<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 18, 1997
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
--------------
INTERNATIONAL LOGISTICS LIMITED
AND OTHER REGISTRANTS*
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 4731 22-3438013
(State or other (Primary Standard (I.R.S. Employer
Jurisdiction of Industrial Identification No.)
Incorporation or Classification Code
Organization) Number)
</TABLE>
-------------------
330 SOUTH MANNHEIM ROAD, HILLSIDE, ILLINOIS 60162
(708)547-3154
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
GARY S. HOLTER
INTERNATIONAL LOGISTICS LIMITED
330 SOUTH MANNHEIM ROAD
HILLSIDE, ILLINOIS 60162
(708) 547-3154
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA
CODE, OF AGENT FOR SERVICE)
------------------------
COPY TO:
ERIC H. SCHUNK, ESQ.
MILBANK, TWEED, HADLEY & MCCLOY
601 S. FIGUEROA STREET, 30TH FLOOR
LOS ANGELES, CALIFORNIA 90017
(213) 892-4000
-------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES
EFFECTIVE.
IF THE SECURITIES BEING REGISTERED ON THIS FORM ARE BEING OFFERED IN
CONNECTION WITH THE FORMATION OF A HOLDING COMPANY AND THERE IS COMPLIANCE WITH
GENERAL INSTRUCTION G, CHECK THE FOLLOWING BOX. / /
-------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
PROPOSED
MAXIMUM PROPOSED
OFFERING MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE AMOUNT TO PRICE AGGREGATE REGISTRATION
REGISTERED BE REGISTERED PER UNIT OFFERING PRICE (1) FEE (1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
9 3/4% Senior Notes due 2007...................... $110,000,000 100% $110,000,000 $32,450
- -------------------------------------------------------------------------------------------------------------------------------
Guarantees of the Notes........................... $110,000,000 (2) (2) (2)
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</TABLE>
(1) In accordance with Rule 457(f)(2), the registration fee is calculated based
on the book value of the securities as of December 15, 1997.
(2) No separate consideration will be received for the Guarantees.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
(CONTINUED FROM PREVIOUS PAGE)
*OTHER REGISTRANTS
<TABLE>
<CAPTION>
ADDRESS, INCLUDING ZIP
STATE OR OTHER CODE, AND TELEPHONE NUMBER,
EXACT NAME OF REGISTRANT JURISDICTION OF PRIMARY STANDARD INCLUDING AREA CODE OF
AS INCORPORATION OR INDUSTRIAL CLASSIFICATION I.R.S. EMPLOYER REGISTRANT'S PRINCIPAL
SPECIFIED IN ITS CHARTER ORGANIZATION CODE NUMBERS IDENTIFICATION NUMBER EXECUTIVE OFFICES
<S> <C> <C> <C> <C>
The Bekins Company........ Delaware 4731 95-4106021 330 South Mannheim Road
Hillside, Illinois 60162
(708) 547-2000
Bekins Van Lines, Co...... Nebraska 4731 36-2193916 330 South Mannheim Road
Hillside, Illinois 60162
(708) 547-2000
LEP Profit International,
Inc..................... Delaware 4731 95-2920613 1950 Spectrum Circle
Marietta, Georgia 30067
(770) 951-8100
LEP Fairs, Inc............ Georgia 4731 58-1666904 1950 Spectrum Circle
Marietta, Georgia 30067
(770) 951-8100
Air Freight Consolidators
International, Inc...... New York 4731 11-2826590 1950 Spectrum Circle
Marietta, Georgia 30067
(770) 951-8100
Matrix International
Logistics, Inc.......... Delaware 4731 54-1378078 200 Connecticut Avenue
Norwalk, Connecticut 06859
(203) 854-5797
Bay Area Matrix, Inc...... Delaware 4731 54-1521288 200 Connecticut Avenue
Norwalk, Connecticut 06859
(203) 854-5797
L.A. Matrix, Inc. Delaware 4731 52-1744031 200 Connecticut Avenue
Norwalk, Connecticut 06859
(203) 854-5797
Southwest Matrix, Inc..... Delaware 4731 54-1840752 200 Connecticut Avenue
Norwalk, Connecticut 06859
(203) 854-5797
Matrix CT., Inc........... Delaware 4731 54-1513202 200 Connecticut Avenue
Norwalk, Connecticut 06859
(203) 854-5797
LIW Holdings Corp......... Delaware 4731 Applied For 330 South Mannheim Road
Hillside, Illinois 60162
(708) 547-2000
ILLCAN, INC............... Delaware 4731 22-3471988 330 South Mannheim Road
Hillside, Illinois 60162
(708) 547-2000
ILLSCOT, INC.............. Delaware 4731 22-3471990 330 South Mannheim Road
Hillside, Illinois 60162
(708) 547-2000
</TABLE>
<PAGE>
SUBJECT TO COMPLETION DATED DECEMBER 18, 1997
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 by 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.
PROSPECTUS
$110,000,000 OFFER TO EXCHANGE
9 3/4% SENIOR NOTES DUE 2007
FOR ANY AND ALL OUTSTANDING
9 3/4% SENIOR NOTES DUE 2007
OF INTERNATIONAL LOGISTICS LIMITED
Interest Payable April 15 and October 15 Due October 15, 2007
------------------------
International Logistics Limited (the "Company") hereby offers (the "Exchange
Offer"), pursuant to a registration statement (the "Registration Statement"), of
which this Prospectus constitutes a part, and the accompanying Letter of
Transmittal (the "Letter of Transmittal"), to exchange its issued 9 3/4% Senior
Notes Due 2007 (the "Old Notes") of which an aggregate of $110,000,000 principal
amount is outstanding as of the date hereof, for an equal amount of newly issued
9 3/4% Senior Notes Due 2007 (the "New Notes" and together with the Old Notes
the "Notes").
The New Notes will mature on October 15, 2007 and are fully and unconditionally
guaranteed (the "Subsidiary Guaranties"), jointly and severally, on an unsecured
senior basis by the Subsidiary Guarantors (as defined). The New Notes will be
redeemable at the option of the Company, in whole or in part, at any time on or
after October 15, 2002, at the redemption prices set forth herein, plus accrued
and unpaid interest, if any, to the date of redemption. In addition, at any time
and from time to time prior to October 15, 2000, the Company may redeem, at its
option, up to an aggregate of 35% of the original principal amount of the New
Notes with the proceeds of one or more Public Equity Offerings (as defined) at
109.75% of the principal amount thereof, plus accrued and unpaid interest, if
any, to the redemption date, provided that at least 65% of the original
principal amount of the New Notes remains outstanding after each such
redemption. Upon a Change of Control (as defined), each holder of the New Notes
will have the right to require the Company to repurchase such holder's New Notes
at 101% of the principal amount thereof, plus accrued and unpaid interest, if
any, to the date of repurchase. See "Description of the New Notes."
The New Notes and the Subsidiary Guaranties will be unsecured senior obligations
of the Company and of the Restricted Subsidiaries (as defined) that execute
Subsidiary Guaranties (each a "Subsidiary Guarantor" and collectively the
"Subsidiary Guarantors"), respectively, and will rank PARI PASSU with all
existing and future unsecured senior indebtedness of the Company and the
Subsidiary Guarantors, respectively, and will be effectively subordinated to all
existing and future Secured Indebtedness (as defined) of the Company and the
Subsidiary Guarantors, respectively, to the extent of the value of the assets
securing such indebtedness. The New Notes and the Subsidiary Guaranties will be
effectively subordinated to all indebtedness and other liabilities (including
trade payables) of the Company's subsidiaries other than those of the Subsidiary
Guarantors. The New Notes and the Subsidiary Guaranties will rank senior in
right of payment to any Subordinated Obligations (as defined) of the Company and
the Subsidiary Guarantors, respectively. As of September 30, 1997, after giving
pro forma effect to the new $100.0 million revolving credit facility (the "New
Credit Facility"), and the Old
<PAGE>
Notes Offering and the application of the net proceeds therefrom, the Company
would have had no outstanding Secured Indebtedness and the Subsidiary Guarantors
would have had approximately $0.2million of outstanding Secured Indebtedness to
which the New Notes and the Subsidiary Guaranties would be effectively
subordinated to the extent of the value of the assets securing such indebtedness
and the Company's non-guarantor subsidiaries would have had approximately $109.3
million of indebtedness and other liabilities (including trade payables)
outstanding to which the New Notes and the Subsidiary Guaranties would be
effectively subordinated. See "New Credit Facility" and "Description of the New
Notes."
The New Notes are being offered hereby in order to satisfy certain obligations
of the Company under a registration rights agreement, dated October 29, 1997
(the "Registration Rights Agreement"), between the Company and Credit Suisse
First Boston Corporation, BT Alex. Brown Incorporated, Smith Barney Inc. and ING
Baring (U.S.) Securities, Inc. (collectively, the "Initial Purchasers"). The
form and terms of the New Notes will be substantially identical to those of the
Old Notes except that the New Notes will have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), and hence are not
subject to certain transfer restrictions, registration rights and related
liquidated damages provisions applicable to the Old Notes. The New Notes will
evidence the same debt as the Old Notes and will be entitled to the benefits of
an indenture (the "Indenture"), dated as of October 29, 1997, by and between the
Company and First Trust National Association, as trustee (the "Trustee"). The
Indenture provides for the issuance of both the Old Notes and the New Notes.
The Company will not receive any proceeds from the Exchange Offer. The Company
will pay all expenses incident to the Exchange Offer (which shall not include
the expenses of any holder in connection with resales of the New Notes). The
Company will accept for exchange any and all validly tendered Old Notes on or
prior to 5:00 p.m. New York City time, on , 1998 (such date and time,
if and as extended, the "Expiration Date"). Tender of the Old Notes may be
withdrawn at any time prior to the Expiration Date. The Exchange Offer is not
conditioned upon any minimum principal amount of Old Notes being tendered for
exchange. Old Notes may be tendered only in integral multiples of $1,000.
This Prospectus, together with the Letter of Transmittal, is first being sent on
or about , 1998 to all holders of the Old Notes known to the Company.
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY HOLDERS OF THE
OLD NOTES (THE "NOTEHOLDERS") PRIOR TO TENDERING THEIR OLD NOTES IN THE EXCHANGE
OFFER OR BY A PROSPECTIVE INVESTOR BEFORE PURCHASING THE NEW NOTES, SEE "RISK
FACTORS" BEGINNING ON PAGE 12.
EACH BROKER-DEALER THAT RECEIVES NEW NOTES FOR ITS OWN ACCOUNT PURSUANT TO THE
EXCHANGE OFFER MUST ACKNOWLEDGE THAT IT WILL DELIVER A PROSPECTUS IN CONNECTION
WITH ANY RESALE OF SUCH NEW NOTES. THE LETTER OF TRANSMITTAL STATES THAT BY SO
ACKNOWLEDGING AND BY DELIVERING A PROSPECTUS, A BROKER-DEALER WILL NOT BE DEEMED
TO ADMIT THAT IT IS AN "UNDERWRITER" WITHIN THE MEANING OF THE SECURITIES ACT.
THIS PROSPECTUS, AS IT MAY BE AMENDED OR SUPPLEMENTED FROM TIME TO TIME, MAY BE
USED BY A BROKER-DEALER IN CONNECTION WITH RESALES OF NEW NOTES RECEIVED IN
EXCHANGE FOR OLD NOTES WHERE SUCH OLD NOTES WERE ACQUIRED BY SUCH BROKER-DEALER
AS A RESULT OF MARKET-MAKING ACTIVITIES OR OTHER TRADING ACTIVITIES. THE COMPANY
HAS AGREED THAT, FOR A PERIOD OF 180 DAYS AFTER THE EXPIRATION DATE (AS DEFINED
HEREIN), IT WILL MAKE THIS PROSPECTUS AVAILABLE TO ANY BROKER-DEALER FOR USE IN
CONNECTION WITH ANY SUCH RESALE. SEE "PLAN FOR DISTRIBUTION."
THE NOTES 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
<PAGE>
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
Based on interpretations contained in no-action letters of the Securities
and Exchange Commission (the "Commission"), the Company believes that the New
Notes issued pursuant to the Exchange Offer in exchange for the Old Notes may be
offered for resale, resold, and otherwise transferred by a holder thereof (other
than (i) a broker-dealer who purchases such New Notes directly from the Company
to resell pursuant to Rule 144A or any other available exemption under the
Securities Act or (ii) a person who is an affiliate of the Company (within the
meaning of Rule 405 under the Securities Act)), without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that the holder is acquiring the New Notes in its ordinary course of business
and is not participating, and has no arrangement or understanding with any
person to participate, in the distribution of the New Notes. The Noteholders
wishing to accept the Exchange Offer must represent to the Company that such
conditions have been met. Each broker-dealer that receives the New Notes for its
own account pursuant to the Exchange Offer must acknowledge that it will deliver
a Prospectus in connection with any resale of such New Notes. This Prospectus
has been prepared for use in connection with the Exchange Offer and may be used
by the Initial Purchasers in connection with offers and sales related to
market-making transactions in the Old Notes. The Initial Purchasers may act as a
principal or agent in such transactions. Such sales will be made at prices
related to prevailing market prices at the time of sale. The Letter of
Transmittal states that by so acknowledging and by delivering a Prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of the New Notes received in exchange for the Old Notes where such
Old Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. The Company has agreed that it will use
its best efforts to make this Prospectus available to any broker-dealer for use
in connection with any such resale for such period of time as such persons may
be required to comply with the prospectus delivery requirements of the
Securities Act (which period shall not exceed one year from the date the
Registration Statement becomes effective). See "Plan of Distribution." EXCEPT AS
DESCRIBED IN THIS PARAGRAPH, THIS PROSPECTUS MAY NOT BE USED FOR AN OFFER TO
RESELL, RESALE OR OTHER TRANSFER OF NEW NOTES.
Prior to this Exchange Offer, there has been no public market for the New
Notes. The New Notes have been made eligible for trading on the Portal-SM-Market
("PORTAL") of the Nasdaq Stock Market, Inc. However, the Initial Purchasers are
not obligated to make a market in the New Notes, and may discontinue such
market-making activities at any time without notice. In addition, there can be
no assurance that an active market for the New Notes will develop. To the extent
that a market for the New Notes does develop, the market value of the New Notes
will depend on many factors, including, among other things, prevailing interest
rates, market conditions, general economic conditions, the Company's results of
operations and financial condition, the market for similar securities, and other
conditions. Such conditions might cause the New Notes, to the extent that they
are actively traded, to trade at a significant discount from face value. See
"Risk Factors--Absence of Public Trading Market."
The date of this Prospectus is , 1998
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO,
INCLUDED ELSEWHERE IN THIS PROSPECTUS. UNLESS SPECIFICALLY INDICATED OTHERWISE,
ALL REFERENCES HEREIN TO "ILOG" REFER TO INTERNATIONAL LOGISTICS LIMITED AND ALL
REFERENCES TO THE "COMPANY" REFER TO ILOG AND ITS CONSOLIDATED SUBSIDIARIES.
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. SEE "RISK FACTORS" FOR CERTAIN FACTORS THAT A PROSPECTIVE
INVESTOR SHOULD CONSIDER IN EVALUATING THE COMPANY BEFORE PURCHASING THE NOTES.
THE COMPANY IS A DELAWARE CORPORATION. ITS PRINCIPAL EXECUTIVE OFFICES ARE
LOCATED AT 330 S. MANNHEIM ROAD, HILLSIDE, ILLINOIS, 60162 AND ITS TELEPHONE
NUMBER IS (708) 547-3154.
THE COMPANY
The Company is the largest non-asset-based provider of worldwide logistics
and transportation services headquartered in the United States, based on
revenues for 1996 and after giving pro forma effect to the LIW Acquisition (as
defined). The Company's primary business operations involve obtaining shipment
or material orders from customers, creating and delivering a wide range of
logistics solutions to meet customers' specific requirements for transportation
and related services, and arranging and monitoring all aspects of material flow
activity utilizing advanced information technology systems. These logistics
solutions include domestic and international freight forwarding and door-to-door
delivery services using a wide range of transportation modes, including air,
ocean, truck and rail. The Company also provides value-added services such as
warehousing, inventory management, assembly, customs brokerage, distribution and
installation for manufacturers and retailers of commercial and consumer products
such as copiers, computers, pharmaceutical supplies, medical equipment, consumer
durables and aviation products. The Company also specializes in arranging for
the worldwide transportation of goods for major infrastructure projects, such as
power plants, oil refineries, oil fields and mines, to lesser developed
countries and remote geographic locations. In addition, the Company provides
international and domestic relocation services through two of its divisions. On
a pro forma basis after giving effect to the LIW Acquisition, the Company
generated approximately $1.1 billion of revenues and $16.2 million of EBITDA (as
defined) for the nine months ended September 30, 1997.
As a non-asset-based logistics services provider, the Company arranges for
and subcontracts services on a non-committed basis to airlines, truck lines, van
lines, express companies, steamship lines, rail lines and warehousing and
distribution operators. By concentrating on network-based solutions, the Company
avoids competition with logistics services providers that offer dedicated
outsourcing solutions for single elements of the supply chain. Such dedicated
logistics companies typically provide expensive, customized infrastructure and
systems for a customer's specific application and, as a result, dedicated
solutions that are generally asset-intensive, inflexible and invariably
localized to address only one or two steps in the supply chain. Conversely,
network-based services leverage common infrastructure and technology systems so
that solutions are scaleable, replicable and require a minimum amount of
customization (typically only at the interface with the customer). This
non-asset ownership approach maximizes the Company's flexibility in creating and
delivering a wide range of end-to-end logistics solutions on a global basis
while simultaneously allowing the Company to exercise significant control over
the quality and cost of the transportation services provided.
As of June 30, 1997 after giving pro forma effect to the LIW Acquisition,
the Company serviced over 75,000 active customers through a global network of 75
countries consisting of operations located in 33 countries and strategic
alliance partners located in 42 countries. Some of the Company's major customers
include Lucent Technologies Inc., Cisco Systems, Inc., Williams-Sonoma, Inc. and
Danka Business Systems plc (formerly the office imaging technology division of
Eastman Kodak Company).
Formed in 1996 by investment entities managed by William E. Simon & Sons,
LLC ("WESS") and Oaktree Capital Management, LLC ("Oaktree"), and Roger E.
Payton, the Company's President and Chief Executive Officer, the Company has
created a global network that provides a broad range of transportation and
logistics services through points of service in both industrialized and
developing nations and a strong local presence in North America, Europe and
Asia. The Company built its network through a series of acquisitions of
transportation and logistics providers (the "Subsidiary Acquisitions") beginning
with The Bekins Company ("Bekins") in May 1996, Matrix International Logistics,
Inc. ("Matrix") in November 1996 and, in a series of transactions beginning in
October 1996, the Company acquired all of the equity securities of LEP
International Worldwide Limited (U.K.) ("LIW") and all of the equity interests
of LIW's North American
1
<PAGE>
subsidiaries (the "LEP Sale"), LEP Profit International, Inc. ("LEP-USA") and
LEP International Co. ("LEP-Canada" and, together with LEP-USA, "LEP"). See
"Risk Factors--Uncertainties Relating to Operations and Acquisition of LIW" and
"Recent Acquisitions."
The U.S. logistics services industry generated approximately $25.0 billion
in revenues in 1996, having experienced an average annual growth rate of
approximately 20.0% from 1992 to 1996. The Company believes that the global
logistics services industry is three to four times the size of the U.S.
logistics services industry. Within the logistics services and freight
forwarding industries, the Company targets specific markets in which the Company
believes it has a competitive advantage. For example, in the freight forwarding
market, the Company arranges transportation for shipments of heavy cargo that
are generally larger than shipments handled by integrated carriers, such as
United Parcel Service of America and Federal Express Corporation. In the
logistics market, the Company provides specialized combinations of services that
traditional freight forwarders cannot cost-effectively provide, including
time-definite delivery requirements, direct-to-store distribution and
merge-in-transit movement of products from various vendors in a single
coordinated delivery and/or installation to the end-user.
The Company has developed a business strategy to increase revenue and expand
profit margins by: (i) continuing to develop and implement higher margin and
greater value-added logistics services to fulfill customers' end-to-end supply
chain requirements, (ii) maintaining and enhancing the Company's existing
technological position to ensure on-time delivery, real-time inventory
management and efficient overall transportation services, (iii) strengthening
and expanding the Company's global network through the opening of new offices
and making strategic acquisitions and (iv) growing the Company's overall
business by further penetrating and expanding its existing customer base as well
as increasing its share of specialized niche transportation and logistics
services.
BUSINESS STRENGTHS
The Company believes that its primary business strengths include the
following:
ESTABLISHED GLOBAL NETWORK WITH STRONG LOCAL PRESENCE. The Company has an
established global network of freight handling operations in 75 countries
throughout the world which serviced over 75,000 active customers as of June 30,
1997, after giving pro forma effect to the LIW Acquisition. The Company offers
its customers a wide range of logistics and transportation solutions through
over 650 Company- and agent-owned locations in 33 countries staffed with 6,352
employees worldwide as of June 30, 1997 (excluding employees of agents), after
giving pro forma effect to the LIW Acquisition. The Company's strategic
alliances with partners in South Africa, South America, the Middle East, Latin
America and the Indian subcontinent provide the Company with service capability
in 42 additional countries with approximately 352 locations. The Company is
particularly well-positioned in three major economic regions of the world with
operations in approximately 449 locations in North America, 159 locations in 18
European countries and 46 locations in 14 Asian countries, as of June 30, 1997,
after giving pro forma effect to the LIW Acquisition. The Company's household
goods ("HHG") relocation business maintains a strong domestic presence with 283
Bekins service centers throughout the United States as of June 30, 1997 and,
through Matrix, provides international relocation services to and from North
America and between other countries.
ADVANCED INFORMATION SYSTEMS. The Company believes the proprietary FAST 400 and
the MATRAK information systems are the most technologically advanced information
systems in the global logistics industry. FAST 400 is a real-time, multi-modal,
multi-currency, multi-lingual system that provides global transportation and
logistics information and detailed job costing analysis. MATRAK is an advanced
system for global project logistics. The Company's existing information
technology system currently supports logistics management applications such as
warehouse management systems, inventory management systems and transportation
management and is scaleable to support additional business and product lines.
The Company believes that planned system upgrades and expenditures, a
significant part of which relates to enhancement of the Company's financial
reporting, communications and inventory tracking systems, will complement the
technological advantages of FAST 400. The Company expects to spend approximately
$30.0 million over the next three years to conclude the global implementation
and integration of FAST 400 and its related BUSINESS 400 systems, purchase
additional information systems equipment and software upgrades and integrate the
system capabilities of the Company's subsidiaries. The Company anticipates that,
upon the completion of the planned expenditures, all of the Companies'
subsidiaries will be operating on a single, FAST 400-based system.
2
<PAGE>
FLEXIBLE NON-ASSET-BASED OPERATIONS. As a non-asset-based provider of
transportation and logistics services, the Company has access to a network of
freight handling providers but does not own a fleet of aircraft or steamships
and owns only a relatively small fleet of road vehicles. As a result of the
Company's ability to subcontract transportation and distribution services on a
non-committed basis to airlines, truck lines, van lines, express companies,
steamship lines and rail lines as well as warehousing and distribution
operators, the Company is able to create and deliver a wide range of logistics
solutions while retaining significant control over the quality of service
provided. In addition, the Company is able to control the costs of
transportation services provided as the large volume of cargo shipped by the
Company permits the Company to negotiate reduced shipping rates with a variety
of transportation providers. Moreover, unlike the asset-intensive nature of
integrated transportation providers such as Burlington Air Express, Inc. and
Emery Air Freight Corp., the Company's network requires a relatively low level
of capital expenditures for transportation equipment.
WELL POSITIONED TO BENEFIT FROM INDUSTRY AND WORLD TRADE TRENDS. Because of its
global position, broad service offerings and technologically-advanced
information systems, the Company believes it is well-positioned to participate
in the growing trend for large corporations to outsource logistics,
transportation and distribution services. From 1992 to 1996, the United States
logistics services industry grew approximately 20.0% per year to $25.0 billion
and it is expected to continue to grow at comparable levels through the end of
the year 2000. Businesses are increasingly striving to minimize the cost of
carrying inventory by decreasing the cycle-time in delivery of products,
minimizing costs of manufacturing by performing manufacturing and assembly
operations in different locations and reducing the overall costs associated with
the distribution and movement of goods. As a result, companies are increasingly
seeking third-party service providers to assist in increasing profitability by
reducing costs of carrying inventory and distribution. In conformity with
industry trends, many of the Company's existing customers are seeking end-to-end
logistics services from capable service providers such as the Company. In
addition, the Company believes that continuing reductions in tariffs, increases
in open trade policies and globalization of the world's economies will cause
manufacturers and distributors of products around the world, and in particular
U.S. multi-national companies, to become increasingly more dependent on the type
of shipping, customs and inventory management services that the Company
currently offers to its customers.
EXPERIENCED MANAGEMENT. The Company's management team is led by Roger E. Payton,
President and Chief Executive Officer. Mr. Payton has over 20 years of
experience in transportation and logistics operations and services. The
Company's senior operating executives also have an average of approximately 20
years of experience in transportation and logistics operations and services. As
of September 30, 1997, the Company's employees owned approximately 9.9% of the
currently outstanding shares of common stock of the Company, par value $.001 per
share ("Common Stock"), and, assuming such employees exercise all of their
warrants to purchase Common Stock, such employees would own approximately 27.3%
of the shares of Common Stock on a fully diluted basis, including, in each case,
shares of Common Stock held by the Company's Deferred Plan (as defined) for the
account of certain employees.
3
<PAGE>
THE EXCHANGE OFFER
The form and terms of the New Notes will be substantially identical to those
of the Old Notes except that the New Notes will have been registered under the
Securities Act, and hence will not be subject to certain transfer restrictions,
registration rights and related liquidated damages provisions applicable to the
Old Notes.
<TABLE>
<S> <C>
The Exchange Offer........... The Company is offering to exchange an aggregate of $110.0
million principal amount of the New Notes for a like
principal amount of the Old Notes. The Old Notes may be
exchanged only in multiples of $1,000 principal amount. The
Company will issue the New Notes on or promptly after the
Expiration Date. See "The Exchange Offer."
Issuance of the Old Notes;
Registration Rights........ The Old Notes were issued and sold on October 29, 1997 to
the Initial Purchasers. In connection therewith, the Company
executed and delivered for the benefit of the Noteholders
the Registration Rights Agreement, pursuant to which the
Company agreed (i) to commence an exchange offer under which
the New Notes, registered under the Securities Act with
terms substantially identical to those of the Old Notes,
will be exchanged for the Old Notes pursuant to an effective
registration statement (the "Exchange Offer Registration
Statement") or (ii) cause the Old Notes to be registered
under the Securities Act pursuant to a resale shelf
registration statement (the "Shelf Registration Statement").
If the Company does not comply with its obligations under
the Registration Rights Agreement, it will be required to
pay certain liquidated damages that will accrue and be
payable semiannually. See "The Exchange Offer--Purpose of
the Exchange Offer; Registration Rights."
Expiration Date.............. The Exchange Offer will expire at 5:00 pm., New York City
time, on , 1998, unless extended in which case the
term "Expiration Date" shall mean the latest date and time
to which the Exchange Offer is extended.
Conditions to the Exchange
Offer...................... The Exchange Offer is subject to certain conditions, which
may be waived by the Company in whole or in part and from
time to time in its sole discretion. See "The Exchange
Offer--Certain Conditions to the Exchange Offer." The
Exchange Offer is not conditioned upon any minimum aggregate
principal amount of Old Notes being tendered for exchange.
Procedures for Tendering Old
Notes...................... Each Noteholder desiring to accept the Exchange Offer must
complete and sign the Letter of Transmittal, have the
signature thereon guaranteed if required by the Letter of
Transmittal, and mail or otherwise deliver the Letter of
Transmittal, together with the Old Notes or a Notice of
Guaranteed Delivery and any other required documents (such
as evidence of authority to act satisfactory to the Company
in its sole discretion, if the Letter of Transmittal is
signed by someone acting in a fiduciary or representative
capacity), to the Exchange Agent (as defined) at the address
set forth herein prior to 5:00 p.m., New York City time, on
the Expiration Date. Any beneficial owner of the Old Notes
whose Old Notes are registered in the name of a nominee,
such as a broker, dealer, commercial bank or trust company
and who wishes to tender the Old Notes in the Exchange
Offer, should instruct such entity or person to promptly
tender on such beneficial owner's behalf. See "The Exchange
Offer-- Procedures for Tendering the Old Notes."
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
Guaranteed Delivery
Procedures................. Noteholders who wish to tender their Old Notes and (i) whose
Old Notes are not immediately available or (ii) who cannot
deliver their Old Notes or any other documents required by
the Letter of Transmittal to the Exchange Agent prior to the
Expiration Date (or complete the procedure for book-entry
transfer on a timely basis), may tender their Old Notes
according to the guaranteed delivery procedures set forth in
the Letter of Transmittal. See "The Exchange
Offer--Guaranteed Delivery Procedures." The Letter of
Transmittal provides that each Noteholder (other than
participating broker-dealers) will represent to the Company
that, among other things, the New Notes acquired pursuant to
the Exchange Offer are being obtained in the ordinary course
of business of the person receiving such New Notes, that
neither such Noteholder nor any such other person has an
arrangement or understanding with any person to participate
in the distribution of such New Notes and that neither the
holder nor any such person is an "affiliate" of the Company,
as defined in Rule 405 under the Securities Act. Any
tendered Old Notes not accepted for exchange for any reason
will be returned promptly after the expiration or
termination of the Exchange Offer. See "The Exchange Offer."
Withdrawal Rights............ Tenders of the Old Notes may be withdrawn at any time prior
to the Expiration Date. See "The Exchange Offer--Withdrawal
Rights."
Acceptance of the Old Notes
and Delivery of the New
Notes...................... The Company will accept for exchange any and all Old Notes
which are properly tendered in the Exchange Offer prior to
the Expiration Date. The New Notes issued pursuant to the
Exchange Offer will be delivered promptly following the
Expiration Date. See "The Exchange Offer--Terms of the
Exchange Offer."
Resales of the New Notes..... Based on an interpretation by the staff of the Commission
set forth in no-action letters issued to third parties, the
Company believes that the New Notes issued pursuant to the
Exchange Offer in exchange for the Old Notes may be offered
for resale, resold and otherwise transferred by any
Noteholder thereof (other than any such Noteholder which is
an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the
Securities Act, provided that such New Notes are acquired in
the ordinary course of such Noteholder's business and that
such Noteholder has no arrangement or understanding with any
person to participate in the distribution of such New Notes,
and provided, further, that each broker-dealer that receives
the New Notes for its own account in exchange for the Old
Notes must acknowledge that it will deliver a Prospectus in
connection with any resale of such New Notes. See "Plan of
Distribution." If a Noteholder does not exchange such Old
Notes for New Notes pursuant to the Exchange Offer, such Old
Notes will continue to be subject to the restrictions on
transfer contained in the legend thereon. In general, the
Old Notes may not be offered or sold, unless registered
under the Securities Act, except pursuant to an exception
from, or in a transaction not subject to, the Securities Act
and applicable state securities laws. See "The Exchange
Offer--Consequences of Failure to Exchange."
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
Consequences of Failure to
Exchange................... Noteholders who do not exchange their Old Notes for the New
Notes pursuant to the Exchange Offer will continue to be
subject to the restrictions on transfer of such Old Notes as
set forth in the legend thereon. In general, the Old Notes
may not be offered or sold, except pursuant to a
registration statement under the Securities Act or any
exemption from registration thereunder and in compliance
with applicable state securities laws. In the event the
Company completes the Exchange Offer, the Noteholders will
have no further rights to registration or liquidated damages
pursuant to the Registration Rights Agreement.
Certain Tax Considerations... There will be no Federal income tax consequences to
Noteholders exchanging the Old Notes for the New Notes
pursuant to the Exchange Offer and a Noteholder will have
the same adjusted basis and holding period in the New Notes
as in the Old Notes immediately before the exchange.
Registration Rights
Agreement.................. The Exchange Offer is intended to satisfy the registration
rights of Noteholders under the Registration Rights
Agreement, which rights terminate upon consummation of the
Exchange Offer.
Exchange Agent............... First Trust National Association is the Exchange Agent. The
address and telephone number of the Exchange Agent are set
forth in "The Exchange Offer--Exchange Agent."
</TABLE>
6
<PAGE>
DESCRIPTION OF THE NEW NOTES
<TABLE>
<S> <C>
New Notes.................... $110,000,000 principal amount of 9 3/4% Senior Notes Due
2007 (the "New Notes").
Maturity Date................ October 15, 2007.
Interest Payment Dates....... April 15 and October 15, commencing April 15, 1998.
Optional Redemption.......... The New Notes may be redeemed at the option of the Company,
in whole or in part, at any time after October 15, 2002 at
the redemption prices set forth herein, plus accrued and
unpaid interest, if any, to the date of redemption. In
addition, at any time and from time to time prior to October
15, 2000, the Company may redeem up to an aggregate of 35%
of the original principal amount of the New Notes, with the
net cash proceeds of one or more Public Equity Offerings (as
defined) at 109.75% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the redemption date;
provided, however, that at least $71.5 million aggregate
principal amount of Notes remain outstanding immediately
after each such redemption. See "Description of the New
Notes--Optional Redemption."
Change of Control............ Upon a Change of Control (as defined), each holder of the
New Notes may require the Company to repurchase such
holder's New Notes at a price equal to 101% of the principal
amount thereof, plus accrued and unpaid interest, if any, to
the repurchase date. There can be no assurance that the
Company will have sufficient funds to purchase all of the
New Notes in the event of a Change in Control. See "Risk
Factors--Change of Control" and "Description of the New
Notes--Change of Control."
Ranking...................... The New Notes and the Subsidiary Guaranties (as defined)
will be unsecured senior obligations of the Company and the
Subsidiary Guarantors (as defined), respectively, and will
rank PARI PASSU in right of payment with all existing and
future senior unsecured indebtedness of the Company and the
Subsidiary Guarantors, respectively. The New Notes and the
Subsidiary Guaranties will be effectively subordinated to
all existing and future Secured Indebtedness (as defined) of
the Company and the Subsidiary Guarantors, respectively, to
the extent of the value of the assets securing such
indebtedness. The New Notes and the Subsidiary Guaranties
will be effectively subordinated to all indebtedness and
other liabilities (including trade payables) of the
Company's subsidiaries other than the Subsidiary Guarantors.
The New Notes and the Subsidiary Guaranties will rank senior
in right of payment to any Subordinated Obligations (as
defined) of the Company and the Subsidiary Guarantors,
respectively. As of September 30, 1997, after giving pro
forma effect to the New Credit Facility, the LIW Acquisition
and the Old Notes Offering and the application of the net
proceeds therefrom, the Company would have had no
outstanding Secured Indebtedness and the Subsidiary
Guarantors would have had approximately $0.2 million of
outstanding Secured Indebtedness to which the New Notes and
the Subsidiary Guaranties would be effectively subordinated
to the extent of the value of the assets securing such
indebtedness, and the Company's non-guarantor subsidiaries
would have had approximately $109.3 million of indebtedness
and other liabilities (including trade payables) outstanding
to which the New Notes and the Subsidiary Guaranties would
be effectively subordinated. See "Description of the New
Notes--Ranking."
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
Subsidiary Guaranties........ The New Notes will be guaranteed (the "Subsidiary
Guaranties") on a senior unsecured basis by the Company's
domestic Restricted Subsidiaries (as defined) that are or
become obligors or guarantors with respect to the New Credit
Facility (the "Subsidiary Guarantors"). See "Description of
the New Notes--Subsidiary Guaranties."
Certain Covenants............ The indenture under which the New Notes will be issued (the
"Indenture") will contain certain covenants that, among
other things, will limit the ability of the Company and its
Restricted Subsidiaries to (i) incur additional
indebtedness, (ii) incur liens, (iii) pay dividends or make
certain other restricted payments, (iv) make investments,
(v) enter into transactions with affiliates, (vi) make
certain asset dispositions and (vii) merge or consolidate
with, or transfer substantially all of its assets to,
another person. The Indenture will also limit the ability of
the Company's Restricted Subsidiaries to create restrictions
on the ability of such Restricted Subsidiaries to pay
dividends or make any other distributions. In addition, the
Company will be obligated, under certain circumstances, to
offer to repurchase New Notes at a purchase price equal to
100% of the principal amount thereof, plus accrued and
unpaid interest, if any, to the date of repurchase, with the
net cash proceeds of certain sales or other dispositions of
assets. However, all of these limitations and prohibitions
are subject to a number of important qualifications. See
"Description of the New Notes--Certain Covenants."
Exchange Rights.............. Holders of New Notes are not entitled to any exchange rights
with respect to the New Notes. Holders of Old Notes are
entitled to certain exchange rights pursuant to the
Registration Rights Agreement. Under the Registration Rights
Agreement, the Company is required to offer to exchange the
Old Notes for new notes having substantially identical terms
which have been registered under the Securities Act. This
Exchange Offer is intended to satisfy such obligation. Once
the Exchange Offer is consummated, the Company will have no
further obligations to register any of the Old Notes not
tendered by the Holders for exchange, except pursuant to a
shelf registration statement to be filed under certain
limited circumstances specified in "The Exchange Offer
--Purposes of the Exchange Offer." See "Risk Factors
--Consequences to Non-Tendering Holders of Old Notes."
Absence of a Public Market
for the New Notes.......... The New Notes will be a new issue of securities with no
established market. Accordingly, there can be no assurance
as to the development or liquidity of any market for the New
Notes.
Use of Proceeds.............. The Company will not receive any proceeds in connection with
the Exchange Offer. In consideration for issuing the New
Notes in exchange for the Old Notes as described in this
Prospectus, the Company will receive the Old Notes that will
be retired and canceled.
</TABLE>
8
<PAGE>
EXCHANGE RATES
For the convenience of the reader, certain financial data of LIW has been
translated from British Pounds Sterling to U.S. Dollars using the exchange rate
in effect at the end of the respective period presented. The following table
reflects the exchange rates used as well as other information for the benefit of
the reader. The Company does not represent that the British Pound Sterling
amounts shown in this Prospectus would have been converted into U.S. Dollars at
the quoted exchange rates.
<TABLE>
<CAPTION>
PERIOD PERIOD
END AVERAGE
--------- ---------
<S> <C> <C>
($ PER L1.00)
Nine Months Ended September 30, 1997....................................... 1.6185 1.6305
Year Ended December 31, 1996............................................... 1.7123 1.5607
January 24, 1996 to September 30, 1996..................................... 1.5650 1.5373
January 1, 1996 to January 23, 1996........................................ 1.5135 1.5377
Year Ended December 31, 1995............................................... 1.5530 1.5785
Year Ended December 31, 1994............................................... 1.5603 1.5319
Year Ended December 31, 1993............................................... 1.4794 1.5016
Year Ended December 31, 1992............................................... 1.5145 1.7642
</TABLE>
RISK FACTORS
Holders of the Old Notes and prospective purchasers of New Notes should
consider carefully all of the information set forth in this Prospectus, and in
particular the information set forth under "Risk Factors" before tendering their
Old Notes in the Exchange Offer or making an investment in the New Notes.
9
<PAGE>
SUMMARY UNAUDITED PRO FORMA CONDENSED FINANCIAL DATA
The following table presents summary unaudited pro forma condensed financial
data derived from the Unaudited Pro Forma Condensed Financial Statements
included elsewhere in this Prospectus. The summary pro forma financial data
gives effect to the Old Notes Offering and the execution of the Company's new
$100.0 million revolving credit facility (the "New Credit Facility"), as well as
the acquisitions of Bekins, LEP-USA, LEP-Canada, and Matrix and the LIW
Acquisition as if they had occurred at the beginning of the respective periods
presented, for purposes of the pro forma statements of operations and other
financial data, and as of September 30, 1997 for purposes of the pro forma
balance sheet data. With respect to the nine months ended September 30, 1996,
the financial statements of LIW have been derived from management reports.
Management has made such adjustments to these reports as they believe are
necessary for a fair presentation of the statement of operations with respect to
the nine months ended September 30, 1996. However, there can be no assurances
that such financial statements are as reliable or accurate as financial
statements prepared using normal interim period or year-end financial reporting
procedures. In addition, such financial statements have not been subject to
independent review of the independent accountants of LIW or the Company.
The Unaudited Pro Forma Condensed Financial Statements do not purport to
present the actual financial position or results of operations of the Company
had the transactions and events assumed therein in fact occurred on the dates
specified, nor are they necessarily indicative of the results of operations that
may be achieved in the future. The Unaudited Pro Forma Condensed Financial
Statements are based on certain assumptions and adjustments described in the
notes to the Unaudited Pro Forma Condensed Financial Statements and should be
read in conjunction therewith and with "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Recent Acquisitions" and the
Consolidated Financial Statements of the Company and LIW and the related notes
thereto included elsewhere in this Prospectus.
Financial data of LIW has been translated from British Pounds Sterling to
U.S. Dollars using the exchange rate in effect at the end of the respective
period presented.
<TABLE>
<CAPTION>
TWELVE MONTHS NINE MONTHS ENDED
ENDED SEPTEMBER 30,
DECEMBER 31, --------------------------
1996(1)(2) 1996(1)(2) 1997(1)(2)
-------------- ------------ ------------
<S> <C> <C> <C>
Revenues.............................................................. $ 1,638,841 $ 1,167,118 $ 1,089,004
Transportation and other direct costs................................. 1,235,108 892,246 818,439
-------------- ------------ ------------
Net revenues.......................................................... 403,733 274,872 270,565
Other operating expenses.............................................. 380,404 257,228 252,909
Depreciation and amortization......................................... 33,079 23,870 24,455
-------------- ------------ ------------
Operating loss........................................................ (9,750) (6,226) (6,799)
Interest expense, net and amortization of debt issuance costs......... 10,967 7,997 8,867
Share of loss in equity investments................................... 2,344 1,093 914
Other income, net..................................................... (676) (368) (135)
-------------- ------------ ------------
Loss before income taxes and minority interests....................... (22,385) (14,948) (16,445)
Income tax provision (benefit)........................................ (136) (1,127) (4,376)
-------------- ------------ ------------
Loss before minority interests........................................ (22,249) (13,821) (12,069)
-------------- ------------ ------------
Minority interests.................................................... (706) (762) (361)
-------------- ------------ ------------
Net loss.............................................................. $ (22,955) $ (14,583) $ (12,430)
-------------- ------------ ------------
-------------- ------------ ------------
OTHER FINANCIAL DATA:
EBITDA(3)........................................................... $ 22,818 $ 17,965 $ 16,182
-------------- ------------ ------------
-------------- ------------ ------------
Cash advances to affiliates, net.................................... $ (1,187) $ (47) $ (1,609)
Cash interest expense(4)............................................ 11,715 7,637 8,288
Capital expenditures................................................ 6,118 4,825 7,097
Ratio of earnings to fixed charges(5)(6)............................ -- -- --
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
------------------
<S> <C>
BALANCE SHEET DATA:
Current assets.............................................................................. $ 319,638
Property and equipment, net................................................................. 48,167
Total assets................................................................................ 473,401
Current liabilities......................................................................... 295,131
Long-term debt (including current portion).................................................. 119,725
Other noncurrent liabilities................................................................ 35,624
Minority interest........................................................................... 2,403
Stockholders' equity........................................................................ 26,905
</TABLE>
- ------------------------
(1) For a description of purchase accounting and pro forma adjustments, see the
notes to the Unaudited Pro Forma Condensed Balance Sheet and Statements of
Operations included elsewhere herein.
