by resolution the issuance of
any or all shares of the Common Stock and the Preferred
Stock herein authorized or any class or series of capital
stock hereafter authorized, together with any additional
shares of any class or series to be issued by reason of any
increase of the authorized stock of the Corporation of any
class or series, or bonds, certificates of indebtedness,
debentures or other securities convertible into or
exchangeable for, or carrying the right to purchase or
otherwise acquire, stock of any class or series of the
Corporation, for such purposes, in such amounts, to such
Persons, for such consideration and, in the case of the
Preferred Stock, in one or more series or classes, all as
the Board of Directors or as any such committee to the
extent so authorized by the Board of Directors may in its
sole and absolute discretion from time to time determine and
without any vote, approval, consent or other action by the
stockholders, except as otherwise required by Applicable
Law."
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2. A new ARTICLE ELEVENTH is hereby inserted to read in its entirety as
follows:
"ELEVENTH:
A. HIGHER VOTE FOR CERTAIN BUSINESS
TRANSACTIONS. In addition to any affirmative vote
required by Law or this Certificate of Incorporation
or the By-Laws of the Corporation, any of the
following Business Combinations when entered into by
the Corporation or a Subsidiary with or upon a
proposal by or on behalf of or otherwise involving an
Interested Stockholder or an Affiliate or Associate
thereof shall require, except as otherwise expressly
provided in Section C of this Article ELEVENTH, the
express approval of said Business Combination by the
affirmative vote of the holders of at least eighty
percent (80%) of the voting power of all outstanding
shares of capital stock of the Corporation entitled
to vote generally in the election of directors,
voting together as a single class:
(1) any merger or consolidation of
the Corporation or any Subsidiary with (a)
any Interested Stockholder or (b) any other
Entity (whether or not itself an Interested
Stockholder) which is or after such merger
or consolidation would be an Affiliate or
Associate of an Interested Stockholder; or
(2) any sale, lease, exchange,
mortgage, pledge, transfer or other
disposition (in one transaction or a series
of transactions) to or with any Interested
Stockholder or any Affiliate or Associate of
any Interested Stockholder, or any Entity or
other person which upon such transaction
would be such Affiliate or Associate,
involving any assets or securities of the
Corporation, any Subsidiary or any
Interested Stockholder or any such Affiliate
or Associate of any Interested Stockholder,
having an aggregate Fair Market Value (as
hereinafter defined) in excess of
$5,000,000; or
(3) the adoption of any plan or
proposal for the termination, liquidation or
dissolution of the Corporation proposed by
or on behalf of an Interested Stockholder or
any Affiliate or Associate of any Interested
Stockholder; or
(4) any reclassification of
securities (including any reverse stock
split) or recapitalization of the
Corporation or any merger or consolidation
of the Corporation with any of its
Subsidiaries or any other transaction
(whether or not with or otherwise involving
an Interested Stockholder) that has the
effect, directly or indirectly, of
increasing the proportionate share of any
class or series of Common Stock, or any
securities convertible into Common Stock or
into other equity securities of the
Corporation or any Subsidiary, that is
beneficially owned by any Interested
<PAGE> 3
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Stockholder or any Affiliate or Associate of
any Interested Stockholder; or
(5) any tender offer or exchange
offer made by the Corporation for shares of
Common Stock which may have the effect of
increasing an Interested Stockholder's
percentage beneficial ownership so that
following the completion of the tender offer
or exchange offer the Interested
Stockholder's percentage beneficial
ownership of the outstanding Common Stock
may exceed 110% of the Interested
Stockholder's percentage beneficial
ownership immediately prior to the
commencement of such tender offer or
exchange offer; or
(6) the issuance or transfer by the
Corporation or any Subsidiary (in one
transaction or a series of transactions) of
any securities of the Corporation or any
Subsidiary to any Interested Stockholder or
any Affiliate or Associate of any Interested
Stockholder having an aggregate Fair Market
Value in excess of $5,000,000; or
(7) any agreement, contract or
other arrangement providing for any one or
more of the actions specified in the
foregoing clauses (1) to (6).
The aforesaid affirmative vote shall be required
notwithstanding the fact that no vote may be
required, or that a lesser percentage may be
specified, by Law or any agreement with any national
securities exchange or otherwise.
B. DEFINITION OF "BUSINESS COMBINATION". For
the purposes of this Article ELEVENTH the term
"Business Combination" shall mean any transaction
that is referred to in any one or more of clauses (1)
through (6) of Section A of this Article ELEVENTH.
C. WHEN HIGHER VOTE IS NOT REQUIRED. The
provisions of the preceding Section A shall not be
applicable to any particular Business Combination,
and such Business Combination shall require only such
affirmative vote, if any, as is required by Law or by
any other provision of this Certificate of
Incorporation or the By-Laws of the Corporation or
any agreement with any national securities exchange,
if all of the conditions specified in either of the
following Paragraphs (1) or (2) are met:
(1) The Business Combination shall
have been approved by a majority (whether
such approval is made prior to or subsequent
to the acquisition of beneficial ownership
of the
<PAGE> 4
-4-
Common Stock that caused the Interested
Stockholder to become an Interested
Stockholder) of the Disinterested Directors.
(2) All of the following conditions
shall have been met with respect to the
outstanding Common Stock, whether or not the
Interested Stockholder has previously
acquired beneficial ownership of any shares
of the Common Stock:
(a) The aggregate amount of
cash and the Fair Market Value, as
of the date of the consummation of
the Business Combination, of
consideration other than cash to be
received per share by holders of the
Common Stock in such Business
Combination shall be at least equal
to the highest amount determined
under clauses (i) and (ii) below:
(i) (if
applicable) the highest per
share price (including any
brokerage commissions,
transfer taxes and
soliciting dealers' fees)
paid by or on behalf of the
Interested Stockholder for
any share of the Common
Stock in connection with
the acquisition by the
Interested Stockholder of
beneficial ownership of
shares of the Common Stock
(x) within the two-year
period immediately prior to
the first public
announcement of the
proposed Business
Combination (the
"Announcement Date") or (y)
in the transaction in which
it became an Interested
Stockholder, whichever is
higher, in either case as
adjusted for any subsequent
stock split, stock
dividend, subdivision or
reclassification with
respect to the Common
Stock; and
(ii) the Fair
Market Value per share of
the Common Stock on the
Announcement Date or on the
date on which the
Interested Stockholder
became an Interested
Stockholder (the
"Determination Date"),
whichever is higher, as
adjusted for any subsequent
stock split, stock
dividend, subdivision or
reclassification with
respect to the Common
Stock.