(2) Amounts for LIW and its predecessor have been translated from British Pounds
Sterling into U.S. Dollars using the period end exchange rate for
convenience purposes only. In addition, certain amounts of LIW and its
predecessor have been adjusted to conform to U.S. GAAP. See Notes 24 and 25
to the Combined and Consolidated Financial Statements of LIW, Note 8 to the
Unaudited Interim Consolidated Financial Statements of LIW and "Prospectus
Summary--Exchange Rates" included elsewhere herein.
(3) "EBITDA" represents earnings before interest, income taxes, depreciation and
amortization, and other non-cash items such as share of loss in equity
investments and minority interests. EBITDA also includes other income and
expenses and cash advances to and cash dividends received from companies
accounted for under the equity method or consolidated subsidiaries in which
LIW has a controlling interest. While EBITDA should not be construed as a
substitute for operating income or a better indicator of liquidity than cash
flow from operating activities, which are determined in accordance with
generally accepted accounting principles, it is included herein to provide
additional information with respect to the ability of the Company to meet
its future debt service, capital expenditure and working capital
requirements. EBITDA is not necessarily a measure of the Company's ability
to fund its cash needs. See the Consolidated Statements of Cash Flows of the
Company and of LIW and the related notes thereto included in this
Prospectus. EBITDA is included herein because management believes that
certain investors find it to be a useful tool for measuring the ability to
service debt.
(4) "Cash interest expense" represents interest expense recorded in the
statement of operations less amortization of deferred financing costs. Total
debt and cash interest expense give effect to the Old Notes Offering and
other interest bearing debt after application of proceeds from the Old Notes
Offering. See "Use of Proceeds" and "Historical and Pro Forma Consolidated
Capitalization."
(5) For purposes of this computation, fixed charges consist of interest expense
and amortization of deferred financing costs and the estimated portion of
rental expense attributable to interest. Earnings consist of income (loss)
before income taxes excluding losses from equity investments plus fixed
charges.
(6) Pro forma earnings were inadequate to cover pro forma fixed charges by
$20,696, $14,141 and $15,531 for the twelve months ended December 31, 1996
and for the nine months ended September 30, 1996 and 1997, respectively.
11
<PAGE>
RISK FACTORS
EXCEPT FOR HISTORICAL INFORMATION CONTAINED IN THIS PROSPECTUS, THE MATTERS
DISCUSSED HEREIN CONTAIN FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE SECURITIES EXCHANGE ACT
OF 1934, AS AMENDED (THE "EXCHANGE ACT"), SUCH AS PLANS FOR FUTURE EXPANSIONS,
CAPITAL SPENDING AND FINANCING SOURCES. SUCH FORWARD-LOOKING STATEMENTS ARE
INHERENTLY UNCERTAIN, AND INVESTORS MUST RECOGNIZE THAT ACTUAL RESULTS MAY
DIFFER FROM MANAGEMENT'S EXPECTATIONS. KEY FACTORS AFFECTING CURRENT AND FUTURE
OPERATIONS OF THE COMPANY INCLUDE THE FACTORS DISCUSSED BELOW. THE NOTEHOLDERS
SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS IN ADDITION TO THE OTHER
INFORMATION SET FORTH IN THIS PROSPECTUS BEFORE TENDERING THEIR OLD NOTES IN THE
EXCHANGE OFFER.
RESTRICTIONS UPON TRANSFER OF AND LIMITED TRADING MARKET FOR OLD NOTES
The New Notes will be issued in exchange for the Old Notes only after timely
receipt by the Exchange Agent of tenders of such Old Notes. Therefore,
Noteholders desiring to tender such Old Notes in exchange for the New Notes
should allow sufficient time to ensure timely delivery. Neither the Exchange
Agent nor the Company is under any duty to give notification of defects or
irregularities with respect to tenders of the Old Notes for exchange. The Old
Notes that are not tendered or are tendered but not accepted will, following
consummation of the Exchange Offer, continue to be subject to the existing
restrictions upon transfer thereof. In addition, any holder of the Old Notes who
tenders in the Exchange Offer for the purpose of participating in a distribution
of the New Notes will be required to comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any resale
transaction. Each broker-dealer who receives New Notes for its own account in
exchange for the Old Notes, where such Old Notes were acquired by such
broker-dealer as a result of market-making activities or any other trading
activities, must acknowledge that it will deliver a Prospectus in connection
with any resale of such New Notes. See "Plan of Distribution." To the extent
that the Old Notes are tendered and accepted in the Exchange Offer, the trading
market for untendered and tendered but unaccepted Old Notes could be adversely
affected. See "The Exchange Offer."
LIMITED OPERATING HISTORY; NET LOSSES
ILOG was incorporated on February 14, 1996 and acquired (i) Bekins in May
1996, (ii) LEP and a 33.3% minority interest in LIW in October 1996, (iii)
Matrix in November 1996 and (iv) an additional 41.9% interest in the common
equity of LIW in September 1997. Accordingly, the Company has only a limited
combined operating history upon which an evaluation of the Company and its
prospects can be based. After giving effect to certain purchase accounting
adjustments made in connection with the acquisitions of Bekins, LEP and Matrix,
which resulted in approximately $104.0 million in intangible assets, the Company
incurred net losses of $9.2 million for its first year of operations and net
losses of $13.3 million for the nine months ended September 30, 1997. On the
same basis, for the nine months ended September 30, 1997, pro forma earnings
were inadequate to cover fixed charges by $15.5 million. Net losses for the year
ended December 31, 1996 and the nine months ended September 30, 1997 included
amortization expenses of $14.8 million and $16.3 million, respectively, relating
to intangible assets. It is expected that the Company will incur net losses for
the remainder of the 1997 fiscal year. There can be no assurances that the
Company will achieve profitability, will improve EBITDA or will be able to meet
fixed charges. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
LEVERAGE AND DEBT SERVICE OBLIGATIONS
The Company has substantial fixed debt service in addition to operating
expenses. The Company used the net proceeds from the Old Notes Offering to repay
all amounts outstanding under the Old Credit Facility and, concurrently with the
closing of the Old Notes Offering, entered into the New Credit Facility. See
"New Credit Facility." As of September 30, 1997, after giving pro forma effect
to the New Credit Facility, the LIW Acquisition and the Old Notes Offering and
the application of the net proceeds therefrom, the Company's total consolidated
indebtedness would have been $119.7 million, consisting of the Old Notes and
$9.7 million of other indebtedness, and the Company's ratio of pro forma EBITDA
to cash interest expense for the nine months ended September 30, 1997 would have
been 2.0 to 1.0.
The Company's ability to make scheduled payments of principal of, or
interest on, or to refinance its indebtedness will depend on the availability of
funding under its New Credit Facility and on future operating performance and
cash flow, which are subject to prevailing economic conditions, prevailing
interest rate levels and financial, competitive, business and other factors
beyond the Company's control. The degree to which the Company is leveraged could
have important
12
<PAGE>
consequences to the holders of the New Notes, including the following: (i) the
Company's ability to obtain additional financing in the future for working
capital, capital expenditures, acquisitions or other purposes may be impaired,
(ii) the Company's flexibility in planning for or reacting to changes in market
conditions may be limited, (iii) the Company's vulnerability in the event of a
downturn in its business and (iv) the Company's ability to finance contingencies
related to tax and regulatory matters and payments due under incentive and stock
repurchase arrangements. See "Business -- Litigation" and "Management--Incentive
Compensation Plans--Employee Stock Ownership." The Company anticipates that the
refinancing effected by the application of the proceeds of the Old Notes
Offering will reduce its principal repayment obligations in the near future;
however, under the terms of the Indenture and the New Credit Facility, the
Company may continue to incur additional indebtedness, including indebtedness
that may be incurred to fund future distributions to stockholders of the
Company. The Company believes that, based on anticipated levels of operations,
it should be able to meet its debt service obligations, including interest
payments on the Notes, when due. If, however, the Company cannot generate
sufficient cash flow from operations to meet its obligations, the Company might
be required to refinance its indebtedness or dispose of assets to obtain funds
for such purpose. There is no assurance that any such refinancing or asset
dispositions could be effected on satisfactory terms, if at all, or would be
permitted by the terms of the New Credit Facility or the Indenture pursuant to
which the Old Notes were issued and the New Notes will be issued. In the event
that the Company is unable to refinance the New Credit Facility or raise funds
through asset sales, sales of equity or otherwise, its ability to pay principal
of and interest on the New Notes would be materially adversely affected.
HOLDING COMPANY STRUCTURE; SUBSIDIARY OPERATIONS
The Company conducts its operations through subsidiaries. Substantially all
of the assets of the Company are owned by its subsidiaries and the Company has
no significant assets of its own other than cash, cash equivalents and equity
interests in subsidiaries of the Company. As a holding company, the Company is
dependent on distributions or other intercompany transfers of funds from its
subsidiaries to meet its debt service and other obligations, including the
payment of principal of and interest on the New Notes. The Company does not own
all of the equity interests of certain of its subsidiaries, and consequently
must share profits with certain minority shareholders. See "Business --
Ownership of LIW Subsidiaries." Distributions and intercompany transfers from
the Company's subsidiaries to the Company may be restricted by covenants
contained in debt agreements and other agreements to which such subsidiaries may
be subject and may be restricted by other agreements entered into in the future
and by applicable law. There can be no assurance that the operating results of
the Company's subsidiaries at any given time will be sufficient to make
distributions to the Company. The Company's right and the rights of its
creditors, including holders of New Notes, to participate in the distribution of
assets of any subsidiary of the Company upon such subsidiary's liquidation or
recapitalization will be subject to the prior claims of such subsidiary's
creditors.
RESTRICTIONS IMPOSED BY TERMS OF INDEBTEDNESS
The New Credit Facility and the Indenture contain certain restrictive
covenants including, among other things, limitations on the ability of the
Company and its Restricted Subsidiaries to incur additional indebtedness, create
liens and other encumbrances, make certain payments and investments, enter into
transactions with affiliates, sell or otherwise dispose of assets and merge or
consolidate with another entity. Although the covenants are subject to various
exceptions which are designed to allow the Company to operate without undue
restraint, there can be no assurance that such covenants will not adversely
affect the Company's ability to finance future operations or capital needs or
engage in other activities which may be in the interest of the Company. In June
1997, the Company obtained a waiver from its bank under the Old Credit Facility
for non-compliance of covenants contained in the Old Credit Facility regarding
earnings and limits on capital expenditures. Although the Company was not in
compliance with the covenants under the Old Credit Facility at September 30,
1997 the debt was repaid in October 1997 and no waiver was required. The Company
is required under the New Credit Facility to maintain certain financial ratios.
The Company's ability to comply with such provisions will be dependent upon its
future performance, which will be affected by prevailing economic conditions and
financial, business and other factors, certain of which are beyond the Company's
control. Accordingly, no assurance can be given that the Company will maintain a
level of operating cash flow that will permit it to service its obligations and
to satisfy the financial covenants in the New Credit Facility. A breach of any
of these covenants or the inability of the Company to comply with the required
financial ratios could result in a default under the New Credit Facility, which
would entitle the lenders thereunder to accelerate the maturity of the New
Credit Facility, and could result in cross-defaults permitting the acceleration
of other indebtedness of the Company, including the New Notes. Such an event
would materially adversely affect the Company's ability to make payments on the
New Notes. See "New Credit Facility" and "Description of the New Notes."
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ENFORCEABILITY OF THE SUBSIDIARY GUARANTIES; FRAUDULENT CONVEYANCE
CONSIDERATIONS
The Subsidiary Guarantors will guarantee the Company's obligations under the
New Notes. Initially, the Subsidiary Guarantors will consist of Bekins, LEP-USA,
Matrix and three special-purpose direct domestic subsidiaries, the sole assets
of which will be LEP-Canada and LIW. See "Description of the New Notes
- --Subsidiary Guaranties." Under applicable provisions of the federal bankruptcy
law or comparable provisions of state law, if any Subsidiary Guarantor is
insolvent at the time it incurs its Subsidiary Guaranty, such Subsidiary
Guaranty could be voided, or claims in respect of such Subsidiary Guaranty could
be subordinated to all other debts of such Subsidiary Guarantor. The measures of
insolvency will vary depending upon the law applied in any such proceeding.
Generally, however, the Subsidiary Guarantors may be considered insolvent if the
sum of their debts, including contingent liabilities, is greater than the fair
market value of all of their assets at a fair valuation or if the present fair
market value of their assets is less than the amount that would be required to
pay their probable liability on their existing debts, including contingent
liabilities, as they become absolute and mature. See "Description of the New
Notes--Ranking."
The incurrence by the Company or the Subsidiary Guarantors of indebtedness
such as the New Notes or the Subsidiary Guaranties, respectively, may be subject
to review under relevant U.S. federal and state fraudulent conveyance laws if a
bankruptcy case or a lawsuit (including in circumstances where bankruptcy is not
involved) is commenced by or on behalf of unpaid creditors of the Company or the
Subsidiary Guarantors. Under these laws, if a court were to find that, at the
time the New Notes were issued, either (a) any of the Company or the Subsidiary
Guarantors incurred debt represented by the New Notes or Subsidiary Guaranties,
respectively, with the intent of hindering, delaying or defrauding creditors or
(b) any of the Company or the Subsidiary Guarantors received less than
reasonably equivalent value or consideration for incurring the indebtedness
represented by the New Notes or such Subsidiary Guaranties, respectively, and
(i) was insolvent or was rendered insolvent by reason of such transaction, (ii)
was engaged in a business or transaction for which the assets remaining with
such entity constituted unreasonably small capital or (iii) intended to incur,
or believed that it would incur, debts beyond its ability to pay such debts as
they matured, such court may subordinate the New Notes or such Subsidiary
Guaranty to presently existing and future indebtedness of such entity, void the
issuance of the New Notes or any Subsidiary Guaranty or direct the repayment of
any amounts paid thereunder to such entity or to a fund for the benefit of such
entity's creditors or take other action detrimental to the holders of the New
Notes. Because substantially all of the Company's obligations (including trade
payables) are at the subsidiary level, any such voiding of the New Notes or the
Subsidiary Guaranties would effectively subordinate the New Notes and such
Subsidiary Guaranties, respectively, to such obligations.
The Company believes that it and each Subsidiary Guarantor will receive
equivalent value at the time the indebtedness represented by the New Notes and
the Subsidiary Guaranties, respectively, is incurred. In addition, the Company
does not believe that it, as a result of the issuance of the New Notes, or any
Subsidiary Guarantor as a result of the issuance of the Subsidiary Guaranties,
(i) will be insolvent or rendered insolvent under the foregoing standards, (ii)
will be engaged in a business or transaction for which its remaining assets
constitute unreasonably small capital or (iii) intends to incur, or believes
that it will incur, debts beyond its ability to pay such debts as they mature.
These beliefs are based on the Company's and each Subsidiary Guarantor's
operating history and net worth and management's analysis of internal cash flow
projections and estimated values of assets and liabilities of each such entity
at the time of the Old Notes Offering. There can be no assurance, however, that
a court passing on these issues would make the same determination. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Use of Proceeds."
UNCERTAINTIES RELATING TO OPERATIONS AND ACQUISITION OF LIW
In January 1996, certain members of the senior management of LEP Group plc
formed LIW and acquired the freight forwarding business of LEP Group plc. LEP
Group plc and its operating subsidiaries, including the freight forwarding
business, had experienced substantial financial difficulties, and, immediately
following the management buy-out of the freight forwarding business, LEP Group
plc was placed into an administrative receivership. Notwithstanding the
separation of LIW from LEP Group plc, LIW's reputation, business and operations
have been adversely affected by LEP Group plc's historical financial
difficulties.
In addition, certain of LIW's operating subsidiaries have incurred
historical operating losses that have threatened such subsidiaries' solvency and
certain of the LIW operating subsidiaries' credit facility providers have
withdrawn financing to such subsidiaries or have indicated that outstanding
indebtedness must be refinanced or restructured. LIW incurred
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a net loss of L3.0 million ($4.9 million) for the period from January 24, 1996
(the date on which the management buy-out was consummated) to December 31, 1996
and a net loss of L2.8 million ($4.5 million) for the nine month period ended
September 30, 1997. Furthermore, LIW has faced and is encountering numerous
other challenges relating to the worldwide integration of its financial and
operating systems, increased competition resulting from deregulation, and
various customs and tax matters in dispute involving approximately L11.6 million
($18.8 million). See "Business--Litigation." Moreover, the purchase obligation
for the minority equity interests not owned by LIW in its Italian affiliate will
require payments totaling approximately L.6 million (approximately $1.0 million)
over the next two years, and minority shareholders in certain of LIW's foreign
subsidiaries hold significant interests in the profits of such subsidiaries and
have a significant say in management and control issues related to such
subsidiaries. Successful integration of such entities may depend on maintaining
satisfactory relationships with such minority shareholders. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and "Business--Ownership of LIW
Subsidiaries." While the Company believes that it will be able to integrate LIW
successfully and improve its results of operations, there can be no assurances
that future operations of LIW will be profitable or that the operations of LIW
will not have a material adverse effect on the Company as a whole.
INTEGRATION OF ACQUISITIONS
The Company has experienced significant growth in the past through the
Subsidiary Acquisitions. The Company's future operations and earnings will be
largely dependent upon the Company's ability to continue to integrate the
operations of the companies acquired in the Subsidiary Acquisitions,
particularly LIW, into the current operations of the Company. Although the
Company believes that the Subsidiary Acquisitions, and in particular the
recently consummated LIW Acquisition, offer opportunities for long-term
efficiencies in operations and that the combined operations of Bekins, Matrix,
LEP and LIW should positively affect future results of the operations of the
Company, such acquisitions may materially adversely affect the Company's
financial performance in 1997 and beyond until such time as the Company is able
to realize the positive effect of expected long-term efficiencies of such
acquisitions. As a result of the Subsidiary Acquisitions, the combined companies
are more complex and diverse than the stand-alone operations of the Company
prior to the Subsidiary Acquisitions. The combination and continued operation of
the businesses of the Company's subsidiaries may present significant challenges
for the Company's management due to the increased time and resources required to
properly integrate management, employees, information systems, accounting
controls, personnel and administrative functions of such businesses. There can
be no assurance that the Company will be able to successfully integrate and
streamline overlapping functions with respect to any or all of such entities,
or, if successfully accomplished, that such integration will not be more costly
to accomplish than presently contemplated by the Company. The difficulties of
such integration may be increased by the necessity of coordinating
geographically separate organizations. The continued integration of certain
operations of the Company's subsidiaries will require the dedication of
management resources which may distract attention from the day-to-day business
of the combined companies in the short- and long-term. Failure to effectively
and completely accomplish the integration of operations of the Company's
subsidiaries could have a material adverse effect on the Company's results of
operations and financial condition.
COMPETITION
The transportation and logistics services industry is highly competitive.
The Company competes against other integrated logistics companies and third
party carriers offering logistics services. The Company also competes with truck
lines for the services of fleet contractors and drivers. Competition is based
primarily on freight rates, quality of service, reliability, transit times and
scope of operations. Several other logistics companies, third party brokers and
numerous carriers have substantially greater financial and other resources and
are more established than the Company. Additionally, the Company competes
against carriers' internal sales forces and shippers' transportation
departments.
As the Company expands its international operations, it expects to encounter
increased competition from those service providers that have a predominantly
international focus, including Air Express International Corporation, Expeditors
International of Washington, Inc., Fritz Companies Inc., Circle International
Group, Inc., Kuehne & Nagel, Panalpina and NFC plc, as well as from its
competitors for domestic freight forwarding such as Burlington Air Express,
Inc., Eagle USA Air Freight Inc. and Emery Air Freight Corp. Many of these
competitors have substantially greater financial resources than the Company. The
Company also encounters competition from regional and local air freight
forwarders and HHG relocaters such as North American Van Lines, Allied Van Lines
Inc., Atlas Van Lines Inc. and UniGroup, Inc. (United Van Lines, Inc. and
Mayflower Transit, Inc.), cargo sales agents and brokers, surface freight
forwarders and carriers, and associations of shippers organized for the purpose
of consolidating their members' shipments to obtain lower freight rates
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from carriers. Deregulation has also increased competitive pressures on pricing.
The intense competition to which the Company is subject could materially
adversely affect the Company's operating margins. See "Business--Competition and
Business Conditions."
RANKING
The Indenture permits the Company and its Restricted Subsidiaries to incur
additional senior indebtedness provided certain financial or other conditions
are met. The New Notes and the Subsidiary Guaranties will be senior unsecured
obligations and will rank PARI PASSU in right of payment with all existing and
future senior unsecured indebtedness of the Company and the Subsidiary
Guarantors, respectively. In addition, the New Notes and the Subsidiary
Guaranties will be effectively subordinated to all existing and future Secured
Indebtedness of the Company and the Subsidiary Guarantors, respectively, to the
extent of the value of the assets securing such indebtedness and all existing
and future indebtedness and other liabilities (including trade payables) of the
Company's non-guarantor subsidiaries. As of September 30, 1997, after giving pro
forma effect to the LIW Acquisition, the New Credit Facility and the Old Notes
Offering and the application of the net proceeds therefrom, (i) the Company
would have had no outstanding Secured Indebtedness and the Subsidiary Guarantors
would have had approximately $0.2 million of outstanding Secured Indebtedness to
which the New Notes and the Subsidiary Guaranties would be effectively
subordinated to the extent of the value of the assets securing such
indebtedness, (ii) all indebtedness and other liabilities (including trade
payables) of the Company's non-guarantor subsidiaries would have been
approximately $109.3 million, to which the New Notes and the Subsidiary
Guaranties would be effectively subordinated and (iii) the Company and the
Subsidiary Guarantors would have had $44.9 million of outstanding indebtedness
ranking PARI PASSU with the New Notes and the Subsidiary Guaranties (consisting
of trade accounts payable of ILOG and Subsidiary Guarantors). The New Credit
Facility is secured by certain assets of the Company and its Restricted
Subsidiaries and therefore, the New Notes and the Subsidiary Guaranties will be
effectively subordinated to the New Credit Facility to the extent of the value
of the assets securing such indebtedness. Holders of existing or future Secured
Indebtedness of the Company and its Restricted Subsidiaries permitted under the
Indenture, including the New Credit Facility, and holders of existing or future
indebtedness of the Company's non-guarantor subsidiaries will have claims with
respect to certain assets of the Company and such subsidiaries that are prior to
the claims of holders of the New Notes. See "Description of the New Notes
- --Ranking."
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS
After giving pro forma effect to the Subsidiary Acquisitions, the Company
derived approximately 63.4% and 56.0% of its total revenue from sales outside
the United States in the fiscal year ended December 31, 1996 and the nine months
ended September 30, 1997, respectively. As of June 30, 1997, the Company had
operations in 33 countries, utilizing the services of approximately 1,632
employees in the United States and 4,720 employees in other countries and
maintained strategic alliance partnerships with 57 partners in 42 additional
countries. International operations are subject to a number of risks, including
longer accounts receivable collection periods and greater difficulty in accounts
receivable collections in certain geographic regions, unexpected changes in
regulatory requirements, import and export restrictions, delays and tariffs,
difficulties and costs of staffing and managing international operations,
potentially adverse tax consequences, political instability, share ownership
restrictions on foreign operations, currency fluctuations, the burdens of
complying with multiple, potentially conflicting laws and the impact of business
cycles and economic instability. There can be no assurance that the geographic,
time zone, language and cultural differences between the Company's international
personnel and operations will not result in problems that materially adversely
affect the Company's business, operating results and financial condition.
The Company expects to commit additional time and resources to expanding its
worldwide sales and marketing activities, globalizing its products in selected
markets and developing local sales and support channels. There can be no
assurance that such efforts will be successful. Failure to sustain international
revenue could have a material adverse effect on the Company's business,
operating results and financial condition. The Company may also experience an
operating loss in one or more regions of the world for one or more periods. The
Company's ability to manage such operational fluctuations and to maintain
adequate long-term strategies in the face of such developments will be critical
to the Company's continued growth and profitability. See "Management's
Discussion and Analysis of Financial Condition and the Results of Operations"
and "Business--Marketing."
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EXPOSURE TO CURRENCY FLUCTUATIONS
To date the Company's revenue from international operations has primarily
been denominated in U.S. Dollars. After giving pro forma effect to the LIW
Acquisition, the proportion of revenues and expenses denominated in currencies
other than U.S. Dollars will increase dramatically. As of June 30, 1997, after
giving pro forma effect to the LIW Acquisition, 41.8%, 12.0%, 11.6% and 4.9% of
the Company's accounts receivable were denominated in U.S. Dollars, British
Pounds Sterling, German Deutschemarks and Canadian Dollars, respectively. The
remainder of the Company's accounts receivable were denominated in various other
European and Asian currencies of the countries in which LIW operates. In
addition, a portion of the borrowings under the New Credit Facility may be
denominated in British Pounds Sterling, Canadian Dollars and other foreign
currencies to the extent permitted by the New Credit Facility. As a result,
fluctuations in the values of the respective currencies relative to the other
currencies in which the Company generates revenue could materially adversely
affect its business, operation results and financial condition. Adoption of the
new European currency may affect the fluctuations. Fluctuations in currencies
relative to the U.S. Dollar will affect period-to-period comparisons of the
Company's reported results of operations. Due to the constantly changing
currency exposures and the volatility of currency exchange rates, there can be
no assurance that the Company will not experience currency losses in the future,
nor can the Company predict the effect of exchange rate fluctuations upon future
operating results. The Company has not in the past undertaken hedging
transactions due to the previously limited exposure and impact of currency
fluctuations on financial results. The Company may choose to hedge a portion of
its currency exposure in the future as it deems appropriate. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
IMPLEMENTATION AND INTEGRATION OF MANAGEMENT INFORMATION SYSTEMS; YEAR 2000
SOLUTIONS
The Company utilizes FAST 400, a proprietary system for the real-time
management of shipments on a multi-modal, multi-currency and multi-lingual
basis, in certain of its operations. The Company believes that FAST 400 is the
most advanced information system of its type currently in use in the global
freight forwarding industry. The Company expects to spend approximately $30.0
million over the next three years to conclude the implementation and integration
of FAST 400 and its related BUSINESS 400 systems globally, purchase additional
information systems equipment and software upgrades and integrate the system
capabilities of its Company's subsidiaries. The failure of the Company's
management information systems to adapt to the Company's business needs or the
failure of the Company to successfully implement these systems could have a
material adverse effect on the Company.
The planned expenditures for information systems include significant costs
during the next two to three years to address the inability of certain
information systems, primarily computer software programs, to properly recognize
and process date sensitive information after December 31, 1999 (the "Year 2000
Problem"). The Company has completed an assessment of its information systems
and has developed a specific workplan to address the Year 2000 Problem through
the introduction of new financial software for all of its subsidiaries. Of the
$30.0 million required to implement and integrate the FAST 400 and related
BUSINESS 400 systems globally, approximately $6.0 million will be spent to
complete the upgrade and integration of the Company's North American
subsidiaries' accounting systems and simultaneously address the Year 2000
Problem. Such costs may have a material adverse effect on the Company's results
of operation in the near future. The Company believes it will be able to modify
or replace its affected systems to minimize any detrimental effect that the Year
2000 Problem may have on the Company's long-term results of operations,
liquidity or consolidated financial position. However, no assurance can be given
that the Year 2000 Problem will be resolved without any future disruption or
that the Company will not incur significant expense in resolving the issue. See
"Business--Information Systems."
PRINCIPAL STOCKHOLDERS
As of September 30, 1997, TCW Special Credits Fund V--The Principal Fund
(the "Principal Fund") and OCM Principal Opportunities Fund, L.P. (the
"Opportunities Fund" and together with the Principal Fund, the "Oaktree
Entities") owned 1,295,575 shares of Common Stock, representing approximately
62.4% of the outstanding shares of Common Stock (or 46.5% on a fully-diluted
basis). As of September 30, 1997, Logistical Simon, L.L.C. ("Logistical Simon")
owned 469,532 shares of Common Stock representing approximately 22.6% of the
outstanding shares of Common Stock (or 21.3% on a fully-diluted basis). The
Oaktree Entities and Logistical Simon are parties to a Stockholders Agreement
(the "Stockholders Agreement") pursuant to which the parties thereto have agreed
to elect a board of directors consisting of (i) two individuals appointed by the
Opportunities Fund, (ii) one individual appointed by the Principal Fund, (iii)
three individuals appointed by WESS, (iv) the Chief Executive Officer of the
Company and (v) William E. Myers, Jr. In addition,
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pursuant to the terms of the Stockholders Agreement, under certain
circumstances, the consent of directors appointed by each of Logistical Simon
and the Oaktree Entities will be required to effect any material action of the
Board of Directors. As a result, because of concentration of ownership of Common
Stock of the Company by the Oaktree Entities and Logistical Simon and the
provisions of the Stockholders Agreement, the Oaktree Entities and Logistical
Simon may be in a position to influence the Company at both the Board of
Directors and stockholder levels. There can be no assurance that the Oaktree
Entities and Logistical Simon will exercise their power over the Common Stock in
a manner that is consistent with, or that will not have a material adverse
effect on, the interests of the holders of the New Notes. See "Principal
Stockholders" and "Certain Relationships and Related Transactions."
DEPENDENCE ON KEY PERSONNEL
The Company believes that its future success will be highly dependent upon
its ability to attract and retain skilled managers and other personnel,
including Roger E. Payton, the Company's other executive officers and its
regional managers. The loss of the services of any such managers and personnel
could have a material adverse effect on the Company.
RELIANCE ON INDEPENDENT AGENTS
The Company relies in part upon the services of independent agents to market
its transportation services, to act as intermediaries with customers and to
provide services on behalf of the Company. Although the Company believes its
relationship with its agents is satisfactory, there can be no assurance that the
Company will continue to be successful in retaining its agents or that agents
who terminate their contracts can be replaced by equally qualified companies.
Because the agents occasionally have the primary relationship with customers,
some customers could be expected to terminate their relationship with the
Company if a particular agent were to terminate his or her relationship with the
Company. See "Business--Operations."
CHARACTERISTICS OF THE LOGISTICS INDUSTRY
As a participant in the global logistics services industry, the Company's
business is dependent upon a number of factors including the availability of
transportation equipment and warehousing and distribution facilities at
cost-effective rates and on reasonable terms and conditions. Such services and
facilities are often provided by independent third parties. Shortages of cargo
space are most likely to develop in and around the holiday season and in
exceptionally heavy transportation lanes. Shortages in available space could
also be triggered by economic conditions, transportation strikes, regulatory
changes and other factors beyond the control of the Company. The future
operating results of the Company could be materially adversely affected by
significant shortages of suitable cargo space and associated increases in rates
charged by passenger airlines and other providers of such cargo space. In
addition, if the Company were unable to secure sufficient equipment or attract
and retain sufficient personnel drivers and owner-operators to meet its
customers' needs, its results of operations could be materially adversely
affected. Finally, the Company's operating results would be materially adversely
affected if the Company were unable to arrange suitable warehousing and
distribution facilities to support its customers' logistics services needs
because the Company's production would be limited to transportation-based
services which are typically lower margin and subject to greater competitive
pressures than logistics services. See "Business--Competition and Business
Conditions."
From time to time, third parties, including the Internal Revenue Service
("IRS") and state authorities, have sought to assert, and at times have been
successful in asserting, that independent owner-operators in the transportation
industry, including those of the type utilized in connection with the Company's
local pick-up and delivery operations, are "employees," rather than "independent
contractors." Although the Company believes that the independent owner-operators
utilized by it are not employees, there can be no assurance that the IRS and
state authorities or others will not challenge this position, or that federal
and state tax or other applicable laws, or interpretations thereof, will not
change. If they do, the Company could incur additional employee benefit related
expenses and could be liable for additional taxes, penalties and interest for
prior periods and additional taxes for future periods. See
"Business--Employees."
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VULNERABILITY TO ECONOMIC CONDITIONS
The Company's future operating results may be dependent on the economic
environments in which it operates. Demand for the Company's services could be
materially adversely affected by economic conditions in the industries of the
Company's customers. Interest rate fluctuations, economic recession, customers'
business cycles, availability of qualified drivers, changes in fuel prices and
supply, increases in fuel or energy taxes and the transportation costs of third
party carriers are all economic factors over which the Company has little or no
control. Increased operating expenses incurred by transportation carriers can be
expected to result in higher transportation costs, and the Company's operating
margins would be materially adversely affected if it were unable to pass through
to its customers the full amount of increased transportation costs. Economic
recession or a downturn in customers' business cycles, particularly in
industries in which the Company has a large number of customers, could also have
a materially adverse effect on the Company's operating results due to reduced
volume of loads shipped. The Company expects that demand for the Company's
services (and, consequently, its results of operations) will continue to be
sensitive to domestic and, increasingly, global economic conditions and other
factors beyond its control.
GOVERNMENT REGULATION
The Company's operations are subject to various state, local, federal and
foreign regulations that in many instances require permits and licenses. The
Company was issued a license by the Interstate Commerce Commission (the "ICC")
permitting the Company to act as a broker in arranging for the transportation,
by motor vehicle, of general commodities between points in the United States and
as a motor carrier and freight forwarder. In 1996, the ICC was dissolved and
responsibility for oversight of motor carriers, brokers and freight forwarders
was assumed by the Surface Transportation Board (the "STB") of the Department of
Transportation (the "DOT"). The STB prescribes qualifications for acting in this
capacity, including certain surety bonding requirements. In its ocean freight
forwarding business, the Company is licensed as an ocean freight forwarder and
as a non-vessel operating common carriers ("NVOCC") by the Federal Maritime
Commission. The Company's domestic customs brokerage agents are licensed by the
United States Department of the Treasury and are regulated by the United States
Customs Service. The Company's air freight forwarding business is subject to
regulation, as an indirect air cargo carrier, under the Federal Aviation Act by
the DOT. The Company's motor carrier operations are subject to safety
regulations of the DOT related to such matters as hours of service by drivers,
equipment inspection and equipment maintenance. The Company is also subject to
similar regulations by the regulatory authorities of foreign jurisdictions in
which the Company operates. The Company is also a common carrier and a contract
motor carrier regulated by the STB and various state agencies. The Company is
subject to various foreign and U.S. environmental laws. Numerous jurisdictions
in Asia prohibit or restrict United States ownership of local logistics
operations, and although the Company believes its ownership structure in Asia
conforms to such laws, the matter is often subject to considerable regulatory
discretion and there can be no assurance local authorities would agree with the
Company.
Any violation of the laws and regulations discussed above could increase
claims and/or liability, including claims for uninsured punitive damages.
Violations also could subject the Company to fines or, in the event of a serious
violation, suspension, revocation of operating authority or criminal penalties.
All of these regulatory authorities have broad powers generally governing
activities such as authority to engage in motor carrier operations, rates and
charges, and certain mergers, consolidations and acquisitions. Although
compliance with these regulations has not had a materially adverse effect on the
Company's operations or financial condition in the past, there can be no
assurance that such regulations or changes thereto will not materially adversely
impact the Company's operations in the future. See "Business -- Regulation."
Certain federal officials have announced that they are considering
implementing increased security measures with respect to air cargo. There can be
no assurance as to what, if any, regulations will be adopted or what, if
adopted, their ultimate effect on the Company will be. Failure of the Company to
maintain required permits or licenses, or to comply with applicable regulations,
could result in substantial fines or revocation of the Company's operating
authorities. See "Business--Regulation."
PICK-UP AND DELIVERY CLAIMS EXPOSURE
The Company utilizes the services of a significant number of drivers in
connection with its local pick-up and delivery operations and from time to time
such drivers are involved in accidents. Although most of these drivers are
independent contractors, there can be no assurance that the Company will not be
held liable for the actions of such drivers. The Company currently carries, or
requires its independent owner-operators to carry, liability insurance in
varying amounts,
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depending on the country in which operations are being conducted, for each such
accident. However, there can be no assurance that claims against the Company
will not exceed the amount of coverage. If the Company were to experience a
material increase in the frequency or severity of accidents, liability claims or
workers' compensation claims, or unfavorable resolutions of claims, the
Company's operating results and financial condition could be materially
adversely affected. In addition, significant increases in insurance costs could
reduce the Company's profitability.
CHANGE OF CONTROL
In the event of a Change of Control of the Company, the Company will be
required, subject to certain conditions, to offer to purchase all outstanding
New Notes at a price equal to 101% of the principal amount thereof, plus accrued
and unpaid interest to the date of purchase. Certain events involving a Change
of Control may be an event of default under other indebtedness of the Company.
Moreover, the exercise by the holders of the New Notes of their right to require
the Company to purchase the New Notes may cause a default under such other
indebtedness, even if the Change of Control does not. Finally, there can be no
assurance that the Company will have the financial resources necessary to
repurchase the New Notes upon a Change of Control. See "Description of the New
Notes--Change of Control."
ABSENCE OF PUBLIC TRADING MARKET
Prior to this Exchange Offer, there has been no public market for the Old
Notes which were sold pursuant to an exemption from registration under
applicable securities laws. Like the Old Notes, the New Notes constitute a new
issue of securities, have no established trading market and may not be widely
distributed. The Initial Purchasers have informed the Company that they
currently intend to make a market in the New Notes following the effectiveness
of the Registration Statement; however, the Initial Purchasers are not obligated
to do so and may discontinue such market-making activities at any time without
notice.
Although the New Notes will be eligible for trading on The Portal-SM- Market
("PORTAL") of the Nasdaq Stock Market, Inc., the Company does not intend to list
the New Notes on any securities exchange or to seek the admission thereof to
trading in the Nasdaq Stock Market. If the New Notes are traded after their
initial issuance, they may trade at a discount from their initial offering
price, depending on prevailing interest rates, the market for similar securities
and other factors, including general economic conditions and the financial
condition of, performance of and prospects for the Company. There can be no
assurance as to the development of any market or liquidity of any market that
may develop for the New Notes. If a market does develop, the price of the New
Notes may fluctuate and liquidity may be limited. If a market for the New Notes
does not develop, purchasers of the New Notes may be unable to resell such
securities for an extended period of time, if at all.
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USE OF PROCEEDS
This Exchange Offer is intended to satisfy certain of the Company's
obligations under the Registration Rights Agreement. The Company will not
receive any cash proceeds from the issuance of the New Notes offered in the
Exchange Offer. In consideration for issuing the New Notes as contemplated in
this Prospectus, the Company will receive in exchange Old Notes in like
principal amount, the form and terms of which are the same in all material
respects as the form and terms of the New Notes except that the New Notes have
been registered under the Securities Act and hence do not include certain rights
to registration thereunder and do not contain transfer restrictions or terms
with respect to special interest payments applicable to the Old Notes. The Old
Notes surrendered in exchange for New Notes will be retired and canceled and
cannot be reissued. Accordingly, issuance of the New Notes will not result in
any increase in the indebtedness of the Company.
The net proceeds to the Company from the sale of the Old Notes were
approximately $104.6 million (after deducting discounts to the Initial
Purchasers and other expenses). Of the net proceeds of the Old Notes Offering
(i) approximately $72.5 million was used to repay all indebtedness outstanding
under the Company's Old Credit Facility, (ii) approximately $3.9 million has
been used by the Company to repay certain outstanding indebtedness of LIW's
subsidiaries and the Company anticipates that an additional $4.1 million will be
used to repay other outstanding indebtedness of LIW's subsidiaries, (iii)
approximately $9.8 million was used to finance the purchase price paid by the
Company for the acquisition of certain shares of LIW capital stock and
preference shares, (iv) approximately $3.3 million was used to pay expenses
relating to the LIW Acquisition, (v) approximately $2.3 million was used to pay
commitment fees and other fees and expenses associated with the execution of the
Company's New Credit Facility, and (vi) approximately $8.7 million is expected
to be used for general working capital purposes. See "Recent
Acquisitions--Acquisition of LIW," "New Credit Facility," "Unaudited Pro Forma
Condensed Combined Financial Statements" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources."
21
<PAGE>
HISTORICAL AND PRO FORMA CONSOLIDATED CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company at September 30, 1997 and as adjusted to give pro forma effect to (i)
the execution of the New Credit Facility, (ii) the issuance and sale of the Old
Notes by the Company after deducting discounts and commissions and estimated
expenses of the Old Notes Offering payable by the Company, and the application
of the net proceeds therefrom and (iii) the acquisition of the remaining 24.8%
of the equity of LIW, including the preference shares. See "Use of Proceeds,"
"Selected Consolidated Historical Financial Data of the Company" and "Unaudited
Pro Forma Condensed Consolidated Balance Sheet." This table should be read in
conjunction with the more detailed information and financial statements
appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1997
------------------------------------
HISTORICAL PRO FORMA
ILOG ADJUSTMENTS COMBINED
---------- ----------- ---------
<S> <C> <C> <C>
(UNAUDITED, IN THOUSANDS)
Cash and cash equivalents.............................................................. $ 26,124 $ 9,140(1) $ 35,264
---------- ----------- ---------
---------- ----------- ---------
Long-term debt (including current portion):
Old Credit Facility.................................................................. $ 72,536 $(72,536)(1) --
Other indebtedness (including capital leases)........................................ 17,725 (8,000)(2) $ 9,725
New Credit Facility(3)............................................................... -- -- --
9 3/4% Senior Notes Due 2007......................................................... -- 110,000 110,000
---------- ----------- ---------
Total debt......................................................................... 90,261 29,464 119,725
---------- ----------- ---------
Stockholders' equity:
Common stock......................................................................... 2 -- 2
Additional paid-in capital........................................................... 52,101 -- 52,101
Retained earnings (accumulated deficit).............................................. (22,497) (2,340)(3) (24,837)
Notes receivable from stockholders................................................... (357) -- (357)
Cumulative translation adjustment.................................................... (4) -- (4)
---------- ----------- ---------
Total stockholders' equity............................................................. 29,245 (2,340) 26,905
---------- ----------- ---------
Total capitalization............................................................... $ 119,506 $ 27,124 $146,630
---------- ----------- ---------
---------- ----------- ---------
</TABLE>
(1) The Company applied a portion of the proceeds of the Old Notes Offering to
repay all ILOG indebtedness with respect to the Old Credit Facility
outstanding as of the Issue Date (as defined). Increases in borrowings under
such facility subsequent to September 30, 1997 resulted in decreases in
funds applied to working capital. See "Use of Proceeds."
(2) The Company is evaluating several alternatives with respect to the
refinancing or repayment of indebtedness of certain LIW subsidiaries. While
the Company is under no obligation to retire any of such borrowing
facilities in connection with the Old Notes Offering, the Company has
already applied $3.9 million to reduce any principal amount outstanding and
to cancel such facilities. The Company anticipates that it will apply
approximately an additional $4.1 million to reduce such borrowings or to
replace such facilities. See "Use of Proceeds."
(3) Reflects the after-tax impact of the write-off of deferred financing costs
associated with the repayment of the Old Credit Facility.
22
<PAGE>
UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Condensed Financial Statements give effect
to the acquisitions of Bekins, LEP-USA, LEP-Canada, Matrix and a 75.2% interest
in LIW (the "Completed Acquisitions Adjustments"), and the Old Notes Offering,
the New Credit Facility and the acquisition of the remaining 24.8% of the equity
of LIW (the "Pro Forma Adjustments") as if they had occurred at the beginning of
the respective period presented, for purposes of the pro forma statements of
operations and other financial data, and as of September 30, 1997 for purposes
of the pro forma balance sheet data. With respect to the nine months ended
September 30, 1996, the financial statements of LIW have been derived from
management reports. Management has made such adjustments to these reports as
they believe are necessary for a fair presentation of the statement of
operations with respect to the nine months ended September 30, 1996. However,
there can be no assurances that such financial statements are as reliable or
accurate as financial statements prepared using normal interim period or
year-end financial reporting procedures. In addition, such financial statements
have not been subject to independent review of the independent accountants of
LIW or the Company.
The Unaudited Pro Forma Condensed Financial Statements do not purport to
present the actual financial position or results of operations of the Company
had the transactions and events assumed therein in fact occurred on the dates
specified, nor are they necessarily indicative of the results of operations that
may be achieved in the future. The Unaudited Pro Forma Condensed Financial
Statements are based on certain assumptions and adjustments described in the
notes to the Unaudited Pro Forma Condensed Financial Statements and should be
read in conjunction therewith and with "Management's Discussion and Analysis of
Financial Condition and Results of Operations", "Recent Acquisitions" and the
Consolidated Financial Statements of the Company and LIW and the related notes
thereto included elsewhere in this Prospectus.
23
<PAGE>
INTERNATIONAL LOGISTICS LIMITED
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
COMPANY ADJUSTMENTS PRO FORMA
-------- ----------- ---------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents..................................................................... $ 26,124 $ 9,140 (1) $ 35,264
Accounts receivable, net...................................................................... 269,701 -- 269,701
Deferred tax asset............................................................................ 731 -- 731
Prepaid expenses and other current assets..................................................... 13,942 -- 13,942
-------- ----------- ---------
Total current assets...................................................................... 310,498 9,140 319,638
Property and equipment, net..................................................................... 46,697 1,470 (2) 48,167
Deferred income taxes........................................................................... 9,729 1,560 (3) 11,289
Intangibles, net................................................................................ 71,974 3,800 (3) 75,774
Investments in affiliates....................................................................... 2,242 -- 2,242
Other assets.................................................................................... 16,291 -- 16,291
-------- ----------- ---------
Total assets.............................................................................. $457,431 $15,970 $473,401
-------- ----------- ---------
-------- ----------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.............................................................................. $139,422 -- $139,422
Accrued expenses.............................................................................. 147,447 $(3,300)(2) 144,147
Income taxes payable.......................................................................... 5,175 -- 5,175
Current portion long-term debt and capital lease obligations.................................. 18,590 (12,203)(4) 6,387
-------- ----------- ---------
Total current liabilities................................................................. 310,634 (15,503) 295,131
Long-term debt and capital lease obligations.................................................... 71,671 41,667 (4) 113,338
Other noncurrent liabilities.................................................................... 35,624 -- 35,624
-------- ----------- ---------
Total liabilities......................................................................... 417,929 26,164 444,093
-------- ----------- ---------
Minority Interest............................................................................... 2,205 198 (5) 2,403
Redeemable preferred stock...................................................................... 8,052 (8,052)(2) --
Stockholders' equity:
Common stock.................................................................................... 2 -- 2
Additional paid-in capital...................................................................... 52,101 -- 52,101
Accumulated deficit............................................................................. (22,497) (2,340)(3) (24,837)
Notes receivable from stockholders.............................................................. (357) -- (357)
Cumulative translation adjustment............................................................... (4) -- (4)
-------- ----------- ---------
Total stockholders' equity................................................................ 29,245 (2,340) 26,905
-------- ----------- ---------
Total liabilities and stockholders' equity................................................ $457,431 $15,970 $473,401
-------- ----------- ---------
-------- ----------- ---------
</TABLE>
See accompanying Notes to Unaudited Pro Forma
Condensed Consolidated Balance Sheet.
24
<PAGE>
INTERNATIONAL LOGISTICS LIMITED
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
(1) Reflects an increase in cash as a result of the excess net proceeds from
the Old Notes Offering. Increases in borrowings under the Old Credit Facility
subsequent to September 30, 1997 resulted in decreases in funds applied to
working capital.
(2) The acquisition of ordinary shares of LIW consummated on September 30,
1997 (initial purchase) has been accounted for as a purchase, applying the
provisions of Accounting Principles Board Opinion No. 16. The excess of purchase
cost over the book value of net assets acquired has been allocated to LIW's
assets and liabilities based on their relative fair values as of the closing
date of the LIW Acquisition, based on valuations and other studies that are not
yet complete. The purchase of the remaining ordinary and preference shares (pro
forma) will be accounted for in a similar manner. Accordingly, the excess of
purchase cost over the book value of net assets acquired has not yet been fully
allocated to the individual assets and liabilities acquired. However, the
Company estimates as of September 30, 1997, the amount and allocation of the
excess of purchase cost over the book value of net assets acquired in such
transactions is as follows:
<TABLE>
<CAPTION>
INITIAL PRO FORMA
PURCHASE ADJUSTMENTS TOTAL
--------- ------------ ---------
<S> <C>
Purchase cost of equity and preference shares................................. $ 426 $ 9,324 $ 9,750
Transaction costs............................................................. 3,300 3,300
Direct acquisition costs to be accrued:
Facility closing costs...................................................... 4,000 4,000
Employee termination costs.................................................. 2,000 2,000
Asset valuation adjustment:
Accounts receivable....................................................... 3,850 3,850
Investments in affiliates................................................. 2,500 2,500
Tax liabilities............................................................. 1,650 1,650
Pension liability adjustment................................................ 3,000 3,000
--------- ----------- ---------
Total purchase cost........................................................... 20,726 9,324 30,050
Book value of net assets acquired and redemption of preference shares......... (607) 7,854 7,247
--------- ----------- ---------
Excess of purchase cost over book value of net assets acquired allocated to
property and equipment...................................................... $ 21,333 $ 1,470 $ 22,803
--------- ----------- ---------
--------- ----------- ---------
</TABLE>
(3) Reflects deferred financing costs of $5,400 related to the issuance of
the Old Notes and deferred financing costs of $2,300 related to the
establishment of the New Credit Facility, net of the write-off of the Old Credit
Facility net deferred financing costs of $3,900 resulting in an extraordinary
loss of $2,340 net of tax benefit of $1,560.
(4) Reflects issuance of the Old Notes, net of repayment of the Old Credit
Facility, as follows:
<TABLE>
<S> <C>
Issuance of the Old Notes......................................................... $ 110,000
Less repayment of:
LIW long-term debt including current portion.................................... (8,000)
ILOG long-term debt including current portion................................... (72,536)
Current portion long-term debt.................................................. 12,203
---------
Net adjustment to long-term debt..................................................... $ 41,667
---------
---------
</TABLE>
(5) Reflects the elimination of the 24.8% minority interest in LIW as if it
were purchased by the Company.
25
<PAGE>
INTERNATIONAL LOGISTICS LIMITED
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
LIW
COMPANY BEKINS(1) MATRIX PREDECESSOR(1)
------------- ------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
PERIOD FROM PERIOD FROM PERIOD FROM PERIOD FROM
MAY 2, 1996 JANUARY 1, JANUARY 1, 1996 JANUARY 1, 1996
TO 1996 TO COMPLETED TO
DECEMBER 31, TO NOVEMBER 6, ACQUISITIONS JANUARY 23,
1996 MAY 1, 1996 1996 ADJUSTMENTS 1996
------------- ------------- --------------- ------------- ---------------
Revenues................................... $ 225,793 $ 54,536 $ 68,156 -- $ 117,056
Transportation and other direct costs...... 181,208 44,285 51,747 $ (2,510)(3) 95,235
------------- ------------- ------- ------------- ---------------
Net revenues............................... 44,585 10,251 16,409 2,510 21,821
Other operating expenses................... 37,554 8,523 8,565 (996)(3) 20,364
Depreciation and amortization.............. 16,310 977 317 8,885 (3) 380
------------- ------------- ------- ------------- ---------------
Operating income (loss).................... (9,279) 751 7,527 (5,379) 1,077
Interest expense, net...................... 2,981 718 377 1,578 (3) 168
Share of (income) loss in equity
investments.............................. -- -- -- -- 147
Other (income) expense..................... -- (20) -- -- --
------------- ------------- ------- ------------- ---------------
Income (loss) before income taxes,
extraordinary item and minority
interests................................ (12,260) 53 7,150 (6,957) 762
Income tax provision (benefit)............. (4,013) 37 1,920 (2,783)(7) 318
------------- ------------- ------- ------------- ---------------
Income (loss) before extraordinary item and
minority interests....................... (8,247) 16 5,230 (4,174) 444
Extraordinary loss on early extinguishment
of debt, net of tax benefit of $664...... (997) -- -- -- --
Minority interests......................... -- -- -- -- (45)
------------- ------------- ------- ------------- ---------------
Net income (loss).......................... $ (9,244) $ 16 $ 5,230 $ (4,174) $ 399
------------- ------------- ------- ------------- ---------------
------------- ------------- ------- ------------- ---------------
Other Financial Data:
EBITDA(8).................................. $ 7,031 $ 1,748 $ 7,844 $ 3,506 $ 1,457
------------- ------------- ------- ------------- ---------------
------------- ------------- ------- ------------- ---------------
Cash (advances to) dividends from
affiliates, net.......................... -- -- -- -- --
Cash interest expense(9)................... $ 2,718 $ 475 $ 377 $ 1,355 $ 260
Capital expenditures....................... 1,369 1,598 141 -- --
Ratio of earnings to fixed
charges(10)(11)..........................
<CAPTION>
LIW(1)
------
<S> <C> <C> <C>
PERIOD FROM
JANUARY 24,
1996
TO
DECEMBER 31, PRO FORMA PRO FORMA
1996 ADJUSTMENTS COMBINED
------------ ----------- ------------
Revenues................................... $1,641,863 $(468,563)(2) $1,638,841
Transportation and other direct costs...... 1,333,706 (468,563)(2) 1,235,108
------------ ----------- ------------
Net revenues............................... 308,157 -- 403,733
Other operating expenses................... 307,394 (1,000)(4) 380,404
Depreciation and amortization.............. 3,930 2,280(4) 33,079
------------ ----------- ------------
Operating income (loss).................... (3,167) (1,280) (9,750)
Interest expense, net...................... 2,101 3,044(5) 10,967
Share of (income) loss in equity
investments.............................. 2,197 -- 2,344
Other (income) expense..................... (15,729) 15,073(6) (676)
------------ ----------- ------------
Income (loss) before income taxes,
extraordinary item and minority
interests................................ 8,264 (19,397) (22,385)
Income tax provision (benefit)............. 6,115 (1,730)(7) (136)
------------ ----------- ------------
Income (loss) before extraordinary item and
minority interests....................... 2,149 (17,667) (22,249)
Extraordinary loss on early extinguishment
of debt, net of tax benefit of $664...... -- 997(2) --
Minority interests......................... (661) -- (706)
------------ ----------- ------------
Net income (loss).......................... $ 1,488 $ (16,670) $ (22,955)
------------ ----------- ------------
------------ ----------- ------------
Other Financial Data:
EBITDA(8).................................. $ 15,305 $ (14,073) $ 22,818
------------ ----------- -----------
------------ ----------- -----------
Cash (advances to) dividends from
affiliates, net.......................... $ (1,187) -- $ (1,187)
Cash interest expense(9)................... 3,486 $ 3,044 11,715
Capital expenditures....................... 3,010 -- 6,118
Ratio of earnings to fixed
charges(10)(11).......................... --
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed
Combined Statements of Operations.
26
<PAGE>
INTERNATIONAL LOGISTICS LIMITED
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMPANY MATRIX
----------- ------------
BEKINS(1) PERIOD FROM PERIOD FROM
----------- MAY 2, JANUARY 1,
PERIOD FROM 1996, 1996
JANUARY 1, TO TO
1996 SEPTEMBER SEPTEMBER COMPLETED
TO 30, 30, ACQUISITIONS
MAY 1, 1996 1996 1996 ADJUSTMENTS
----------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Revenues...................... $ 54,536 $89,975 $60,522 --
Transportation and other
direct costs................ 44,285 73,748 46,005 $(1,883)(3)
----------- ----------- ------------ -------------
Net revenues.................. 10,251 16,227 14,517 1,883
Other operating expenses...... 8,523 11,375 7,429 (733)(3)
Depreciation and
amortization................ 977 9,690 283 8,345 (3)
----------- ----------- ------------ -------------
Operating income (loss)....... 751 (4,838) 6,805 (5,729)
Interest expense, net......... 718 1,419 368 1,419 (3)
Share of (income) loss in
equity investments.......... -- -- -- --
Other (income) expense........ (20) (21) -- --
----------- ----------- ------------ -------------
Income (loss) before income
taxes and minority
interests................... 53 (6,236) 6,437 (7,148)
Income tax provision
(benefit)................... 37 (2,232) 1,759 (2,859)(7)
----------- ----------- ------------ -------------
Income (loss) before minority
interests................... 16 (4,004) 4,678 (4,289)
Minority interests............ -- -- -- --
----------- ----------- ------------ -------------
Net income (loss)............. $ 16 $(4,004) $4,678 $(4,289)
----------- ----------- ------------ -------------
----------- ----------- ------------ -------------
Other Financial Data:
EBITDA(8)..................... $ 1,748 $4,873 $7,088 $ 2,616
----------- ----------- ------------ -------------
----------- ----------- ------------ -------------
Cash (advances to) dividends
from affiliates, net........ -- -- -- --
Cash interest expense(9)...... $ 475 $1,377 $ 368 $ 1,235
Capital expenditures.......... 1,598 950 322 --
Ratio of earnings to fixed
charges(10)(11).............
<CAPTION>
LIW LIW(1)
PREDECESSOR(1) ------------
-------------- PERIOD FROM
PERIOD FROM JANUARY 24,
JANUARY 1, 1996
1996 TO
TO SEPTEMBER
JANUARY 23, 30, PRO FORMA PRO FORMA
1996 1996 ADJUSTMENTS COMBINED
-------------- ------------ --------------- -----------
<S> <C> <C> <C> <C>
Revenues...................... $106,987 $1,172,029 $ (316,931)(2) $1,167,118
Transportation and other
direct costs................ 87,042 959,980 (316,931)(2) 892,246
-------------- ------------ --------------- -----------
Net revenues.................. 19,945 212,049 -- 274,872
Other operating expenses...... 18,613 212,771 (750)(4) 257,228
Depreciation and
amortization................ 347 2,518 1,710(4) 23,870
-------------- ------------ --------------- -----------
Operating income (loss)....... 985 (3,240) (960) (6,226)
Interest expense, net......... 153 1,637 2,283(5) 7,997
Share of (income) loss in
equity investments.......... 135 958 -- 1,093
Other (income) expense........ -- (327) -- (368)
-------------- ------------ --------------- -----------
Income (loss) before income
taxes and minority
interests................... 697 (5,508) (3,243) (14,948)
Income tax provision
(benefit)................... 291 3,174 (1,297)(7) (1,127)
-------------- ------------ --------------- -----------
Income (loss) before minority
interests................... 406 (8,682) (1,946) (13,821)
Minority interests............ (41) (721) -- (762)
-------------- ------------ --------------- -----------
Net income (loss)............. $ 365 $ (9,403) $ (1,946) $ (14,583)
-------------- ------------ --------------- -----------
-------------- ------------ --------------- -----------
Other Financial Data:
EBITDA(8)..................... $ 1,332 $ (442) $ 750 $ 17,965
-------------- ------------ --------------- -----------
-------------- ------------ --------------- -----------
Cash (advances to) dividends
from affiliates, net........ -- $ (47) -- $ (47)
Cash interest expense(9)...... $ 262 1,637 $ 2,283 7,637
Capital expenditures.......... -- 1,955 -- 4,825
Ratio of earnings to fixed
charges(10)(11)............. --
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Combined Statements of
Operations.
27
<PAGE>
INTERNATIONAL LOGISTICS LIMITED
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMPLETED
ACQUISITIONS PRO FORMA PRO FORMA
COMPANY ADJUSTMENTS LIW(1) ADJUSTMENTS COMBINED
--------- ------------- --------- --------------- -----------
<S> <C> <C> <C> <C> <C>
Revenues...................... $550,141 -- $ 817,385 $ (278,522)(2) $1,089,004
Transportation and other
direct costs................ 436,466 $ (559)(3) 661,054 (278,522)(2) 818,439
--------- ----- --------- --------------- -----------
Net revenues.................. 113,675 559 156,331 -- 270,565
Other operating expenses...... 105,659 (389)(3) 153,086 (5,447)(4) 252,909
Depreciation and
amortization................ 22,138 -- 607 1,710(4) 24,455
--------- ----- --------- --------------- -----------
Operating income (loss)....... (14,122) 948 2,638 3,737 (6,799)
Interest expense, net......... 5,765 -- 819 2,283(5) 8,867
Share of (income) loss in
equity investments.......... -- -- 914 -- 914
Other (income) expense........ (88) -- 398 (445)(6) (135)
--------- ----- --------- --------------- -----------
Income (loss) before income
taxes and minority
interest.................... (19,799) 948 507 1,899 (16,445)
Income tax provision
(benefit)................... (6,546) 379(7) 2,910 (1,119)(7) (4,376)
--------- ----- --------- --------------- -----------
Income (loss) before minority
interests................... (13,253) 569 (2,403) 3,018 (12,069)
Minority interests............ -- -- (361) -- (361 )
--------- ----- --------- --------------- -----------
Net income (loss)............. $(13,253) $ 569 $ (2,764) $ 3,018 $ (12,430)
--------- ----- --------- --------------- -----------
--------- ----- --------- --------------- -----------
Other Financial Data:
EBITDA(8)................... $ 8,104 $ 948 $ 1,238 $ 5,892 $ 16,182
--------- ----- --------- --------------- -----------
--------- ----- --------- --------------- -----------
Cash (advances to)
dividends from
affiliates, net......... -- -- $ (1,609) -- $ (1,609)
Cash interest
expense(9).............. $ 5,186 -- 819 $ 2,283 8,288
Capital expenditures...... 5,551 -- 1,546 -- 7,097
Ratio of earnings to fixed
charges(10)(11)......... --
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Combined Statements of
Operations.
28
<PAGE>
INTERNATIONAL LOGISTICS LIMITED
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
(1) On January 24, 1996, LEP International Holdings Limited (the "LIW
Predecessor") and LEP International A/S, LIW's Danish affiliate, were purchased
by LIW. Amounts for LIW and the LIW Predecessor have been translated from
British Pounds Sterling into U.S. Dollars using the period end exchange rate and
adjusted to conform to U.S. GAAP. See Notes 24 and 25 to the Combined and
Consolidated Financial Statements of LIW, Note 8 to the Unaudited Interim
Consolidated Financial Statements of LIW and "Prospectus Summary--Exchange
Rates" included elsewhere herein. The historical accounts of LEP-USA and
LEP-Canada prior to November 1, 1996 are reflected in the financial information
of LIW and its predecessor. Beginning November 1, 1996, the on-going operations
of LEP-USA and LEP-Canada were recorded in the financial statements of the
Company. The accounts of Bekins prior to May 2, 1996 have been adjusted to
remove the operating activity of Bekins Moving and Storage ("BMS"). The
operations of BMS have been treated as discontinued as of the Bekins acquisition
date with the net assets of BMS classified as held for sale on the Company's
balance sheet. See "Notes to Consolidated Financial Statements--Note 3."
(2) Reflects primarily the elimination of (a) intercompany balances between
the Company and LIW, (b) duties and value-added tax paid on behalf of customers
which is subsequently invoiced to customers and (c) extraordinary loss on early
extinguishment of debt. Duties and value-added tax paid on behalf of customers
are recorded by the Company net of invoiced amounts while LIW records the
revenue and cost components separately. Therefore, such amounts have been
removed to conform LIW's historical financial information to the Company's
accounting procedures. The following represents the effect of such eliminations
on both revenues and transportation and other direct costs:
<TABLE>
<CAPTION>
TWELVE NINE MONTHS NINE MONTHS
MONTHS ENDED ENDED ENDED
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1996 1996 1997
------------- ------------- -------------
<S> <C> <C> <C>
Duty, value-added tax and other..................................... $ (450,933) $ (316,931) $ (197,305)
Intercompany........................................................ (17,630) -- (81,217)
------------- ------------- -------------
Total............................................................... $ (468,563) $ (316,931) $ (278,522)
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
(3) Reflects adjustments as if the acquisitions of Bekins, LEP-USA,
LEP-Canada and Matrix were completed at the beginning of the respective period
as follows:
<TABLE>
<CAPTION>
TWELVE NINE MONTHS NINE MONTHS
MONTHS ENDED ENDED ENDED
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1996 1996 1997
------------- ------------- ---------------
<S> <C> <C> <C>
Administrative costs and expenses (eliminated) created as a result
of the acquisitions:
Transportation and other direct costs............................. $ (2,510) $ (1,883) $ (559)
------------- ------------- -----
Corporate office expenses......................................... 1,800 1,410 120
Duplicate computer data centers................................... (792) (566) --
Telecommunication charges......................................... (667) (528) --
Insurance......................................................... (1,265) (995) (505)
Other............................................................. (72) (54) (4)
------------- ------------- -----
Total other operating expense adjustment........................ (996) (733) (389)
------------- ------------- -----
Net (increase) in EBITDA.......................................... $ (3,506) $ (2,616) $ (948)
------------- ------------- -----
------------- ------------- -----
</TABLE>
29
<PAGE>
INTERNATIONAL LOGISTICS LIMITED
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
TWELVE NINE MONTHS NINE MONTHS
MONTHS ENDED ENDED ENDED
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1996 1996 1997
------------- ------------- ---------------
<S> <C> <C> <C>
Additional amortization of intangible assets........................ $ 8,885 $ 8,345 --
------------- ------------- -----
------------- ------------- -----
Additional interest expense......................................... $ 1,355 $ 1,235 --
Increase in amortization related to deferred financing costs........ 223 184 --
------------- ------------- -----
$ 1,578 $ 1,419 --
------------- ------------- -----
------------- ------------- -----
</TABLE>
Amortization of intangible assets reflects the useful lives used by the
Company applied to the intangible assets recorded for each acquisition from the
beginning of the respective period shown above to the acquisition date.
Additional interest expense reflects the increase in borrowings to finance
the acquisitions as if they occurred at the beginning of the respective period
using an interest rate of 9.75%. The interest rate approximates the cost of
funds to the Company during each of the respective periods.
(4) Reflects adjustments to LIW's other operating expenses and depreciation
and amortization as if the LIW Acquisition was completed at the beginning of the
respective period as follows:
<TABLE>
<CAPTION>
TWELVE NINE MONTHS NINE MONTHS
MONTHS ENDED ENDED ENDED
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1996 1996 1997
------------- ------------- -------------
<S> <C> <C> <C>
Administrative costs and expenses of LIW that will be eliminated as
a result of the LIW Acquisition................................... $ (1,000) $ (750) $ (750)
Pro forma adjustment to reverse LIW reserve captured in purchase
accounting........................................................ -- -- (4,697)
------------- ------ -------------
Total........................................................... $ (1,000) $ (750) $ (5,447)
------------- ------ -------------
------------- ------ -------------
Additional depreciation as a result of the LIW Acquisition.......... $ 2,280 $ 1,710 $ 1,710
------------- ------ -------------
------------- ------ -------------
</TABLE>
Additional depreciation relates to the excess of purchase cost over book
value of net assets acquired and is allocated to property and equipment
depreciated on a straight-line basis using an average useful life of
approximately 10 years (see Note 2 to the Unaudited Pro Forma Condensed Combined
Balance Sheet).
30
<PAGE>
INTERNATIONAL LOGISTICS LIMITED
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
(5) Reflects adjustments to interest expense for the Old Notes Offering as
if such offering were completed at the beginning of the respective period as
follows:
<TABLE>
<CAPTION>
TWELVE NINE MONTHS NINE MONTHS
MONTHS ENDED ENDED ENDED
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1996 1996 1997
------------- ------------- -------------
<S> <C> <C> <C>
Interest on the Old Notes........................................... $ 10,725 $ 8,044 $ 8,044
Amortization of deferred financing costs related to the Old Notes
Offering and the New Credit Facility.............................. 1,000 750 750
------------- ------ ------
Pro forma interest expense for the Old Notes Offering............... 11,725 8,794 8,794
------------- ------ ------
Less interest expense on retired debt............................... (8,025) (6,019) (6,019)
Less amortization of deferred financing costs of retired debt....... (656) (492) (492)
------------- ------ ------
Pro forma interest expense related to existing debt................. (8,681) (6,511) (6,511)
------------- ------ ------
Net adjustment...................................................... $ 3,044 $ 2,283 $ 2,283
------------- ------ ------
------------- ------ ------
</TABLE>
Amortization of deferred financing costs assume costs related to the Old
Notes Offering and New Credit Facility of approximately $5,400 and $2,300
amortized over a period of 10 and 5 years, respectively.
The amount of retired debt is assumed to be $80,536 with an assumed interest
rate of 9.96% as if the debt were retired at the beginning of the respective
period. Net deferred financing costs on the retired debt approximates $4,594
amortized over 7 years.
(6) Reflects adjustment to gain on the October 31, 1996 sale of LEP-USA and
LEP-Canada to ILOG recorded by LIW.
(7) Reflects the tax effect of Completed Acquisitions Adjustments and Pro
Forma Adjustments.
(8) "EBITDA" represents earnings before interest, income taxes, depreciation
and amortization, and other non-cash items such as share of loss in equity
investments, extraordinary loss and minority interests. EBITDA also includes
other income and expenses and cash advances to and cash dividends received from
companies accounted for under the equity method or consolidated subsidiaries in
which LIW has a controlling interest. While EBITDA should not be construed as a
substitute for operating income or a better indicator of liquidity than cash
flow from operating activities, which are determined in accordance with
generally accepted accounting principles, it is included herein to provide
additional information with respect to the ability of the Company to meet its
future debt service, capital expenditure and working capital requirements.
EBITDA is not necessarily a measure of the Company's ability to fund its cash
needs. See the Consolidated Statement of Cash Flows of the Company and LIW and
the related notes thereto included in this Prospectus. EBITDA is included herein
because management believes that certain investors find it to be a useful tool
for measuring the ability to service debt.
(9) "Cash interest expense" represents interest expense recorded in the
statement of operations less amortization of deferred financing costs. Total
debt and cash interest expense give effect to the Old Notes Offering and other
interest bearing debt after application of proceeds from the Old Notes Offering.
See "Use of Proceeds" and "Historical and Pro Forma Consolidated
Capitalization."
(10) Pro forma earnings were inadequate to cover pro forma fixed charges by
$20,696, $14,141 and $15,531 for the twelve months ended December 31, 1996 and
for the nine months ended September 30, 1996 and 1997, respectively.
(11) For purposes of this computation, fixed charges consist of interest
expense and amortization of deferred financing costs and the estimated portion
of rental expense attributable to interest. Earnings consist of income (loss)
before income taxes excluding equity investment losses plus fixed charges.
31
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY
The following table summarizes certain selected consolidated financial data,
which should be read in conjunction with the Company's consolidated financial
statements and notes thereto included elsewhere herein and with "Management's
Discussion and Analysis of Financial Condition and Results of Operations." The
selected consolidated financial data for the years ended March 31, 1993, 1994,
1995 and 1996 and for the periods from April 1, 1996 to May 1, 1996 and from May
2, 1996 to December 31, 1996 have been derived from the audited consolidated
financial statements of the Company and Bekins (the "Company Predecessor"). The
selected financial data as of and for the period from May 2, 1996 to September
30, 1996 and as of and for the nine months ended September 30, 1997 have been
derived from the Company's unaudited consolidated financial statements. In the
opinion of management, the unaudited consolidated financial statements have been
prepared on the same basis as the audited financial statements and include all
adjustments, consisting of normal recurring adjustments, necessary for a fair
presentation of the financial position and the results of operations as of such
dates and for such periods. The results for the nine month period ended
September 30, 1997 are not necessarily indicative of the results to be expected
for the entire year or the quarter following in 1997.
32
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY (Continued)
<TABLE>
<CAPTION>
Company Predecessor(1)
- ----------------------------------------------------------------------------------------
Year Ended March 31,(2)
--------------------------------------
1993 1994 1995 1996
-------- -------- -------- --------
Period From
April 1, 1996 to
May 1, 1996(2)
----------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues.................... $244,353 $238,812 $242,966 $231,752 $17,458
Transportation and other
direct costs.............. 192,530 186,570 191,278 179,611 13,634
-------- -------- -------- -------- -------
Net revenues................ 51,823 52,242 51,688 52,141 3,824
Other operating expenses.... 40,853 40,799 43,008 42,810 3,309
Depreciation and
amortization.............. 6,085 6,054 5,675 4,194 337
-------- -------- -------- -------- -------
Operating income (loss)... 4,885 5,389 3,005 5,137 178
Interest expense, net....... 3,552 1,758 2,252 2,397 230
Other (income) expense...... 32 (26) (259) 34 (73)
-------- -------- -------- -------- -------
Income (loss) before
income taxes and
extraordinary item....... 1,301 3,657 1,012 2,706 21
Income tax provision
(benefit)................. 628 1,880 816 1,508 48
-------- -------- -------- -------- -------
Income (loss) before
extraordinary item....... 673 1,777 196 1,198 (27)
Extraordinary loss on early
extinguishment of debt,
net of tax benefit of
$664(4)................... -- -- -- -- --
-------- -------- -------- -------- -------
Net income (loss)......... $ 673 $ 1,777 $ 196 $ 1,198 $ (27)
-------- -------- -------- -------- -------
-------- -------- -------- -------- -------
OTHER FINANCIAL DATA:
EBITDA(5)................... $ 10,938 $ 11,469 $ 8,939 $ 9,297 $ 588
Capital expenditures........ 3,055 3,210 3,251 3,175 130
Ratio of earnings to fixed
charges(6)(7)............. 1.3x 2.8x 1.4x 2.1x 1.1x
BALANCE SHEET DATA:
Current assets.............. $ 39,115 $ 38,437 $ 35,389 $ 33,313 $32,834
Property and equipment,
net....................... 14,285 12,011 10,080 8,266 8,143
Total assets................ 81,264 74,604 71,276 64,476 63,845
Current liabilities......... 44,099 57,223 36,799 48,188 48,798
Long-term debt (including
current portion).......... 22,911 18,861 21,049 11,915 15,634
Other noncurrent
liabilities............... 11,431 10,219 7,423 7,768 6,567
Minority interest...........
Redeemable preferred
stock.....................
Stockholders' equity........ 4,487 6,264 6,879 8,137 8,112
<CAPTION>
Company
--------------------------------------------------------------------
Period From May 2, Period From
1996 to May 2, 1996 Nine Months Ended
December 31, 1996(3) to September 30, 1996 September 30, 1997(3)
-------------------- --------------------- ---------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues.................... $225,793 $89,975 $550,141
Transportation and other
direct costs.............. 181,208 73,748 436,466
------- ------- --------
Net revenues................ 44,585 16,227 113,675
Other operating expenses.... 37,554 11,375 105,659
Depreciation and
amortization.............. 16,310 9,690 22,138
------- ------- --------
Operating income (loss)... (9,279) (4,838) (14,122)
Interest expense, net....... 2,981 1,419 5,765
Other (income) expense...... -- (21) (88)
------- ------- --------
Income (loss) before
income taxes and
extraordinary item....... (12,260) (6,236) (19,799)
Income tax provision
(benefit)................. (4,013) (2,232) (6,546)
------- ------- --------
Income (loss) before
extraordinary item....... (8,247) (4,004) (13,253)
Extraordinary loss on early
extinguishment of debt,
net of tax benefit of
$664(4)................... (997) -- --
------- ------- --------
Net income (loss)......... $(9,244) $(4,004) $(13,253)
------- ------- --------
------- ------- --------
OTHER FINANCIAL DATA:
EBITDA(5)................... $ 7,031 $ 4,873 $ 8,104
Capital expenditures........ 1,369 950 5,551
Ratio of earnings to fixed
charges(6)(7)............. -- -- --
BALANCE SHEET DATA:
Current assets.............. $135,036 $41,792 $310,498
Property and equipment,
net....................... 11,781 5,754 46,696
Total assets................ 236,684 7,901 457,431
Current liabilities......... 123,144 39,170 310,634
Long-term debt (including
current portion).......... 66,314 30,616 90,261
Other noncurrent
liabilities............... 11,117 6,758 35,624
Minority interest........... 2,205
Redeemable preferred
stock..................... 8,052
Stockholders' equity........ 40,619 12,430 29,245
</TABLE>
See accompanying Notes to Selected Consolidated Financial Data of the Company.
33
<PAGE>
INTERNATIONAL LOGISTICS LIMITED
NOTES TO SELECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY
(DOLLARS IN THOUSANDS)
(1) On May 2, 1996, the Company acquired all of the outstanding shares of
the Company Predecessor. See "Recent Acquisitions" and Note 3 to the Company's
Consolidated Financial Statements.
(2) Includes the operating results of Bekins Moving and Storage division
("BMS"). Upon acquisition of Bekins by the Company on May 2, 1996, BMS was
treated as discontinued with the net assets of BMS recorded as a current
asset--see Note 3 to the Company's Consolidated Financial Statements. The
following is selected financial information of BMS:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
------------------------------------------
<S> <C> <C> <C> <C>
1993 1994 1995 1996
--------- --------- --------- ---------
INCOME STATEMENT DATA:
Revenues........................................ $ 54,491 $ 52,880 $ 53,948 $ 47,264
Net revenues.................................... 18,327 18,803 19,564 17,855
Depreciation and amortization................... 1,447 1,413 1,453 1,237
Operating income (loss)......................... 7 440 470 243
OTHER FINANCIAL DATA:
EBITDA.......................................... $ 1,454 $ 1,853 $ 1,923 $ 1,480
Capital expenditures............................ 561 1,817 1,216 608
</TABLE>
(3) Includes the accounts of LEP-USA and LEP-Canada since November 1, 1996
when acquired from LIW and the accounts of Matrix since its acquisition on
November 7, 1996. See "Recent Acquisitions" and Note 3 to the Company's
Consolidated Financial Statements.
(4) On October 31, 1996, the Company applied proceeds from the Old Credit
Facility to retire certain indebtedness incurred to finance the acquisition of
Bekins. In connection with such transaction, the Company recorded an
extraordinary loss of $1,661 ($997 net of tax) related to the write-off of
unamortized deferred financing costs.
(5) "EBITDA" represents earnings before interest, income taxes, depreciation
and amortization, and other non-cash terms such as share of loss in equity
investments, extraordinary loss and minority interests. EBITDA also includes
other income and expenses and cash advances to and cash dividends received from
companies accounted for under the equity method or consolidated subsidiaries in
which LIW has a controlling interest. While EBITDA should not be construed as a
substitute for operating income or a better indicator of liquidity than cash
flow from operating activities, which are determined in accordance with
generally accepted accounting principles, it is included herein to provide
additional information with respect to the ability of the Company to meet its
future debt service, capital expenditure and working capital requirements.
EBITDA is not necessarily a measure of the Company's ability to fund its cash
needs. See the Consolidated Statement of Cash Flows of the Company and the
related Notes thereto included in this Prospectus. EBITDA is included herein
because management believes that certain investors find it to be a useful tool
for measuring the ability to service debt.
(6) For purposes of this computation, fixed charges consist of interest
expense and amortization of deferred financing costs and the estimated portion
of rental expense attributable to interest. Earnings consists of income (loss)
before income taxes plus fixed charges.
(7) Earnings were inadequate to cover fixed charges by $12,260, $6,236 and
$15,531 for the period from May 2, 1996 to December 31, 1996, the period from
May 2, 1996 to September 30, 1996 and for the nine months ended September 30,
1997, respectively.
34
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA OF LIW
The following table summarizes certain selected financial data, which should
be read in conjunction with LIW's financial statements and notes thereto
included elsewhere herein and "Management's Discussion and Analysis of Financial
Condition and Results of Operations." The selected consolidated financial data
as of December 31, 1992, 1993, 1994 and 1995 and for the periods from January 1,
1996 to January 23, 1996 and January 24, 1996 to December 31, 1996, set forth in
U.K. GAAP in British Pounds Sterling, has been derived from the audited combined
and consolidated financial statements of LIW and the LIW Predecessor which have
been audited by Price Waterhouse, Chartered Accountants and Registered Auditors.
The data for the nine months ended September 30, 1997, has been derived from
LIW's accounting records and the unaudited interim consolidated financial
statements of LIW. In the opinion of LIW management, the unaudited interim
consolidated financial statements for the nine months ended September 30, 1997
have been prepared on the same basis as the audited financial statements and
include all adjustments, consisting of normal recurring adjustments, necessary
for a fair presentation of the financial position and the results of operations
as of such dates and for such periods. With respect to the nine months ended
September 30, 1996, the financial statements of LIW have been derived from
management reports. Management has made such adjustments to these reports as
they believe are necessary for a fair presentation of the statement of
operations with respect to the nine months ended September 30, 1996. However,
there can be no assurances that such financial statements are as reliable or
accurate as financial statements that were prepared using normal interim period
or year-end financial reporting procedures. In addition, such financial
statements have not been subject to independent review of the independent
accountants of LIW or the Company. The combined and consolidated financial
statements of LIW and its predecessor for periods other than the period ended
September 30, 1996 have been prepared in accordance with U.K. GAAP, which
differs in certain significant respects from U.S. GAAP. See Notes 24 and 25 to
the Combined and Consolidated Financial Statements of LIW and Note 8 to the
Unaudited Interim Consolidated Financial Statements of LIW included elsewhere
herein. The selected financial data for the fiscal years ended December 31,
1992, 1993, 1994 and 1995, for the period from January 1, 1996 to January 23,
1996, for the period from January 24, 1996 to December 31, 1996 and (unaudited)
for the periods from January 24, 1996 to September 30, 1996 and the nine months
ended September 30, 1997, set forth in U.S. GAAP in U.S. Dollars, has been
derived from the audited and unaudited consolidated financial statements of LIW
and its predecessor and adjusted for differences between U.K. GAAP and U.S.
GAAP.
35
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA OF LIW (CONTINUED)
<TABLE>
<CAPTION>
U.K. GAAP IN U.K. POUNDS (POUNDS IN THOUSANDS)
------------------------------------------------------------------------------------------------------------
LIW PREDECESSOR(1)(2)
---------------------------------------------------------------
YEAR ENDED DECEMBER 31, LIW
--------------------------------------------------------------- ------------------------------------------
PERIOD FROM PERIOD FROM PERIOD FROM
JANUARY 1, JANUARY 24, JANUARY 24, NINE MONTHS
1996 TO 1996 TO 1996 TO ENDED
JANUARY 23, DECEMBER 31, SEPTEMBER SEPTEMBER 30,
1992 1993 1994 1995 1996 1996(2) 30, 1996(2) 1997
----------- ----------- ----------- ----------- ----------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
INCOME STATEMENT DATA:
Revenues............ L 1,073,681 L 1,032,689 L 1,096,377 L 1,106,223 L 68,362 L 958,864 L 748,900 L 505,026
Transportation and
other direct
costs............. 876,873 831,319 900,700 906,743 55,618 778,897 613,406 408,436
----------- ----------- ----------- ----------- ----------- ------------ ----------- -------------
Net revenues...... 196,808 201,370 195,677 199,480 12,744 179,967 135,494 96,590
Other operating
expenses.......... 199,437 192,661 188,176 204,840 11,948 180,039 136,281 95,000
Depreciation and
amortization...... 6,632 5,654 4,670 4,234 244 3,424 2,690 1,554
----------- ----------- ----------- ----------- ----------- ------------ ----------- -------------
Operating income
(loss).......... (9,261) 3,055 2,831 (9,594) 552 (3,496) (3,477) 36
Interest expense,
net............... 2,843 2,478 1,985 2,741 98 1,227 1,046 506
Share of (income)
loss in equity
investments....... 145 (135) (14) 1,021 86 1,283 612 565
Other (income)
expense........... -- 1,769(3) -- -- -- (5,800)(3) -- 275
----------- ----------- ----------- ----------- ----------- ------------ ----------- -------------
Income (loss) before
income taxes and
minority
interests......... (12,249) (1,057) 860 (13,356) 368 (206) (5,135) (1,310)
Income tax provision
(benefit)......... (32) 2,809 1,780 5,987 168 2,420 1,431 1,246
----------- ----------- ----------- ----------- ----------- ------------ ----------- -------------
Income (loss) before
minority
interests......... (12,217) (3,866) (920) (19,343) 200 (2,626) (6,566) (2,556)
Minority
interests......... (324) (221) (353) (397) (26) (386) (461) (223)
----------- ----------- ----------- ----------- ----------- ------------ ----------- -------------
Net income
(loss).......... L (12,541) L (4,087) L (1,273) L (19,740) L 174 L (3,012) L (7,027) L (2,779)
----------- ----------- ----------- ----------- ----------- ------------ ----------- -------------
----------- ----------- ----------- ----------- ----------- ------------ ----------- -------------
OTHER FINANCIAL DATA:
EBITDA(4)........... L (2,859) L 7,061 L 7,284 L (4,925) L 796 L 5,035 L (817) L 321
Cash (advances to)
dividends received
from equity
investments....... 3 269 17 670 -- (410) 58 (954)
Cash (advances to)
dividends received
from minority
interests......... (233) (148) (234) (235) -- (283) (88) (40)
Capital
expenditures...... 3,255 1,202 1,935 2,981 -- 1,758 1,249 955
Ratio of earnings to
fixed
charges(5)(6)..... -- 0.7x 1.4x -- 4.0x 1.5x -- --
BALANCE SHEET DATA:
Current assets...... L 172,674 L 169,816 L 171,024 L 181,889 L 181,320 L 127,531 L 171,508 L 122,739
Property and
equipment, net.... 45,559 34,603 33,904 33,580 31,621 22,306 28,996 20,488
Total assets........ 231,174 215,214 215,973 224,860 216,842 152,206 203,804 146,963
Current
liabilities....... 174,307 155,587 165,734 186,304 178,240 122,376 170,751 121,839
Long-term debt
(including current
portion).......... 33,223 23,394 24,726 39,383 39,768 11,239 28,056 9,690
Other noncurrent
liabilities....... 12,510 14,238 14,704 18,256 18,209 15,414 20,628 15,210
Minority interest... 1,668 1,651 1,479 1,455 1,481 1,447 1,815 1,485
Stockholders'
equity............ 30,974 32,296 29,306 15,035 15,081 11,122 8,447 7,240
</TABLE>
See accompanying Notes to Selected Consolidated Financial Data of LIW.