(b) The consideration to be
received by holders of the Common
Stock shall be in cash or, at their
option, in the same form as
previously has been paid by or on
behalf of the Interested Stockholder
in connection with its direct or
indirect acquisition of beneficial
ownership of shares of such Common
Stock. If the consideration
previously paid by the
<PAGE> 5
-5-
Interested Stockholder to acquire
Common Stock varied among the
recipients thereof as to form, the
form of consideration to be paid for
such Common Stock in connection with
the Business Combination shall be
either cash or, at the option of the
holders of Common Stock, the form
used to acquire beneficial ownership
of the largest number of shares of
such Common Stock previously
acquired by the Interested
Stockholder.
(c) A proxy or information
statement describing the proposed
Business Combination and complying
with the requirements of the
Securities Exchange Act of 1934, as
amended, and the rules and
regulations thereunder (the "Act")
(or any subsequent provisions
amending or replacing such Act,
rules or regulations) shall be
mailed to all stockholders of the
Corporation at least 30 days prior
to the consummation of such Business
Combination (whether or not such
proxy or information statement is
required to be mailed pursuant to
such Act or subsequent provisions).
The proxy or information statement
shall contain on the first page
thereof, in a prominent place, any
statement as to the advisability of
the Business Combination that the
Disinterested Directors, or any of
them, may choose to make and, if
deemed advisable by a majority of
the Disinterested Directors, the
opinion of an investment banking
firm selected by a majority of the
Disinterested Directors as to the
fairness (or not) of the terms of
the Business Combination from a
financial point of view to the
holders of the outstanding shares of
the Common Stock other than the
Interested Stockholder and its
Affiliates or Associates, such
investment banking firm to be paid a
reasonable fee for its services by
the Corporation.
D. CERTAIN DEFINITIONS. The following
definitions shall apply with respect to this
Article ELEVENTH:
(1) The term "person" shall mean any
individual, firm, company or other Entity
and shall include any group as such term is
used in Rule 13d under the Act.
(2) The term "Interested
Stockholder" shall mean any person (other
than the Corporation or any Subsidiary and
other than any profit-sharing, employee
stock ownership or other employee benefit or
dividend reinvestment plan of the
Corporation or any Subsidiary or any trustee
of or fiduciary with respect to any such
plan when acting in such capacity) who is
the beneficial owner
<PAGE> 6
-6-
of Common Stock representing ten
percent (10%) or more of the then
outstanding shares of Common Stock.
(3) A person shall be a "beneficial
owner" of any Common Stock (a) which such
person or any of its Affiliates or
Associates beneficially owns, directly or
indirectly; (b) which such person or any of
its Affiliates or Associates has, directly
or indirectly, (i) the right to acquire
(whether such right is exercisable
immediately or subject only to the passage
of time), pursuant to any agreement,
arrangement or understanding or upon the
exercise of conversion rights, exchange
rights, warrants or options, or otherwise,
or (ii) the right to vote pursuant to any
agreement, arrangement or understanding; or
(c) which is beneficially owned, directly or
indirectly, by any other person with which
such person or any of its Affiliates or
Associates has any agreement, arrangement or
understanding for the purpose of acquiring,
holding, voting or disposing of any shares
of Common Stock. For purposes of determining
whether a person is an Interested
Stockholder pursuant to this Section D, the
number of shares of Common Stock deemed to
be outstanding shall include shares deemed
beneficially owned by such person through
application of clauses (3) and (4) of this
Section D, but shall not include any other
shares of Common Stock that may be issuable
pursuant to any agreement, arrangement or
understanding, or upon exercise of
conversion rights, warrants, or options, or
otherwise.
(4) An "Affiliate" of a specified
person is a person that directly, or
indirectly through one or more
intermediaries, controls, or is controlled
by, or is under common control with, the
person specified. The term "Associate", used
to indicate a relationship with any person,
means (a) any Entity (other than the
Corporation or any Subsidiary) of which such
person is an officer, director or partner or
is, directly or indirectly, the beneficial
owner of ten percent (10%) or more of any
class of equity securities, (b) any trust or
other estate in which such person has a
substantial beneficial interest or as to
which such person serves as trustee or in a
similar fiduciary capacity, and (c) any
relative or spouse of such person, or any
relative of such spouse, who has the same
home as such person.
(5) The term "Subsidiary" means any
Entity of which a majority of the
outstanding voting stock is beneficially
owned by the Corporation and/or one or more
Subsidiaries or any other Entity a majority
of the equity of which shall at the time be
owned by the Corporation and/or one or more
Subsidiaries and whose
<PAGE> 7
-7-
financial statements are consolidated with
the financial statements of the Corporation.
(6) The term "Disinterested
Director" with respect to a Business
Combination means any member of the Board of
Directors of the Corporation who is not an
Affiliate, Associate, representative or
nominee of any Interested Stockholder
involved in such Business Combination or of
any Affiliate or Associate of such
Interested Stockholder and who either (i)
was a member of the Board of Directors prior
to the time that such Interested Stockholder
became an Interested Stockholder or became a
director of the Corporation not later than
one week following the closing of the
offering of the Corporation's Common Stock
pursuant to its first registration statement
filed with the Securities and Exchange
Commission, or (ii) is a successor of a
Director referred to in clause (i) and was
nominated or elected to succeed such
Director by a majority of Disinterested
Directors on the Board of Directors at the
time of such individual's nomination or
election.