36
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA OF LIW (CONTINUED)
<TABLE>
<CAPTION>
U.K. GAAP IN U.S. DOLLARS U.K. GAAP IN U.S. DOLLARS
(DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS)(6)
------------------------------------- ---------------------------------------------------------------------
LIW PREDECESSOR(1)(2)
---------------------------------------------------------------
YEAR ENDED DECEMBER 31, LIW
--------------------------------------------------------------- ------------------------------------------
PERIOD FROM PERIOD FROM PERIOD FROM
JANUARY 1, JANUARY 24, JANUARY 24, NINE MONTHS
1996 TO 1996 TO 1996 TO ENDED
JANUARY 23, DECEMBER 31, SEPTEMBER SEPTEMBER 30,
1992 1993 1994 1995 1996 1996(2) 30, 1996(2) 1997
----------- ----------- ----------- ----------- ----------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
INCOME STATEMENT DATA:
Revenues............ $ 1,626,090 $ 1,527,760 $ 1,710,677 $ 1,717,964 $ 103,466 $1,641,863 $1,172,029 $ 817,385
Transportation and
other direct
costs............. 1,328,024 1,229,853 1,405,362 1,408,172 84,178 1,333,706 959,980 661,054
----------- ----------- ----------- ----------- ----------- ------------ ----------- -------------
Net revenues...... 298,066 297,907 305,315 309,792 19,288 308,157 212,049 156,331
Other operating
expenses.......... 302,047 285,023 293,611 317,572 18,000 307,394 212,771 153,086
Depreciation and
amortization...... 10,044 8,365 7,287 6,030 336 3,930 2,518 607
----------- ----------- ----------- ----------- ----------- ------------ ----------- -------------
Operating income
(loss).......... (14,025) 4,519 4,417 (13,810) 952 (3,167) (3,240) 2,638
Interest expense,
net............... 4,306 3,666 3,097 4,257 148 2,101 1,637 819
Share of (income)
loss in equity
investments....... 220 (200) (22) 1,586 130 2,197 958 914
Other (income)
expense........... -- 2,617(3) -- -- -- (15,729)(3) (327) 398
----------- ----------- ----------- ----------- ----------- ------------ ----------- -------------
Income (loss) before
income taxes and
minority
interests......... (18,551) (1,564) 1,342 (19,653) 674 8,264 (5,508) 507
Income tax provision
(benefit)......... (48) 4,156 2,777 9,478 282 6,115 3,174 2,910
----------- ----------- ----------- ----------- ----------- ------------ ----------- -------------
Income (loss) before
minority
interests......... (18,503) (5,720) (1,435) (29,131) 392 2,149 (8,682) (2,403)
Minority
interests......... (491) (327) (551) (617) (39) (661) (721) (361)
----------- ----------- ----------- ----------- ----------- ------------ ----------- -------------
Net income
(loss).......... $ (18,994) $ (6,047) $ (1,986) $ (29,748) $ 353 $ 1,488 $ (9,403) $ (2,764)
----------- ----------- ----------- ----------- ----------- ------------ ----------- -------------
----------- ----------- ----------- ----------- ----------- ------------ ----------- -------------
OTHER FINANCIAL DATA:
EBITDA(4)........... $ (4,329) $ 10,446 $ 11,366 $ (7,104) $ 1,288 $ 15,305 $ (442) $ 1,238
Cash (advances to)
dividends received
from equity
investments....... 5 398 27 1,041 -- (702) 91 (1,544)
Cash (advances to)
dividends received
from minority
interests......... (353) (219) (365) (365) -- (485) (138) (65)
Capital
expenditures...... 4,930 1,778 3,019 4,629 -- 3,010 1,955 1,546
Ratio of earnings to
fixed
charges(5)(7)..... -- 0.7x 1.4x -- 4.5x 4.0x -- 2.7
Balance Sheet Data:
Current assets...... $ 261,515 $ 251,226 $ 266,849 $ 282,474 $ 274,428 $ 218,371 $ 268,410 $ 198,653
Property and
equipment, net.... 68,999 51,192 52,900 30,103 26,373 15,616 19,922 13,773
Total assets........ 350,113 318,388 336,983 327,595 307,127 251,119 302,504 228,917
Current
liabilities....... 263,988 230,175 258,595 289,330 269,766 209,544 267,225 197,196
Long-term debt
(including current
portion).......... 50,316 34,609 38,580 61,162 60,189 19,245 43,908 15,683
Other noncurrent
liabilities....... 18,946 21,064 22,943 29,102 28,290 27,505 34,607 24,399
Minority interest... 2,526 2,442 2,308 2,260 2,241 2,478 2,840 2,403
Stockholders'
equity............ 46,910 47,779 45,726 986 1,031 8,430 407 2,557
</TABLE>
See accompanying Notes to Selected Consolidated Financial Data of LIW.
37
<PAGE>
LEP INTERNATIONAL WORLDWIDE LIMITED
NOTES TO SELECTED CONSOLIDATED FINANCIAL DATA OF LIW
(DOLLARS AND POUNDS IN THOUSANDS)
(1) On January 24, 1996, the LIW Predecessor was purchased by LIW together
with LEP International A/S, LIW's Danish affiliate.
(2) Includes the accounts of LEP-USA and LEP-Canada until October 31, 1996
when sold to the Company. See "Recent Acquisitions" and Note 1 to the LIW
consolidated financial statements.
(3) For the year ended December 31, 1993, amount represents loss on sale of
property in Cologne, Germany. For the period January 24, 1996 to December 31,
1996 amount primarily represents gain on sale of LEP-USA and LEP-Canada to the
Company. See Note 2 above and Note 21(a) to the Consolidated Financial
Statements of LIW.
(4) "EBITDA" represents earnings before interest, income taxes, depreciation
and amortization, and other non cash items such as share of loss in equity
investments, extraordinary loss and minority interest. EBITDA is further
adjusted to include other income and expenses and cash advances to and cash
dividends received from companies accounted for under the equity method or
consolidated subsidiaries in which LIW has a controlling interest. While EBITDA
should not be construed as a substitute for operating income or a better
indicator of liquidity than cash flow from operating activities, which are
determined in accordance with generally accepted accounting principles, it is
included herein to provide additional information with respect to the ability of
the Company to meet its future debt service, capital expenditure and working
capital requirements. EBITDA is not necessarily a measure of the Company's
ability to fund its cash needs. See the Consolidated Statement of Cash Flows of
LIW and the related Notes thereto included in this Prospectus. EBITDA is
included herein because management believes that certain investors find it to be
a useful tool for measuring the ability to service debt.
(5) For purposes of this computation, fixed charges consist of interest
expense and amortization of deferred financing costs and the estimated portion
of rental expense attributable to interest. Earnings consists of income (loss)
before income taxes excluding equity investment losses plus fixed charges.
(6) Earnings were inadequate to cover fixed charges by L12,104, L12,335 and
L4,523 for the years ended December 31, 1992 and 1995 and for the period January
24, 1996 to September 30, 1996, respectively.
(7) Earnings were inadequate to cover fixed charges by $18,331, $18,067 and
$4,550 for the years ended December 31, 1992 and 1995 and for the period January
24, 1996 to September 30, 1996, respectively.
(8) Amounts shown as of and for the year ended December 31, 1995 and all
subsequent periods have been converted into U.S. GAAP based on the information
disclosed in Notes 24 and 25 to the LIW Consolidated Financial Statements
included elsewhere herein with amounts for all periods shown translated into
U.S. Dollars for convenience purposes only using the respective period end Noon
Buying Rate. See also "Prospectus Summary--Exchange Rates".
38
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PRO FORMA
THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH
"UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS," "SELECTED CONSOLIDATED
FINANCIAL DATA OF THE COMPANY," "SELECTED CONSOLIDATED FINANCIAL DATA OF LIW,"
THE CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY AND THE COMBINED AND
CONSOLIDATED FINANCIAL STATEMENTS OF LIW INCLUDED ELSEWHERE IN THIS PROSPECTUS.
THIS PROSPECTUS CONTAINS, IN ADDITION TO HISTORICAL INFORMATION, FORWARD-LOOKING
STATEMENTS THAT INCLUDE RISKS AND OTHER UNCERTAINTIES. THE COMPANY'S ACTUAL
RESULTS MAY DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING
STATEMENTS. FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE INCLUDE THOSE DISCUSSED
BELOW, AS WELL AS GENERAL ECONOMIC AND BUSINESS CONDITIONS, COMPETITION AND
OTHER FACTORS DISCUSSED ELSEWHERE IN THIS PROSPECTUS.
GENERAL
The Company commenced operation on May 2, 1996 in connection with its
acquisition of Bekins. On October 31, 1996, the Company acquired LEP and
securities representing 33.3%, in the aggregate, of the common equity of LIW. On
November 7, 1996, the Company acquired Matrix. On September 30, 1997, the
Company acquired an additional 41.9% of the common equity of LIW and on December
15, 1997, the Company completed the acquisition of all of the remaining equity
securities of LIW. All of such acquisitions were accounted for by the purchase
method of accounting, and accordingly, the book values of the assets and
liabilities of the acquired companies were adjusted to reflect their estimated
values at the dates of acquisition. As a result of these acquisitions and
related accounting treatments, management does not believe the financial
statements of the Company are comparable to stand alone financial statements of
the Company Predecessor, LIW or Matrix. Therefore, comparisons may be made
between pro forma combined results of the Company and LIW for the nine months
ended September 30, 1997 and the pro forma combined results of the Company, the
Company Predecessor, LIW and Matrix for the nine months ended September 30,
1996.
The Company is the largest non-asset-based provider of worldwide logistics
and transportation services headquartered in the United States, based on
revenues for 1996 and after giving pro forma effect to the LIW Acquisition. The
Company's primary business operations involve obtaining shipment or material
orders from customers, creating and delivering a wide range of logistics
solutions to meet customers' specific requirements for transportation and
related services, and arranging and monitoring all aspects of material flow
activity utilizing advanced information technology systems. The logistics
solutions include domestic and international freight forwarding and door-to-door
delivery services using a wide range of transportation modes, including air,
ocean, truck and rail. The Company also provides value-added services such as
warehousing, inventory management, assembly, customs brokerage, distribution and
installation for manufacturers and retailers of commercial and consumer products
such as copiers, computers, pharmaceutical supplies, medical equipment, consumer
durables and aviation products. The Company also specializes in arranging for
the worldwide transportation of goods for major infrastructure projects, such as
power plants, oil refineries, oil fields and mines, to lesser developed
countries and remote geographic locations. In addition, the Company provides
international and domestic relocation services through two of its divisions.
The portion of the Company's business that is focused on traditional
transportation and logistics services normally experiences a higher percentage
of its revenues and operating income in the fourth calendar quarter as volumes
increase for the holiday season. Conversely, the Company's domestic household
goods relocation business experiences approximately half of its revenue between
June and September. In addition, Matrix has a significant project logistics
business which is cyclical due to its dependence upon the timing of shipment
volumes for large, one-time projects. Because of this uneven revenue and
earnings stream of the project-related business, and recognizing that the
performance of Matrix in 1996 would not be maintained in 1997 due to the
conclusion of two major contracts, the acquisition of Matrix was structured with
a significant portion of the total potential consideration tied to future
financial performance. See "Notes to Consolidated Financial Statements of the
Company--Note 3."
Through the Subsidiary Acquisitions, the Company has created a global
network that provides a broad range of transportation and logistics services
through points of service in both industrialized and developing nations with a
strong local presence in North America, Europe and Asia. Because of its global
position, broad service offerings and technologically-advanced information
systems, the Company believes it is well-positioned to participate in the
growing trend for large corporations to outsource logistics and transportation
distribution services. The United States logistics services industry generated
approximately $25.0 billion in revenues in 1996, having experienced an average
annual growth rate of approximately 20.0% from 1992 to 1996. The Company
believes that the global logistics service industry is three to four times the
size of the U.S. logistics services industry. In addition, the Company's future
operating results will be dependent on the economic environments in which it
operates. Demand for the Company's services will also be affected by economic
conditions in the industries of the Company's customers. The Company's principal
businesses are directly impacted by the volume of domestic and international
trade between the United States and foreign nations and among foreign nations.
39
<PAGE>
Pro forma revenues are exclusive of any customs duty invoiced to customers.
Net revenues are net of all transportation costs payable to agent service
providers or third-party air, ocean or ground service providers. The net
revenues of the Company (gross revenues less costs of transportation) are the
primary indicator of the Company's ability to source, add value and resell
services and products that are provided by third parties, and are considered by
management of the Company to be the primary measurement of growth for the
Company. Other operating expenses include the percentage of revenue or net
revenues paid to independent sales contractors or agents for sales, marketing
and coordination services as well as other operating expenses.
The pro forma combined results presented include the benefits of synergy
initiatives completed or nearly completed in North America resulting from the
Bekins, LEP and Matrix acquisitions. These initiatives have generated the
following synergy benefits: consolidation of duplicate crossdock operations,
selected scheduled transportation truck runs and duplicate computer data centers
and increased purchasing power for telecommunication services and insurance
coverages. These synergies would have resulted in pro forma savings of $5.3
million for 1996. In addition, the Company anticipates the consolidation of
certain corporate office functions and related personnel between its offices in
the United States and that of LIW in the United Kingdom. Benefits of these
expected lower corporate costs have been estimated at $1.0 million on an annual
basis and are included in the following pro forma results.
RESULTS OF OPERATIONS
The pro forma statements are presented based on the historical businesses
which are part of the Company. Going forward, portions of each of these former
stand-alone businesses may be shifted to another business segment based on
operational expertise and infrastructure considerations. Therefore, historic
business segment definitions will likely change over time. Synergy benefits
described above from North America initiatives have been allocated to the
respective operating entities' results in the table below. LIW's results reflect
conversion both to U.S. Dollars and U.S. GAAP. Analysis of LIW results of
operations in British Pounds Sterling and also in U.K. GAAP is included
elsewhere in "Management's Discussion and Analysis of Financial Condition and
Results of Operations." The results of LIW reported below include results from
LIW and LEP for the full time periods presented and are not affected by the LEP
Sale. The results of Bekins are presented in its two principal operating units:
high-value products and logistics ("HVP/ Logistics"), a provider of inventory
management, distribution, specialized truck transportation and network-based
logistics services for manufacturers and distributors of high-value products,
and HHG, a provider of domestic relocation and storage services. BMS has been
excluded from pro forma results since BMS was treated as a discontinued
operation in May 1996 at the time of the acquisition of Bekins. With respect to
the nine months ended September 30, 1996, the financial statements of LIW have
been derived from management reports. Management has made such adjustments to
these reports as they believe are necessary for a fair presentation of the
statement of operations with respect to the nine months ended September 30,
1996. However, there can be no assurances that such financial statements are as
reliable or accurate as financial statements prepared using normal interim or
year-end financial reporting procedures. In addition, such financial statements
have not been subject to independent review of the independent accountants of
LIW or the Company.
In connection with the Subsidiary Acquisitions, the Company incurred a
significant amount of goodwill and other intangible assets of which
approximately $21.8 million was amortized in the Company's pro forma financial
statements for the fiscal year ended December 31, 1996 and $16.3 million was
amortized for each of the nine months ended September 30, 1996 and 1997. The
Company believes that amortization expense should decrease to $3.1 million in
fiscal 1998 because the portion of the intangible assets from the Subsidiary
Acquisitions with twelve to twenty-four month amortization periods will have
been already expensed.
40
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA STATEMENTS
--------------------------------------
TWELVE MONTHS
ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
------------- ----------------------
1996 1996 1997
------------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
LIW................................... $1,373,108 $ 962,085 $ 889,895
Bekins: HVP/Logistics................. 85,144 63,089 64,716
HHG........................... 104,812 81,422 83,984
Matrix................................ 75,777 60,522 50,409
------------- ---------- ----------
Consolidated........................ $1,638,841 $1,167,118 $1,089,004
------------- ---------- ----------
------------- ---------- ----------
Net Revenues:
LIW................................... $ 347,483 $ 232,449 $ 229,087
Bekins: HVP/Logistics................. 19,266 14,214 14,914
HHG........................... 18,177 13,692 14,468
Matrix................................ 18,807 14,517 12,096
------------- ---------- ----------
Consolidated........................ 403,733 274,872 270,565
------------- ---------- ----------
Other Operating Expenses:
LIW................................... 341,516 229,735 221,348
Bekins: HVP/Logistics................. 10,408 7,532 9,092
HHG........................... 14,356 10,474 10,364
Matrix................................ 11,224 7,379 9,296
Corporate............................. 2,900 2,108 2,809
------------- ---------- ----------
Consolidated........................ 380,404 257,228 252,909
Depreciation and Amortization........... 33,079 23,870 24,455
------------- ---------- ----------
Operating Loss.......................... (9,750) (6,226) (6,799)
Interest Expense, Net................... 10,967 7,997 8,867
Share of Loss in Equity Investment...... 2,344 1,093 914
Other (Income) Expense.................. (676) (368) (135)
Income Tax Benefit...................... (136) (1,127) (4,376)
Minority Interests...................... (706) (762) (361)
------------- ---------- ----------
Net Loss................................ $ (22,955) $ (14,583) $ (12,430)
------------- ---------- ----------
------------- ---------- ----------
OTHER DATA:
EBITDA:
LIW................................... $ 5,436 $ 2,994 $ 6,261
Bekins: HVP/Logistics................. 8,858 6,682 5,822
HHG........................... 3,841 3,259 4,108
Matrix................................ 7,583 7,138 2,800
Corporate............................. (2,900) (2,108) (2,809)
------------- ---------- ----------
Consolidated........................ $ 22,818 $ 17,965 $ 16,182
------------- ---------- ----------
------------- ---------- ----------
EBITDA/Net Revenues:
LIW................................... 1.6 0.4% 1.3 0.3% 2.7 0.7%
Bekins: HVP/Logistics................. 46.0 10.4% 47.0 10.6% 39.0 9.0%
HHG........................... 21.1 3.7% 28.8 4.0% 28.4 4.9%
Matrix................................ 40.3 10.0% 49.2 11.8% 23.1 5.6%
Consolidated.......................... 5.7 1.4% 6.5 1.5% 6.0 1.5%
</TABLE>
41
<PAGE>
NINE MONTHS ENDED SEPTEMBER 30, 1997 VERSUS NINE MONTHS ENDED SEPTEMBER 30, 1996
REVENUES. The Company's revenues decreased by approximately $78.1 million,
or 6.7%, to $1,089.0 million for the nine months ended September 30, 1997 from
$1,167.1 million for the nine months ended September 30, 1996. Currency
fluctuations accounted for $60.4 million of the decrease in LIW. Exclusive of
currency fluctuations, LIW Europe revenues decreased by $2.8 million, LIW
Asia/Pacific revenues decreased by $7.2 million due to changes in product mix
and LEP revenues increased by $2.9 million. A decrease in volume and revenues of
Matrix due to the conclusion of two large project cargo contracts late in 1996
also contributed to the decrease in revenues in the period.
NET REVENUES. Net revenues decreased by approximately $4.3 million, or
1.6%, to $270.6 million for the nine months ended September 30, 1997 from $274.9
million for the nine months ended September 30, 1996. Net revenues as a
percentage of revenues during this period increased to 24.8% from the 23.6% for
the same period in 1996. Currency fluctuations accounted for a $15.0 million
decrease in LIW net revenues. Exclusive of currency fluctuations, net revenues
of LIW Europe and LIW Asia/Pacific increased by $3.7 million and $6.4 million,
respectively, due to increases of higher margin business in the product mix.
Declines in the net revenues of Matrix were partially offset by a $1.5 million
increase in net revenues at Bekins. Declines in the net revenues of Matrix
resulted from the conclusion of two large project cargo contracts. The percent
of net revenues to revenues increased for each operating company due to improved
pricing controls and the aforementioned shift in product offerings to higher
margin value-added services.
OTHER OPERATING EXPENSES. Other operating expenses decreased by
approximately $4.3 million, or 1.7%, to $252.9 million for the nine months ended
September 30, 1997 from $257.2 million for the nine months ended September 30,
1996. Other operating expenses as a percentage of net revenues for the nine
month period ending September 30, 1997 decreased slightly to 93.5% from 93.6%
for the same period in 1996. Currency fluctuations accounted for $14.6 million
of the decrease in LIW operating expenses. Exclusive of currency fluctuations,
other operating expenses of LIW Europe decreased by $5.2 million while other
operating expenses of LIW Asia/Pacific increased by $3.9 million. This net
dollar reduction in other operating expenses at LIW was offset, however, by
increases at HVP/Logistics, Matrix and a higher level of Corporate expenses. The
Matrix increase was due primarily to costs associated with additional sales and
operations infrastructure added in 1997 to develop and service numerous new
customers to mitigate the impact of the conclusion of two major contracts. The
Company intends to invest approximately $30.0 million over the next three years
in new and improved information systems. Some of these capital expenditures may
provide benefits to the Company through the reduction of other operating
expenses.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
increased 2.5% to $24.5 million for the nine months ended September 30, 1997
compared to $23.9 million for the nine months ended September 30, 1996. Both
periods reflect pro forma adjustments as if the Subsidiary Acquisitions were
completed at the beginning of each period.
OPERATING LOSS. The Company recorded a $6.8 million loss for the nine
months ended September 30, 1997 as compared to $6.2 million for the nine months
ended September 30, 1996 due to an increase in charges for depreciation and
amortization expense. Operating income was also negatively affected by certain
non-recurring items which amounted to $3.4 million and $2.4 million in the 1997
and 1996 periods, respectively. Substantially all of such charges relate to
restructuring activities at LIW/LEP.
INTEREST EXPENSE, NET. Interest expense, net, increased by approximately
$0.9 million, or 10.9%, to $8.9 million for the nine months ended September 30,
1997 from $8.0 million for the nine months ended September 30, 1996. The
decrease in interest expense of LIW as a result of the reduction in borrowings
from the cash proceeds of the LEP sale was more than offset by increased
interest expense of the Company associated with higher levels of working
capital-related borrowings, primarily by LEP.
SHARE OF INCOME (LOSS) IN EQUITY INVESTMENT. The share of loss in equity
investment represents the Company's portion of losses incurred by LIW's Italian
affiliate. LIW's portion of such losses decreased by approximately $0.2 million
to $0.9 million for the nine months ended September 30, 1997 from $1.1 million
for the nine months ended September 30, 1996. This decrease was due to
operational improvements effected by LIW's restructuring efforts.
INCOME TAX PROVISION. Income tax benefit changed by approximately $3.3
million, to a tax benefit of $4.4 million for the nine months ended September
30, 1997, from $1.1 million for the nine months ended September 30, 1996. The
tax benefit for the nine months ended September 30, 1997 produced an effective
benefit rate of 26.6%. Tax benefit for the nine months ended September 30, 1996
produced an effective benefit rate of 7.5% which was lower than 1997 due to the
fact that losses generated in certain countries in which LIW operates were not
available to offset taxable income in other countries.
MINORITY INTERESTS. Interests held by minority shareholders in certain
subsidiaries of LIW decreased by $0.4 million, or 52.6%, to $0.4 million for the
nine months ended September 30, 1997 from $0.8 million for the nine months ended
September 30, 1996.
42
<PAGE>
This decrease was primarily due to the impact of foreign currency fluctuations
in those LIW subsidiaries which have minority shareholders.
NET LOSS. Net loss decreased by $2.2 million to $12.4 million for the nine
months ended September 30, 1997 compared to $14.6 million for the nine months
ended September 30, 1996. This improvement is due primarily to lower other
operating expenses, minority interests and favorable income tax benefits.
LIQUIDITY AND CAPITAL RESOURCES
Within North America, the Company has utilized cash flows from operations
and borrowings under the Old Credit Facility to meet working capital
requirements and to fund capital expenditures principally related to the
improvement of existing information systems. Since May 2, 1996, the Company has
received an aggregate of $5.6 million in net cash proceeds from the disposition
of certain assets of BMS. At September 30, 1997, the Company had a working
capital borrowing base under the Old Credit Facility of $78.4 million compared
with working capital related borrowings of $17.3 million and outstanding letter
of credit commitments of $9.0 million. In addition, as of September 30, 1997,
the Company had $55.2 million of term borrowings outstanding under the Old
Credit Facility and $2.0 million of capital lease commitments and other
indebtedness outstanding. In connection with the LIW Acquisition and the Old
Notes Offering, the Company applied certain of the proceeds of the Old Notes
Offering to repay all amounts outstanding under the Old Credit Facility and
enter into the New Credit Facility. See "New Credit Facility" and "Use of
Proceeds."
Total borrowings of LIW at September 30, 1997 were approximately $15.7
million, representing a combination of short-and long-term borrowings in local
currencies in countries where LIW operates. Funding requirements have
historically been satisfied by revenues from operations and borrowings under
various bank credit facilities. In connection with the LIW Acquisition and the
New Credit Facility, the Company anticipates that a certain amount of borrowing
capacity will be provided to LIW based upon the level of accounts receivable in
the United Kingdom. The Company believes that this borrowing ability and
revenues from operations will be sufficient to meet the liquidity needs of LIW
in the future.
Approximately $75.8 million of the proceeds from the Old Notes Offering was
used to repay the debt of the Company under the Old Credit Facility. In
addition, $9.8 million of the proceeds was used to complete the acquisition of
all outstanding LIW equity securities. See "Recent Acquisitions--LIW
Acquisition." The balance of the proceeds of the Old Notes Offering will be used
to pay transaction costs as well as for general corporate purposes which may
include the repayment of debt of certain LIW subsidiaries. See "Use of
Proceeds."
The Company expects that its future liquidity needs will be primarily for
debt service obligations, working capital and capital expenditures. The
Company's primary sources of liquidity are cash flows from operations and
borrowings under the New Credit Facility. Subsequent to September 30, 1997, the
Company entered into the New Credit Facility which provides for up to $100.0
million of borrowing capacity, based upon the level of the Company's accounts
receivable. Up to $30.0 million of the total commitment under the New Credit
Facility may be derived from eligible accounts receivable of LEP International
Ltd., a subsidiary of LIW ("LEP UK"). In addition to the increase in borrowing
capacity provided by the New Credit Facility and the Notes, the Company intends
to improve the efficiency of existing cash management consistent with systems
currently used by other multinational corporations in order to reduce the need
for external borrowing and to improve liquidity. The Company estimates its
capital expenditures for 1997 and 1998 will be $13.7 million and $19.5 million,
respectively. Of these amounts, $8.7 million and $12.8 million, respectively,
relate to information technology projects. The Company also will be required to
pay $0.9 million prior to July 1999 to purchase the remainder of its Italian
affiliate and may have to fund undetermined amounts in connection with the
ultimate resolution of tax, customs and similar matters and in connection with
stock repurchase and other incentive compensation. See "Management--Incentive
Compensation Plans--Employee Stock Ownership." See "Business--Litigation." The
Company believes that funds provided from operations, cash available from
proceeds of the Old Notes Offering, improved cash management and borrowings
under the New Credit Facility will be sufficient to meet planned financial
commitments and anticipated future needs.
As of September 30, 1997, after giving pro forma effect to the Old Notes
Offering, the Company would have had $110.0 million of debt relating to the
Notes, $9.7 million of other funded indebtedness outstanding and no borrowings
under the New Credit Facility. However, as of December 10, 1997, the Company had
approximately $34.2 million in letters of credit outstanding under the New
Credit Facility, leaving approximately $65.8 million of unused credit commitment
under such facility.
43
<PAGE>
COMPANY PREDECESSOR
GENERAL
Following the acquisition of Bekins on May 2, 1996, Bekins' changed its
fiscal year-end from March 31 to December 31. The results of Bekins are
presented in three principal operating units: HVP/Logistics, HHG and BMS. The
Company has pursued a strategy of converting the Company-owned BMS service
centers into centers owned by independent moving and storage agents, which have
or will become part of the Bekins HHG agent network. Since the acquisition of
Bekins, BMS has been treated as a discontinued operation, with its net assets
recorded on the balance sheet; however, the results are included in the Company
Predecessor financial statements. See "Notes to Consolidated Financial
Statements of the Company--Note 3."
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the relative
contribution to income and expense of the HVP/Logistics division, HHG division
and BMS division.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
-------------------------------
1994 1995 1996
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
HVP/Logistics.................................................................... $ 70,711 $ 76,736 $ 80,970
HHG.............................................................................. 115,221 112,282 103,518
BMS.............................................................................. 52,880 53,948 47,264
--------- --------- ---------
Consolidated................................................................... $ 238,812 $ 242,966 $ 231,752
--------- --------- ---------
--------- --------- ---------
Net Revenues:
HVP/Logistics.................................................................... $ 13,440 $ 14,279 $ 15,521
HHG.............................................................................. 19,999 17,845 18,765
BMS.............................................................................. 18,803 19,564 17,855
--------- --------- ---------
Consolidated................................................................... 52,242 51,688 52,141
Other Operating Expenses:
HVP/Logistics.................................................................... 9,269 10,402 11,820
HHG.............................................................................. 14,580 14,965 14,615
BMS.............................................................................. 16,950 17,641 16,375
--------- --------- ---------
Consolidated................................................................... 40,799 43,008 42,810
Depreciation and Amortization...................................................... 6,054 5,675 4,194
--------- --------- ---------
Operating Income................................................................... 5,389 3,005 5,137
Interest Expense, Net.............................................................. 1,758 2,252 2,397
Other (Income) Expense............................................................. (26) (259) 34
Income Tax Provision............................................................... 1,880 816 1,508
--------- --------- ---------
Net Income......................................................................... $ 1,777 $ 196 $ 1,198
--------- --------- ---------
--------- --------- ---------
EBITDA:
HVP/Logistics.................................................................... $ 4,171 $ 3,877 $ 3,701
HHG.............................................................................. 5,445 3,139 4,116
BMS.............................................................................. 1,853 1,923 1,480
--------- --------- ---------
Consolidated................................................................... $ 11,469 $ 8,939 $ 9,297
--------- --------- ---------
--------- --------- ---------
EBITDA/Net Revenues:
HVP/Logistics.................................................................... 31.0% 27.1% 23.8%
HHG.............................................................................. 27.2% 17.6% 21.9%
BMS.............................................................................. 9.9% 9.8% 8.3%
Consolidated................................................................... 21.9% 17.3% 17.8%
</TABLE>
44
<PAGE>
FISCAL YEAR ENDED MARCH 31, 1996 VERSUS FISCAL YEAR ENDED MARCH 31, 1995
REVENUES. Revenues decreased by approximately $11.2 million, or 4.6%, to
$231.8 million for the year ended March 31, 1996 from $243.0 million for the
year ended March 31, 1995. Revenues of the HVP/ Logistics division increased by
approximately $4.3 million, or 5.5%, to $81.0 million for the year ended March
31, 1996 from $76.7 million for the year ended March 31, 1995. Such increase was
attributable primarily to growth in the value-added logistics services business
which was partially offset by an intentional reduction of low-margin truckload
business.
Revenues of the HHG division decreased by approximately $8.8 million, or
7.8%, to $103.5 million for the year ended March 31, 1996 from $112.3 million
for the year ended March 31, 1995. This decrease was primarily attributable to a
program initiated by Bekins' HHG management to strengthen the profitability of
the HHG division. Specific HHG strategies were developed to eliminate lower
margin national account business and create a geographic balance of tonnage,
thereby also providing operational efficiencies. Such balance was achieved
through the creation of a zoned pricing matrix which allowed the management of
spot pricing by region for non-contract customers.
Revenues of the BMS division decreased by approximately $6.6 million, or
12.4%, to $47.3 million for the year ended March 31, 1996 from $53.9 million for
the year ended March 31, 1995. The BMS division revenue was also substantially
impacted by the new HHG strategy, particularly as it related to the national
balance of tonnage, with the majority of BMS revenue derived from the Southwest
region of the United States.
NET REVENUES. Net revenues increased by approximately $0.4 million, or
0.9%, to $52.1 million for the year ended March 31, 1996 from $51.7 million for
the year ended March 31, 1995. In the HVP/ Logistics division, net revenues as a
percentage of revenue increased to 19.2% for the year ended March 31, 1996 from
18.6% for the year ended March 31, 1995 due to an increased focus on generating
higher prices per shipment and providing more value-added services such as
inventory management and home delivery.
In the HHG division, net revenues as a percentage of revenues increased to
18.1% for the year ended March 31, 1996 from 15.9% for the year ended March 31,
1995. The increase in net revenues for the HHG division was primarily
attributable to more efficient operations resulting from the improved geographic
balance of tonnage.
In the BMS division, the $1.7 million net revenue decrease was attributable
to a decrease in revenue, partially offset by a favorable change in the product
mix. Net revenues as a percentage of revenue increased to 37.8% for the year
ended March 31, 1996 from 36.3% for the year ended March 31, 1995.
OTHER OPERATING EXPENSES. Other operating expenses remained virtually
unchanged, decreasing by approximately $0.2 million, or 0.5%, to $42.8 million
for the year ended March 31, 1996 from $43.0 million for the year ended March
31, 1995. The other operating expenses of the HVP/Logistics division increased
along with the growth in revenue, because incremental resources were employed to
manage the future revenue growth and introduce more value-added services, while
other operating expenses of the HHG and BMS divisions decreased as a result of
the lower revenues.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
decreased by approximately $1.5 million, or 26.1%, to $4.2 million for the year
ended March 31, 1996 from $5.7 million for the year ended March 31, 1995. This
decline was attributable primarily to a shift from ownership and depreciation of
trailers to leasing of trailers.
OPERATING INCOME. Operating income increased by approximately $2.1 million,
or 70.9%, to $5.1 million for the fiscal year ended March 31, 1996 from $3.0
million for the fiscal year ended March 31, 1995. This increase was primarily
due to the reduction in depreciation and amortization noted above together with
improvements in net revenues and improved management of other operating expenses
primarily in the HHG and BMS divisions.
EBITDA. EBITDA increased by approximately $0.4 million, or 4.0%, to $9.3
million for the year ended March 31, 1996 from $8.9 million for the year ended
March 31, 1995. EBITDA as a percentage of net revenues increased to 17.8% from
17.3%. The increase was primarily attributable to improvements in operating
leverage and cost controls implemented in the HHG and BMS divisions. EBITDA for
the HVP/ Logistics division fell slightly as the pace of infrastructure
investment exceeded revenue growth to enable the division to harness future
growth opportunities.
INTEREST EXPENSE, NET. Interest expense, net increased by approximately
$0.1 million, or 6.4%, to $2.4 million for the fiscal year ended March 31, 1996
from $2.3 million for the fiscal year ended March 31, 1995. This increase was
primarily due to an increase in the weighted average interest rate during the
period to 8.6% from 7.3%. This increase in rate was partially offset by a
reduction
45
<PAGE>
in borrowings, primarily in the fourth fiscal quarter of the fiscal year ended
March 31, 1996, to $10.9 million from $19.5 million at March 31, 1995, due to
improved working capital management and the disposition of certain BMS assets.
INCOME TAX PROVISION. Income taxes increased by approximately $0.7 million
to $1.5 million for the fiscal year ended March 31, 1996 from $0.8 million for
the fiscal year ended March 31, 1995. The effective tax rate was 56.0% for the
fiscal year ended March 31, 1996 compared to 81.0% for the fiscal year ended
March 31, 1995. This decrease in effective tax rate was related to the overall
increase in earnings resulting in less of an impact of non-deductible intangible
asset amortization.
NET INCOME. Net income increased by approximately $1.0 million to $1.2
million for the fiscal year ended March 31, 1996 from $0.2 million for the
fiscal year ended March 31, 1995. This improvement was attributable to increased
net revenues achieved through operating improvements and reduced depreciation
and amortization expense.
FISCAL YEAR ENDED MARCH 31, 1995 VERSUS FISCAL YEAR ENDED MARCH 31, 1994
REVENUES. Revenues increased by approximately $4.2 million, or 1.7%, to
$243.0 million for the fiscal year ended March 31, 1995 from $238.8 million for
the fiscal year ended March 31, 1994.
Revenues of the HVP/Logistics division increased by approximately $6.0
million, or 8.5%, to $76.7 million for the year ended March 31, 1995 from $70.7
million for the year ended March 31, 1994. This increase was primarily
attributable to growth in the HVP/Logistics division and its entry into the home
delivery market.
Revenues of the HHG division decreased by approximately $2.9 million, or
2.6%, to $112.3 million for the year ended March 31, 1995 from $115.2 million
for the year ended March 31, 1994. The HHG division revenues declined as a
result of insufficient hauling capacity related to a nationwide imbalance of
tonnage during the peak summer months. Significant revenue was rejected by the
HHG division due to its inability to service the tonnage during the summer of
1994.
Revenues of the BMS division increased by approximately $1.0 million, or
2.0%, to $53.9 million for the year ended March 31, 1995 from $52.9 million for
the year ended March 31, 1994. This increase was primarily a result of increased
volume in BMS's California locations due to the January 1994 earthquake which
caused significant storage activity in the spring and summer of 1994.
NET REVENUES. Net revenues decreased by approximately $0.6 million, or
1.1%, to $51.7 million for the fiscal year ended March 31, 1995 from $52.2
million for the fiscal year ended March 31, 1994. Net revenue of the
HVP/Logistics division increased by approximately $0.8 million, or 6.2%, to
$14.3 million for the year ended March 31, 1995 from $13.4 million for the year
ended March 31, 1994. Such increase was attributable to the increase in revenue,
partially offset by higher costs and lower margins related to the new home
delivery business segment. Net revenue as a percentage of revenue decreased to
18.6% for the year ended March 31, 1995 from 19.0% for the year ended March 31,
1994.
Net revenues of the HHG division decreased $2.2 million, or 10.8%, to $17.8
million for the fiscal year ended March 31, 1995 from $20.0 million for the
fiscal year ended March 31, 1994. Net revenues of the HHG division as a
percentage of revenue decreased to 15.9% for the year ended March 31, 1995 from
17.4% for the year ended March 31, 1994. This decrease was primarily
attributable to increased operational costs in the HHG division related to the
geographic imbalance of tonnage.
Net revenue of the BMS division as a percentage of revenue increased to
36.3% for the year ended March 31, 1995 from 35.6% for the year ended March 31,
1994. The increase in net revenue in the BMS division was attributable to an
increase in revenue, and a favorable change in product offerings to a higher
percentage of storage revenue.
OTHER OPERATING EXPENSES. Other operating expenses increased by
approximately $2.2 million, or 5.4%, to $43.0 million for the fiscal year ended
March 31, 1995 from $40.8 million for the fiscal year ended March 31, 1994. This
increase was principally due to customer service and operational control costs
associated with the growth and development in the HVP/Logistics business.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
decreased by $0.4 million, or 6.3%, to $5.7 million for the year ended March 31,
1995 from $6.1 million for the year ended March 31, 1994. This decrease was
primarily attributable to a shift from ownership and depreciation of trailers to
leasing of trailers.
OPERATING INCOME. Operating income decreased by approximately $2.4 million,
or 44.2%, to $3.0 million for the fiscal year ended March 31, 1995 from $5.4
million for the fiscal year ended March 31, 1994. This decrease was primarily
due to decreases in the HHG division revenues combined with higher other
operating expenses.
46
<PAGE>
EBITDA. EBITDA decreased by approximately $2.6 million, or 22.1%, to $8.9
million for the fiscal year ended March 31, 1995 from $11.5 million for the
fiscal year ended March 31, 1994. This decrease was principally due to the HHG
division imbalance of tonnage and the resultant operational inefficiencies and
the increase in other operating expenses of the HVP/Logistics division. As a
percentage of net revenues, EBITDA decreased to 17.3% for the fiscal year ended
March 31, 1995 from 21.9% for the fiscal year ended March 31, 1994.
INTEREST EXPENSE, NET. Interest expense, net increased by approximately
$0.4 million, or 28.1%, to $2.2 million for the fiscal year ended March 31,
1995, from $1.8 million for the fiscal year ended March 31, 1994. This increase
in interest expense was due to a slightly higher level of borrowings during the
year ended March 31, 1995 and an increase in the weighted average interest rate
to 7.3% from 5.4%.
INCOME TAX PROVISION. Income taxes decreased by approximately $1.1 million
to $0.8 million for the fiscal year ended March 31, 1995 from $1.9 million for
the fiscal year ended March 31, 1994. The effective tax rate was 81% for the
fiscal year ended March 31, 1995 compared to 51% for the fiscal year ended March
31, 1994. The increase in effective rate was related to the overall decrease in
earnings and the resulting larger impact that the non-deductible intangible
asset amortization had on the effective tax rate.
NET INCOME. Net income decreased by approximately $1.6 million to $0.2
million for the fiscal year ended March 31, 1995 from $1.8 million for the
fiscal year ended March 31, 1994. This increase was attributable to lower net
revenues, increases in other operating expenses and higher interest expense.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents at March 31, 1996 totaled $1.4 million compared to
$1.9 million at March 31, 1995. Long-term debt was reduced by approximately $9.1
million to $11.9 million at March 31, 1996 from $21.0 million at March 31, 1995.
This debt reduction was a result of increased cash flow from operations and
improved management of working capital. The working capital deficit at March 31,
1996 was $14.9 million as a result of the classification of the Company's
revolving credit facility of $10.9 million as a current liability because of the
expiration date of July 31, 1996. At March 31, 1995, the working capital deficit
was $1.4 million.