The term "Disinterested Director"
with respect to amendment, alteration,
change or repeal of this Article ELEVENTH
means any member of the Board of Directors
of the Corporation who is not an Affiliate,
Associate, representative or nominee of any
Interested Stockholder or of any Affiliate
or Associate of an Interested Stockholder
and who either (i) was a member of the Board
of Directors prior to the time that any
Interested Stockholder became an Interested
Stockholder or became a director of the
Corporation not later than one week
following the closing of the offering of the
Corporation's Common Stock pursuant to its
first registration statement filed with the
Securities and Exchange Commission, or (ii)
is a successor of a Director referred to in
clause (i) and was nominated or elected to
succeed such Director by a majority of
Disinterested Directors on the Board of
Directors at the time of such individual's
nomination or election.
(7) The term "Fair Market Value"
means (a) in the case of cash, the amount of
such cash; (b) in the case of stock, the
highest closing sale price during the 30-day
period immediately preceding the date in
question of a share of such stock on the
Composite Tape for New York Stock
Exchange-Listed Stocks, or, if such stock is
not quoted on the Composite Tape, on the New
York Stock Exchange, or, if such stock is
not listed on such Exchange, on the
principal United States securities exchange
registered under the Act on which such stock
is listed, or, if such stock is not listed
on any such exchange, the highest closing
bid
<PAGE> 8
-8-
quotation with respect to a share of such
stock during the 30-day period preceding the
date in question on the National Association
of Securities Dealers, Inc. Automated
Quotations System or any similar system then
in use, or if no such quotations are
available, the fair market value on the date
in question of a share of such stock as
determined by a majority of the
Disinterested Directors in good faith; and
(c) in the case of property other than cash
or stock, the fair market value of such
property on the date in question as
determined in good faith by a majority of
the Disinterested Directors.
(8) In the event of any Business
Combination in which the Corporation
survives, the phrase "consideration other
than cash to be received" as used in clause
2(a) of Section C of this Article ELEVENTH
shall include the shares of Common Stock
retained by the holders of such shares.
E. POWERS OF THE DISINTERESTED DIRECTORS. A
majority of the Disinterested Directors shall have
the power and duty to determine for purposes of this
Article ELEVENTH, on the basis of information known
to them after reasonable inquiry, all questions
arising under this Article ELEVENTH, including (1)
whether a person is an Interested Stockholder, (2)
the number of shares of Common Stock or other
securities beneficially owned by any person, (3)
whether a person is an Affiliate or Associate of
another, and (4) whether the assets that are the
subject of any Business Combination have, or the
consideration to be received for the issuance or
transfer of securities by the Corporation or any
Subsidiary in any Business Combination has, an
aggregate Fair Market Value in excess of the amounts
set forth in clauses (2) and (6) of Section A of this
Article ELEVENTH.
Any such determination made in good faith by
a majority of the Disinterested Directors shall be
binding and conclusive for all the purposes of this
Article ELEVENTH.
F. NO EFFECT ON FIDUCIARY OBLIGATIONS OF
INTERESTED STOCKHOLDERS. Nothing contained in this
Article ELEVENTH shall be construed to relieve any
Interested Stockholder from any fiduciary
obligation imposed by Law.
G. NO EFFECT ON FIDUCIARY OBLIGATION OF
DIRECTORS. The fact that any Business Combination
complies with the provisions of Section C, Paragraph
(2) of this Article ELEVENTH shall not be construed
to impose any fiduciary duty, obligation or
responsibility on the Board of Directors, or any
member thereof, to approve such Business Combination
or recommend its adoption or approval to the
stockholders of the Corporation, nor shall such
compliance limit, prohibit or otherwise restrict
<PAGE> 9
-9-
in any manner the Board of Directors, or any member
thereof, with respect to evaluations of or actions
and responses taken with respect to such Business
Combination.
H. AMENDMENT, REPEAL, ETC. The affirmative
vote of the holders of at least eighty percent (80%)
of the voting power of all outstanding shares of
capital stock of the Corporation entitled to vote
generally in the election of directors, voting as a
single class, shall be required in order to amend,
alter, change or repeal this Article ELEVENTH, unless
such amendment, alteration, change or repeal shall
first be approved by a majority of the Disinterested
Directors, in which case any such amendment,
alteration, change or repeal shall also require such
affirmative vote of the Directors and stockholders of
the Corporation as is now or hereafter prescribed by
Law."
3. The prior ARTICLE ELEVENTH appearing in the Restated Certificate is
hereby redesignated as ARTICLE TWELFTH and redesignated ARTICLE TWELFTH
is amended to read in its entirety as follows:
"TWELFTH: (i) Except for the provisions in
Articles SEVENTH through TENTH, both inclusive, and
this Article TWELFTH and Section C of Article FOURTH
and the authorization of the Corporation to issue up
to 1,000,000 shares of Preferred Stock, par value
$.001 share, none of which provisions or
authorization shall be amended, altered, changed or
repealed except with the approval of the holders of
not less than sixty-six and two-thirds percent
(66-2/3%) of the voting power of all outstanding
shares of capital stock of the Corporation entitled
to vote generally in the election of directors,
voting together as a single class, and (ii) except
with respect to Article ELEVENTH, as to which the
provisions of Section H of said Article shall govern,
the Corporation reserves the right at any time and
from time to time to amend, alter, change or repeal
any provision contained in this Certificate of
Incorporation (including provisions as may hereafter
be added or inserted in this Certificate of
Incorporation as authorized by the Laws of the State
of Delaware) in the manner now or hereafter
prescribed by Law. All rights, preferences and
privileges of whatsoever nature conferred upon
stockholders, directors or any other person
whomsoever by and pursuant to this Certificate of
Incorporation in its present form or as hereafter
amended are granted subject to the rights reserved in
this Article.