On May 2, 1996, Bekins was acquired by the Company and all outstanding debt
was paid in full.
47
<PAGE>
LIW
GENERAL
LIW was founded in 1849 and is one of the leading European-based
international freight forwarding companies. In October 1996, the Company
acquired LEP from LIW, acquired a 33.3% interest in LIW and entered into
long-term agreements with LIW to continue to operate LEP and the remaining LIW
operations as an integrated network. The net proceeds to LIW resulting from the
LEP Sale were used to restructure certain operations that had been generating
operating losses in LIW's European operations. In September 1997, the Company
exercised options and warrants with respect to equity of LIW which increased
ILOG's ownership position in LIW from 33.3% to 75.2% of LIW's outstanding
ordinary shares.
With respect to the nine months ended September 30, 1996, the financial
statements of LIW have been derived from management reports. Management has made
such adjustments to these reports as they believe are necessary for a fair
presentation of the Statement of Operations with respect to the nine months
ended September 30, 1996. However, there can be no assurances that such
financial statements are as reliable or accurate as financial statements that
were prepared using normal interim period or year-end financial reporting
procedures. In addition, such financial statements have not been subject to
independent review of the independent accountants of LIW or the Company.
RESULTS OF LIW EUROPE, LIW ASIA/PACIFIC AND LEP OPERATIONS
The following table sets forth, for the periods indicated, the relative
contribution to income and expense of LIW Europe, LIW Asia/Pacific and LEP. The
Company acquired LEP on October 31, 1996 and the results of operations for LIW
following such date do not include results of operations of LEP.
48
<PAGE>
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
---------------------- ------------------
1995 1996 1996 1997
---------- ---------- -------- --------
(POUNDS IN THOUSANDS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues(a):
LIW Europe......................................................................... L556,188 L543,409 L402,722 L370,710
LIW Asia/Pacific................................................................... 180,754 180,690 139,587 134,316
LEP................................................................................ 369,281 303,127 274,953 --
---------- ---------- -------- --------
Consolidated..................................................................... L1,106,223 L1,027,226 L817,262 L505,026
---------- ---------- -------- --------
---------- ---------- -------- --------
Net Revenues:
LIW Europe......................................................................... L103,181 L100,385 L71,813 L65,065
LIW Asia/Pacific................................................................... 37,156 41,967 30,924 31,525
LEP................................................................................ 59,143 50,359 45,501 --
---------- ---------- -------- --------
Consolidated..................................................................... 199,480 192,711 148,238 96,590
---------- ---------- -------- --------
Other Operating Expenses:
LIW Europe......................................................................... 110,847 101,751 72,880 63,998
LIW Asia/Pacific................................................................... 33,202 37,297 27,838 27,361
LEP................................................................................ 57,942 50,278 45,343 --
Corporate.......................................................................... 2,849 2,661 2,167 3,641
---------- ---------- -------- --------
Consolidated..................................................................... 204,840 191,987 148,228 95,000
Depreciation and Amortization........................................................ 4,234 3,668 2,935 1,554
---------- ---------- -------- --------
Operating Income (Loss).............................................................. (9,594) (2,944) (2,925) 36
Interest Expense, Net................................................................ 2,741 1,325 1,144 506
Share of (Income) Loss in Equity Investments......................................... 1,021 1,369 698 565
Other (Income) Expense............................................................... -- (5,800) -- 275
---------- ---------- -------- --------
Income (Loss) Before Income Taxes and Minority Interests............................. (13,356) 162 (4,767) (1,310)
Income Tax Provision (Benefit)....................................................... 5,987 2,588 1,599 1,246
---------- ---------- -------- --------
Income (Loss) Before Minority Interests.............................................. (19,343) (2,426) (6,366) (2,556)
Minority Interests................................................................... (397) (412) (487) (223)
---------- ---------- -------- --------
Net Income (Loss).................................................................... L(19,740) L(2,838) L(6,853) L(2,779)
---------- ---------- -------- --------
---------- ---------- -------- --------
OTHER DATA:
EBITDA:
LIW Europe......................................................................... L(6,996) L(1,833) L(1,067) L113
LIW Asia/Pacific................................................................... 3,719 4,444 3,056 4,124
LEP................................................................................ 1,201 81 158 --
Corporate.......................................................................... (2,849) 3,139 (2,168) (3,916)
---------- ---------- -------- --------
Consolidated..................................................................... L(4,925) L5,831 L(21) L321
---------- ---------- -------- --------
---------- ---------- -------- --------
EBITDA/Net Revenues:
LIW Europe......................................................................... (6.8)% (1.8)% (1.5)% 0.2%
LIW Asia/Pacific................................................................... 10.0 10.5 9.9 13.1
LEP................................................................................ 2.0 0.2 0.3 --
Consolidated..................................................................... (2.5) 3.0 -- 0.3
</TABLE>
- ------------------------
(a) Revenues include intercompany balances between LIW and LEP as well as duties
and value-added tax paid on behalf of customers and subsequently invoiced to
customers.
49
<PAGE>
NINE MONTHS ENDED SEPTEMBER 30, 1997 VERSUS NINE MONTHS ENDED SEPTEMBER 30, 1996
REVENUES. Revenues decreased by approximately L312.3 million to L505.0
million for the nine months ended September 30, 1997 from L817.3 million for the
nine months ended September 30, 1996. This decrease was primarily attributable
to the sale of LEP to ILOG on October 31, 1996, (the "LEP Sale") which reduced
overall revenues by L275.0 million between the two periods. In addition,
currency fluctuations accounted for L67.5 million of the decrease over the
period. Exclusive of currency fluctuations, the combined revenues of LIW Europe
and LIW Asia/Pacific (the "Retained Businesses") increased by L30.2 million, or
5.6%, with LIW Europe accounting for L21.0 million of the increase and LIW
Asia/Pacific for L9.2 million. These increases were due in part to increased air
and ocean volumes of the export-oriented manufacturers served by LIW in the
growth economies of the Asia/Pacific region.
NET REVENUES. Net revenues decreased by approximately L51.6 million to
L96.6 million for the nine months ended September 30, 1997 from L148.2 million
for the nine months ended September 30, 1996. This decrease was primarily
attributable to the LEP Sale, which reduced net revenues by L45.5 million. In
addition, currency fluctuations accounted for L12.5 million of the decrease.
Exclusive of currency fluctuations, the net revenues of the Retained Businesses
increased by L6.3 million, or 5.6%. LIW Europe increased by L2.3 million and LIW
Asia/Pacific increased by L2.0 million. Net revenues as a percentage of revenues
increased to 19.1% for the nine months ended September 30, 1997, from 18.1% for
the nine months ended September 30, 1996.
OTHER OPERATING EXPENSES. Other operating expenses decreased by
approximately L53.2 million to L95.0 million for the nine months ended September
30, 1997 from L148.2 million for the nine months ended September 30, 1996. This
decrease was primarily attributable to the LEP Sale which resulted in a decrease
of L45.3 million in other operating expenses. Currency fluctuations accounted
for L12.2 million of the reduction in these expenses. Exclusive of the impact of
currency fluctuations, other operating expenses of the Retained Businesses
increased slightly by L4.3 million. Other operating expenses as a percentage of
net revenues improved to 98.3% to September 30, 1997 from 99.6% in the first
nine months of 1996. Redundancy/restructuring charges were included in other
operating expenses for each of the 1997 and 1996 periods.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
decreased by approximately L1.4 million to L1.5 million for the nine months
ended September 30, 1997 from L2.9 million for the nine months ended September
30, 1996. This decrease was primarily attributable to the reduction in
depreciable assets associated with the LEP Sale.
OPERATING INCOME (LOSS). Operating income increased by approximately
L3.0 million to a profit of L0.1 million for the nine months ended September
30, 1997 from a loss of L2.9 million for the nine months ended September 30,
1996. This increase was partially attributable to (i) the LEP Sale which
removed losses of L0.9 million, (ii) an increase of L2.3 million in the
profits of LIW Europe and (iii) an increase of L1.1 million in the profits of
LIW Asia/Pacific. None of the foregoing factors were impacted by currency
fluctuations.
EBITDA. EBITDA increased by approximately L0.3 million to L0.3 million in
the nine months ended September 30, 1997 from a breakeven for the nine months
ended September 30, 1996. This increase was primarily attributable to an
increase in the net revenues of the Retained Businesses and the LEP Sale which
removed the losses associated with LEP. As a result of these factors, EBITDA
expressed as a percentage of net revenues, improved to 0.3% for the nine months
ended September 30, 1997 from zero for the nine months ended September 30, 1996.
INTEREST EXPENSE, NET. Interest expense, net decreased by approximately
L0.6 million to L0.5 million for the nine months ended September 30, 1997 from
L1.1 million for the nine months ended September 30, 1996. This decrease was
primarily due to lower average outstanding debt balances following the L17.3
million reduction in borrowings which were repaid in 1996 from the proceeds of
the LEP Sale.
SHARE OF INCOME (LOSS) IN EQUITY INVESTMENT. The Company's share of losses
in equity investments decreased by approximately L0.1 million for the nine
months ended September 30, 1997 to L0.6 million from L0.7 million for the nine
months ended September 30, 1996. This decrease is due to reduced losses from
LIW's 50% equity interest in its Italian affiliate.
INCOME TAX PROVISION. The provision for income tax decreased by
approximately L0.4 million to L1.2 million for the nine months ended September
30, 1997 from L1.6 million for the nine months ended September 30, 1996. The
decrease is primarily attributable to the LEP Sale. In both periods, LIW was a
net payer of taxes on a worldwide basis as a result of a corporate structure
wherein losses in one country cannot be offset against profits in another
country.
MINORITY INTERESTS. Interests of minority shareholders in certain
subsidiaries of LIW decreased by approximately L0.3 million to L0.2 million for
the nine months ended September 30, 1997 from L0.5 million for the nine months
ended September 30, 1996. The decrease is primarily due to the impact of foreign
currency fluctuations in those Asian subsidiaries which have minority interests.
50
<PAGE>
NET INCOME (LOSS). Net loss decreased by approximately L4.1 million to a
loss of L2.8 million for the nine months ended September 30, 1997 from a net
loss of L6.9 million for the nine months ended September 30, 1996. The
improvement is primarily attributable to the factors affecting the
aforementioned increase in operating income in combination with reductions in
depreciation expense and interest expense occasioned by the LEP Sale.
FISCAL YEAR ENDED DECEMBER 31, 1996 COMPARED TO FISCAL YEAR ENDED DECEMBER 31,
1995
REVENUES. Revenues decreased by approximately L79.0 million, or 7.1%, to
L1,027.2 million for the fiscal year ended December 31, 1996 from L1,106.2
million for the fiscal year ended December 31, 1995. This decrease was primarily
attributable to the LEP Sale on October 31, 1996, which reduced revenues by
L68.7 million. Currency fluctuations accounted for an additional L6.0 million of
the reduction. Exclusive of currency fluctuations, revenues of the Retained
Businesses decreased by L4.3 million reflecting increased pricing pressure
within continental Europe and decreases in the revenues of the Australian
business.
NET REVENUES. Net revenues decreased by approximately L6.8 million, or
3.4%, to L192.7 million for the fiscal year ended December 31, 1996 from L199.5
million for the fiscal year ended December 31, 1995. Currency fluctuations
accounted for L1.1 million of the decrease in net revenues while the LEP Sale
contributed L9.2 million to the decrease. Exclusive of currency fluctuations,
net revenues of the Retained Businesses increased by L3.5 million. The L1.4
million decrease in net revenues of Europe was more than offset by increases of
L4.9 million in LIW Asia/Pacific. Net revenue as a percentage of revenue for the
period increased to 18.8% in 1996 from 18.0% in 1995.
OTHER OPERATING EXPENSES. Other operating expenses decreased by
approximately L12.8 million, or 6.3%, to L192.0 million for the fiscal year
ended December 31, 1996 from L204.8 million for the fiscal year ended December
31, 1995. This decrease was primarily attributable to the LEP Sale, which
reduced other operating expenses by L8.0 million. Currency fluctuations
accounted for L1.3 million of the decrease. Exclusive of currency fluctuations,
other operating expenses of the Retained Businesses decreased by L3.5 million
over the period, as LIW Europe decreased by L7.6 million and LIW Asia/Pacific
increased by L4.1 million. Redundancy/restructuring charges were reflected in
other operating expenses for the fiscal years ended December 31, 1995 and 1996.
The decline in expense levels in LIW Europe reflects the benefits of certain
restructuring efforts and administrative personnel reductions undertaken in 1995
and 1996, while increases in other operating expenses of LIW Asia/Pacific were
consistent with the growth of business in that region. Other operating expenses
as a percentage of net revenues for the period improved to 99.6% in 1996 from
102.7% in 1995.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
decreased by approximately L0.5 million, or 13.4%, to L3.7 million for the
fiscal year ended December 31, 1996, from L4.2 million for the fiscal year ended
December 31, 1995. This decrease was primarily attributable to the decrease in
depreciable assets associated with the LEP Sale.
OPERATING INCOME (LOSS). Operating loss improved by approximately L6.7
million to a loss of L2.9 million for the year ended December 31, 1996 from a
loss of L9.6 million for the year ended December 31, 1995. This improvement was
attributable to reduced losses, net of currency fluctuations, in LIW Europe of
L6.7 million as a result of a decrease in other operating expenses while LIW
Asia/Pacific also improved by L0.7 million. This was offset by a decrease in
income due to the divestiture of LEP of L0.9 million. In addition, depreciation
and amortization decreased by L0.5 million, while currency fluctuations had no
significant impact on the operating loss results.
EBITDA. EBITDA increased by approximately L10.7 million to L5.8 million for
the year ended December 31, 1996 from a loss of L4.9 million for the year ended
December 31, 1995. This increase was primarily attributable to reductions in
other operating expenses partially offset by a decrease in consolidated net
revenues. While this EBITDA improvement includes the gain on the LEP Sale of
L5.8 million, LIW Europe reported a L5.2 million improvement in EBITDA.
INTEREST EXPENSE, NET. Interest expense, net decreased by approximately
L1.4 million, or 52%, to L1.3 million for the fiscal year ended December 31,
1996 from L2.7 million for the fiscal year ended December 31, 1995. This
decrease was due to the reduction of borrowings from the proceeds from the sales
of a minority interest in a Swiss freight forwarding business in the beginning
of 1996, and the reduction of L17.3 million of borrowings which were repaid in
1996 from the proceeds of the LEP Sale.
SHARE OF INCOME (LOSS) IN EQUITY INVESTMENT. LIW's share of losses in
equity investments increased by approximately L0.4 million to L1.4 million for
the year ended December 31, 1996 from L1.0 million for the year ended December
31, 1995. LIW's principal investment is a 50% share in its Italian affiliate,
where LIW's share of such entity's loss was unchanged at a loss of L1.4 million.
In 1995, LIW reported a profit of L0.4 million from its 33% interest in a Swiss
freight forwarding business which was sold at the start of 1996.
51
<PAGE>
INCOME TAX PROVISION. The provision for income tax decreased by L3.4
million to L2.6 million for the year ended December 31, 1996 from L6.0 million
for the year ended December 31, 1995. The 1995 provision includes a general
provision of L2.5 million recorded to provide for contingent tax liabilities in
a number of countries. The improvement in profit before taxation has little
impact on the tax charge as a result of losses being reduced, and also as the
profit on the LEP Sale was not subject to significant taxes.
MINORITY INTEREST. There was no change in the minority share of profit of
L0.4 million.
NET INCOME (LOSS). Net loss decreased by approximately L16.9 million to a
net loss of L2.8 million for the year ended December 31, 1996 from a net loss of
L19.7 million for the year ended December 31, 1995. This reduction was
attributable to the factors affecting the aforementioned increase in operating
income in conjunction with reductions in depreciation expense and interest
expense occasioned by the LEP Sale. In addition, a gain on the sale of LEP of
L5.8 million was recorded in other income in the 1996 period.
LIQUIDITY AND CAPITAL RESOURCES
In connection with the LEP Sale, LIW's net working capital was reduced by
L10.7 million and the cash position of LIW was improved as a result of the
removal of L14.4 million of loans and borrowings. The cash proceeds of L6.0
million received by LIW from the LEP Sale were applied by LIW to repay L2.9
million of borrowings in Europe and Australia and L2.3 million for restructuring
costs primarily in Germany. At September 30, 1997, LIW had borrowings of L9.7
million and cash balances of L13.7 million.
For the fiscal year ended December 31, 1996, the principal sources of cash
for LIW were L6.0 million from the LEP Sale, L5.4 million from the sale of
shares in a freight forwarding business in Switzerland, and L2.7 million from
the sale of fixed assets, including L1.9 million from the sale of certain real
estate and assets in the United Kingdom. Operating losses of L2.9 million were
offset by L3.7 million of depreciation. Interest costs amounted to L1.8 million,
which includes interest costs of L1.2 million in respect of the borrowings of
the North American business prior to the LEP Sale. Tax charges of L2.4 million
were paid as operating losses in certain countries were not able to shelter
taxable income in profitable countries. Capital expenditures totalled L1.8
million in the period.
During the fiscal year ended December 31, 1995, cash inflows consisted of
L5.2 million of capital contributed to LIW by its sole shareholder, L6.3 million
in commercial loans and L6.7 million in overdraft facilities. Cash outflows
consisted of losses of L5.4 million, net of depreciation, additional working
capital investment of L4.0 million, interest costs of L2.7 million, tax charges
of L3.0 million and capital expenditures of L3.0 million including L0.9 million
on FAST 400 software development.
In the nine months ending September 30, 1997 cash of L1.3 million was
generated from operations and L2.4 million was generated by reduced working
capital of which L0.8 million was used to fund income tax charges.
At September 30, 1997, LIW had loan facilities with a number of banks in the
countries in which it operates. Such facilities aggregate to L34.0 million of
which L23.0 million relate to customs and other guarantees integral to LIW's
freight forwarding operations. The remaining L11.0 million is available in
overdraft/revolver facilities, on which the utilization varies. Additional
facilities include mortgage loans of L1.4 million secured by property in Germany
and Portugal. The remainder of the facilities are normally fully utilized over
the course of an average month, however, the degree and timing of utilization
varies by region. For LIW Europe, peak utilization is normally in the middle of
the month as customs duties and excise taxes are paid. In LIW Asia/Pacific peak
utilization varies among countries depending on local terms of trade.
52
<PAGE>
BUSINESS
HISTORY
The Company was formed in 1996 by Oaktree, WESS and Roger E. Payton, the
Company's President and Chief Executive Officer who has over 20 years experience
in the logistics industry, with the objective of developing a leading provider
of global logistics services for major multinational companies. The Company
believes that it can accomplish its objective by offering comprehensive
logistics and freight forwarding services that fulfill the individual
requirements of multinational customers that outsource their logistics needs. In
furtherance of the Company's strategy, the Company has assembled, through a
series of strategic acquisitions, a core platform of leading domestic and
international logistics companies that serve the niche markets that the Company
has targeted for future growth.
On May 2, 1996, the Company acquired Bekins. Founded in 1891, Bekins has
historically been a provider of HHG hauling and storage services. In recent
years, Bekins has expanded its service offerings to include inventory
management, distribution, specialized truck transportation and TimeLok, a
network-based transportation and warehouse logistics operation which services
manufacturers and distributors of high value products ("HVP"). As of June 30,
1997 Bekins operated through a United States network of 92 HVP Logistics service
centers and 283 HHG service centers, all of which were owned by independent
agents.
On October 31, 1996, the Company acquired LEP-USA and LEP-Canada from LIW in
the first step of the overall acquisition of LIW. Founded in 1973, LEP-USA is a
non-asset-based freight forwarder serving niche transport segments of both the
United States and international freight forwarding and logistics markets. As of
June 30, 1997, LEP-USA operated 56 full service offices throughout the United
States and Puerto Rico, 26 of which were owned by the Company, with the
remainder owned and operated by agents. Founded in 1930, LEP-Canada operates 12
offices located throughout Canada and provides international freight forwarding
and logistics services, focusing on inbound transportation, customs clearance
activities and trade fairs and exhibitions.
On November 7, 1996, the Company acquired Matrix. Founded in 1986, Matrix
offers specialized international relocation services for executives of
multinational companies and government agencies and project cargo logistics
services for major infrastructure development projects. Matrix provides its
services through five offices in the United States, one minority partnership in
Holland, one exclusive agent in Canada and eight joint venture offices in the
Commonwealth of Independent States (the former Soviet Union).
In September 1997, the Company expanded its international operations by
acquiring a controlling interest in the common equity of LIW and executing
options to acquire the remaining capital stock and securities convertible into
capital stock of LIW. See "Recent Acquisitions--Acquisition of LIW." Founded in
1849, LIW provided complete freight forwarding and logistics services through
196 branches in 26 countries, as of June 30, 1997. In Europe, LIW operates a
pan-European transportation network and has offices in 12 countries including
one of the largest freight forwarding businesses in the United Kingdom. In the
Asia Pacific region, LIW maintains locations in 14 countries and is particularly
well-established in the Hong Kong, Singapore and Philippines markets.
Additionally, through strategic alliances in South Africa, the Indian
sub-continent, Latin America and the Middle East, LIW provided freight
forwarding and logistics services in an additional 42 countries as of June 30,
1997.
The Company believes that the acquisition of all of the equity interests of
LIW will complete its efforts to create a global network with a strong local
presence in North America, Europe and Asia, capable of providing logistics and
transportation solutions to multinational companies. Moreover, the LIW
Acquisition affords the Company ownership of FAST 400, LIW's proprietary system
for the real-time management of transportation shipments on a multi-modal,
multi-currency and multi-lingual basis. The Company believes that FAST 400 is
the most advanced information system of its type currently in use in the global
freight forwarding and logistics industries. See "Business-- Information
Systems".
For a more detailed discussion of the Subsidiary Acquisitions, see "Recent
Acquisitions."
OVERVIEW
The Company is the largest non-asset-based provider of worldwide logistics
and transportation services headquartered in the United States, based on
revenues for 1996 and after giving pro forma effect to the LIW Acquisition. The
Company's primary business operations involve obtaining shipment or material
orders from customers, creating and delivering a wide range of logistics
solutions to meet customers' specific requirements for transportation and
related services, and arranging and monitoring all aspects of material flow
activity utilizing advanced information technology systems. These logistics
solutions include domestic and international freight forwarding and door-to-door
delivery services using a wide range of transportation modes, including air,
ocean, truck and rail. The Company also provides value-added services such as
warehousing, inventory management, assembly, customs
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brokerage, distribution and installation for manufacturers and retailers of
commercial and consumer products such as copiers, computers, pharmaceutical
supplies, medical equipment, consumer durables and aviation products. The
Company also specializes in arranging for the worldwide transportation of goods
for major infrastructure projects, such as power plants, oil refineries, oil
fields and mines, to lesser developed countries and remote geographic locations.
In addition, the Company provides international and domestic relocation services
through two of its divisions. On a pro forma basis after giving effect to the
Subsidiary Acquisitions, the Company generated approximately $1.1 billion of
revenues and $16.2 million of EBITDA for the nine months ended September 30,
1997.
As a non-asset-based logistics services provider, the Company arranges for
and subcontracts services on a non-committed basis to airlines, truck lines, van
lines, express companies, steamship lines, rail lines and warehousing and
distribution operators. By concentrating on network-based solutions, the Company
avoids competition with logistics services providers that offer dedicated
outsourcing solutions for single elements of the supply chain. Such dedicated
logistics companies typically provide expensive, customized infrastructure and
systems for a customer's specific application and, as a result, dedicated
solutions that are generally asset-intensive, inflexible and invariably
localized to address only one or two steps in the supply chain. Conversely,
network-based services leverage common infrastructure and technology systems so
that solutions are scaleable, replicable and require a minimum amount of
customization (typically only at the interface with the customer). This
non-asset ownership approach maximizes the Company's flexibility in creating and
delivering a wide range of end-to-end logistics solutions on a global basis
while simultaneously allowing the Company to exercise significant control over
the quality and cost of the transportation services provided.
Through the Subsidiary Acquisitions the Company has created a global network
that provides a broad range of transportation and logistics services through
points of service in both industrialized and developing nations with a strong
local presence in North America, Europe and Asia. As of June 30, 1997, after
giving pro forma effect to the LIW Acquisition, the Company serviced over 75,000
active customers through a global network of 75 countries consisting of
operations located in 33 countries and strategic alliance partners located in 42
countries. Some of the Company's major customers include Lucent Technologies
Inc., Cisco Systems, Inc., Williams-Sonoma, Inc. and Danka Business Systems plc
(formerly the office imaging technology division of Eastman Kodak Company). See
"Recent Acquisitions."
The U.S. logistics services industry generated approximately $25.0 billion
in revenues in 1996, having experienced an average annual growth rate of
approximately 20.0% from 1992 to 1996. The Company believes that the global
logistics services industry is three to four times the size of the U.S.
logistics services industry. Within the logistics services and freight
forwarding industries, the Company targets specific markets in which the Company
believes it has a competitive edge. For example, in the freight forwarding
market, the Company arranges transportation for shipments of heavy cargo that
are generally larger than shipments handled by integrated carriers, such as
United Parcel Service of America and Federal Express Corporation. In the
logistics market, the Company provides specialized combinations of services that
traditional freight forwarders cannot cost-effectively provide, including
time-definite delivery requirements, direct-to-store distribution and
merge-in-transit movement of products from various vendors in a single
coordinated delivery and/or installation to the end-user.
BUSINESS STRATEGY
The Company has developed a business strategy designed to increase revenues
and expand profit margins which includes the following principal elements:
EMPHASIZE END-TO-END LOGISTICS SERVICES. The Company intends to continue to
develop and market higher-margin, value-added logistics services. The Company
believes that it differentiates itself from its competitors by providing its
customers with superior service and added value through a global end-to-end
logistics network. The Company is increasingly providing end-to-end logistics
programs for a number of major customers in which the Company implements
solutions addressing the customers' transportation, customs clearance,
warehousing and distribution activities. For example, the Company manages
purchase order requests from customers of a computer component manufacturer,
selects optimal transportation modes to the United States, United Kingdom and
Europe for such computer components, tests equipment to ensure that such
equipment is in working order prior to delivery to the customer and delivers
the product to the customer on a just-in-time basis. These logistics programs
are specifically tailored to solve sourcing and distribution challenges of
customers within targeted industries, including life sciences (health-care
and pharmaceuticals), office technology, medical equipment and products,
aviation and defense and retail. The implementation of these programs often
includes the integration of the Company's information systems with those of
its customers, and, in some cases, the stationing of Company personnel at the
customers' offices.
MAINTAIN AND ENHANCE TECHNOLOGICAL LEADERSHIP POSITION. The Company believes
that the ability to provide accurate, up-to-date information on the status of
shipments to ensure on-time delivery, real-time visibility of inventory on a
global basis and efficient operations provides competitive advantages in the
logistics services industry. The Company believes that it is a leader in
information processing for transportation logistics and that maintaining and
strengthening its leadership position will be critical to
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its continued success. The Company utilizes FAST 400, a proprietary system for
the real-time management of shipments on a multi-modal, multi-currency and
multi-lingual basis, in certain of its operations. The Company believes that
FAST 400 is the most advanced information system of its type currently in use in
the global freight forwarding industry. The Company believes that planned system
upgrades and expenditures, a significant part of which relate to enhancement of
the Company's financial reporting, communications and inventory tracking
systems, will complement the technological advantages of FAST 400. The Company
expects to spend approximately $30.0 million over the next three years to
conclude the implementation and integration of FAST 400 and its related BUSINESS
400 systems globally, purchase additional information systems equipment and
software upgrades and integrate the systems capabilities of its subsidiaries.
The Company anticipates that, upon the completion of the planned expenditures,
all the Company's subsidiaries will be operating on a single, FAST 400-based
system.
INCREASE PENETRATION OF EXISTING CUSTOMERS. The Company's broad range of
services, dedication to excellent customer service and efforts to develop
integrated transportation logistics programs have fostered customer loyalty,
enabling the Company to expand sales and services to existing customers. The use
of specialized teams of marketing and operational personnel enables the Company
to better analyze its customers' transportation logistics requirements and
develop more complete end-to-end logistics solutions. For example, the Company
recently expanded its services to an apparel manufacturer through the
development of a centralized European distribution center that receives delivery
of products from 8 points of origin around the world and makes delivery of
products to approximately 26 different ultimate points of destination in Europe
on a demand basis. In addition, the Company's dedicated marketing staff for
major accounts enables it to maintain close contact with its major customers on
an ongoing basis. The Company believes that the combination of its knowledge of
customer needs, proven level of service, quality and ability to develop
customized logistics solutions continues to give the Company the opportunity to
expand its business significantly within its existing customer base.
EXPAND CUSTOMER BASE. The Company intends to increase the number of major
corporations worldwide for which it provides transportation and logistics
services. Through industry specialization teams, the Company believes that it
can further penetrate certain targeted industries such as life sciences (health
care and pharmaceuticals), office technology, medical equipment and products,
aviation and defense and retail. For example, the Company recently developed a
customized logistics solution for one of the world's leading pharmaceutical
companies which required a complete logistics program to support sales sample
distribution including temperature control facilities, inventory management,
individual item tracking and management control for U.S. Food and Drug
Administration compliance. The Company believes that the combination of its
global network, high-quality service and ability to develop customized
end-to-end logistics solutions will make its services attractive to potential
new customers. In addition, the Company believes that its efforts to strengthen
its international office network will enhance its ability to add major customers
throughout the world.
STRENGTHEN THE COMPANY'S GLOBAL NETWORK. The Company has a global network
spanning 75 countries which includes offices in 33 countries and strategic
partnerships in 42 countries. The Company intends to continue to strengthen its
network of Company-owned offices by opening new offices and, to the extent the
Company is able to identify appropriate acquisition opportunities, making
selective acquisitions. Such expansion is expected to occur in major commercial
centers in both the United States and abroad. As more countries with closed or
highly-controlled economies have moved toward free market systems, the
opportunity for international trade with emerging growth regions has improved
significantly. Consequently, the Company continuously monitors and evaluates
opportunities in developing nations and plans to expand its operations in Latin
America, Asia and the Commonwealth of Independent States to meet the needs of
customers that are serving the evolving consumer economies in such areas. The
Company believes that such expansion will enhance its ability to offer uniform
services on a worldwide basis, thereby enabling it to earn increased revenue
from existing and new customers, particularly with respect to shipments
originating in countries other than the United States. See "Risk Factors--Risks
Associated with International Operations."
EXPAND PRESENCE IN NICHE MARKETS. The Company intends to expand its presence in
selected niche markets which utilize the Company's existing transportation and
logistics services and provide high marginal profits. In particular, the Company
is focused on expanding its niche in project cargo logistics involving
large-scale governmental and commercial projects. The Company's project
logistics services include multiple-origin transportation planning and
evaluation, vendor compliance, risk/opportunity assessment, performance
measurement, procedure documentation, and forwarding of heavy material and
equipment and its attendant logistics information from multiple points of
origins to project locations. The Company believes that the addition of LIW's
Asian and European operations to the Company's existing logistics capabilities
will allow the Company to continue to expand its position in the market for
complex, project cargo logistics solutions.
INDUSTRY OVERVIEW
GENERAL. As business requirements for efficient and cost-effective
distribution services have increased, so has the importance and complexity of
effectively managing freight transportation. Businesses increasingly strive to
minimize inventory levels, perform manufacturing and assembly operations in
lowest cost locations and distribute their products to numerous global markets.
As a
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result, companies frequently desire expedited or time-definite shipment
services. To assist in accomplishing these tasks, many businesses turn to
freight forwarders and logistics providers. A freight forwarder procures
shipments from customers, makes arrangements for transportation of the cargo on
a carrier and may arrange both for pick-up from the shipper to the carrier and
for delivery of the shipment from the carrier to the recipient. A logistics
provider moves and manages goods from suppliers to end customers with the goal
of meeting specific customer requirements, working capital objectives and
overall customer satisfaction.
Historically, most transportation services have been provided by companies
with capabilities in only one or a very limited number of modes. The Company
believes it has differentiated itself by providing traditional transportation
services in virtually every mode, as well as by combining these services with
value-added logistics services, including pick-and-pack services,
merge-in-transit, inventory management, warehousing, reverse logistics,
dedicated trucking and regional and local distribution. The Company's logistics
managers have the ability to utilize a portfolio of transportation products and
design optimal transportation solutions for its customers. The Company believes
that it has a competitive advantage resulting from the experience and knowledge
of its logistics managers and in the market information it possesses from its
diverse client base.
Shippers increasingly use computer technology to control inventory carrying
costs and improve customer service by decreasing shipping time through
just-in-time delivery systems. The complex distribution systems that result
require not only selection of the proper mode to transport freight, but also
hands-on management to minimize overall logistics costs. At the same time, in an
effort to reduce overhead costs and introduce the expertise necessary to manage
their distribution systems, many shippers have sought to downsize their
transportation departments by outsourcing all or a portion of the traffic
function.
<TABLE>
<C> <S> <C>
-- FREIGHT Freight forwarding services are provided through the following modes
FORWARDING. of transportation:
-- AIR The air freight forwarding industry is highly fragmented. Many
FREIGHT. industry participants are capable of meeting only a portion of their
customers' required transportation service needs. Some national
domestic air freight forwarders rely on networks of terminals
operated by franchisees or non-exclusive agents. The Company
believes that the development and operation of Company-owned and
exclusive agent-owned service centers under the supervision of the
Company's management have enabled it to provide a higher degree of
financial and operational control and service assurance than that
offered by franchise-based networks.
-- OCEAN. The ocean freight forwarding industry is highly fragmented,
consisting of dedicated freight forwarders, private owners and
operators of shipping fleets, and state-controlled shipping
companies. The demand for ocean freight forwarding services is
largely a factor of the level of worldwide economic activity and the
distance between major trade areas. Freight rates are determined in
a highly competitive global market and have been characterized by a
steady decline since the early 1990s.
-- TRUCKING. The largest segment of the non-local trucking industry is comprised
of private fleets owned and operated by shippers. This segment has
been gradually shrinking since 1980 as truckload carriers have
become more service oriented in a deregulated environment. The
shipper's focus on profitability has driven a trend toward
outsourcing of private fleets. The next largest segment, for-hire
truckload, is comprised primarily of specialized niches such as
household goods, temperature-controlled flats and tanks. Truckload
carriers have traditionally focused on providing services within
only one of these niches, with few dominating any particular niche
or operating equipment in multiple niches. Less than truckload
services are provided by a large number of carriers who specialize
in consolidating smaller shipments into truckload quantities for
transportation across regional and national networks. Freight
forwarders such as the Company have been able to capitalize on these
trends in the trucking industry by purchasing excess capacity at
reduced rates and by providing incremental freight business to
truckload carriers in regions where the marketing presence of the
truckload carriers may not be as strong as the freight forwarders.
</TABLE>
LOGISTICS SERVICES. The U.S. logistics services industry generated approximately
$25.0 billion in revenues in 1996, having experienced an average annual growth
rate of approximately 20.0% from 1992 to 1996. The Company believes that the
global logistics services industry is three to four times the size of the U.S.
logistics services industry. Such growth is a result of increasing demands by
traditional freight forwarding customers for more than the simple movement of
freight from their transportation suppliers. To meet these needs, suppliers,
such as the Company, seek to customize their services by, among other things,
providing information on the status of materials, components and finished goods
through the logistics pipeline and providing performance reports on and proof of
delivery for each shipment. The growing emphasis of some manufacturers on
just-in-time manufacturing and production practices has also added to the demand
for rapid deliveries that are available through air freight. As a result of
these developments, many companies are realizing that they perform freight
transportation management and logistics
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functions less effectively than third-party providers, such as the Company, and
are relying increasingly on partial or complete outsourcing of these functions.
At the same time, major shippers are seeking to utilize fewer firms to service
their transportation management and logistics needs. The Company believes that
the continuing trend toward outsourcing and the continuing concentration of
transportation suppliers by major shippers offers significant opportunities for
those forwarders, such as the Company, with extensive, well-managed global
networks and advanced logistics information systems.
RELOCATION SERVICES. The top 15 HHG carriers, which accounted for approximately
83.0% of total revenues generated by the 61 carriers who filed with the STB
according to the American Movers Conference, generated approximately $3.2
billion of revenues in 1996, an increase of 5.5% over 1995. The domestic HHG
relocation services market is competitive and highly fragmented. The Company
competes with approximately 2,000 carriers for the domestic interstate
transportation of household goods. These carriers are generally van lines that
use the services of independent moving and storage agencies that contractually
affiliate with the carrier, although some carriers own and operate company-owned
branches. The relocation services industry generally markets to three distinct
customer groups: (i) corporate accounts who pay for the relocations of their
employees, (ii) private transferees paying for their own moves and (iii) the
U.S. Government, which pays for both civilian and military relocations of their
personnel. The Motor Carrier Act of 1980 (the "Motor Carrier Act") reduced
regulation in the trucking industry and provided the opportunity for increased
competition which has resulted in generally low profit margins due to the
escalation of discounts against tariffs within the HHG industry.
The international HHG relocation services market has grown due to increasing
globalization of economics and the advent of free trade. International
relocation services are principally offered by specialist companies that
generally provide services through non-exclusive agents at the destination
locations around the world. There are a few larger companies that own and
operate their own businesses in major markets, although that is the exception
rather than the rule. A significant number of domestic HHG carriers offer
international relocation services through wholly-owned subsidiaries or separate
departments that specialize in international relocation services.
GLOBAL NETWORK
As of June 30, 1997 and after giving pro forma effect to the LIW
Acquisition, the Company operated a global network in 75 countries consisting of
654 offices in 33 countries and strategic partnerships in 42 countries with 352
locations. Within this network of over 1,000 locations, the Company maintains a
strong local presence in North America, Europe and Asia/Pacific.
NORTH AMERICA. As of June 30, 1997 and after giving pro forma effect to the LIW
Acquisition, the Company had 32 Company-owned offices located in 32 cities with
approximately 1,632 employees and had 312 agents covering an additional 404
locations in the United States. The Company developed its North American network
through the acquisition and integration of Bekins in May 1996 and LEP in October
1996. The Company has successfully integrated the major road transportation and
logistics services hubs of Bekins and LEP-USA in Columbus, Ohio. The Company
believes that this combined system, which supports the Bekins TimeLok System and
LEP-USA's Profitnet Logistics System, is one of the largest of its type in the
United States. The Company expects the synergy benefits of the combined system
to be (i) reduced fixed costs, (ii) better utilization of linehaul equipment
between the hub and service centers, (iii) improved cycle time for Bekins
customers, (iv) the ability to offer improved service schedules and
time-definite service and (v) combination of the previously separate operating
networks of Bekins and LEP-USA, which enable the Company to view its
U.S.-domestic business as an integrated product offering. In addition, as of
June 30, 1997, LEP-USA and LEP-Canada provided international freight forwarding,
customs brokerage, and logistics services through 68 offices located throughout
the United States, Puerto Rico and Canada. Matrix provides project cargo and HHG
relocation services through five offices located in the United States.
EUROPE. LIW is a major provider of freight forwarding and transportation and
logistics services throughout Europe. As of June 30, 1997, LIW employed 2,591
employees in 150 locations in 12 European countries. Through its U.K.
subsidiary, LIW is one of the largest freight forwarders in the United Kingdom,
with approximately 44 locations with 943 employees as of September 30, 1997.
Matrix maintains international operations through eight joint venture offices in
the former Soviet Union and numerous non-exclusive and unaffiliated HHG agents
worldwide.
ASIA/PACIFIC. As of June 30, 1997, LIW had 46 locations in 14 countries in the
Asia/Pacific region with approximately 1,800 employees. LIW is a major
participant in the freight forwarding markets of Hong Kong, Singapore and the
Philippines. In March 1997, LIW's Asia/Pacific operations were recognized by
CARGONEWS ASIA as one of the top two multi-modal forwarders in 1996 and received
a total of three Asian Freight Industry Awards which were awarded by CARGONEWS
ASIA based on input from its 13,000 readers.
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SERVICES PROVIDED
The Company's services can be broadly classified into the following
categories:
FREIGHT FORWARDING SERVICES. The Company offers domestic and international air,
ocean, road and rail freight forwarding for shipments of heavy cargo that are
generally larger than shipments handled by integrated carriers of primarily
small parcels such as Federal Express Corporation and United Parcel Service of
America. The Company's basic freight forwarding business includes the following
services which are complemented by numerous value-added, customized and
information technology-based options to meet customers' specific needs:
<TABLE>
<C> <S>
-- International door-to-door shipment of freight, including service to remote
destinations, lesser developed countries and locations which are difficult to
reach.
-- One-, two- and five-day express transport service within the United States and
between the United States and Puerto Rico.
-- Value-added complementary services including customs brokerage, full tracking of
goods in transit, warehousing, packing/unpacking and insurance.
</TABLE>
LOGISTICS SERVICES. Logistics services involve taking responsibility for several
or all steps in the supply chain of products. The Company's access to worldwide
distributions systems, together with its experience in coordinating deliveries
from various supply sources and its advanced information systems have enabled
the Company to capitalize on outsourcing of distribution functions by
manufacturers and retailers and other companies. Shippers that avail themselves
of the Company's logistics services often realize financial savings due to
reduced fixed costs associated with outsourcing distribution, the Company's
volume discounts and information base and the Company's ability to reliably and
efficiently perform complex, multi-phased distribution projects. The Company's
logistics services provide value to the Company's customers by providing
reliable access to low cost materials and product sources, reducing distribution
times and facilitating rapid movement and integration of products and materials.
For example, the Company currently provides the following logistics-based
management services:
<TABLE>
<C> <S>
-- Pharmaceutical distributions including high-speed, time-definite distributions of
sales samples to pharmaceutical companies' sales forces to enable their
pharmaceutical customers to comply with United States federal regulations. The
Company's distribution systems permit the Company to deliver pharmaceutical samples
to over 3,000 distribution points in a 24- to 48-hour period with 2-hour delivery
windows.
-- Direct to store logistics for retail clients involving coordination of product
receipt directly from manufacturers and dividing large shipments from the
manufacturer into numerous smaller shipments for delivery directly to retail
outlets or distribution centers to meet time-definite product launch dates.
-- Merge-in-transit logistics involving movement of products from various vendors at
multiple locations to a Company facility and the subsequent merger of the various
deliveries into a single coordinated delivery to the final destinations. For
example, such services are useful to technology manufacturers and resellers where
major installations are organized to meet a customer's need to minimize disruptions
to its clients' businesses and maximize the efficiency of the customer's technical
support staff/field engineers.