Notwithstanding the foregoing, no such
amendment, alteration, change, repeal or waiver of
any provision of Article SEVENTH that relates
directly to any terms or provisions of any class or
series of the Preferred Stock or of Common Stock that
adversely affects such class or series of the
Preferred Stock or of Common Stock shall be effective
without the prior written approval of the holders of
not less than sixty-six and two-thirds
<PAGE> 10
-10-
percent (66 2/3%) of the then outstanding shares
of such class or series of the Preferred Stock or of
Common Stock, as the case may be, except as may
otherwise be provided in any certificate of
designation with respect to any class or series of
Preferred Stock."
IN WITNESS WHEREOF, United TransNet, Inc. has caused this Certificate
of Amendment to be signed by Philip A. Belyew, its President, this 7th day of
May, 1996.
UNITED TRANSNET, INC.
By: /s/ PHILIP A. BELYEW
---------------------
Name: Philip A. Belyew
Title: President
<PAGE> 1
EXHIBIT 10.12
UNITED TRANSNET, INC.
---------------------
1996 STOCK AND OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
-----------------------------------------------------
1. PURPOSE
The purpose of this 1996 Stock and Option Plan for NonEmployee Directors
(the "Plan") is to advance the interests of United TransNet, Inc. (the
"Company") and its Subsidiaries (as hereinafter defined) by providing to each of
the Directors of the Company who is not also an officer or an employee of the
Company or a Subsidiary an added incentive to continue in the service of the
Company, and a more direct interest in its future success, by providing
favorable opportunities for them to participate in the ownership of the Company
and in its future growth through the acquisition of stock of the Company and by
granting to those Directors options ("Options," and each individually an
"Option") to purchase stock of the Company, subject to the terms and conditions
of the Plan. The term "Subsidiary" as used in the Plan means a corporation,
partnership or other entity whose controlling stock or other ownership interest
is owned directly or indirectly by the Company.
The Options granted hereunder are not intended to be incentive stock
options or to qualify for special federal income tax treatment under Section 422
of the Internal Revenue Code of 1986, as amended (the "Code").
2. ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Board of Directors of the Company
(the "Board"). A majority of the Directors acting upon a particular matter shall
have no personal interest in the matter with which they are concerned. The Board
shall appoint a person (the "Plan Administrator") to keep records of all
Elections (as defined in Section 5).
The Board shall have no authority, discretion or power to select the
participants who will receive Common Stock pursuant to the terms of the Plan (a
"Grant"), to set the number of shares to be issued in connection with a Grant,
to select the participants who will receive Options, to set the number of shares
to be covered by each Option, to set the exercise price or the period within
which Options may be exercised, or to alter any other terms or conditions
specified herein, except in the sense of administering the Plan subject to its
express provisions and except in accordance with Section 12.
Subject to the foregoing limitations, the Board may: (1) construe the
respective Stock Option Agreements and Plan and make all other determinations
necessary or advisable for administering
<PAGE> 2
2
the Plan; (2) correct any defect or supply any omission or reconcile any
inconsistency in the Plan or in any Stock Option Agreement in the manner and to
the extent it shall deem expedient to carry it into effect; and (3) constitute
and appoint a person or persons selected by the Board to execute and deliver in
the name and on behalf of the Company all agreements, instruments and other
documents. Notwithstanding the foregoing, the Board shall have no discretionary
or interpretative power or authority with respect to any Grant or Option that
would cause any Non-Employee Director (as defined in Section 4) to fail to be a
"disinterested person" as defined in Rule 16b-3 or its successor under the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
3. STOCK SUBJECT TO THE PLAN
The total number of shares of stock that may be subject to grant under the
Plan shall be 50,000 of the Company's outstanding Common Stock, $0.001 par value
per share (the "Common Stock"), from either authorized but unissued shares or
treasury shares. The number of shares stated in this Section 3 shall be subject
to adjustment in accordance with the provisions of Section 9. In the event that
any Options granted under the Plan shall be surrendered to the Company or shall
terminate, lapse, or expire for any reason without having been exercised in
full, the shares not purchased under such Options shall be available again for
issuance pursuant to the Plan.
4. ELIGIBILITY
Only Non-Employee Directors (as hereinafter defined) may be granted Common
Stock or Options under the Plan. The term "Grantee," as used in the Plan, refers
to a Non-Employee Director to whom Common Stock has been granted. The term
"Optionee," as used in the Plan, refers to any individual to whom an Option has
been granted.
The term "Non-Employee Director" as used in the Plan means an individual
who (a) is now or hereafter becomes a member of the Board by virtue of an
election by the stockholders of the Company or election or appointment by the
Board, and (b) is neither an employee nor an officer of the Company or a
Subsidiary. The term "Director Retainer Fee" as used in the Plan means the
annual retainer fee paid to a Non-Employee Director. The term "Director's
Compensation" as used in the Plan means all payments to an individual for
services rendered as a Director of the Company and as a Chairman of any
committee of the Board and shall include the annual retainer fee and fees paid
for attendance at meetings of the Board or any committee thereof, other than
that portion of a Director's Director Retainer Fee that is paid in accordance
with Section 6 of this Plan.
<PAGE> 3
3
The amount of a Director's Compensation paid to a Non-Employee Director in
cash shall be reduced pro-rata to reflect his election to receive grants of
Common Stock in lieu of cash.
5. ELECTION CONCERNING DIRECTOR'S COMPENSATION
Each Non-Employee Director may make an irrevocable election (an
"Election"), in accordance with the terms of this Section 5, either (a) to
receive a grant of Common Stock in lieu of cash for twenty-five percent (25%),
fifty percent (50%), seventy-five percent (75%) or 100 percent (100%) of his
Director's Compensation, or (b) not to participate in this Section 5 of the
Plan. Elections shall be made in writing and delivered to the Plan Administrator
and shall, except as otherwise provided in this Section 5, apply to all of a
Director's Compensation paid at least six (6) months after the date the Election
is delivered to the Plan Administrator. The Elections of Non-Employee Directors
serving on the Effective Date shall be delivered to the Plan Administrator on or
before June 30, 1996. The Elections of individuals who subsequently become
Non-Employee Directors shall be delivered to the Plan Administrator on or before
the June 30 or December 31 next following the date on which they become members
of the Board, and such Non-Employee Directors shall not be eligible to
participate in this Section 5 of the Plan prior to the June 30 or December 31
next following the date on which the Non-Employee Director first becomes a
member of the Board. A Non-Employee Director may revoke or change his Election
by filing a new Election with the Plan Administrator; provided, however, that in
no event shall the effective date of an Election be less than six (6) months
after the date of delivery of the Election to the Plan Administrator.
On each date on which a payment of Director's Compensation is due, Common
Stock shall be granted to Non-Employee Directors who have on file with the Plan
Administrator an Election to forego all or part of their cash Director's
Compensation. Each Grant shall be for that number of shares of Common Stock that
is equal in fair market value, as determined pursuant to Section 7(a), to 100
percent (100%) of the foregone cash Director's Compensation; provided, however,
that if the result of the computation just described includes a fractional
share, the number of shares granted shall be reduced by the amount of the
fractional share and the Non-Employee Director shall receive such amount in
cash. In the event the aggregate number of shares of Common Stock authorized
under the Plan and to be granted under this Section 5 is insufficient to make
such grants in full, after giving effect to any Options which are to be granted
on such date, each Non-Employee Director shall be awarded a pro-rata portion of
the available shares.
<PAGE> 4
4
6. ANNUAL FORMULA AWARDS OF OPTIONS
As of the first day of each calendar year following the calendar year in
which the Plan is adopted (the "Grant Date"), there shall be granted to each
Non-Employee Director who is an incumbent member of the Board on that date an
Option to acquire that number of shares of Common Stock that must be taken into
account in order for the Option to have a value, determined using the
Black-Scholes formula as described in Appendix A, equal to 70 percent (70%) of
the Director Retainer Fee in effect for the preceding calendar year.
If on any Grant Date the number of shares remaining available under the
Plan is fewer than the aggregate number calculated under the preceding paragraph
of this Section 6 for all Non-Employee Directors then serving, then the number
of shares so remaining shall be apportioned pro-rata among the Options to be
granted on that Grant Date; provided, however, that the number of shares to be
granted under each Option shall always be a whole number.
Notwithstanding the foregoing, if a Non-Employee Director's service
terminates during a calendar year for any reason whatsoever, his Director
Retainer Fee for such year shall be prorated for the portion of the year served
and all of the pro-rated Director Retainer Fee, including the portion normally
payable in the form of an Option pursuant to this Section 6, shall be paid to
him in the form of cash promptly upon termination; provided, however, that the
Non-Employee Director may prior to such payment elect to receive all or a
portion of his cash Director's Compensation, including the portion of his
Director Retainer Fee that would have been paid in the form of an Option but for
his termination from service, in the form of Common Stock pursuant to Section 5
above.
7. TERMS OF OPTIONS
Each Option shall be evidenced by a written Stock Option Agreement in such
form as the Board shall approve from time to time, which shall conform to the
following terms and conditions and such other terms and conditions not
inconsistent with the Plan as the Board considers appropriate in each case:
(a) OPTION PRICE. The option exercise price per share of Common Stock
under each Option shall be the fair market value of the Common Stock on the
Grant Date. For purposes of the Plan, except as may be otherwise explicitly
provided in the Plan or in any Stock Option Agreement, the "fair market
value" of a share of Common Stock at any particular date shall be
determined according to the following rules: (i) if the Common Stock is not
at the time listed or admitted to trading on a stock exchange or the Nasdaq
National Market, the fair market value shall be the closing
<PAGE> 5
5
price of the Common Stock on the date in question in the over-the-counter
market, as such price is reported in a publication of general circulation
selected by the Board and regularly reporting the price of the Common Stock
in such market; provided, however, that if the price of the Common Stock is
not so reported, the fair market value shall be determined in good faith by
the Board, which may take into consideration (1) the price paid for the
Common Stock in the most recent trade of a substantial number of shares
known to the Board to have occurred at arm's length between willing and
knowledgeable investors, or (2) an appraisal by an independent party, or
(3) any other method of valuation undertaken in good faith by the Board, or
some or all of the above as the Board shall in its discretion elect; or
(ii) if the Common Stock is at the time listed or admitted to trading on
any stock exchange or the Nasdaq National Market, then the fair market
value shall be the mean between the lowest and highest reported sale prices
(or the lowest reported bid price and the highest reported asked price) of
the Common Stock on the date in question on the principal exchange on which
the Common Stock is then listed or admitted to trading. If no reported sale
of Common Stock takes place on the date in question on the principal
exchange or the Nasdaq National Market, as the case may be, then the fair
market value shall be the mean between the lowest and highest reported sale
prices (or the lowest reported bid price and the highest reported asked
price) of the Common Stock on the last day prior to such date for which
there was trading reported on the principal exchange or the Nasdaq National
Market, as the case may be.
(b) SETTLEMENT OF OPTIONS. Payment of the exercise price shall be made
in cash or check payable to the Company or, at the Optionee's election (but
only if such election shall not cause such Optionee to cease to be a
"disinterested person" within the meaning of Rule 16b-3 under the Exchange
Act), by delivery of shares of Common Stock of the Company already owned by
the Optionee or to be received upon exercise of the Option, or by a
"cashless exercise" through a broker acceptable to the Company, as
described in the following paragraph.
Options may be exercised by means of a "cashless exercise" procedure
approved in all respects in advance by the Plan Administrator, in which a
broker: (i) transmits the option price to the Company in cash or acceptable
cash equivalents, either (1) against the Optionee's notice of exercise and
the Company's confirmation that it will deliver to the broker stock
certificates issued in the name of the broker for at least that number of
shares having a fair market value equal to the option price, or (2) as the
proceeds of a margin loan to the Optionee; or (ii) agrees to pay the option
price to the Company in cash or acceptable cash equivalents upon the
broker's receipt from the Company
<PAGE> 6
6
of stock certificates issued in the name of the broker for at least that
number of shares having a fair market value equal to the option price. The
Optionee's written notice of exercise of an Option pursuant to a "cashless
exercise" procedure must include the name and address of the broker
involved, a clear description of the procedure and such other information
or undertaking by the broker as the Plan Administrator shall reasonably
require.