-- Value-added, high-speed, time-definite, total-destination programs that include
packaging, transportation, unpacking and placement of a new product. The Company
will also package and remove the old equipment that is being replaced by the
equipment that the Company delivers.
-- Packaging, transportation, unpacking and stand installation for domestic and
international trade shows and major expositions.
-- Global project cargo logistics for major infrastructure developments, including
shipments of equipment to prepare a site for the development, materials used in
construction of the project and final products manufactured following construction
of the project.
-- Reverse logistics involving the return of products from end users to manufacturers,
retailers, resellers or remanufacturers, including verification of working order,
defect analysis, serial number tracking, inventory management and disposal of
sensitive materials in accordance with regulations. An example of such services is
</TABLE>
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<TABLE>
<C> <S>
the removal of an old photocopying system for reuse, recycling or remanufacture at
the time of delivery of a new photocopying system.
</TABLE>
RELOCATION SERVICES. The Company's domestic and international relocation
services are generally provided through the Bekins and Matrix subsidiaries in
the United States. The domestic business is generally handled by Bekins and
offers a full range of relocation services within the United States focusing on
the corporate account, private transferee and government/military sectors. As of
June 30, 1997, Bekins operated through a network of 223 independent agents
covering 283 locations. Based on 1996 revenue data filed with the STB, Bekins is
the sixth largest carrier of household goods.
The Company's international relocation services are provided primarily
through Matrix from its New York, Virginia and California offices. The Company's
principal customers for international relocation services are U.S.-based
multi-national corporations, various United States government agencies and the
United Nations. The Company handles relocations from the United States to other
countries, relocations from other countries to the United States and relocations
between two international destinations on behalf of its customers. The Company
uses a number of non-exclusive HHG agents in the countries in which it provides
services.
OPERATIONS
As of June 30, 1997 and after giving pro forma effect to the LIW
Acquisition, the Company provided transportation and logistics services in 75
countries through the following facilities:
<TABLE>
<CAPTION>
NUMBER OF
LOCATIONS
-----------
<S> <C>
Company-owned offices............................................................. 249
Agent-owned offices............................................................... 405
Offices owned by strategic partners............................................... 352(1)
-----
Total............................................................................. 1,006
-----
-----
</TABLE>
(1) Approximate number.
COMPANY LOCATIONS. Offices operated by Company employees rather than agents are
generally structured as stand-alone business units that operate in largely the
same manner as the independent, exclusive agents. Customers and carriers
generally do not distinguish between agent locations and Company-owned locations
as both must display, utilize and promote the Company's image, information
technology systems and processes.
EXCLUSIVE AGENTS. The Company's contracts with its agents have terms ranging
from 30 days to as much as 10 years. Short-term cancelable contracts are the
exception rather than the norm, particularly for larger agents, and the majority
of the Company's contracts with agents range from 3 to 5 years. Contracts with
agents call for exclusive representation of the Company in respect of the
services provided by the Company. Agents are required to utilize the logo, image
and information systems of the Company. Each agent operates as an independent
business responsible for all costs associated with sales, operations, billing
and any related overhead for these items and are compensated by sharing in the
revenue generated by the business handled by such agent. An agent can (i)
generate sales which generally result in a sales commission or sharing of the
gross profit produced and (ii) provide services on behalf of the Company such as
origin, destination or other transportation services for which the agent is
compensated based on a prescribed revenue distribution formula.
STRATEGIC ALLIANCE PARTNERS. Arrangements with LIW's strategic alliance partners
are generally less stringent than with independent agents but generally involve
exclusive representation by the strategic partner on behalf of the Company.
Although strategic alliance partners are encouraged to utilize the logo and
image of the Company, they are required to acknowledge that they have no rights
to the Company's trademarks and use it only with the Company's permission.
Strategic alliance partners are encouraged to utilize the Company's information
technology systems but are not required to do so. Strategic alliance agreements
are generally not for a specified period and are terminable by either party
providing various periods of notice.
NON-EXCLUSIVE AGENTS. In countries where the Company does not have Company-owned
operations, exclusive agents or strategic alliance partners, the Company
utilizes the services of non-exclusive agents. Non-exclusive agents have no
contractual commitment to the Company and do not use its name, logo or systems.
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EQUIPMENT. As of June 30, 1997 and after giving pro forma effect to the LIW
Acquisition, the Company owned approximately 204 vehicles and 890 trailers and
leased approximately 63 vehicles and 300 trailers. Approximately 50 vehicles and
925 trailers are located in the United States, 32 vehicles and 257 trailers are
located in Europe, 47 vehicles and 8 trailers are located in Puerto Rico and 138
vehicles are located in Asia. Such equipment is used for transportation of
freight by the Company and its agents.
INFORMATION SYSTEMS
The Company believes that its ability to provide its customers with timely
access to accurate information regarding the status of cargo in transit is a
point of differentiation from its competitors and is a critical factor to
customer retention and expansion on a multi-modal basis of the Company's
customer base and services provided to existing customers. The Company also
believes that the ability to monitor all purchased transportation costs and
compare them to anticipated costs on a job-by-job basis is critical to
maintaining and growing margins. The Company utilizes FAST 400, a global,
multi-modal, multi-currency and multi-lingual integrated freight forwarding and
job costing system that provides international tracking, custom services,
document preparation, document transmittal and electronic data interchange
("EDI") interfaces with customers and carriers. FAST 400 is currently installed
in the majority of the Company's operations in Europe, the United States and key
locations in Asia. The Company plans to install FAST 400 at its facilities
worldwide. The Company's Purchase Order Management System ("POMS") provides item
level tracking at the purchase order level and links multiple purchase orders to
fulfill customer service requirements. POMS is currently installed in the
Company's operations in Europe and the Company plans to extend use of POMS to
its facilities worldwide. BUSINESS 400 is a financial system that is fully
integrated with FAST 400 and is utilized in the Company's operations in parts of
Europe and part of Asia and the Company plans to extend the use of BUSINESS 400
throughout Europe and Asia. The Company's Bekins operations currently utilize
the BECOM System, a mainframe system that provides ground transportation,
warehouse and reverse logistic information services including a nationwide
asset/inventory tracking and shipment monitoring systems which feature
state-of-the-art barcoding technology. The Company's Matrix operations currently
utilize MATRAK. The Company's LEP-USA subsidiary utilizes FAST 400 for all
international shipments, and for its domestic business it uses a proprietary
system called PACER. The Company intends to integrate the LEP PACER domestic
system and the Bekins BECOM domestic logistics system into a single domestic
system, based on the FAST 400 international system prior to the end of the year
2000, which will result in a single global system that processes all of the
Company's business on a common platform. The Company expects to spend
approximately $30.0 million over the next three years to expand its existing
FAST 400 system to all of its facilities and improve its existing information
technology to ensure that the Company remains competitive with other logistics
providers.
The Company believes that its information systems that integrate independent
agents and select strategic alliance partners with the Company's operations are
a competitive advantage and provide an incentive for the Company's independent
agents and strategic alliance partners to continue to do business with the
Company. The information technology systems result in increased efficiencies and
reduced costs by providing direct interface between the Company, its customers,
agents and strategic alliance partners.
MARKETING
An important part of the Company's business strategy is its approach to a
single global brand and identity, its treatment of distinct customer segments
and its emphasis on vertical industry know-how and logistics services. The
Company's strategy of providing network-based global logistics requires that all
operating units and agent-managed operations reflect the same corporate brand.
The Company believes that its business and operations will be positively
affected if all of its employees, suppliers, agents, partners and customers
share the same perception of the Company's business strategy, products, values
and culture. Accordingly, the Company is developing an integrated global brand
that is expected to be introduced during the first quarter of 1998.
The Company believes that its target customer base consists of: buyers of
traditional transportation services that are motivated by cost and transit-time
considerations and buyers of logistics management services that are seeking
operating efficiencies, increased revenues and improved customer service
resulting from the end-to-end management of inventory. To enjoy the benefits of
both customer segments, the Company has organized its sales and marketing
efforts along two lines: global/national sales personnel and a global logistics
solutions team. Global and national sales personnel focus their sales efforts on
senior transportation executives, financial officers and materials managers of
companies that are complex users of international transportation logistics
services. The Company's goal is to provide such customers with effective
transportation programs that reduce the customers' total cost of shipping goods.
Because multi-national companies increasingly require complex analysis of
their logistics activities, the Company is currently organizing a Global
Logistics Solutions Team to perform consulting, transportation management,
inventory management and order fulfillment services that enhance the Company's
traditional transportation services. The Global Logistics Solutions Team will
operate as an independent division that works in partnership with global account
representatives who are primarily responsible for clients, and will be
responsible for the implementation of the clients' logistics solutions. The
Company intends to offer global
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solutions programs on a three to five year contractual basis and may feature
incentive pricing based on performance, resulting in increased margins when the
Company's performance exceeds client expectations.
The Company has determined that its customers are increasingly seeking
logistics answers and services tailored to specific industries. Accordingly, the
Company believes that service providers that organize sales, marketing and
product development along industry lines will have a competitive advantage over
providers that address the transportation and logistics needs of all industries
similarly. The Company is organizing product development and marketing groups
for life sciences (health care and pharmaceuticals), office technology, medical
equipment and products, aviation and defense and retail. The Company believes
that if it achieves recognition as an industry-based expert in logistics, it
will develop longer-lasting client relationships with customers in targeted
industries and secure higher-margin business from such customers.
COMPETITION AND BUSINESS CONDITIONS
The Company's principal businesses are directly impacted by the volume of
domestic and international trade. The volume of such trade is influenced by many
factors, including economic and political conditions in the United States and
abroad, major work stoppages, exchange controls, currency fluctuations, war and
other armed conflicts, and United States and international laws relating to
tariffs, trade restrictions, foreign investments and taxation.
The global logistics services and transportation services industries are
intensively competitive and are expected to remain so for the foreseeable
future. The Company competes against other integrated logistics companies, as
well as transportation services companies, consultants and information
technology vendors. The Company also competes against carriers' internal sales
forces and shippers' transportation departments. This competition is based
primarily on freight rates, quality of service (such as damage free shipments,
on-time delivery and consistent transit times), reliable pickup and delivery and
scope of operations.
The Company also competes with transportation services companies for the
services of independent agents, and with trucklines for the services of
independent contractors and drivers. The Company encounters competition from a
large number of firms with respect to the services provided by the Company. Much
of this competition comes from local or regional firms which have only one or a
small number of offices and do not offer the breadth of services and integrated
approach offered by the Company. However, some of this competition comes from
major United States and foreign-owned firms which have networks of offices and
offer a wide variety of services. The Company believes that quality of service,
including information systems capability, global network capacity, reliability,
responsiveness, expertise and convenience, scope of operations, customized
program design and implementation and price are important competitive factors in
its industry.
Competition within the domestic freight forwarding industry is intense.
Although the industry is highly fragmented, with a large number of participants,
the Company competes most often with a relatively small number of freight
forwarders with nationwide networks and the capability to provide the breadth of
services offered by the Company and with fully integrated carriers focusing on
heavy cargo, including Burlington Air Express, Inc., Eagle USA Freight Inc. and
Emery Air Freight Corp. The Company also encounters competition from passenger
and cargo air carriers, trucking companies and others. As the Company expands
its international operations, it expects to encounter increased competition from
those freight forwarders that have a predominantly international focus,
including Air Express International Corporation, Expeditors International of
Washington, Inc., Fritz Companies Inc. and Circle International Group. Many of
the Company's competitors have substantially greater financial resources than
the Company.
The Company also encounters competition from regional and local air freight
forwarders, cargo sales agents and brokers, surface freight forwarders and
carriers and associations of shippers organized for the purpose of consolidating
their members' shipments to obtain lower freight rates from carriers. As an
ocean freight forwarder, the Company encounters strong competition in every port
in which it operates. This includes competition from steamship companies and
both large forwarders with multiple offices and local and regional forwarders
with one or a small number of offices. As an air freight forwarder, the Company
encounters strong competition from other air freight forwarders in the United
States and overseas. The Company believes that quality of service, including
reliability, responsiveness, expertise and convenience, scope of operations,
information technology and price are the most important competitive factors in
its industry.
Competition for the domestic interstate transportation of household goods is
intense and long-term relationships with corporate accounts are difficult to
obtain and retain. In the HHG market, the Company encounters competition from
larger van lines such as North American Van Lines Inc., Allied Van Lines Inc.,
Atlas Van Lines, Inc. and UniGroup, Inc. (United Van Lines, Inc. and Mayflower
Transit, Inc.). Based on revenue data filed with the STB, Bekins has been the
sixth largest HHG carrier in the United States for more than a decade. According
to reports filed with STB, 1996 operating revenues aggregated approximately $3.2
billion for the 15 largest HHG carriers, of which approximately 79.0% was
accounted for by the six largest carriers and approximately 6.0% was accounted
for by the Company. The Motor Carrier Act reduced regulation in the trucking
industry, and
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provided the opportunity for increased competition, which resulted in generally
lower profit margins within the domestic HHG relocation industry. The
international relocations services industry is competitive and much more highly
fragmented than the domestic HHG business. Matrix competes with a large number
of specialized competitors although the Company believes that Matrix
differentiates its service offerings from many of its competitors by focusing on
"high-end" executive relocation services for leading multinational companies and
organizations.
REGULATION
The Company's domestic air freight forwarding business is subject to
regulation, as an indirect air cargo carrier, under the Federal Aviation Act by
the DOT, the successor to the Civil Aeronautics Board, although Part 296 of the
DOT's Economic Aviation Regulations exempts air freight forwarders from most of
such act's requirements. The Company's foreign air freight forwarding operations
are subject to similar regulation by the regulatory authorities of the
respective foreign jurisdictions. The air freight forwarding industry is subject
to regulatory and legislative changes which can affect the economics of the
industry by requiring changes in operating practices or influencing the demand
for, and the costs of providing, services to customers. In its ocean freight
forwarding business, the Company is licensed as an ocean freight forwarder by
the Federal Maritime Commission ("FMC"). The FMC does not currently regulate the
level of Company's fees in any material respect. The Company's ocean freight
NVOCC business is subject to regulation, as an NVOCC under the FMC tariff filing
and surety bond requirements, and under the Shipping Act of 1984, particularly
those terms proscribing rebating practices.
In the United States, the Company is subject to federal, state and local
provisions relating to the discharge of materials into the environment or
otherwise for the protection of the environment. Similar laws apply in many
foreign jurisdictions in which the Company presently operates or may operate in
the future. Although the Company's current operations have not been
significantly affected by compliance with these environmental laws, governments
are becoming increasingly sensitive to environmental issues, and the Company
cannot predict what impact future environmental regulations may have on its
business. The Company does not anticipate making any material capital
expenditures for environmental control purposes during the remainder of the
current or succeeding fiscal years.
Certain federal officials are considering implementing increased security
measures with respect to air cargo. There can be no assurance as to what, if
any, regulations will be adopted or, if adopted, as to their ultimate effect on
the Company. The Company does not believe that costs of regulatory compliance
have had a material adverse impact on its operations to date. However, failure
of the Company to comply with the applicable regulations or to maintain required
permits or licenses could result in substantial fines or revocation of the
Company's operating permits or authorities. There can be no assurance as to the
degree or cost of future regulations on the Company's business.
As a customs broker operating in the United States, the Company is licensed
by the United States Department of the Treasury and regulated by the United
States Customs Service. The Company's fees for acting as a customs broker are
not currently regulated.
The Company's local pick-up and delivery operations are subject to various
state and local regulations and, in many instances, require registrations with
state authorities. In addition, certain of the Company's local pick-up and
delivery operations are regulated by the STB. Federal authorities have broad
power to regulate the delivery of certain types of shipments and operations
within certain geographic areas, and the STB has the power to regulate motor
carrier operations, approve certain rates, charges and accounting systems and
require periodic financial reporting. Interstate motor carrier operations are
also subject to safety requirements prescribed by the DOT. In some potential
locations for the Company's delivery operations, state and local registrations
may be difficult to obtain.
The Company is regulated as a motor carrier of property by the Federal
Highway Administration of Motor Carriers, previously the ICC, by which the
Company is registered as both a common carrier, freight forwarder and a property
broker. For dispatch purposes, the Company also holds Federal Communications
Commission radio licenses. Certain of the Company's offshore operations are
subject to similar regulation by the regulatory authorities of the respective
foreign jurisdictions. Certain of the Company's warehouse operations are
licensed as container freight stations, public bonded warehouses and customs
examination sites by the United States and other sovereign countries' customs
services.
Traditionally, HHG pricing had been based upon tariffs accepted by the ICC
for each class of goods hauled by an interstate carrier. These tariffs are
generally based upon the weight of the shipment, distance traveled, type of
goods transported and points of origin and destination. Most HHG moves are now
priced significantly below tariffs through individual discount programs, binding
estimates negotiated between the carrier and individual residential customers or
on the basis of a contract between the carrier and a corporate customer. HHG
carriers participate in rate bureaus through which competitors jointly establish
and publish tariffs and rates. The Company is currently a member of the
Household Goods Carrier Bureau, which is comprised of approximately
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2,000 other common carriers of household goods, including the ten largest
carriers in the industry. The Motor Carrier Act permits certain collective
ratemaking activities through rate bureaus by exempting such ratemaking from the
antitrust laws. Management believes prices in the industry are determined by
market forces.
The Company operates nationwide as an interstate common carrier through its
subsidiary, Bekins, that holds Certificates of Public Convenience and Necessity
that were granted by the ICC. These certificates authorize Bekins to transport
various classes of goods and products. The Company's subsidiaries also operate
as contract carriers, pursuant to contract authority granted by the STB. The
Company is required to comply with STB regulations. In addition, the DOT
regulates the hours of service of the Company's drivers and other safety related
aspects of operations.
The Company is also subject to similar and other laws in the foreign
jurisdictions in which it operates. Numerous jurisdictions in Asia prohibit or
restrict United States ownership of local logistics operations, and although the
Company believes its ownership structure in Asia conforms to such laws, the
matter is often subject to considerable regulatory discretion and there can be
no assurance local authorities would agree with the Company.
A failure by the Company to comply with the foregoing laws, rules and
regulations could subject it to suspension or revocation of its operating
authority or civil or criminal liabilities, or any combination of such penalties
or both. In addition, the Company-owned service centers hold intrastate
operating authority which subjects them to the jurisdiction of various state
regulatory commissions. See "Risk Factors--Government Regulation."
From time to time, U.S. tax authorities have sought to assert that
owner-operators in the trucking industry are employees, rather than independent
contractors. No such claim has been successfully made with respect to
owner-operators serving the Company, and management is confident the
owner-operators of the Company could not be properly characterized as employees
of the Company under existing interpretations of federal and state tax law.
However, there can be no assurance that tax authorities will not successfully
challenge this position, or that such interpretations will not change, or that
the tax laws will not change. See "Risk Factors--Characteristics of the
Logistics Industry; Seasonality."
TRADEMARKS
The Company has registered trademarks on a number of variations of the
Bekins name and corporate logo in the United States. Depending on the
jurisdiction of registration, trademarks are generally protected for ten to
twenty years (if they are in continuous use during that period) and are
renewable. These trademarks are material to the Company in the marketing of its
services because of the high name recognition possessed by Bekins in the
transportation services industry. In connection with the acquisitions by the
Company, LEP-USA and LEP-Canada entered into certain Trademark License
Agreements whereby they obtained the non-exclusive right to use LEP trademarks
in their North American operations for a period of at least ten years. With the
recent acquisition of LIW, the Company obtained ownership of the LEP trademarks
with numerous variations and in the vast majority of countries in which LEP
operates. See "Recent Acquisitions."
EMPLOYEES
As of June 30, 1997, the Company and its subsidiaries had 6,352 employees,
excluding employees of agents and strategic alliance partners. Management
believes that it has good relationships with its employees. In the United
States, a total of 175 employees at five LEP-USA locations are members of
collective bargaining units affiliated with the teamsters, out of a total of
approximately 1,632 employees in the United States as of September 30, 1997. Two
of the five collective bargaining contracts expired on August 31, 1997 but have
been extended through February 28, 1998. The Company is currently renegotiating
the terms of these two contracts and hopes to reach a settlement with the unions
on the remaining issues. The Company believes that any action resulting from a
failure to reach a settlement with the unions is unlikely to have a material
adverse effect on the Company; however, there can be no assurance that the
Company's operations would not be materially adversely affected if the Company
is unable to reach such a settlement.
PROPERTIES
The properties used in the Company's operations consist principally of
freight forwarding offices and warehouse and distribution facilities. As of June
30, 1997 and after giving pro forma effect to the LIW Acquisition, the Company
had 130 office facilities, 11 of which were owned and 119 of which were leased,
and 171 warehouse facilities, 27 of which were owned and 144 of which were
leased, constituting, in the aggregate, approximately 624,714 square feet of
office space and 4.2 million square feet of warehouse space in 33 countries. The
Company is headquartered in Hillside, Illinois at an approximately 99,000 square
foot facility leased through May 2005. The Company operates a major distribution
center in Columbus, Ohio which serves as the
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national cross-docking facility for Bekins TimeLok and LEP-USA Logistics where
the Company sorts freight originating from across the United States.
The following table sets forth certain information relating to the Company's
domestic and foreign properties as of June 30, 1997 and after giving pro forma
effect to the LIW Acquisition.
<TABLE>
<CAPTION>
NUMBER OF FACILITIES
-------------------------------------
<S> <C> <C> <C>
OWNED LEASED TOTAL
----------- ----------- -----
U.S.................................................................. -- 49 49
Canada............................................................... 1 12 13
Asia/Pacific......................................................... 5 56 61
Europe............................................................... 32 146 178
-- --- ---
Total............................................................ 38 263 301
-- --- ---
-- --- ---
</TABLE>
The Company believes that its office and warehouse facilities are generally
well-maintained, are suitable to support the Company's business and are adequate
for the Company's present needs.
OWNERSHIP OF LIW SUBSIDIARIES
Certain countries in which LIW operates have regulations limiting foreign
ownership of freight forwarders. To comply with such regulations, the Company
has established trust or nominee relationships in certain countries, including
Malaysia, Philippines, Taiwan and Thailand. As a result of such arrangements,
the Company has legal ownership of only 30%, 30%, 33% and 49% of the LIW
operations in Malaysia, Philippines, Taiwan and Thailand, respectively. The
Company reports such subsidiaries as consolidated for financial reporting
purposes. See "Selected Consolidated Financial Data of LIW."
Certain LIW subsidiaries, including the principal Hong Kong subsidiary, have
minority shareholders who have rights to participate in the profits and cash
flows of such subsidiaries and who have rights which limit LIW's ability to take
certain actions without the consent of the minority holder. For certain
subsidiaries, such events include changes in the capital structure, changes in
allocation of net profits, liquidation, merger, disposal of a material part of
the assets, capital expenditures and contracts with related parties.
LIW currently owns 50.0% of the outstanding shares, and has entered into an
agreement to purchase the remaining 50.0% of the outstanding shares, of its
Italian partner. The purchase agreement requires the Company to pay installments
aggregating approximately L593,000 (approximately $960,000) plus an amount equal
to 24.0% of the proceeds derived from the sale of certain assets specified in
the purchase agreement and sold during the term of the agreement. Payment of the
final installment is due and payable on or before July 31, 1999. Upon payment of
the fifth installment on or before July 31, 1998, the holder of the other 50.0%
of the outstanding shares must transfer to LIW a number of shares equal to the
proportion of the consideration paid, but will retain a security interest in
such shares to guarantee the remaining payments. Until completion of the sale,
most significant business decisions require the unanimous written consent of all
shareholders. Since 1996, LIW has committed additional funds for the purpose of
supporting the Italian operations and in return for such commitment, LIW has
been allowed broad authority to manage the day-to-day operations and finances of
such subsidiary.
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LITIGATION
LIW is currently contesting a claim made by Danish Customs and Excise for
payment of customs duties and excise taxes of approximately L2.9 million ($4.7
million) related to alleged irregularities in connection with a number of
shipments of freight out of Denmark. Additionally, LIW is subject to a challenge
by German tax authorities relating to approximately L2.0 million ($3.2 million)
of alleged liabilities relating to the status of LIW's historical tax filings.
LIW has other tax disputes which, in the aggregate, involve amounts of L6.7
million ($10.9 million). The Company believes it has a number of defenses to the
alleged tax liabilities and it intends to defend the tax claims vigorously. LIW
has not recorded any reserves for the Danish customs matters but believes it has
established adequate reserves for the remaining total alleged tax liabilities.
Any adverse decision relating to such tax claims could materially adversely
affect the Company's liquidity and capital resources.
The Company and its subsidiaries are also defendants in legal proceedings
arising in the ordinary course of business and are subject to certain claims.
Although the outcome of the proceedings cannot be determined, it is the opinion
of management, that the resolution of these matters will not have a material
adverse effect on the Company.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the directors, executive officers and certain
key management personnel of the Company and certain of its subsidiaries as of
November 30, 1997. Members of the Board of Directors are elected annually and
hold office from the time of their election and qualification until the annual
meeting of stockholders at which their term expires or their successor is
elected and qualified or until their earlier resignation or removal. Executive
officers are elected by and serve at the discretion of the Board of Directors
until their successors are duly chosen and qualified.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------------------------------- ----------- ----------------------------------------------------
<S> <C> <C>
Roger E. Payton(1).................................. 41 President, Chief Executive Officer and Director
Gary S. Holter...................................... 43 Chief Financial Officer
Luis F. Solis....................................... 39 Executive Vice President of Strategic Marketing
Larry Tieman........................................ 49 Chief Information Officer
Ronald Jackson...................................... 45 Vice President and General Counsel
Terry G. Clarke..................................... 43 Vice President and Treasurer
Kenneth R. Batko.................................... 47 Vice President -- Corporate Controller
William E. Simon, Jr.(2)............................ 46 Chairman of the Board
Vincent J. Cebula(1)(2)(3).......................... 33 Director
Richard J. Goldstein(2)............................. 32 Director
Stephen A. Kaplan(2)................................ 39 Director
Michael B. Lenard(1)(2)............................. 42 Director
Conor T. Mullett(2)(3).............................. 31 Director
William E. Myers, Jr................................ 37 Director
</TABLE>
- ------------------------------
(1) Member of Executive Committee of the Board of Directors.
(2) Pursuant to the Stockholders Agreement, Logistical Simon has the right to
designate three members to the Board of Directors, the Opportunities Fund
has the right to designate two members of the Board of Directors and the
Principal Fund has the right to designate one member of the Board of
Directors. Messrs. Simon, Lenard and Mullett are designees of Logistical
Simon, Messrs. Cebula and Goldstein are designees of the Opportunities Fund
and Mr. Kaplan is the designee of the Principal Fund.
(3) Member of Audit Committee and Compensation Committee of the Board of
Directors.
ROGER E. PAYTON has been a director of the Company and the President and
Chief Executive Officer of the Company since May 1996. From 1982 to 1995 Mr.
Payton was the Chief Executive Officer of the following subsidiaries of NFC plc,
a logistics company: (i) Pickfords Industrial Ltd. (1982 to 1984), a U.K.-based
industrial and manufacturing services company providing transport, shipping,
installation and electrical and mechanical services, (ii) Merchants Home
Delivery Services Inc. (1985 to 1987 and 1991 to 1995), a U.S.-based delivery
and logistics services company providing logistics-related services to United
States and Canadian home furnishing retailers and manufacturers, and (iii)
Allied Van Lines Inc. (1988 to 1990), a U.S.-based van line offering relocation
services, high value product logistics services, international shipping and
freight forwarding services and insurance products to a wide array of industries
and consumers.
GARY S. HOLTER has been Chief Financial Officer of the Company since January
1997. From February 1995 through December 1996, he was Executive Vice President
and Chief Financial Officer of Bekins. From 1989 to 1995, Mr. Holter served as
Executive Vice President and Chief Operating Officer of Knapp Shoes, Inc., a
manufacturing and distribution company. From 1986 to 1988, Mr. Holter was the
Executive Vice President of Finance at Simmons Airlines, a publicly held
regional transportation carrier. Mr. Holter is a certified public accountant.
LUIS F. SOLIS has been the Executive Vice President of Strategic Marketing
of the Company since March 1997. From May 1996 to February 1997, Mr. Solis was
Vice President of Business Development of GE Capital Logistics, a logistics
services venture of GE Capital Corporation. Prior to joining GE, Mr. Solis
served as Vice President of Strategic Marketing, Global Strategies for Skyway
Freight Systems, a third-party logistics subsidiary of Union Pacific
Corporation, from 1994 to 1996. Mr. Solis served as Vice President of Global
Marketing for Circle International, a global freight forwarder, from 1991 to
1994.
LARRY TIEMAN has been Chief Information Officer of the Company since March
1997. He was Chief Information Officer for GE Capital Logistics from May 1996 to
February 1997. Prior thereto, Mr. Tieman was Senior Vice President and Chief
Information
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Officer for Schneider National Incorporated, a logistics company, from October
1993 to May 1996, and the Chief Technology Officer of the Nielson division of
Dunn & Bradstreet, a market research company, from 1990 to 1993.
RONALD JACKSON has been Vice President and General Counsel of the Company
since September 1997. Mr. Jackson was Legal Director and Secretary of LIW from
January 1996 to September 1997 and was Group Legal Advisor for LEP Group plc
from October 1989 to December 1995.
TERRY G. CLARKE has been Vice President and Treasurer of the Company since
September 1997. From October 1995 to November 1996, Mr. Clarke was Assistant
Treasurer with the M.A. Hanna Company, a Cleveland based chemicals company.
Prior to that, Mr. Clarke served as Director of Planning and Control of B.F.
Goodrich's ("Goodrich") Water Systems Group, was Director, Finance and Banking
for Goodrich and held various other management positions in the United States
and Canada for Goodrich from 1988 to 1995.
KENNETH R. BATKO has been Vice President-Corporate Controller since
November 1997. From 1994 to 1997, Mr. Batko was Assistant Controller with
Anixter International Inc., a leading supplier of wiring systems and networking
products. From 1982 to 1993, Mr. Batko was the Director of Financial Reporting
for Anixter Inc., a subsidiary of Anixter International. Prior to that Mr. Batko
was a Manager with Ernst & Young from 1974 to 1982. Mr. Batko is a certified
public accountant.
WILLIAM E. SIMON, JR. has been the Chairman of the Board of Directors of the
Company since May 1996. Mr. Simon has been the Executive Director of WESS since
1988. In addition, Mr. Simon is a director of William E. Simon & Sons (Asia),
LDC, WESS's affiliate merchant bank based in Hong Kong. Mr. Simon also serves on
the boards of directors of Hanover Compressor Co. and various private companies.
VINCENT J. CEBULA has been a director of the Company since May 1996 and is a
member of the Audit Committee and the Compensation Committee. He is also a
Managing Director of Oaktree, where he has worked since 1995. Pursuant to a
subadvisory agreement with TCW Asset Management Company ("TCW"), the general
partner of the Principal Fund, Oaktree provides investment management services
to the Principal Fund. Mr. Cebula was a Senior Vice President of Trust Company
of the West and TCW from 1994 to 1995. Prior thereto, Mr. Cebula was Executive
Assistant to the Vice Chairman of Brooke Group Ltd. where he was responsible for
the coordination of financing and investment banking activities. Mr. Cebula also
serves on the boards of directors of Decorative Home Accents, Inc. and various
private companies.
RICHARD J. GOLDSTEIN has been a director of the Company since May 1996 and
is a Senior Vice President of Oaktree where he has worked since 1995. Mr.
Goldstein was an Assistant Vice President of Trust Company of the West and TCW
from 1994 to 1995. Prior thereto, Mr. Goldstein was an Associate in the
Corporate Finance Department of Jefferies & Company, Inc. Mr. Goldstein also
serves on the boards of directors of Decorative Home Accents, Inc. and various
private companies.
STEPHEN A. KAPLAN has been a director of the Company since May 1996 and is a
principal of Oaktree. Prior to joining Oaktree in June 1995, Mr. Kaplan was a
Managing Director of Trust Company of the West and TCW. Prior to joining TCW in
1993, Mr. Kaplan was a partner in the law firm of Gibson, Dunn & Crutcher. Mr.
Kaplan serves on the boards of directors of Acorn Products, Inc., Chief Auto
Parts Inc., Decorative Home Accents, Inc., KinderCare Learning Centers, Inc.,
Roller Bearing Holding Company, Inc. and various private companies.
MICHAEL B. LENARD has been a director of the Company since April 1996 and is
a Managing Director and the Counsellor of WESS. In addition, Mr. Lenard is a
director of William E. Simon & Sons (Asia), LDC, WESS affiliate merchant bank
based in Hong Kong, and the President of WESSHIP, Inc., the general partner of
certain WESS affiliated limited partnerships that have invested in the shipping
industry. Prior to joining WESS in early 1993, Mr. Lenard was a partner in the
international law firm of Latham & Watkins. Mr. Lenard is also a director of
various private companies.
CONOR T. MULLETT has been a director of the Company since May 1996 and is a
Vice President of WESS. From 1994 to 1996 Mr. Mullett was an Associate at WESS
and from 1993 to 1994 Mr. Mullett was an Associate at GE Capital Corporation.
Mr. Mullett is also a director of various private companies.
WILLIAM E. MYERS, JR. has been a director of the Company since May 1996 and,
for more than five years, has been Chairman of the Board and Chief Executive
Officer of W.E. Myers & Co., a private merchant bank. Mr. Myers is also a
director of Aftermarket Technology Corp. and Roller Bearing Holding Company,
Inc.
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COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has an Executive Committee (the "Executive
Committee"). The Executive Committee is composed of Messrs. Cebula, Payton and
Lenard. Pursuant to the terms of the Stockholders Agreement, the Executive
Committee is authorized to take any action on behalf of the Board of Directors
in between meetings of the Board of Directors upon the unanimous approval of the
Executive Committee. In addition, the bylaws of the Company provide for an audit
committee (the "Audit Committee") which is responsible for reviewing the scope
of the Company's independent auditors' examination of the Company's financial
statements and reviewing their reports, and a compensation committee (the
"Compensation Committee"), which is responsible for determining the Company's
policies with respect to the nature and amount of all compensation to be paid to
the Company's executives and administering the Company's benefit plans. The
Audit Committee and Compensation Committee are to consist of two members, one of
whom shall be designated by the Oaktree Entities and one of whom shall be
designated by Logistical Simon.
COMPENSATION OF DIRECTORS
Non-employee directors are not currently compensated for their services, but
receive reimbursement of reasonable out-of-pocket expenses incurred in
connection with board meetings or director-related activities. The Stockholders
Agreement does, however, provide that certain members of the Board of Directors
will be entitled to receive compensation if directors who are employees of the
Company or directors who were admitted after November 7, 1996 receive additional
compensation in their capacity as directors.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE. The Summary Compensation Table below sets
forth the annual base salary and other annual compensation which the Company
paid during the year ended December 31, 1996 to the Company's Chief Executive
Officer and other executive officers of the Company whose cash salary and
bonus compensation exceeded $100,000 (the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION ----------------------------
------------------------------------------------------ SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
FISCAL SALARY BONUS COMPENSATION OPTIONS/SARS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR $ $ $ $ $
- -------------------------------------------- ----------- ----------- --------- ----------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Roger E. Payton.............................
Director, President and Chief
Executive Officer........................... 1996 165,416(1) 75,000 -- 175,000 19,432(3)
Gary S. Holter..............................
Chief Financial Officer..................... 1996 160,000(2) 100,000 -- -- 12,219(4)
</TABLE>
- ------------------------------
(1) Mr. Payton began his employment with the Company in May 1996.
(2) Mr. Holter was Executive Vice President and Chief Financial Officer of
Bekins during 1996.
(3) Mr. Payton received an automobile allowance of $6,500 in 1996. Additionally,
in 1996 the Company paid $4,965 in premiums for a life insurance policy for
Mr. Payton and contributed $7,967 as a matching payment to the account
established for Mr. Payton's benefit pursuant to the Deferred Plan (as
defined).
(4) Mr. Holter received an automobile allowance of $6,600 in 1996. Additionally,
in 1996 the Company paid $537 in premiums for a life insurance policy for
Mr. Holter and contributed $2,063 and $3,019 as matching payments to
accounts established for Mr. Holter's benefit pursuant to the Deferred Plan
and the Company's 401(k) plan, respectively.
WARRANT GRANTS IN 1996. The following table contains information concerning
the grant of warrants made during the year ended December 31, 1996 to the Named
Executive Officers. The table also lists potential realizable value of such
warrants on the basis
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of assumed annual compounded stock appreciation rights of 5% and 10% over the
life of the warrants, which is set for a maximum of seven years.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF STOCK
SECURITIES PERCENT OF TOTAL PRICE APPRECIATION FOR
UNDERLYING WARRANTS GRANTED TO EXERCISE OF WARRANT TERM
WARRANTS EMPLOYEES IN BASE PRICE EXPIRATION ----------------------
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- ---------------------------------- ----------------- ----------------------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Roger E. Payton................... 62,500 35.7% $ 25.00 5/2/03 $ 196,376 $ 873,396
.................................. 62,500 35.7% 28.00 5/2/03 8,876 685,896
.................................. 25,000 14.3% 36.00 5/2/03 155,325 561,538
.................................. 25,000 14.3% 39.00 5/2/03 80,325 486,538
</TABLE>
NEW EXECUTIVE OFFICERS AND WARRANTS GRANTED IN 1997. Luis F. Solis and Larry
Tieman began employment with the Company in March 1997 as the Company's
Executive Vice President of Strategic Marketing and Chief Information Officer,
respectively. Ronald Jackson (together with Messrs. Solis and Tieman, the "New
Executive Officers") began employment with the Company in September 1997 as the
Company's Vice President and General Counsel. The Company has agreed to pay each
of Mr. Solis and Mr. Tieman $250,000 per year, and has agreed to pay Mr. Jackson
$170,000 per year. In addition, in March 1997 the Company granted each of Mr.
Solis and Mr. Tieman warrants to purchase an aggregate of 37,500 shares of
Common Stock. The warrants vest in three equal installments in March 1998, 1999
and 2000, which installments are exercisable at a price equal to $52 per share,
$55 per share and $60 per share, respectively. In March 1997, the Company
granted Gary S. Holter warrants to purchase an aggregate of 37,500 shares of
Common Stock, which vest in three equal annual installments in March 1998, 1999
and 2000 at prices ranging from $48 and $60 per share. In September 1997, the
Company granted Mr. Jackson warrants to purchase an aggregate of 8,000 shares of
Common Stock, which vest in three equal annual installments in September 1998,
1999 and 2000, respectively, at an exercise price equal to $52 per share, $55
per share and $60 per share, respectively.
EMPLOYMENT AGREEMENTS
Mr. Payton entered into an employment agreement with the Company effective
as of April 30, 1996 which terminates on April 30, 2000 (the "Payton
Agreement"). The Payton Agreement provides for a base salary of not less than
$315,000, with annual increases and bonuses at the discretion of the Board of
Directors. In November 1996, Mr. Payton's base salary was increased to $365,000
per year. The Payton Agreement also provides for the payment by the Company of
the premium on one of Mr. Payton's personal life insurance policies and an
automobile allowance in the amount of $12,000 per year. The Payton Agreement may
be terminated by the Company for "cause" (as defined in the Payton Agreement) or
upon the death or, under certain circumstances, disability of Mr. Payton. In the
event that the Company terminates the Payton Agreement without cause or if a
constructive discharge has occurred, Mr. Payton is entitled to receive his
salary for the lesser of a period of two years from the date of termination or
the remaining term under the Payton Agreement, but in no event less than one
year's salary. During the term of the Payton Agreement and any period during
which Mr. Payton receives severance pay, Mr. Payton is prohibited from competing
with the Company and is precluded from engaging in any form of solicitation of
the Company's customers or employees. If the Payton Agreement has not been
renewed on or before the expiration date and Mr. Payton's employment with the
Company terminates pursuant to the terms of the employment agreement on the
expiration date, Mr. Payton is entitled to receive his salary for a period of
one year from the expiration date.
Mr. Holter entered into an employment agreement with the Company effective
as of March 1, 1997 which terminates on March 1, 2000 (the "Holter Agreement").
The Holter Agreement provides for a base salary of not less than $200,000 per
year and provides that Mr. Holter may receive performance-based cash bonus
compensation and performance-based equity compensation if certain financial and
other defined management objectives are satisfied. In October 1997, Mr. Holter's
base salary was increased to $250,000 per year. If the equity incentive
objectives are not fully achieved for any fiscal year, the equity compensation
may still be granted at the discretion of the Board. The Holter Agreement also
provides for an automobile allowance of $12,000 per year. The Holter Agreement
may be terminated by the Company for "cause" (as defined in the Holter
Agreement) or upon the death or, under certain circumstances, the disability of
Mr. Holter. The employment agreement provides for constructive discharge if
there has been a substantial diminution in Mr. Holter's duties and
responsibilities as directed by the Board since the date of the Holter
Agreement. In the event that the Company terminates the Holter Agreement without
cause or if there has been a constructive
69
<PAGE>
discharge, Mr. Holter is entitled to receive his salary for a period of one year
from the date of termination and a proportionate share of the cash bonus
compensation due to him for the fiscal year in which the date of termination has
occurred. During the term of the Holter Agreement and for one year thereafter,
Mr. Holter is prohibited from competing with the Company and is precluded from
engaging in any form of solicitation of the Company's customers or employees.
Mr. Tieman entered into an employment agreement with the Company effective
as of March 3, 1997 which terminates on March 3, 2000 (the "Tieman Agreement").
The Tieman Agreement provides for a base salary of not less than $250,000 per
year and provides that Mr. Tieman may receive performance-based cash bonus
compensation and performance-based equity compensation if certain financial and
other defined management objectives are satisfied. If the equity incentive
objectives are not fully achieved for any fiscal year, the equity compensation
may still be granted at the discretion of the Board. The Tieman Agreement also
provides for an automobile allowance of $12,000 per year. The Tieman Agreement
may be terminated by the Company for "cause" (as defined in the Tieman
Agreement) or upon the death or, under certain circumstances, the disability of
Mr. Tieman. The employment agreement provides for constructive discharge if
there has been a substantial diminution in Mr. Tieman's duties and
responsibilities as directed by the Board since the date of the Tieman
Agreement. In the event that the Company terminates the Tieman Agreement without
cause or if there has been a constructive discharge, Mr. Tieman is entitled to
receive his salary for a period of one year from the termination date and a
proportionate share of the cash bonus compensation due to him for the fiscal
year in which the date of termination has occurred. During the term of the
Tieman Agreement and for one year thereafter, Mr. Tieman is prohibited from
competing with the Company and is precluded from engaging in any form of
solicitation of the Company's customers or employees.