If payment of the option price is to be made in shares of Common Stock
already owned by the Optionee or to be received upon exercise of the
Option, such shares must be fully vested and free of all liens, claims and
encumbrances of any kind; provided, further, that the Optionee may not make
payment in shares of Common Stock that he acquired upon the earlier
exercise of any incentive stock option, unless he has held the shares until
at least two (2) years after the date the incentive stock option was
granted and at least one (1) year after the date the incentive stock option
was exercised. If payment is made in whole or in part in shares of Common
Stock, then the Optionee shall deliver to the Company certificates
registered in his name representing a number of shares of Common Stock
legally and beneficially owned by him, fully vested and free of all liens,
claims and encumbrances of every kind and having a fair market value on the
date of delivery that is not greater than the exercise price, such
certificates to be duly endorsed, or accompanied by stock powers duly
endorsed, by the record holder of the shares represented by such
certificates. If the exercise price exceeds the fair market value of the
shares for which certificates are delivered, the Optionee shall also
deliver cash or a check payable to the order of the Company in an amount
equal to the amount of that excess.
(c) Restrictions on Exercise.
-------------------------
(i) Each Option shall be immediately exercisable in full on the Grant
Date.
(ii) The minimum number of shares with respect to which an Option may
be exercised at any one time shall be 100 shares, or such lesser number as
is subject to exercise under the Option at the time.
(d) Duration.
---------
(i) Except as otherwise provided in this Section 7(d), each Option
shall expire no later than ten (10) years after the Grant Date.
(ii) In the event of a Non-Employee Director's retirement on account
of maximum age, permanent disability, failure to be re-elected as a
Director or to stand for re-election, resignation, or other termination of
service
<PAGE> 7
7
(collectively, a "Separation from Service"), the Option may be exercised by
the Non-Employee Director during its specified term within sixty (60) days
of the Separation from Service; provided, however, that in the event a
Non-Employee Director is removed for cause, the Option shall automatically
terminate as of the date of his removal from office.
(iii) In the event of a Non-Employee Director's death, the Option may
be exercised by his heirs, legatees, or legal representatives during its
specified term within one (1) year of the date of death.
(e) METHOD OF EXERCISE. An Option may be exercised in full at one time
or in part from time to time by written notice to the Chief Financial
Officer of the Company stating the number of shares with respect to which
the Option is being exercised and accompanied by payment in full for such
shares in accordance with Section 7. Such notice shall be delivered in
person or by facsimile transmission to the Chief Financial Officer or shall
be sent by registered mail, return receipt requested, to the Chief
Financial Officer, in which case delivery shall be deemed made on the date
such notice is deposited in the mail.
At the time specified in an Optionee's notice of exercise, the Company
shall, without issue or transfer tax to the Optionee, deliver to the
Optionee (or other person entitled to exercise the Option) at the main
office of the Company, or such other place as shall be mutually acceptable,
a certificate for the shares as to which the Option is exercised. If the
Optionee fails to pay for or to accept delivery of all or any part of the
number of shares specified in the notice upon tender of delivery thereof,
the right to exercise the Option with respect to those shares shall be
terminated, unless the Company otherwise agrees.
Notwithstanding the foregoing, the Company may delay issuance of
shares pursuant to an Option (i) until the person exercising the Option has
complied with all of the terms and conditions of the Plan and the
applicable Stock Option Agreement, and (ii) for such period as may be
required for the Company with reasonable diligence to comply with any
applicable requirements of law.
8. PURCHASE FOR INVESTMENT
The Company shall not be required to transfer any Common Stock issued
pursuant to the Plan or to sell or issue any Common Stock upon exercise of any
Option or pursuant to Section 5 hereof if the transfer, sale, or issuance of
such shares will result in a violation by the Non-Employee Director or the
Company of any provisions of any law, statute or regulation of any governmental
<PAGE> 8
8
authority. Specifically, in connection with the Securities Act of 1933, as
amended (the "Securities Act"), upon the exercise of an Option or the issuance
of Common Stock pursuant to Section 5 the Company shall not be required to issue
shares unless the Board has received evidence satisfactory to it to the effect
that the Non-Employee Director will not transfer such shares except pursuant to
a registration statement in effect under the Securities Act or unless an opinion
of counsel satisfactory to the Company has been received by the Company to the
effect that such registration is not required. Any determination in this
connection by the Board shall be conclusive. The Company shall not be obligated
to take any other affirmative action in order to cause the transfer, sale, or
issue of Common Stock to comply with any law or regulations of any governmental
authority, including, without limitation, the Securities Act or applicable state
securities laws.
9. CHANGES IN CAPITAL STRUCTURE
In the event that the outstanding shares of Common Stock are hereafter
changed for a different number or kind of shares or other securities of the
Company, by reason of a reorganization, recapitalization, exchange of shares,
stock split, combination of shares or dividend payable in shares or other
securities, a corresponding adjustment shall be made by the Board in the number
and kind of shares of Common Stock or other securities subject to the Plan, or
subject to any outstanding Options; provided, however, that no such adjustment
shall result in any Optionee's holding an Option to purchase a fractional share,
and to the extent necessary to eliminate fractional shares, numbers of shares
shall be rounded down to the next whole number. Any adjustment in outstanding
Options shall be made without change in the total exercise price applicable to
the unexercised portion of the Option, but the price per share specified in each
Stock Option Agreement shall be correspondingly adjusted. Any adjustment made by
the Board shall be conclusive and binding upon all affected persons, including
the Company and all Non-Employee Directors.
If while unexercised Options remain outstanding under the Plan the Company
merges or consolidates with a wholly-owned subsidiary or other affiliate for the
purpose of reincorporating itself under the laws of another jurisdiction, the
Optionees will be entitled to acquire shares of Common Stock of the
reincorporated Company upon the same terms and conditions as were in effect
immediately prior to such reincorporation (unless such reincorporation involves
a change in the number of shares or the capitalization of the Company, in which
case proportional adjustments shall be made as provided above) and the Plan,
unless otherwise rescinded by the Board, will remain the Plan of the
reincorporated Company.
<PAGE> 9
9
Except as otherwise provided in the preceding paragraph, if while
unexercised Options remain outstanding under the Plan the Company merges or
consolidates with one or more corporations (whether or not the Company is the
surviving corporation), or is liquidated or sells or otherwise disposes of
substantially all of its assets to another entity, or upon a Change of Control
(as defined herein), then, except as otherwise specifically provided to the
contrary in an Optionee's Stock Option Agreement, the Board, in its discretion,
shall amend the terms of all outstanding Options so that either:
(i) after the effective date of such merger, consolidation, sale or
Change of Control, as the case may be, each Optionee shall be entitled,
upon exercise of an Option, to receive in lieu of shares of Common Stock
the number and class of shares of such stock or other securities to which
he would have been entitled pursuant to the terms of the merger,
consolidation, sale or Change of Control if he had been the holder of
record of the number of shares of Common Stock as to which the Option is
being exercised, or shall be entitled to receive from the successor entity
a new stock option of comparable value; or
(ii) all outstanding Options shall be cancelled as of the effective
date of any such merger, consolidation, liquidation, sale or Change of
Control, provided that each Optionee shall have the right to exercise his
Option according to its terms during the period of ten (10) days ending on
the day preceding the effective date of such merger, consolidation,
liquidation, sale or Change of Control; or
(iii) all outstanding Options shall be cancelled as of the effective
date of any such merger, consolidation, liquidation, sale or Change of
Control in exchange for consideration in cash or in kind, which
consideration in both cases shall be equal in value to the value of those
shares of stock or other securities the Optionee would have received had
the Option been exercised in full and no disposition of the shares acquired
upon such exercise had been made prior to such merger, consolidation,
liquidation, sale or Change in Control, less the option price therefor.
Upon receipt of such consideration by the Optionee, his or her Option shall
immediately terminate and be of no further force and effect. The value of
the stock or other securities the Optionee would have received if the
Option had been exercised shall be determined in good faith by the Board,
and in the case of shares of the Common Stock of the Company, in accordance
with the provisions of Section 7(a).
For purposes of this Section 9, a "Change in Control" shall mean the
acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Exchange Act) of beneficial ownership
(within the
<PAGE> 10
10
meaning of Rule 13d-3 promulgated under the Exchange Act) of fifty percent
(50%) or more of the combined voting or economic power of the then
outstanding voting securities of the Company entitled to vote generally in
the election of directors, but excluding for this purpose, any such
acquisition by (i) the Company or any Subsidiary or (ii) any corporation
with respect to which, following such acquisition, more than 50% of the
combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by individuals and entities who
were the beneficial owners of voting securities of the Company immediately
prior to such acquisition in substantially the same proportion as their
ownership, immediately prior to such acquisition, of the combined voting
power of the then outstanding voting securities of the Company entitled to
vote generally in the election of directors.
Except as expressly provided to the contrary in this Section 9, the
issuance by the Company of shares of stock of any class for cash or property or
for services, either upon direct sale or upon the exercise of rights or
warrants, or upon conversion of shares or obligations of the Company convertible
into such shares or other securities, shall not affect the number, class or
price of shares of Common Stock then subject to outstanding Options.
10. METHOD OF GRANTING OPTIONS AND COMMON STOCK
The grant of Options and Common Stock shall be made by action of the Board
at a meeting at which a quorum of its members is present, or by unanimous
written consent of all its members; provided, however, that if an individual to
whom a grant has been made fails to execute and deliver to the Plan
Administrator a Stock Option Agreement within thirty (30) days after it is
submitted to him, the Option granted under the agreement shall be voidable by
the Company at its election, without further notice to the Optionee.
11. MISCELLANEOUS
(a) NO GUARANTEE OF CONTINUATION IN OFFICE. The Plan shall not give
any Non-Employee Director any right with respect to continuation of his
Directorship, nor shall it affect or restrict the right of the Company or
any assuming or succeeding Company or the stockholders thereof to terminate
his Directorship at any time.
(b) RIGHTS OF GRANTEE. A Grantee shall have all of the rights of a
stockholder of the Company, including the right to vote the shares and the
right to receive any cash dividends; provided, however, that a Grantee
shall have none
<PAGE> 11
11
of the rights of a stockholder of the Company prior to the date on which a
Grant is made.
(c) EFFECT OF OPTION. The grant of an Option shall not entitle the
Optionee to have or claim any rights of a stockholder of the Company,
whether as to dividends, voting rights or otherwise.
(d) USE OF PROCEEDS. The proceeds from the sale of shares pursuant to
Option shall constitute general funds of the Company.
(e) COMPLIANCE WITH APPLICABLE LAWS AND REGULATIONS. Upon the grant of
Common Stock or the exercise of any Option granted hereunder, the recipient
shall file any and all reports required of him under the Exchange Act, or
otherwise.
(f) CONSTRUCTION. The titles of the sections of the Plan are included
for convenience only and shall not be construed as modifying or affecting
their provisions. The masculine gender shall include both sexes; the
singular shall include the plural and the plural the singular unless the
context otherwise requires.
(g) COMPLIANCE WITH RULE 16B-3 INTENDED. With respect to persons
subject to Section 16 of the Exchange Act, transactions under this Plan are
intended to comply with all applicable conditions of Rule 16b-3 or its
successors under the Exchange Act. To the extent any provision of the Plan
or action by the Board or the Plan Administrator fails to so comply, it
shall be deemed to be modified so as to be in compliance with such Rule or,
if such modification is not possible, it shall be deemed null and void, to
the extent permitted by law and deemed advisable by the Board.