Mr. Solis entered into an employment agreement with the Company effective as
of March 3, 1997 which terminates on March 3, 2000 (the "Solis Agreement"). The
Solis Agreement provides for a base salary of not less than $250,000 per year
and provides that Mr. Solis may receive performance-based cash bonus
compensation and performance-based equity compensation if certain financial and
other defined management objectives are satisfied. If the equity incentive
objectives are not fully achieved for any fiscal year, the equity compensation
may still be granted at the discretion of the Board. The Solis Agreement also
provides for an automobile allowance of $12,000 per year. The Solis Agreement
may be terminated by the Company for "cause" (as defined in the Solis Agreement)
or upon the death or, under certain circumstances, disability of Mr. Solis. The
Solis Agreement provides for constructive discharge if there has been a
substantial diminution in Mr. Solis's duties and responsibilities as directed by
the Board since the date of the employment agreement. In the event that the
Company terminates the Solis Agreement without cause or if there has been a
constructive discharge, Mr. Solis is entitled to receive his salary through
March 3, 2000 and a proportionate share of the cash bonus compensation due to
him for the fiscal year in which the date of termination has occurred. During
the term of the Solis Agreement and for one year thereafter, Mr. Solis is
prohibited from competing with the Company and is precluded from engaging in any
form of solicitation of the Company's customers or employees.
Mr. Jackson entered into a five-year employment agreement with the Company
effective upon the occurrence of each of (i) the acquisition by the Company of a
majority of the outstanding ordinary shares of LIW stock (including all interest
exchangeable therefor or convertible thereto) and (ii) the delivery to the
Company of all warrants to purchase LIW ordinary shares and other equity
interests of LIW held by Mr. Jackson (the "Jackson Agreement"). The Jackson
Agreement provides for a base salary of not less than $170,000 per year and
provides that Mr. Jackson may receive performance-based cash compensation if
certain financial and other defined management objections are achieved. The
Jackson Agreement also provides for an automobile allowance of $12,000 per year.
The Jackson Agreement may be terminated by the Company for "cause" (as defined
in the Jackson Agreement) or upon the death or, under certain circumstances,
disability of Mr. Jackson. In the event that the Company terminates the Jackson
Agreement without cause, Mr. Jackson is entitled to receive his salary for a
period of one year from the termination date. During the term of the Jackson
Agreement and for one year thereafter, Mr. Jackson is prohibited from competing
with the Company and is precluded from engaging in any form of solicitation of
the Company's customers or employees. Prior to Mr. Jackson's relocation to the
United States it is expected that he will remain an employee of LIW at his
current salary and benefits.
The Company has agreements with certain other significant employees. See
"Recent Acquisitions."
INCENTIVE COMPENSATION PLANS
EMPLOYEE STOCK PURCHASE PLAN. The Company's Employee Stock Purchase Plans
(the "Purchase Plans") provided certain employees of the Company with the
right to purchase any or all of such employee's allocated portion, as
determined by the Board of Directors of the Company, of an aggregate of 8,500
shares of Common Stock of the Company at a purchase price of $20.00 per share
and 75,000 shares of Common Stock at a purchase price of $30.00 per share.
The right to acquire shares of Common Stock under the Purchase Plans has
terminated. A total of 33 employees purchased an aggregate of 55,150 shares
of Common Stock pursuant to the Purchase Plans.
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<PAGE>
The Purchase Plans provide that, if at any time prior to an initial public
offering, an employee who has purchased shares under the Purchase Plans is
terminated for any reason whatsoever, including without limitation, death,
disability, resignation, retirement or termination with or without cause, (i)
the Company has an option (a "call") to repurchase, in whole or in part, the
shares of Common Stock of the Company that are then owned by such employee or
any transferee which were acquired pursuant to the Purchase Plans and (ii) the
terminated employee has an option (a "put"), to sell to the Company, in whole or
in part, the shares of Common Stock then owned by such employee which were
acquired pursuant to the Purchase Plans. The purchase price for the exercise of
either the call or the put option is based on the Company's earnings for the
most recent fiscal quarter prior to termination and the number of shares of
Common Stock outstanding and subject to options and warrants to the extent such
options and warrants are in the money.
DEFERRED COMPENSATION PLAN. Effective April 28, 1997 the Company adopted
the International Logistics Deferred Compensation Plan (the "Deferred Plan") to
acknowledge and reward certain key employees of the Company. The Deferred Plan
permits certain key employees to elect to reduce their regular compensation
and/or bonus compensation on a pre-tax basis by a fixed percentage up to a
maximum specified amount. The Company may, in its sole discretion, make an
allocation on behalf of employees who meet certain requirements. Each
participant in the Deferred Plan may designate one or more of the funds
specified in the Deferred Plan for the purpose of attributing investment
experience to his accounts. Upon eligibility for retirement, death or
disability, a participant, or his beneficiary, will have a 100% vested interest
in such participant's accounts. Upon termination of employment for any other
reason, a participant will be vested with respect to (i) 100% of that portion of
his account attributable to his voluntary deferral allocations and any
applicable investment experience credited to such allocation and (ii) a
percentage of the portion of his account attributable to Company discretionary
allocations based on years of service. Notwithstanding the foregoing, the
committee which administers the Deferred Plan may, in its sole discretion,
accelerate any specified vesting period. The Company has established a trust
with Key Trust Company as trustee (the "Trustee") to hold and invest amounts
contributed pursuant to the Deferred Plan. The Company may from time to time, at
its sole discretion, direct the Trustee to purchase shares of the Company's
common stock (the "Plan Shares"). The Company may, by written action, designate
which employees are entitled to receive Plan Shares. If at any time prior to an
initial public offering, a participant's employment is terminated for any reason
whatsoever, the Company has the option to repurchase any Plan Shares held in
such participant's account. As of September 30, 1997, 3,168 Plan Shares were
held by the Trustee on behalf of participants under the Deferred Plan.
EMPLOYEE STOCK OWNERSHIP. In addition to shares of Common Stock issued to
employees under the Purchase Plans and the Deferred Plan, certain shares of
Common Stock and warrants to purchase shares of Common Stock held by employees
are required to be repurchased by the Company under certain circumstances. An
aggregate of 46,712 shares of Common Stock and warrants to purchase 175,000
shares of Common Stock held by employees of the Company are subject to put and
call options on substantially the same terms as the shares of Common Stock
purchased pursuant to the Purchase Plans described above. Warrants to purchase
an additional 228,000 shares of Common Stock held by employees of the Company
must be repurchased by the Company pursuant to the terms of such warrants upon
the termination of employment of any holder of such warrants. The repurchase
price depends upon, among other factors, the circumstances surrounding
termination of employment, the fair market value of the Common Stock on the date
of termination and the purchase price paid by the employee. With respect to
warrants to purchase 110,500 of such shares, the holders thereof have additional
rights to require the Company to repurchase, under certain circumstances, such
warrants or shares purchased upon the exercise thereof if an initial public
offering of the Company's Common Stock shall not have occurred as of specified
dates.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth as of December 15, 1997 certain
information regarding the shares of Common Stock beneficially owned by (i)
each stockholder who is known by the Company to beneficially own in excess of
5% of the outstanding shares of Common Stock, (ii) each director, Named
Executive Officer and New Executive Officer and (iii) all executive officers
and directors as a group. Unless otherwise indicated, each of the
stockholders shown in the table below has sole voting and investment power
with respect to the shares beneficially owned.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
-------------------------------
NUMBER OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER(1) SHARES(2) CLASS
- --------------------------------------------------------------------------------- -------------- ---------------
<S> <C> <C>
Oaktree Capital Management, LLC(3)............................................... 1,295,575 62.4%
The TCW Group, Inc.(4)........................................................... 695,575 33.5
TCW Special Credits Fund V--The Principal Fund................................... 695,575 33.5
OCM Principal Opportunities Fund, L.P............................................ 600,000 28.9
Logistical Simon, L.L.C.(5)...................................................... 519,532 24.4
Stephen A. Kaplan(6)............................................................. 1,295,575 62.4
Vincent J. Cebula(6)............................................................. 1,295,575 62.4
Richard J. Goldstein(6).......................................................... 1,295,575 62.4
William E. Simon, Jr.(7)......................................................... 519,532 24.4
Michael B. Lenard(7)............................................................. 519,532 24.4
Conor T. Mullett(7).............................................................. 519,532 24.4
Roger E. Payton(8)............................................................... 66,250 3.1
William E. Myers(9).............................................................. 59,938 2.8
Luis F. Solis.................................................................... 7,000 *
Gary S. Holter................................................................... 10,000 *
Larry Tieman..................................................................... 1,000 *
Ronald Jackson................................................................... 0 *
Terry G. Clarke.................................................................. 0 *
Kenneth R. Batko................................................................. 0 *
Executive Officers and Directors as a Group (14 persons)(10)..................... 1,959,295 87.8
</TABLE>
- ------------------------------
* Less than one percent
(1) The address of The TCW Group, Inc. and the Principal Fund is 865 South
Figueroa Street, Los Angeles, California 90017. The address of Oaktree
Capital Management LLC, the Opportunities Fund, Mr. Kaplan, Mr. Goldstein
and Mr. Cebula is 550 Hope Street, 22nd Floor, Los Angeles, California
90071. The address of Logistical Simon, L.L.C., Mr. Simon and Mr. Lenard is
10990 Wilshire Boulevard, Suite 500, Los Angeles, California 90024. The
address of Mr. Mullett is 310 South Street, P.O. Box 1913, Morristown, New
Jersey 07692.
(2) As used in the table above, a beneficial owner of a security includes any
person who, directly or indirectly, through contract, arrangement,
understanding, relationship, or otherwise has or shares (i) the power to
vote, or direct the voting, of such security or (ii) investment power which
includes the power to dispose, or to direct the disposition of, such
security. In addition, a person is deemed to be the beneficial owner of a
security if that person has the right to acquire beneficial ownership of
such security within 60 days.
(3) All such shares are owned by the Principal Fund and the Opportunities Fund.
Pursuant to a subadvisory agreement with TCW Asset Management Company
("TAMCO"), the general partner of the Principal Fund, Oaktree manages the
investments and assets of the Principal Fund. In such capacity, Oaktree
shares voting and dispositive power with TAMCO, a wholly-owned subsidiary of
the TCW Group, Inc., as to shares owned by the Principal Fund. Oaktree also
manages the investments and assets of the Opportunities Fund.
(4) All such shares are owned by the Principal Fund. TAMCO is the general
partner of the Principal Fund. TAMCO is a wholly-owned subsidiary of TCW
Group, Inc.
(5) Includes 50,000 shares of Common Stock issuable upon exercise of warrants
which are currently exercisable.
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<PAGE>
(6) All such shares are owned by the Principal Fund and the Opportunities Fund
and are also shown as beneficially owned by Oaktree. To the extent Mr.
Kaplan, Mr. Cebula or Mr. Goldstein, on behalf of Oaktree, participates in
the process to vote or dispose of any such shares, they may be deemed under
such circumstances for the purpose of Section 13 of the Exchange Act to be
the beneficial owner of such shares. Each of Mr. Kaplan, Mr. Cebula and Mr.
Goldstein disclaims beneficial ownership of such shares.
(7) All such shares are owned by Logistical Simon. To the extent Mr. Simon, Mr.
Lenard or Mr. Mullett, on behalf of Logistical Simon, participates in the
process to vote or dispose of any such shares, they may be deemed under such
circumstances for the purpose of Section 13 of the Exchange Act to be the
beneficial owner of such shares. Each of Mr. Simon, Mr. Lenard and Mr.
Mullett disclaims beneficial ownership of such shares.
(8) Includes 2,488 shares held by the ILOG Deferred Compensation Plan for the
benefit of Roger E. Payton and 43,750 shares of Common Stock issuable upon
exercise of warrants which are currently exercisable.
(9) Includes 59,938 shares of Common Stock issuable upon exercise of warrants
which are currently exercisable.
(10) See notes (6)-(9).
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 1996, Mr. Payton purchased a total of 22,500 shares of Common Stock for
the aggregate purchase price of $450,000. In 1996 and 1997, Mr. Holter purchased
a total of 10,000 shares of Common Stock for the aggregate purchase price of
$250,000. In June 1997, Mr. Solis purchased a total of 7,000 shares of Common
Stock for the aggregate purchase price of $210,000 and Mr. Tieman purchased a
total of 1,000 shares of Common Stock for the aggregate purchase price of
$30,000. The Company loaned money to Messrs. Payton and Solis to finance the
purchase of certain shares of Common Stock by such individuals. Messrs. Payton
and Solis executed promissory notes in the amounts of $150,240 and $157,500,
respectively, in favor of the Company and pledged their shares of Common Stock
as collateral for such promissory notes pursuant to a stock pledge agreement.
The promissory notes executed by Messrs. Payton and Solis bear interest at rates
of 8% and 10% per annum, respectively, and mature on April 30, 2000 and March 1,
1998, respectively. The aggregate principal amount outstanding as of September
30, 1997 on the promissory notes executed by Messrs. Payton and Solis was
$150,240 and $157,500, respectively. In addition, pursuant to the terms of the
promissory note, Mr. Payton will make additional mandatory prepayments on his
promissory note equal to (i) 80% of the after-tax amount of any dividend or
distribution made by the Company with respect to the shares of Common Stock
subject to the pledge agreement as a mandatory prepayment of principal and
interest on the promissory note executed by Mr. Payton and (ii) 75% of the
after-tax amount of any cash bonus paid to him prior to maturity of the
promissory note. Pursuant to the terms of the note and pledge agreement executed
by Mr. Solis, Mr. Solis will remit the after-tax amount of all cash dividends
and distributions on the pledged shares of Common Stock directly to the Company
and such amounts will be applied in payment of principal and interest on the
promissory note executed by Mr. Solis.
In connection with the capitalization of the Company in May 1996, the
Principal Fund and Logistical Simon purchased 628,908 shares of Common Stock and
269,532 shares of Common Stock, respectively, at a purchase price of $20 per
share. In addition, the Company issued Logistical Simon a warrant to purchase
125,000 shares of Common Stock at an initial purchase price of $20 per share
prior to May 2, 2003 (the "Logistical Simon Warrant"). The Logistical Simon
Warrant vests in five equal annual installments beginning on May 2, 1996 and any
unvested portions of the Logistical Simon Warrant will be forfeited and
cancelled in the event of a change of control of Logistical Simon or upon the
occurrence of certain dispositions and failures to acquire Common Stock by
Logistical Simon. The exercise price of the Logistical Simon Warrant increases
daily at an effective rate of 10% per annum. The exercise price of the
Logistical Simon Warrant was $22.88 on September 30, 1997. In connection with
the Company's acquisition of LEP and Matrix in October and November 1996,
Logistical Simon, the Principal Fund and the Opportunities Fund purchased an
aggregate of 200,000 shares of Common Stock, 66,667 shares of Common Stock and
600,000 shares of Common Stock, respectively, at a purchase price of $30 per
share. WESS received a $425,000 transaction fee in consideration for services
provided in connection with the Company's acquisition of Bekins. In addition,
each of WESS and the Opportunities Fund received a $750,000 transaction fee upon
consummation of the Company's acquisition of LEP and Matrix. The Company paid a
total of $2.5 million in transaction fees to WESS and the Oaktree Entities in
connection with the LIW Acquisition, the Old Notes Offering and the New Credit
Facility.
On May 2, 1996, each of the Principal Fund and Logistical Simon,
stockholders of ILOG, loaned ILOG $336,664.50 pursuant to demand promissory
notes bearing interest at a rate equal to 8% per annum. All amounts outstanding
under such notes were repaid by ILOG in November 1996.
On May 2, 1996, Bekins entered into an executive management agreement (the
"Original Management Agreement") with WESS pursuant to which WESS agreed to
provide executive management services to Bekins, including consultation, advice
and direct management assistance with respect to operations, strategic planning,
financing and other aspects of the business of Bekins. The Original Management
Agreement had a four-year term, but was subject to earlier termination upon the
occurrence of specified events. Pursuant to the terms of the Original Management
Agreement, Bekins agreed to pay WESS a base fee of $200,000 per year and a
formula-based annual incentive fee of up to $150,000 so long as there was no
continuing or uncured material default under the material terms of the
indebtedness of Bekins. Bekins also agreed to reimburse WESS for all reasonable
out-of-pocket expenses incurred by WESS or its personnel in connection with
performance of services under the Original Management Agreement. On October 31,
1996, the Original Management Agreement was terminated by WESS and Bekins, and
WESS and ILOG entered into an executive management agreement (the "ILOG
Management Agreement") pursuant to which WESS agreed to provide the same
services to ILOG as it had previously provided to Bekins pursuant to the
Original Management Agreement. The ILOG Management Agreement terminates on May
2, 2000, subject to earlier termination upon the occurrence of specified events,
and provides that ILOG will pay WESS a management fee equal to $350,000 per year
so long as there is no continuing or uncured material event of default under the
material terms of indebtedness of ILOG or its subsidiaries. ILOG also agreed to
reimburse WESS for reasonable out-of-pocket expenses incurred by WESS or its
personnel in connection with performance of services under the ILOG Management
Agreement. In 1996, ILOG and Bekins paid WESS an aggregate of $241,000 pursuant
to the Original Management Agreement and the ILOG Management Agreement. The
Company has paid WESS management fees in the aggregate amount of $262,500 for
services provided by WESS in 1997. The Company has entered into a management
agreement with the Oaktree Entities which has substantially the same terms as
the ILOG Management Agreement.
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<PAGE>
On September 29, 1995, WESS executed agreements (the "Myers Agreement") with
W.E. Myers & Co. ("WEMCO"), a company formed by William E. Myers, Jr., a
director of the Company ("Myers"), entitling WEMCO to receive a $50,000 per year
retainer and cash and equity compensation upon the consummation, during the one
year term of the Myers Agreement and for a period of two years following the
termination thereof, of acquisitions of companies introduced by WEMCO to WESS or
its affiliates. The amount of cash fees payable and warrants to purchase ILOG
Common Stock issuable to WEMCO is based on the value of any consummated
transaction. On February 29, 1996, WESS delivered notice to WEMCO terminating
the Myers Agreement. In 1996, the Company paid WEMCO fees in the amount of
$697,000, $574,000 and $300,000 in connection with the acquisition of Bekins,
LEP and Matrix, respectively, in consideration for consulting services provided
by WEMCO to ILOG in connection with such acquisitions. On May 2, 1996, for
aggregate consideration of $600, ILOG issued Myers warrants to acquire 39,584
shares of Common Stock at any time prior to November 2, 2003 at an initial
purchase price of $20 per share. On October 31, 1996 and November 7, 1996, Myers
purchased, for aggregate consideration of $1,488.46, warrants to acquire 13,024
shares of Common Stock and 7,330 shares of Common Stock, respectively, at an
initial purchase price of $30 per share, exercisable at any time prior to April
30, 2004 and May 7, 2004, respectively (the "$30 Warrants"). The exercise price
of each of the $30 Warrants increases daily at an effective rate of 10% per
annum. On September 30, 1997, the exercise price of the $30 Warrants was $32.73.
Each of the foregoing transactions was consummated pursuant to the terms of the
Myers Agreement.
The Company and the holders of all of the Company's issued and outstanding
shares of Common Stock and warrants to purchase Common Stock have executed an
amended and restated Stockholders Agreement. Each of the parties to the
Stockholders Agreement has agreed to vote the Company securities held by such
party to elect a Board of Directors consisting of three directors nominated by
Logistical Simon, two directors nominated by the Opportunities Fund, one
director nominated by the Principal Fund, the Chief Executive Officer of the
Company and William E. Myers, Jr. (the "Initial Voting Agreement"). The Initial
Voting Agreement will terminate upon (i) consummation of an initial public
offering by the Company, (ii) certain sales of Company securities by Logistical
Simon, (iii) failure of the Oaktree Entities or Logistical Simon to purchase
Common Stock under certain circumstances, (iv) the occurrence of a deadlock of
the Board of Directors in the event of a default by the Company with respect to
certain of its indebtedness or the acceleration of certain of the Company's
indebtedness, a bankruptcy of the Company or the entry of a judgement exceeding
a specified level against the Company and (v) May 2, 2002. Each of the parties
to the Stockholders Agreement has agreed that, following the termination of the
Initial Voting Agreement for any reason other than an initial public offering,
it will vote its Company securities to elect a Board of Directors consisting of
five directors. Under such circumstances, the number of directors that the
Oaktree Entities and Logistical Simon may nominate will depend on the percentage
of voting stock of the Company held by the Oaktree Entities. Prior to
termination of the Initial Voting Agreement, the approval of six members of the
Board of Directors is required for the Company to issue securities, borrow
money, spend money, incur any obligation or take any action, except with respect
to the daily affairs and operations of the Company arising in the ordinary
course of business. In addition, prior to termination of the Initial Voting
Agreement, the Executive Committee of the Board of Directors, which consists of
one director nominated by the Oaktree Entities, one director nominated by
Logistical Simon and the Chief Executive Officer of the Company, may take any
action on behalf of the Board of Directors upon unanimous approval of the
Executive Committee. Prior to the termination of the Initial Voting Agreement,
the Audit Committee and Compensation Committee are to be comprised of one member
designated by the Oaktree Entities and one member designated by WESS. Finally,
prior to the termination of the Initial Voting Agreement, all actions taken by
the holders of Common Stock require the approval of the holders of at least 80%
of the issued and outstanding shares entitled to vote. The Stockholders
Agreement also contains certain rights of first refusal with respect to
transfers of Company securities, preemptive rights with respect to future
issuances of Common Stock or securities convertible into Common Stock by the
Company, and tag-along and drag-along rights.
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RECENT ACQUISITIONS
ACQUISITION OF BEKINS
On May 2, 1996 the Company acquired Bekins for an aggregate cash payment of
$32,195,304 and an aggregate of 45,560 shares of the Common Stock pursuant to an
Agreement and Plan of Merger dated April 10, 1996. The Company financed the
Bekins' acquisition with a portion of the $18,468,800 in proceeds received by
the Company from the issuance of an aggregate of 923,440 of shares of Common
Stock and an aggregate of approximately $32.0 million of borrowings under the
Company's $50.0 million credit facility.
ACQUISITION OF LEP-USA AND LEP-CANADA
On October 31, 1996, the Company acquired all of the issued and outstanding
capital stock of LEP-USA, a subsidiary of LIW, for an aggregate purchase price
of $4.5 million and LEP-Canada, a subsidiary of LIW, for an aggregate purchase
price of $6.5 million. The purchase price for the acquisition of LEP-USA and
LEP-Canada was financed with borrowings made pursuant to a $110.0 million credit
facility syndicated by the banks acting as agents under Bekins' previous credit
facility (the "Loan Agreement").
The Company's acquisitions of LEP-USA and LEP-Canada were the initial steps
in the Company's acquisition of LIW. In August 1996, the Company advanced LIW
$1.0 million in the form of a demand note (the "LIW Note"). In exchange for
extending such advance, LIW issued a warrant to the Company to purchase 420,000
ordinary shares, par value L.01 per share of LIW capital stock ("Ordinary
Shares"). In addition, concurrently with the Company's acquisition of LEP-USA
and LEP-Canada, (i) the Company released LIW from its obligations pursuant to
the LIW Note, (ii) LIW cancelled the warrant to purchase Ordinary Shares that
had been previously issued to the Company, (iii) LIW issued 100 Ordinary Shares
to the Company; (iv) LIW issued a warrant to the Company to purchase 419,900
Ordinary Shares (the "LIW Warrant"), and (v) certain holders of Ordinary Shares
and warrants to purchase Ordinary Shares entered into stockholder agreements and
option agreements relating to the transfer of such securities for the three year
period ending on October 31, 1999. As a result of such transactions, the Company
held a 33.3% interest in LIW's fully-diluted equity and appointed two of its
executives to serve as members of the LIW Board of Directors. In connection with
the acquisition of LEP-USA and LEP-Canada, the Company entered into two
operational working agreements providing that, for a term of seven years, each
of LEP-USA, LEP-Canada and LIW will operate their respective freight forwarding
businesses as part of global network with shared information systems platforms
based on LIW's FAST 400 system software.
ACQUISITION OF MATRIX
On November 7, 1996, the Company purchased all of the issued and outstanding
capital stock of Matrix for the aggregate consideration of approximately $19.2
million in cash and 96,000 shares of Common Stock. In connection with the
acquisition of Matrix, the Company entered into a stock purchase agreement with
the minority holder of equity securities of certain subsidiaries of Matrix. The
aggregate consideration paid by the Company to acquire the minority interests of
the Matrix subsidiaries was $754,988 in cash and 4,000 shares of Common Stock.
The Company financed the acquisition of Matrix with borrowings made pursuant to
the Loan Agreement and the proceeds from the sale of equity securities to the
Principal Fund, the Opportunities Fund, Logistical Simon and an affiliate of one
of the Company's lenders. See "Certain Relationships and Related Transactions."
In connection with the acquisition, the Company entered into employment
agreements with each of the four selling stockholders of Matrix. Each employment
agreement with the four Matrix executives terminates on December 31, 2001 and
provides for an annual base salary of $375,000 per year. In addition, each
employment agreement provides for cash bonus compensation of $250,000 and
approximately 8,333 shares of Common Stock awards for each of the years ended
December 31, 1997, 1998 and 1999 if certain of Matrix's EBITDA targets are met.
The cash bonus will increase to $500,000 for each of the years ended December
31, 2000 and 2001 if Matrix's EBITDA is at least $9.0 million for the years
ended December 31, 2000 and 2001, respectively. In addition, the Matrix
employment agreements provide that even if annual EBITDA targets are not met,
unpaid cash bonus compensation will be paid to the Matrix executives if Matrix's
aggregate EBITDA for the five year period beginning January 1, 1997 is equal to
or greater than $40.2 million, there is a change of control of Matrix or the
Company during the term of the Matrix employment agreements, or any such Matrix
executive is terminated without cause or by constructive termination. Unpaid
stock bonus compensation will be paid to the Matrix executives if Matrix's
aggregate EBITDA for the five year period beginning January 1, 1997 is at least
$40.2 million and there is a change of control of the Company or Matrix during
the contract term, the Matrix executive's employment is terminated without cause
or by constructive termination or the Company has consummated a qualifying
registered public offering of the Company's equity securities. The Matrix
employment agreements provide that the Matrix executives will be elected to the
board of directors of Matrix and that all major corporate transactions by Matrix
must be approved by the Company and a majority of the Matrix executives. Shares
of Common Stock issued to each of the Matrix executives in consideration for the
acquisition by the Company of the Matrix capital stock and shares of Common
Stock
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issued to each of the Matrix executives pursuant to the Matrix employment
agreements are subject to certain put and call rights of such Matrix executive
and the Company in the event of a termination of such Matrix executive's
employment by Matrix under certain circumstances. The purchase price for such
put and call options is subject to and based upon the circumstances under which
the employment of the Matrix executive's employment was terminated.
ACQUISITION OF LIW
In the period from May 1997 through September 1997, the Company entered into
option agreements (the "LIW Options") with all of the holders of Ordinary Shares
and warrants to purchase Ordinary Shares of LIW. The LIW Options provided for
the future acquisition of all of LIW's outstanding Ordinary Shares (other than
shares previously acquired by the Company in October 1996. On September 30,
1997, the Company exercised four of the LIW Options for consideration consisting
of L4,500 and warrants to purchase an aggregate of 19,045 shares of Common Stock
at an initial exercise price of $45.00 per share (the "ILOG Warrants"). The ILOG
Warrants are exercisable prior to December 31, 2007. Additionally, on September
30, 1997, the Company exercised the LIW Warrant for L4,199 and exercised
warrants to purchase 306,000 Ordinary Shares of LIW for aggregate consideration
of L253,980. As a result of the foregoing transactions, ILOG owned 726,120
Ordinary Shares, or 75.2% of LIW's issued and outstanding Ordinary Shares as of
September 30, 1997 (the "LIW Acquisition"). On October 1, 1997, certain
employees of LIW returned their warrants to purchase Ordinary Shares to LIW for
cancellation and entered into employment agreements with ILOG or LIW. In October
1997, ILOG purchased warrants to purchase Ordinary Shares held by a former ILOG
employee for $35,000 pursuant to the terms of a pre-existing agreement. On
December 12 and 15, 1997, the Company exercised all remaining LIW Options for an
aggregate exercise price of L462,467 ($763,533). Upon exercise of such remaining
LIW Options, the Company became the holder of 100% of LIW's issued and
outstanding voting Ordinary Shares.
In connection with the LIW Acquisition, the Company entered into an option
agreement to acquire all 50,000 of LIW's issued and outstanding LIW preference
shares (the "Preference Shares") for an aggregate purchase price of L5.3 million
($8.6 million). The Company exercised said option on December 12, 1997. Upon
exercise of the remaining LIW Options and the Preference Shares option on
December 12 and 15, 1997, LIW became a wholly-owned subsidiary of the Company.
The LIW Options contain limited representations and warranties and only
three of the LIW Options relating to Ordinary Shares entitle the Company to
receive indemnification for breaches of representations, warranties and
covenants of the transferring holders. In addition, the three LIW Options that
contain indemnification provisions limit the indemnity that the Company may
receive from the transferring holder to $400,000 and provide that the Company
may not recover under the indemnification provisions unless the losses suffered
by the Company exceed $50,000 in the aggregate. Such LIW Options contain similar
provisions relating to the indemnity obligations of the Company. The options
relating to the acquisition of the Preference Shares do not contain any
provisions relating to indemnification obligations of the Company or the
transferring holders of the Preference Shares.
In connection with the LIW Acquisition, LIW entered into employment
agreements with three of its executives, who were also selling stockholders. The
agreements have terms ranging from three to five years and provide for salaries
ranging from L125,000 ($208,000) to L200,000 ($333,000) per year and benefits
consistent with such executives' current employment arrangements with LIW.
Certain of these agreements provide for annual performance based cash bonus
compensation of up to 70% of such executive's annual salary payable upon
satisfaction of certain financial targets and other clearly defined management
objectives to be agreed upon by LIW and such executive. The executives are
entitled to receive minimum bonuses aggregating approximately $2.6 million over
the terms of such agreements. Subject to the continuing employment of the
relevant executive, such bonuses may be paid in specified installments over the
term of such agreements. The employment agreements provide that, under certain
circumstances, bonuses must be refunded to the Company upon termination of
employment or other events. Each employment agreement requires the executive to
be bound by noncompetition and nonsolicitation provisions similar to those of
other ILOG executives.
In connection with the execution of the LIW Options, ILOG issued and
delivered warrants (the "Performance Warrants") to purchase a total of 73,000
shares of ILOG Common Stock at an exercise price of $45.00 per share to entities
(the "Performance Warrant Holders") related to selling stockholders who are also
executives of LIW. The shares of ILOG Common Stock that may be purchased by the
Performance Warrant Holders pursuant to the terms of the Performance Warrants
vest in annual installments over periods of three to five years based upon
achievement of specified annual consolidated EBITDA targets by certain
subsidiaries of LIW. The vesting of shares of ILOG Common Stock subject to each
of the Performance Warrants is subject to acceleration in the event of a change
of control of ILOG or termination of employment of the relevant executive by the
Company without cause or as a result of constructive discharge. The Company has
agreed, subject to limitations contained in the Company's debt and equity
financing arrangements, to purchase the Performance Warrants and shares of
Common Stock issued upon the exercise of the Performance Warrants in the event
of a termination of the relevant executive dependent upon the circumstances
giving rise to such termination or, in certain circumstances, if the Company has
not completed an initial public offering of its Common Stock prior to specified
dates.
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NEW CREDIT FACILITY
GENERAL
In connection with the Old Notes Offering, certain of the Company's direct
subsidiaries (the "Borrowers"), the Company and certain other direct and
indirect subsidiaries of the Company (including LEP-Canada), as guarantors, and
LEP UK, the Company's indirect U.K. subsidiary, as a foreign borrower, entered
into the New Credit Facility with ING, as agent. The New Credit Facility
consists of a revolving credit facility in an aggregate principal amount of
$100.0 million (the "Loans"). The New Credit Facility includes a $60.0 million
sub-limit for letters of credit, a $30.0 million sub-limit for British Pounds
Sterling borrowings by LEP UK and a $5.0 million sub-limit for the issuance of
letters of credit in Canadian Dollars. The obligations of the Borrowers under
the New Credit Facility are joint and several. The obligations of LEP UK under
the New Credit Facility are several to LEP UK. The Loans will mature in October
2002.
Indebtedness under the New Credit Facility, including the Loans to LEP UK,
is secured by a first priority security interest upon all of the Company's, the
Borrowers' and their domestic subsidiaries' accounts receivable, 100% of the
stock of each domestic active subsidiary of the Company, including LEP-Canada
(except in the case of foreign subsidiaries, in which case only 66% of the stock
of such foreign subsidiaries will be pledged), and certain intercompany
obligations. In addition, LEP UK secured its borrowings under the New Credit
Facility by a first priority security interest upon all of its accounts
receivable.
REVOLVING CREDIT FACILITY
The New Credit Facility consists of a revolving credit facility in an
aggregate principal amount of $100.0 million. The Borrowers are entitled to draw
amounts under the New Credit Facility, subject to availability pursuant to a
borrowing base formula based upon eligible accounts receivable, in order to meet
the Company's working capital requirements and for general corporate purposes.
Loans are available to LEP UK upon the release of certain liens and claims of
the holder of the Preference Share against the assets of LEP UK and its
subsidiaries.
GUARANTIES
The loans are guaranteed by the Company. In addition, certain indirect
domestic subsidiaries of the Company, guaranteed the Loans, including the Loans
to LEP UK. LEP UK is only responsible for its own obligations under the New
Credit Facility. The direct subsidiary that holds the stock of LIW pledged 66%
of that stock.
INTEREST RATES
At the Company's option, interest will accrue on the Loans with reference to
either the Prime Rate (as defined) or LIBOR (as defined), plus the applicable
interest margin. The Prime Rate is defined as, on any date, the arithmetic
average of the prime rates in effect from time to time as announced by the Chase
Manhattan Bank, Citibank and Morgan Guaranty Trust Company. LIBOR is defined as
the London Interbank Offered Rate, as adjusted to include any reserve
requirement of the Lenders. The applicable interest margin will be 0.5% until
March 31, 1998 for Prime Rate loans and 2.0% for LIBOR loans. Between April 1,
1998 and October 27, 1998, the applicable interest margin will be the lower of
(i) the foregoing margins or (ii) a percentage which will fluctuate between 0.0%
and 1.0% for Prime Rate loans and between 1.5% and 2.5% for LIBOR loans, based
on the ratio of the Company's funded indebtedness to EBITDA (the "Floating
Margin"). From October 28, 1998, the Floating Margin will determine the
applicable interest margin.
MANDATORY AND OPTIONAL PREPAYMENT
With the exception of mandatory prepayments in connection with certain
change of control events and certain asset dispositions involving a borrowing
base reduction, the New Credit Facility does not contain any mandatory
prepayment provisions as long as the aggregate amount of the Loans does not
exceed the level of borrowing base availability or the commitments under the New
Credit Facility. The New Credit Facility provides that the Company may prepay
Loans in whole or in part without penalty, subject to reimbursement of the
lender's breakage and redeployment costs in the case of prepayment of LIBOR
loans. The definition of Change of Control in the New Credit Facility in certain
circumstances is be more restrictive than that contained in the Indenture.
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COVENANTS
The New Credit Facility contains certain covenants and other requirements of
the Company and its subsidiaries. In general, the affirmative covenants provide
for mandatory reporting by the Company of financial and other information to the
agent and notice by the Company to the agent upon the occurrence of certain
events, maintenance of its properties and compliance with regulation.
The New Credit Facility also contains certain negative covenants and
restrictions on actions by the Company including, without limitation,
restrictions on indebtedness, liens, guarantee obligations, mergers, creation or
dissolution of subsidiaries, asset dispositions not in the ordinary course of
business, investments, acquisitions, loans, advances, dividends and other
restricted junior payments, transactions with affiliates, sale and leaseback
transactions, prepayment of or amendments to junior obligations, entering other
lines of business and amendments of other indebtedness. The New Credit Facility
requires the Company to meet certain financial covenants including minimum
EBITDA (as defined in the New Credit Facility) and, in certain circumstances,
interest coverage tests.
EVENTS OF DEFAULT
The New Credit Facility specifies certain customary events of default
including, without limitation, nonpayment of principal, interest or fees,
violation of covenants, inaccuracy of representations and warranties in any
material respect, cross default to certain other indebtedness and agreements,
bankruptcy and insolvency events, material judgments and liabilities, material
adverse pension plan events and unenforceability of certain documents under the
New Credit Facility, determination that any subordinated obligation is not
subordinated and change of control. The events of default under the New Credit
Facility are substantially similar to the events of default under the Indenture
except for the following material differences: (i) the Company's failure to pay
other indebtedness or judgments entered against the Company, including failure
to pay amounts due with respect to the New Notes, trigger a cross-default under
the New Credit Facility at lower dollar amounts than in the Indenture and
without the requirement of actual acceleration by the holders of such
indebtedness; (ii) the creation of liens on or failure of any security interest
in collateral securing the New Credit Facility trigger a default under the New
Credit Facility and (iii) the New Credit Facility generally has shorter grace
periods and lower default thresholds.
The description of the New Credit Facility set forth above is qualified in
its entirety to the complete text of the documents entered into in connection
therewith.
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THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER; REGISTRATION RIGHTS
The Old Notes were sold by the Company on October 29, 1997 (the "Closing
Date") to Credit Suisse First Boston Corporation, BT Alex. Brown Incorporated,
Smith Barney Inc. and ING Baring (U.S.) Securities, Inc. (collectively, the
"Initial Purchasers"). As a condition to the sale of the Old Notes, the Company
and the Initial Purchasers entered into the Registration Rights Agreement on the
Closing Date. The Registration Statement, of which this Prospectus is part, is
intended to satisfy certain of the Company's obligations under the Registration
Rights Agreement summarized below. Each broker-dealer that receives New Notes
for its own account in exchange for Old Notes where such Old Notes were acquired
by such broker-dealer as a result of market-making activities or other trading
activities must acknowledge that it will deliver a prospectus in connection with
any resale of such New Notes. See "Plan of Distribution."
The Company has agreed pursuant to the Registration Rights Agreement with
the Initial Purchasers, for the benefit of the Holders, that the Company will,
at its cost, (i) within 60 days after the date of original issue of the Old
Notes, file the Exchange Offer Registration Statement with the SEC with respect
to a registered exchange offer (the "Registered Exchange Offer") to exchange the
Old Notes for the New Notes having terms substantially identical in all material
respects to the Old Notes (except that the New Notes will not contain terms with
respect to transfer restrictions) and (ii) use all reasonable efforts to cause
the Exchange Offer Registration Statement to be declared effective under the
Securities Act within 195 days after the date of original issue of the Old
Notes. Upon the effectiveness of the Exchange Offer Registration Statement, the
Company will offer the New Notes in exchange for surrender of the Old Notes. The
Registration Rights Agreement provides that the Company is required to keep the
Registered Exchange Offer open for not less than 30 days (or longer if required
by applicable law) after the date notice of the Registered Exchange Offer is
mailed to the Holders. For each Old Note surrendered to the Company pursuant to
the Registered Exchange Offer, the Holder of such Old Note will receive a New
Note having a principal amount equal to that of the surrendered Old Note.
Interest on each New Note will accrue from the last interest payment date on
which interest was paid on the Old Note surrendered in exchange therefor or, if
no interest has been paid on such Old Note, from the date of its original issue.
Under existing SEC interpretations, the New Notes will be freely transferable by
Holders other than affiliates of the Company after the Registered Exchange Offer
without further registration under the Securities Act if the Holder of the New
Notes represents that it is acquiring the New Notes in general in the ordinary
course of its business, that it has no arrangement or understanding with any
person to participate in the distribution of the New Notes and that it is not an
affiliate of the Company, as such terms are interpreted by the SEC; provided,
however, that broker-dealers ("Participating Broker-Dealers") receiving New
Notes in the Registered Exchange Offer will have a prospectus delivery
requirement with respect to resales of such New Notes. Under similar SEC
interpretations, Participating Broker-Dealers may fulfill their prospectus
delivery requirements with respect to New Notes (other than a resale of an
unsold allotment from the original sale of the Old Notes) with the prospectus
contained in the Exchange Offer Registration Statement. Under the Registration
Rights Agreement the Company is required to allow Participating Broker-Dealers
and other persons, if any, with similar prospectus delivery requirements to use
the prospectus contained in the Exchange Offer Registration Statement in
connection with the resale of such New Notes.
A Holder (other than certain specified holders) who wishes to exchange such
Old Notes for New Notes in the Registered Exchange Offer will be required to
represent, among other things, that any New Notes to be received by it will be
acquired in the ordinary course of its business, that at the time of the
commencement of the Registered Exchange Offer it has no arrangement or
understanding with any person to participate in the distribution (within the
meaning of the Securities Act) of the New Notes and that it is not an
"affiliate" of the Company, as defined in Rule 405 under the Securities Act, or
if it is an affiliate, that it will comply with the registration and prospectus
delivery requirements of the Securities Act to the extent applicable.
In the event that (i) applicable law or interpretations of the staff of the
SEC do not permit the Company to effect such a Registered Exchange Offer, (ii)
if for any other reason the Registered Exchange Offer is not consummated within
230 days of the date of the original issue of the Old Notes, or (iii) any Holder
notifies the Company within 30 days after commencement of the Registered
Exchange Offer that such holder (x) is prohibited by applicable law or SEC
policy from participating in the Registered Exchange Offer, (y) may not resell
New Notes acquired by it to the public without delivery of a prospectus and that
the prospectus contained in the Exchange Offer Registration Statement is not
appropriate or available for such resales by such Holder or (z) is a
broker-dealer and holds Old Notes acquired directly from the Company or an
affiliate of the Company, then in lieu of conducting the Registered Exchange
Offer, the Company will, at its cost, (a) as promptly as practicable, file a
Shelf Registration Statement covering resales of the Old Notes or the New Notes,
as the case may be, (b) use all reasonable efforts to cause the Shelf
Registration Statement to be declared effective under the Securities Act and (c)
keep the Shelf Registration Statement effective until two years from the date of
its effectiveness or such shorter period that will terminate when all of the Old
Notes covered by the Shelf Registration Statement have been disposed of pursuant
to the Shelf Registration Statement. The Company is required to in the event a
Shelf Registration Statement is filed, among other things, provide to each
Holder for whom such Shelf Registration Statement was filed copies of the
prospectus which is a part of the Shelf Registration Statement, notify each such
Holder when
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the Shelf Registration Statement has become effective and take certain other
actions as are required to permit unrestricted resales of the Old Notes or the
New Notes, as the case may be. A Holder selling such Old Notes or New Notes
pursuant to the Shelf Registration Statement generally would be required to be
named as a selling security Holder in the related prospectus and to deliver a
prospectus to purchasers, will be subject to certain of the civil liability
provisions under the Securities Act in connection with such sales and will be
bound by the provisions of the Registration Rights Agreement which are
applicable to such Holder (including certain indemnification obligations). In
addition, each Holder of the Old Notes or New Notes to be registered under the
Shelf Registration Statement is required to deliver information to be used in
connection with the Shelf Registration Statement and to provide comments on the
Shelf Registration Statement within the time period set forth in the
Registration Rights Agreement in order to have such Holder's Old Notes or New
Notes included in the Shelf Registration Statement and to benefit from the
provisions regarding additional interest set forth in the following paragraph.