12. EFFECTIVE DATE, DURATION, AMENDMENT AND TERMINATION OF PLAN
The Plan shall be effective as of June 1, 1996, subject to ratification
prior to such date or by a date no later than six months after such date by (a)
the holders of a majority of the outstanding shares of capital stock present, or
represented, and entitled to vote thereon (voting as a single class) at a duly
held meeting of the stockholders of the Company, or (b) by the written consent
of the holders of a majority (or such greater degree as may be prescribed under
the Company's charter, by-laws, and applicable state law) of the capital stock
of the Company entitled to vote thereon (voting as a single class).
The Board may grant Common Stock or Options under the Plan from time to
time until the close of business on January 30, 2006.
<PAGE> 12
12
The Board may at any time amend the Plan, provided, however, that without
approval of the Company's stockholders there shall be no: (i) increase in the
total number of shares covered by the Plan, except by operation of the
provisions of Section 9; (ii) change in the class of individuals eligible to
receive Grants or Options under the Plan; (iii) material increase in the
obligations of the Company or rights of any Non-Employee Director under the Plan
or any Option granted pursuant to the Plan; (iv) change in substance of any
provision relating to eligibility to participate in, or price, amount, timing or
vesting of awards under the Plan; or (v) other change in the Plan that requires
stockholder approval under applicable law. No amendment shall adversely affect
outstanding Options without the consent of the Optionee.
The Plan may be terminated at any time by action of the Board, but any such
termination will not adversely affect Common Stock granted pursuant to the Plan
or Options then outstanding, without the consent of the Non-Employee Director.
Except as required to comply with the requirements of the Internal Revenue
Code of 1986, as amended, or the Employee Retirement Income Security Act of
1974, as amended, no amendment to any provisions of this Plan relating to the
amount, price and timing of awards under the Plan shall be made unless at least
six (6) months have elapsed since the adoption of the Plan or any subsequent
amendment affecting such provisions.
<PAGE> 13
APPENDIX A
Black-Scholes Formula
Present value of call option = PN(d[1]) - EXe[-r][f][t]N(d[2])
where
log (P/EX) + r[f]t + [THETA][2]t/2
d[1] = ------------------------------------
[THETA][SQUARE ROOT OF]t
log (P/EX) + r[f]t - [THETA][2]t/2
d[2] = ------------------------------------
[THETA][SQUARE ROOT OF]t
N(d) = cumulative normal probability density function
EX = exercise price of option, as determined pursuant to Section 7(a)
of the Plan
t = time to expiration date, which shall be ten (10) years
v = fair market value of the security on the Grant Date, as the term
fair market value is defined and determined pursuant to Section
7(a) of the Plan.
P = v discounted over t (i.e., time to expiration date) at a rate
equal to the dividend yield ("y"), as follows:
P = v/(1 + y)[t]
y (i.e., dividend yield) is calculated as the annualized
dividend based on the Company's most-recently declared dividend
within the six months immediately preceding the Grant Date,
divided by v on the Grant Date.
THETA[2] = variance per period of continuously compounded rate of return on
Common Stock; provided, however, that for the first three Grant
Dates following adoption of the Plan the variance shall be
determined by using the average variance per period of
continuously compounded rate of return of the Common Stock of a
peer group consisting of Air Express International Corp.,
Expeditors International of Washington Inc., Harper Group Inc.
and U.S. Delivery Systems Inc.
In the event the Common Stock of any of said four corporations
shall cease to be publicly-traded prior to the third of the
aforesaid three Grant Dates, the Board shall substitute an
appropriate replacement for said corporation.
r[f] = continuously compounded risk-free rate of interest, which shall
be the yield as of the December 1 preceding such Grant Date on
a U.S. Treasury Bond with
<PAGE> 14
-2-
coupon interest stripped therefrom, with a maturity date as
close as possible to the expiration date of the option, as may
be determined from generally available published sources such
as The Wall Street Journal.
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES
OF
UNITED TRANSNET, INC.
1. Courier Dispatch Group, Inc.
A. The following companies are wholly-owned subsidiaries of Courier
Dispatch Group, Inc.:
Armstrong Couriers, Inc.
Air Courier Dispatch of New Jersey, Inc. (formerly AirVantage
Courier, Inc.)
Commercial Courier Express, Inc.
Dependable Courier Service, Inc.
Sunstate Courier, Inc.
UTN Contract Services Corporation
2. Film Transit, Incorporated
3. Lanter Courier Corporation
4. Sunbelt Courier, Inc.
5. 3D Distribution Systems, Inc.
A. 3D Package Express, Inc. is a wholly-owned subsidiary of 3D
Distribution Systems, Inc.
6. Tricor America, Inc.
7. Buchanan Acquisition Corp.
8. Coolidge Acquisition Corp.
9. Fillmore Acquisition Corp.
10. Garfield Acquisition Corp.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting a part of this
Registration Statement on Form S-1 of United TransNet, Inc. of our reports dated
March 12, 1996 relating to the financial statements of United TransNet, Inc.;
the Combined Founding Companies (Predecessors to United TransNet, Inc.); CDG
Holding Corp.; Tricor America, Inc.; Film Transit, Incorporated; The Districts
of Lanter Courier Corporation; Salmon Acquisition Corporation; and 3D
Distribution Systems, Inc., which appear in such Prospectus. We also consent to
the application of such reports to Schedule I -- Combined Valuation and
Qualifying Accounts for the three years ended December 31, 1995 of this
Prospectus when such schedule is read in conjunction with the financial
statements referred to in our reports. The audits referred to in such reports
also include this schedule.
Price Waterhouse LLP
Atlanta, Georgia
May 23, 1996
<PAGE> 1
EXHIBIT 23.4
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated May 1, 1996 with respect to the financial statements
of Eddy Messenger Service, Inc. included in Post-Effective Amendment No. 2 to
the Registration Statement (Form S-1, No. 333-396) and related Prospectus of
United TransNet, Inc. for the registration of 2,000,000 shares of its common
stock.
Ernst & Young LLP
White Plains, New York
May 21, 1996