If (i) by December 28, 1997, the Exchange Offer Registration Statement has
not been filed with the SEC; (ii) by June 16, 1998, neither the Registered
Exchange Offer is consummated nor, within the time period specified in the
Registration Rights Agreement, the Shelf Registration Statement is declared
effective; or (iii) after either the Exchange Offer Registration Statement or
the Shelf Registration Statement is declared effective, such Registration
Statement thereafter ceases to be effective or usable (subject to certain
exceptions) in connection with resales of Old Notes or New Notes in accordance
with and during the periods specified in the Registration Rights Agreement (each
such event referred to in clauses (i) through (iii), a "Registration Default"),
additional interest ("Special Interest") will accrue on the Old Notes and the
New Notes from and including the date on which any such Registration Default
shall occur to but excluding the date on which all Registration Defaults have
been cured. Special Interest will accrue at a rate of 0.25% per annum during the
90-day period following the occurrence of any Registration Default and shall
increase by 0.25% per annum at the beginning of each subsequent 90-day period,
but in no event shall such rate exceed 1.0% per annum. Special Interest is
payable in addition to any other interest payable from time to time with respect
to the Old Notes and the New Notes.
If the Company effects the Registered Exchange Offer, it is entitled to
close the Registered Exchange Offer 30 days after the commencement thereof
provided that it has accepted all Old Notes theretofore validly tendered in
accordance with the terms of the Registered Exchange Offer.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the Registration Rights
Agreement, a copy of which is available upon request to the Company.
TRANSFER RESTRICTED SECURITIES
For purposes of the foregoing, "Transfer Restricted Securities" means each
Old Note until (i) the date on which such Old Note has been exchanged by a
person other than a broker-dealer for a New Note in the Exchange Offer, (ii)
following the exchange by a broker-dealer in the Exchange Offer of an Old Note
for a New Note, the date on which such New Note is sold to a purchaser who
receives from such broker-dealer on or prior to the date of such sale a copy of
the prospectus contained in the Exchange Offer Registration Statement, (iii) the
date on which such Old Note has been effectively registered under the Securities
Act and disposed of in accordance with the Shelf Registration Statement or (iv)
the date on which such Old Note may be distributed to the public pursuant to
Rule 144 under the Securities Act or is saleable pursuant to Rule 144(k) under
the Securities Act or another applicable resale exemption under the Securities
Act.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all the Old
Notes validly tendered and not withdrawn prior to the Expiration Date. As of the
date of this Prospectus, $110.0 million aggregate principal amount of the Old
Notes is outstanding. This Prospectus, together with the Letter of Transmittal,
is first being sent on or about [ ], 1998, to all Noteholders known to the
Company. The Company's obligation to accept the Old Notes for exchange pursuant
to the Exchange Offer is subject to certain conditions as set forth under
"--Certain Conditions to the Exchange Offer" below. The Company will issue
$1,000 principal amount of New Notes in exchange for each $1,000 principal
amount of outstanding Old Notes accepted in the Exchange Offer. Noteholders may
tender some or all of their Old Notes pursuant to the Exchange Offer. See
"--Consequences of Failure to Exchange." However, the Old Notes may be tendered
only in integral multiples of $1,000.
The New Notes will evidence the same debt as the Old Notes for which they
are exchanged, and are entitled to the benefits of the Indenture. The form and
terms of the New Notes are the same as the form and terms of the Old Notes
except that the New Notes have been registered under the Securities Act and
hence will not bear legends restricting the transfer thereof.
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Noteholders do not have any appraisal or dissenters' rights under the
Indenture in connection with the Exchange Offer. The Company intends to conduct
the Exchange Offer in accordance with the applicable requirements of Regulation
14E under the Exchange Act.
The Company shall be deemed to have accepted validly tendered Old Notes
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering
Noteholders for the purpose of receiving the New Notes from the Company.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, such unaccepted tenders of Old Notes will be returned, without
expense to the Noteholder thereof, as promptly as practicable after the
Expiration Date.
Noteholders whose Old Notes are not tendered or are tendered but not
accepted in the Exchange Offer will continue to hold such Old Notes and will be
entitled to all the rights and preferences and subject to the limitations
applicable thereto under the Indenture. Following consummation of the Exchange
Offer, the Noteholders will continue to be subject to the existing restrictions
upon transfer thereof and the Company will have no further obligation to such
Noteholders to provide for the registration under the Securities Act of the Old
Notes held by them. To the extent that Old Notes are tendered and accepted in
the Exchange Offer, the trading market for untendered and tendered but
unaccepted Old Notes could be adversely affected. See "Risk Factors
- -Restrictions Upon Transfer of and Limited Trading Market for Old Notes."
Noteholders who tender Old Notes in the Exchange Offer will not be required
to pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Company will pay all charges and expenses,
other than certain applicable taxes, in connection with the Exchange Offer. See
"--Fees and Expenses; Solicitation of Tenders."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time on
[ ], 1998, unless the Company extends the Exchange Offer, in which case the
term "Expiration Date" shall mean the date and time to which the Exchange Offer
is extended.
In order to extend the Expiration Date, the Company will notify the Exchange
Agent of any extension by oral or written notice, mail to the registered
Noteholders an announcement thereof and will make a release to the Dow Jones
News Services each prior to 9:00 a.m., New York City time, on the next business
day after the previously scheduled Expiration Date.
The Company reserves the right at its sole discretion (i) to delay accepting
any Old Notes, (ii) to extend the Exchange Offer, (iii) to terminate the
Exchange Offer and not accept the Old Notes not previously accepted if any of
the conditions set forth below under "--Certain Conditions to the Exchange
Offer" shall have occurred and shall not have been waived by the Company, by
giving oral or written notice of such delay, extension or termination to the
Exchange Agent, or (iv) to amend the terms of the Exchange Offer in any manner.
Any such delay in acceptance, extension, termination or amendment will be
followed as promptly as practicable by oral or written notice thereof to the
Noteholders. If the Exchange Offer is amended in a manner determined by the
Company to constitute a material change, the Company will promptly disclose such
amendment by means of a Prospectus supplement that will be distributed to all
Noteholders, and the Company will extend the Exchange Offer for a period of five
to ten business days, depending upon the significance of the amendment and the
manner of disclosure to Noteholders, if the Exchange Offer would otherwise
expire during such five to ten business day period. During any extension of the
Expiration Date, all Old Notes previously tendered will remain subject to the
Exchange Offer and may be accepted for exchange by the Company.
The Company shall have no obligation to publish, advertise, or otherwise
communicate any such public announcement, other than by making a timely release
to the Dow Jones News Service.
INTEREST ON THE NEW NOTES
Interest accrues on the New Notes at the rate of 9 3/4% per annum and will
be payable in cash semiannually in arrears on each April 1 and October 15,
commencing April 15, 1998. No interest will be payable on the Old Notes on the
date of the exchange for the New Notes and therefore no interest will be paid
thereon to the Noteholders at such time.
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PROCEDURES FOR TENDERING THE OLD NOTES
The tender to the Company of the Old Notes by a beneficial owner thereof as
set forth below and the acceptance by the Company thereof will constitute a
binding agreement between the tendering Noteholder and the Company upon the
terms and subject to the conditions set forth in this Prospectus and the Letter
of Transmittal.
Except as set forth below, a Noteholder who wishes to tender the Old Notes
for exchange pursuant to the Exchange Offer must transmit a properly completed
and duly executed Letter of Transmittal, including all other documents required
by such Letter of Transmittal, to the Exchange Agent at one of the addresses set
forth below under "Exchange Agent" on or prior to the Expiration Date. In
addition, (i) certificates for such Old Notes must be received by the Exchange
Agent along with the Letter of Transmittal, (ii) a timely confirmation of a
book-entry transfer (a "Book-Entry Confirmation") of such Old Notes into the
Exchange Agent's account at the Depository Trust Company (the "Book-Entry
Transfer Facility") pursuant to the procedure for book-entry transfer described
below, must be received by the Exchange Agent prior to the Expiration Date, or
(iii) the Noteholder must comply with the guaranteed delivery procedures
described below. THE METHOD OF DELIVERY OF OLD NOTES, LETTERS OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE NOTEHOLDERS. IF
SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY
INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR OLD
NOTES SHOULD BE SENT TO THE COMPANY.
Each signature on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the Old Notes surrendered for exchange
pursuant thereto are tendered (i) by a registered Noteholder who has not
completed the box entitled "Special Issuance Instructions" or the box entitled
"Special Delivery Instructions" in the Letter of Transmittal or (ii) for the
account of an Eligible Institution (as defined below). In the event that a
signature on a Letter of Transmittal or a notice of withdrawal, as the case may
be, is required to be guaranteed, such guarantee must be by a firm which is a
member of a registered national securities exchange or a member of the National
Association of Securities Dealers, Inc. or by a commercial bank or trust company
having an office or correspondent in the United States or otherwise an "eligible
guarantor institution" within the meaning of Rule 17Ad-15 under the Exchange Act
(collectively, "Eligible Institutions"). If the Old Notes are registered in the
name of a person other than the person signing the Letter of Transmittal, the
Old Notes surrendered for exchange must be endorsed by, or be accompanied by, a
written instrument or instruments of transfer or exchange, in satisfactory form
as determined by the Company in its sole discretion, duly executed by the
registered Noteholder with the signature thereon guaranteed by an Eligible
Institution.
If the Letter of Transmittal is signed by a person or persons other than the
registered Noteholder or Noteholders, such Old Notes must be endorsed by the
registered Noteholder with signature guaranteed by an Eligible Institution or
accompanied by appropriate powers of attorney with signature guaranteed by an
Eligible Institution, in either case signed exactly as the name or names of the
registered Noteholder or Noteholders that appear on the Old Notes.
If the Letter of Transmittal or any Old Notes or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such person should so indicate when signing and, unless waived by the
Company, proper evidence satisfactory to the Company of its authority so to act
must be submitted with the Letter of Transmittal.
By tendering, each Noteholder will represent to the Company that, among
other things, (i) the New Notes acquired pursuant to the Exchange Offer are
being acquired in the ordinary course of business of the person receiving such
New Notes, whether or not such person is the Noteholder, (ii) neither the
Noteholder nor any such other person has an arrangement or understanding with
any person to participate in the distribution of such New Notes, (iii) if the
Noteholder is not a broker-dealer, or is a broker-dealer but will not receive
New Notes for its own account in exchange for the Old Notes, neither the
Noteholder nor any such other person is engaged in or intends to participate in
the distribution of such New Notes and (iv) neither the Noteholder nor any such
other person is an "affiliate," as defined under Rule 405 of the Securities Act,
of the Company. If the tendering Noteholder is a broker-dealer that will receive
New Notes for its own account in exchange for Old Notes that were acquired as a
result of market-making activities or other trading activities, it will be
required to acknowledge that it will deliver a Prospectus in connection with any
resale of such New Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a Prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
DELIVERY OF DOCUMENTS TO THE DEPOSITORY TRUST COMPANY OR THE COMPANY DOES
NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of the Old Notes tendered for exchange will be
determined by the Company in its sole discretion, which determination shall be
final and binding. The Company
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reserves the absolute right to reject any and all tenders of any particular Old
Notes not properly tendered or to not accept any particular Old Notes which
acceptance might, in the judgment of the Company or its counsel, be unlawful.
The Company also reserves the absolute right in its sole discretion to waive any
defects or irregularities or conditions of the Exchange Offer as to any
particular Old Notes either before or after the Expiration Date (including the
right to waive the ineligibility of any Noteholder who seeks to tender Old Notes
in the Exchange Offer). The interpretation of the terms and conditions of the
Exchange Offer as to any particular Old Notes either before or after the
Expiration Date (including the Letter of Transmittal and instructions thereto)
by the Company shall be final and binding on all parties. Unless waived, any
defects or irregularities in connection with the tenders of Old Notes for
exchange must be cured within such reasonable period of time as the Company
shall determine. Neither the Company, the Exchange Agent nor any other person
shall be under any duty to give notification of any defect or irregularity with
respect to any tender of Old Notes for exchange, nor shall any of them incur any
liability for failure to give such notification.
Each broker-dealer that receives New Notes for its own account in exchange
for Old Notes where such Old Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities, must acknowledge
that it will deliver a prospectus in connection with any resale of such New
Notes. See "Plan of Distribution."
ACCEPTANCE OF THE OLD NOTES FOR EXCHANGE; DELIVERY OF THE NEW NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Company will accept, promptly after the Expiration Date, all Old Notes
properly tendered and will issue the New Notes promptly after acceptance of the
Old Notes. See "-- Certain Conditions to the Exchange Offer" below. For purposes
of the Exchange Offer, the Company shall be deemed to have accepted properly
tendered Old Notes for exchange when, and if the Company has given oral or
written notice thereof to the Exchange Agent.
In all cases, issuance of the New Notes for the Old Notes that are accepted
for exchange pursuant to the Exchange Offer will be made only after timely
receipt by the Exchange Agent of certificates for such Old Notes or a timely
Book-Entry Confirmation of such Old Notes into the Exchange Agent's account at
the Book-Entry Transfer Facility pursuant to the book-entry transfer procedures
described below, a properly completed and duly executed Letter of Transmittal
and all other required documents. If any tendered Old Notes are not accepted for
any reason set forth in the terms and conditions of the Exchange Offer or if
certificates representing the Old Notes are submitted for a greater principal
amount than the Noteholder desires to exchange, such unaccepted or non-exchanged
Old Notes will be returned without expense to the tendering Noteholder thereof
(or, in the case of Old Notes tendered by book-entry transfer into the Exchange
Agent's account at the Book-Entry Transfer Facility pursuant to the book-entry
transfer procedures described below, such non-exchanged Old Notes will be
credited to an account maintained with such Book-Entry Transfer Facility) as
promptly as practicable after the expiration or termination of the Exchange
Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at the Book-Entry Transfer Facility for purposes of the
Exchange Offer promptly after the date of this Prospectus. Any financial
institution that is a participant in the Book-Entry Transfer Facility's systems
may make book-entry delivery of the Old Notes by causing the Book-Entry Transfer
Facility to transfer such Old Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility in accordance with the Book-Entry Transfer
Facility's Automated Tender Offer Program ("ATOP") procedures for transfer.
However, the exchange for the Old Notes so tendered will only be made after
timely confirmation of such book-entry transfer of Old Notes into the Exchange
Agent's account, and timely receipt by the Exchange Agent of an Agent's Message
(as such term is defined in the next sentence) and any other documents required
by the Letter of Transmittal on or prior to the Expiration Date or pursuant to
the guaranteed delivery procedures described below. The term "Agent's Message"
means a message, transmitted by the Book-Entry Transfer Facility and received by
the Exchange Agent and forming a part of a Book-Entry Confirmation, which states
that the Book-Entry Transfer Facility has received an express acknowledgement
from a participant tendering Old Notes that are the subject of such Book-Entry
Confirmation that such participant has received and agrees to be bound by the
terms of the Letter of Transmittal, and that the Company may enforce such
agreement against such participant.
GUARANTEED DELIVERY PROCEDURES
If a registered Noteholder of the Old Notes desires to tender such Old Notes
and the Old Notes are not immediately available, or time will not permit such
Noteholder's Old Notes or other required documents to reach the Exchange Agent
before the Expiration Date, or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if (i) the tender is made
through an Eligible Institution, (ii) prior to the Expiration Date, the Exchange
Agent receives from such Eligible Institution a properly completed and duly
executed Letter of Transmittal (or a facsimile thereof) and Notice of Guaranteed
Delivery, substantially in the form provided by the Company (by telegram, telex,
facsimile transmission, mail or hand delivery), setting forth the name and
address of the Noteholder and the amount of Old Notes tendered, stating that the
tender is being made
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thereby and guaranteeing that within five New York Stock Exchange ("NYSE")
trading days after the date of execution of the Notice of Guaranteed Delivery,
the certificates of all physically tendered Old Notes, in proper form for
transfer, or a Book-Entry Confirmation, as the case may be, and any other
documents required by the Letter of Transmittal will be deposited by the
Eligible Institution with the Exchange Agent, and (iii) the certificates for all
physically tendered Old Notes, in proper form for transfer, or a Book-Entry
Confirmation, as the case may be, and all other documents required by the Letter
of Transmittal, are received by the Exchange Agent within five NYSE trading days
after the date of execution of the Notice of Guaranteed Delivery.
WITHDRAWAL RIGHTS
Tenders of the Old Notes may be withdrawn at any time prior to the
Expiration Date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent at one of the addresses set forth below under
"Exchange Agent." Any such notice of withdrawal must specify the name of the
person having tendered the Old Notes to be withdrawn, identify the Old Notes to
be withdrawn (including the principal amount of such Old Notes), and (where
certificates for Old Notes have been transmitted) specify the name in which such
Old Notes are registered, if different from that of the withdrawing Noteholder.
If certificates for Old Notes have been delivered or otherwise identified to the
Exchange Agent, then, prior to the release of such certificates, the withdrawing
Noteholder must also submit the serial numbers of the particular certificates to
be withdrawn and a signed notice of withdrawal with signatures guaranteed by an
Eligible Institution unless such Noteholder is an Eligible Institution. If Old
Notes have been tendered pursuant to the procedure for book-entry transfer
described above, any note of withdrawal must specify the name and number of the
account at the Book-Entry Transfer Facility to be credited with the withdrawn
Old Notes and otherwise comply with the procedures of such facility. All
questions as to the validity, form and eligibility (including time of receipt)
of such notices will be determined by the Company, whose determination shall be
final and binding on all parties. Any Old Notes so withdrawn will be deemed not
to have been validly tendered for exchange for purposes of the Exchange Offer.
Any Old Notes which have been tendered for exchange but which are not exchanged
for any reason will be returned to the Noteholder thereof without cost to such
Noteholder (or, in the case of Old Notes tendered by book-entry transfer
procedures described above, such Old Notes will be credited to an account
maintained with such Book-Entry Transfer Facility for the Old Notes) as soon as
practicable after withdrawal, rejection of tender or termination of the Exchange
Offer. Properly withdrawn Old Notes may be retendered by following one of the
procedures described under "Procedures for Tendering the Old Notes" above at any
time on or prior to the Expiration Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, the Company shall
not be required to accept for exchange, or to issue New Notes in exchange for,
any Old Notes and may terminate or amend the Exchange Offer, if at any time
before the acceptance of such Old Notes for exchange or the exchange of the New
Notes for such Old Notes, there shall be threatened, instituted or pending any
action or proceeding before, or any injunction, order or decree shall have been
issued by, any court or governmental agency or other governmental regulatory or
administrative agency or commission (i) seeking to restrain or prohibit the
making or consummation of the Exchange Offer or any other transaction
contemplated by the Exchange Offer, or assessing or seeking any damages as a
result thereof, or (ii) resulting in a material delay in the ability of the
Company to accept for exchange or exchange some or all of the Old Notes pursuant
to the Exchange Offer; or any statute, rule, regulation, order or injunction
shall be sought, proposed, introduced, enacted, promulgated or deemed applicable
to the Exchange Offer or any of the transactions contemplated by the Exchange
Offer by any government or governmental authority, domestic or foreign, or any
action shall have been taken, proposed or threatened, by any government,
governmental authority, agency or court, domestic or foreign, that in the sole
judgment of the Company might directly or indirectly result in any of the
consequences referred to in clause (i) or (ii) above or, in the sole judgment of
the Company, might result in the holders of New Notes having obligations with
respect to resales and transfers of New Notes which exceed those described
herein, or would otherwise make it inadvisable to proceed with the Exchange
Offer.
If the Company determines in good faith that any of the conditions are not
met, the Company may (i) refuse to accept any Old Notes and return all tendered
Old Notes to exchanging Noteholders, (ii) extend the Exchange Offer and retain
all Old Notes tendered prior to the expiration of the Exchange Offer, subject,
however, to the rights of Noteholders to withdraw such Old Notes (see
"--Withdrawal Rights") or (iii) waive certain of such unsatisfied conditions
with respect to the Exchange Offer and accept all properly tendered Old Notes
which have not been withdrawn or revoked. If such waiver constitutes a material
change to the Exchange Offer, the Company will promptly disclose such waiver by
means of a Prospectus supplement that will be distributed to all Noteholders.
Noteholders have certain rights and remedies against the Company under the
Registration Rights Agreement, including liquidated damages of up to 1.0% per
annum, should the Company fail to consummate the Exchange Offer within a certain
period of time.
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The foregoing conditions are for the benefit of the Company and may be
asserted by the Company in good faith regardless of the circumstances giving
rise to such condition or may be waived by the Company in whole or in part at
any time and from time to time in its discretion. The failure by the Company at
any time to exercise the foregoing rights shall not be deemed a wavier of any
such right and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time.
EXCHANGE AGENT
First Trust National Association has been appointed as Exchange Agent for
the Exchange Offer. Questions and requests for assistance, requests for
additional copies of this Prospectus or of the Letter of Transmittal should be
directed to the Exchange Agent addressed as follows:
BY REGISTERED OR CERTIFIED MAIL; BY OVERNIGHT COURIER; OR BY HAND. First
Trust National Association
180 East Fifth Street
St. Paul, Minnesota 55101
Attention: Specialized Finance Department
Telephone: (612) 244-1215
Facsimile: (612) 244-1537
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF
INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A
VALID DELIVERY.
FEES AND EXPENSES; SOLICITATION OF TENDERS
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telephone or in person by officers and regular
employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company and are estimated in the aggregate to be $ which
includes fees and expenses of the Exchange Agent and Trustee and accounting and
legal fees.
The Company will pay all transfer taxes, if any, applicable to the exchange
of the Old Notes pursuant to the Exchange Offer. If, however, certificates
representing the New Notes or the Old Notes for principal amounts not tendered
or accepted for exchange are to be delivered to, or are to be registered or
issued in the name of, any person other than the registered Noteholders
tendered, or if a transfer tax is imposed for any reason other than the exchange
of the Old Notes pursuant to the Exchange Offer, then the amount of any such
transfer taxes (whether imposed on the registered holder or any other persons)
will be payable by the tendering Noteholder. If satisfactory evidence of payment
of such taxes or exemption therefrom is not submitted to the Exchange Agent, the
amount of such transfer taxes will be billed directly to such tendering
Noteholder.
No person has been authorized to give any information or to make any
representations in connection with the Exchange Offer other than those contained
in this Prospectus. If given or made, such information or representations should
not be relied upon as having been authorized by the Company. Neither the
delivery of this Prospectus nor any exchange made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Company since the respective dates as of which information is
given herein. The Exchange Offer is not being made to (nor will tenders be
accepted from or on behalf of) Noteholders in any jurisdiction in which the
making of the Exchange Offer or the acceptance thereof would not be in
compliance with the laws of such jurisdiction.
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ACCOUNTING TREATMENT
The New Notes will be recorded by the Company at the same carrying value as
the Old Notes, which is face value, as recorded in the Company's accounting
records on the date of the exchange. Accordingly, no gain or loss for accounting
purposes will be recognized. The costs of the Exchange Offer will be expensed
over the term of the New Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
Noteholders who do not exchange their Old Notes for New Notes pursuant to
the Exchange Offer will continue to be subject to the restrictions on transfer
of such Old Notes as set forth in the legend thereon. In general, the Old Notes
may not be offered or sold, unless registered under the Securities Act, except
pursuant to an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. The Company does not intend
to register the Old Notes under the Securities Act. The Company believes that,
based upon interpretations contained in no-action letters issued to third
parties by the staff of the Commission, the New Notes issued pursuant to the
Exchange Offer in exchange for the Old Notes may be offered for resale, resold
or otherwise transferred by Noteholders thereof (other than any such Noteholder
which is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such New Notes are acquired in
the ordinary course of such Noteholders' business and such Noteholders have no
arrangement with any person to participate in the distribution of such Old
Notes, and provided, further, that each broker-dealer that receives New Notes
for its own account in exchange for Old Notes must acknowledge that it will
deliver a Prospectus in connection with any resale of such New Notes. See "Plan
of Distribution." If any Noteholder (other than a broker-dealer described in the
preceding sentence) has any arrangement or understanding with respect to the
distribution of the New Notes to be acquired pursuant to the Exchange Offer,
such Noteholder (i) could not rely on the applicable interpretations of the
staff of the Commission and (ii) must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction. In addition, to comply with the securities laws of certain
jurisdictions, if applicable, the New Notes may not be offered or sold unless
they have been registered or qualified for sale in such jurisdiction or an
exemption from registration or qualification is available and is complied with.
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DESCRIPTION OF THE NEW NOTES
GENERAL
The Old Notes were issued and the New Notes are to be issued under the
Indenture, dated as of October 29, 1997 (the "Indenture"), among the Company,
the Subsidiary Guarantors and First Trust National Association, as Trustee (the
"Trustee"). The form and terms of the New Notes will be substantially identical
to those of the Old Notes except that the New Notes will have been registered
under the Securities Act and hence are not subject to certain transfer
restrictions, registration rights and related liquidated damages applicable to
the Old Notes. The Old Notes and the New Notes are referred to collectively as
the "Notes."
The following is a summary of certain provisions of the Indenture and the
New Notes, a copy of which Indenture and the form of New Notes is available upon
request to the Company. The following summary of certain provisions of the
Indenture and the New Notes, does not purport to be complete and is subject to,
and is qualified in its entirety by reference to, all the provisions of the
Indenture and the New Notes, including the definitions of certain terms therein
and those terms made a part thereof by the Trust Indenture Act of 1939, as
amended. As used in this "Description of the New Notes" section, references to
the "Company" include only International Logistics Limited and not its
Subsidiaries.
Principal of, premium, if any, and interest on the New Notes will be
payable, and the New Notes may be exchanged or transferred, at the office or
agency of the Company in the Borough of Manhattan, The City of New York, which
initially shall be the corporate trust office of the Trustee's agent, at First
Trust New York, 100 Wall Street, 20th Floor, New York, New York 10005, except
that, at the option of the Company, payment of interest may be made by check
mailed to the address of the Holders as such address appears in the Note
register.
The New Notes will be issued only in fully registered form, without coupons,
in denominations of $1,000 and any integral multiple of $1,000. See "--Book
Entry, Delivery and Form." No service charge shall be made for any registration
or exchange of the New Notes, but the Company may require payment of a sum
sufficient to cover any transfer tax or other similar governmental charge
payable in connection therewith.
TERMS OF THE NEW NOTES
The New Notes will be unsecured senior obligations of the Company, limited
to $110.0 million aggregate principal amount, and will mature on October 15,
2007. The New Notes will bear interest at the rate per annum shown on the cover
page hereof from October 29, 1997, or from the most recent date to which
interest has been paid or provided for, payable semiannually to Holders of
record at the close of business on the April 1 or October 1 immediately
preceding the interest payment date on April 15 and October 15 of each year,
commencing April 15, 1998. The Company will pay interest on overdue principal
and, to the extent permitted by applicable law, on overdue installments of
interest borne by the New Notes. Interest on the New Notes will be computed on
the basis of a 360-day year of twelve 30-day months.
OPTIONAL REDEMPTION
Except as set forth in the following paragraph, the New Notes will not be
redeemable at the option of the Company prior to October 15, 2002. Thereafter,
the New Notes will be redeemable, at the Company's option, in whole or in part,
at any time or from time to time, upon not less than 30 nor more than 60 days'
prior notice mailed by first-class mail to each Holder's registered address, at
the following redemption prices (expressed in percentages of principal amount),
plus accrued interest to the redemption date (subject to the right of Holders of
record on the relevant record date to receive interest due on the relevant
interest payment date), if redeemed during the 12-month period commencing on
October 15 of the years set forth below:
<TABLE>
<CAPTION>
REDEMPTION
PERIOD PRICE
- ------------------------------------------------------------------------------------- -----------
<S> <C>
2002................................................................................. 104.875%
2003................................................................................. 103.250
2004................................................................................. 101.625
2005 and thereafter.................................................................. 100.000
</TABLE>
In addition, at any time and from time to time prior to October 15, 2000,
the Company may redeem in the aggregate up to 35% of the original principal
amount of the New Notes with the proceeds of one or more Public Equity
Offerings, at a redemption price (expressed as a percentage of principal amount)
of 109.75% plus accrued interest to the redemption date (subject to the right of
Holders of record on the relevant record date to receive interest due on the
relevant interest payment date); PROVIDED, HOWEVER, that at least $71.5 million
aggregate principal amount of the Notes must remain outstanding after each such
redemption.
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In the case of any partial redemption, selection of the New Notes for
redemption will be made by the Trustee on a pro rata basis, by lot or by such
other method as the Trustee in its sole discretion shall deem to be fair and
appropriate, although no Note of $1,000 in original principal amount or less
shall be redeemed in part. If any Note is to be redeemed in part only, the
notice of redemption relating to such Note shall state the portion of the
principal amount thereof to be redeemed. A new Note in principal amount equal to
the unredeemed portion thereof will be issued in the name of the Holder thereof
upon cancellation of the original Note.
SUBSIDIARY GUARANTIES
Each of the Company's Restricted Subsidiaries that is organized and existing
under the laws of any State of the United States or the District of Columbia and
that is an obligor or guarantor with respect to the New Credit Facility will
irrevocably and unconditionally Guarantee, as a primary obligor and not merely
as a surety, on an unsecured senior basis the performance and punctual payment
when due, whether at Stated Maturity, by acceleration or otherwise, of all
obligations of the Company under the Indenture and the New Notes, whether for
payment of principal of or interest on the New Notes, expenses, indemnification
or otherwise (all such obligations guaranteed by the Subsidiary Guarantors being
herein called the "Guaranteed Obligations"). The Subsidiary Guarantors will
agree to pay, in addition to the amount stated above, any and all expenses
(including reasonable counsel fees and expenses) incurred by the Trustee or the
Holders in enforcing any rights under the Subsidiary Guaranties. Each Subsidiary
Guaranty will be limited in amount to an amount not to exceed the maximum amount
that can be Guaranteed by the applicable Subsidiary Guarantor without rendering
such Subsidiary Guaranty voidable under applicable law relating to fraudulent
conveyance or fraudulent transfer or similar laws affecting the rights of
creditors generally. After the Issue Date, the Company will cause each
Restricted Subsidiary that is organized and existing under the laws of any State
of the United States or the District of Columbia and that becomes an obligor or
guarantor with respect to any of the obligations under one or more of the Bank
Credit Agreements to execute and deliver to the Trustee a supplemental indenture
pursuant to which such Restricted Subsidiary will Guarantee on an unsecured
senior basis the payment of the New Notes. See "Certain Covenants--Future
Subsidiary Guarantors" below.
Each Subsidiary Guaranty is a continuing guarantee and shall (a) remain in
full force and effect until payment in full of all the Guaranteed Obligations,
(b) be binding upon each Subsidiary Guarantor and (c) inure to the benefit of
and be enforceable by the Trustee, the Holders and the successors, transferees
and assigns thereof. Each Subsidiary Guarantor may consolidate with, or merge
into, or sell its assets to the Company or another Subsidiary Guarantor that is
a Wholly Owned Subsidiary of the Company without limitation, or with other
Persons upon the terms and conditions set forth in the Indenture. See "--Certain
Covenants--Merger and Consolidation." A Subsidiary Guaranty will be released
upon the sale of all the Capital Stock, or all or substantially all of the
assets, of the applicable Subsidiary Guarantor if such sale is made in
compliance with the Indenture.
RANKING
The indebtedness evidenced by the New Notes and the Subsidiary Guaranties
will be senior unsecured obligations of the Company and the Subsidiary
Guarantors, respectively, ranking pari passu with all other senior unsecured
Indebtedness of the Company and the Subsidiary Guarantors, respectively, and
senior to all Subordinated Obligations. The New Notes and the Subsidiary
Guaranties will also be effectively subordinated to all Secured Indebtedness of
the Company and the Subsidiary Guarantors, respectively, to the extent of the
value of the assets securing such Indebtedness and to all Indebtedness and other
obligations (including trade payables) of the Company's Subsidiaries other than
the Subsidiary Guarantors.
As of September 30, 1997, after giving pro forma effect to the New Credit
Facility and the Old Notes Offering and the application of the net proceeds
therefrom, as if they had occurred on such date, the Company would not have had
any outstanding Secured Indebtedness, the Subsidiary Guarantors would have had
approximately $2.0 million of outstanding Secured Indebtedness and the Company's
Subsidiaries other than the Subsidiary Guarantors would have had approximately
$109.3 million of Indebtedness and other obligations (including trade payables)
outstanding. Although the Indenture contains limitations on the amount of
additional Indebtedness that the Company and its Restricted Subsidiaries may
incur, under certain circumstances the amount of such Indebtedness could be
substantial and, in any case, such Indebtedness may be Secured Indebtedness. See
"--Certain Covenants-- Limitation on Indebtedness."
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BOOK-ENTRY, DELIVERY AND FORM
The New Notes sold will be issued in the form of a Global Note. The Global
Note will be deposited with, or on behalf of, the Depository and registered in
the name of the Depository or its nominee. Except as set forth below, the Global
Note may be transferred, in whole and not in part, only to the Depository or
another nominee of the Depository. Investors may hold their beneficial interests
in the Global Note directly through the Depository if they have an account with
the Depository or indirectly through organizations which have accounts with the
Depository.
New Notes that are issued as described below under "Certificated New Notes"
will be issued in definitive certificated form. Upon the transfer of a New Note
in definitive certificated form to a QIB, such New Note will, unless the Global
Note has previously been exchanged for New Notes in definitive certificated
form, be exchanged for an interest in the Global Note representing the principal
amount of New Notes being transferred.
The Depository has advised the Company as follows: The Depository is a
limited-purpose trust company organized under the laws of the State of New York,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and "a clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. The
Depository was created to hold securities of institutions that have accounts
with the Depository ("participants") and to facilitate the clearance and
settlement of securities transactions among its participants in such securities
through electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of securities certificates. The
Depository's participants include securities brokers and dealers (which may
include the Initial Purchasers), banks, trust companies, clearing corporations
and certain other organizations. Access to the Depository's book-entry system is
also available to others such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a participant,
whether directly or indirectly.
Upon the issuance of the Global Note, the Depository will credit, on its
book-entry registration and transfer system, the principal amount of the New
Notes represented by such Global Note to the accounts of participants. The
accounts to be credited shall be designated by the Initial Purchasers of such
New Notes. Ownership of beneficial interests in the Global Note will be limited
to participants or persons that may hold interests through participants.
Ownership of beneficial interests in the Global Note will be shown on, and the
transfer of those ownership interests will be effected only through, records
maintained by the Depository (with respect to participants' interest) and such
participants (with respect to the owners of beneficial interests in the Global
Note other than participants). The laws of some jurisdictions may require that
certain purchasers of securities take physical delivery of such securities in
definitive form. Such limits and laws may impair the ability to transfer or
pledge beneficial interests in the Global Note.
So long as the Depository, or its nominee, is the registered holder and
owner of the Global Note, the Depository or such nominee, as the case may be,
will be considered the sole legal owner and holder of the related New Notes for
all purposes of such New Notes and the Indenture. Except as set forth below,
owners of beneficial interests in the Global Note will not be entitled to have
the New Notes represented by the Global Note registered in their names, will not
receive or be entitled to receive physical delivery of certificated New Notes in
definitive form and will not be considered to be the owners or holders of any
New Notes under the Global Note. The Company understands that under existing
industry practice, in the event an owner of a beneficial interest in the Global
Note desires to take any action that the Depository, as the holder of the Global
Note, is entitled to take, the Depository would authorize the participants to
take such action, and that the participants would authorize beneficial owners
owning through such participants to take such action or would otherwise act upon
the instructions of beneficial owners owning through them.
Payment of principal of and interest on New Notes represented by the Global
Note registered in the name of and held by the Depository or its nominee will be
made to the Depository or its nominee, as the case may be, as the registered
owner and holder of the Global Note.
The Company expects that the Depository or its nominee, upon receipt of any
payment of principal of or interest on the Global Note, will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of the Global Note as
shown on the records of the Depository or its nominee. The Company also expects
that payments by participants to owners of beneficial interests in the Global
Note held through such participants will be governed by standing instructions
and customary practices and will be the responsibility of such participants. The
Company will not have any responsibility or liability for any aspect of the
records relating to, or payments made on account of, beneficial ownership
interests in the Global Note for any Note or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests or for any
other aspect of the relationship between the Depository and its participants or
the relationship between such participants and the owners of beneficial
interests in the Global Note owning through such participants.
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Unless and until it is exchanged in whole or in part for certificated New
Notes in definitive form, the Global Note may not be transferred except as a
whole by the Depository to a nominee of such Depository or by a nominee of such
Depository to such Depository or another nominee of such Depository.
Although the Depository has agreed to the foregoing procedures in order to
facilitate transfers of interests in the Global Note among participants of the
Depository, it is under no obligation to perform or continue to perform such
procedures, and such procedures may be discontinued at any time. Neither the
Trustee nor the Company will have any responsibility for the performance by the
Depository or its participants or indirect participants of their respective
obligations under the rules and procedures governing their operations.
CERTIFICATED NEW NOTES
The New Notes represented by the Global Note are exchangeable for
certificated New Notes in definitive form of like tenor as such New Notes in
denominations of $1,000 and integral multiples thereof if (i) the Depository
notifies the Company that it is unwilling or unable to continue as Depository
for the Global Note or if at any time the Depository ceases to be a clearing
agency registered under the Exchange Act or (ii) the Company in its discretion
at any time determines not to have all of the New Notes represented by the
Global Note. Any New Note that is exchangeable pursuant to the preceding
sentence is exchangeable for certificated New Notes issuable in authorized
denominations and registered in such names as the Depository shall direct.
Subject to the foregoing, the Global Note is not exchangeable, except for a
Global Note of the same aggregate denomination to be registered in the name of
the Depository or its nominee. In addition, such certificates will bear
substantially the legend referred to under "Transfer Restrictions" (unless the
Company determines otherwise in accordance with applicable law) subject, with
respect to such New Notes, to the provisions of such legend.
Neither the Company nor the Trustee will be liable for any delay by the
Depository or its nominee in indemnifying the beneficial owners of the New
Notes, and the Company and the Trustee may conclusively rely on, and will be
protected in relying on, instructions from the Depository or its nominee for all
purposes.
CHANGE OF CONTROL
Upon the occurrence of any of the following events (each a "Change of
Control"), each Holder shall have the right to require that the Company
repurchase such Holder's New Notes at a purchase price in cash equal to 101% of
the principal amount thereof plus accrued and unpaid interest, if any, to the
date of purchase (subject to the right of holders of record on the relevant
record date to receive interest due on the relevant interest payment date):
(i) any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act), other than one or more Permitted Holders, is or becomes
the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act, except that for purposes of this clause (i) such person shall be deemed
to have "beneficial ownership" of all shares that such person has the right
to acquire, whether such right is exercisable immediately or only after the
passage of time), directly or indirectly, of more than 50% of the total
voting power of the then outstanding Voting Stock of the Company; PROVIDED,
HOWEVER, that for purposes of this clause (i), the Permitted Holders shall
be deemed to beneficially own any Voting Stock of a corporation (the
"specified corporation") held by any other corporation (the "parent
corporation") so long as the Permitted Holders beneficially own (as so
defined), directly or indirectly, in the aggregate a majority of the voting
power of the Voting Stock of the parent corporation;
(ii) during any period of two consecutive years after the Company's
initial Public Equity Offering, individuals who at the beginning of such
period constituted the Board of Directors (together with any new directors
whose election by such Board of Directors or whose nomination for election
by the shareholders of the Company was approved by a vote of 66 2/3% of the
directors of the Company then still in office who were either directors at
the beginning of such period or whose election or nomination for election
was previously so approved) cease for any reason to constitute a majority of
the Board of Directors then in office; or
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(iii) the merger or consolidation of the Company with or into another
Person or the merger of another Person with or into the Company, or the sale
of all or substantially all the assets of the Company to another Person (in
each case other than a Person that is controlled by the Permitted Holders),
and, in the case of any such merger or consolidation, the securities of the
Company that are outstanding immediately prior to such transaction and which
represent 100% of the aggregate voting power of the Voting Stock of the
Company are changed into or exchanged for cash, securities or property,
unless pursuant to such transaction such securities are changed into or
exchanged for, in addition to any other consideration, securities of the
surviving corporation or a parent corporation that owns all of the capital
stock of such corporation that represent immediately after such transaction,
at least a majority of the aggregate voting power of the Voting Stock of the
surviving corporation or such parent corporation, as the case may be.
Within 30 days following any Change of Control, unless notice of redemption
of the New Notes has been given pursuant to the provisions of the Indenture
described under "--Optional Redemption" above, the Company shall mail a notice
to the Trustee and to each Holder stating: (1) that a Change of Control has
occurred and that such Holder has the right to require the Company to purchase
such Holder's New Notes at a purchase price in cash equal to 101% of the
principal amount thereof plus accrued and unpaid interest, if any, to the date
of purchase (subject to the right of holders of record on the relevant record
date to receive interest on the relevant interest payment date); (2) the
circumstances and relevant facts regarding such Change of Control; (3) the
repurchase date (which shall be no earlier than 30 days nor later than 60 days
from the date such notice is mailed); and (4) the instructions determined by the
Company, consistent with the covenant described hereunder, that a Holder must
follow in order to have its New Notes purchased.
The Company shall comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of New Notes pursuant to the covenant
described hereunder. To the extent that the provisions of any securities laws or
regulations conflict with the provisions of the covenant described hereunder,
the Company shall comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations under the covenant
described hereunder by virtue thereof.
The Change of Control purchase feature is a result of negotiations between
the Company and the Initial Purchasers. Management has no present intention to
engage in a transaction involving a Change of Control, although it is possible
that the Company would decide to do so in the future. Subject to the limitations
discussed below, the Company could, in the future, enter into certain
transactions, including acquisitions, refinancings or other recapitalizations,
that would not constitute a Change of Control under the Indenture, but that
could increase the amount of Indebtedness outstanding at such time or otherwise
affect the Company's capital structure or credit ratings. Restrictions on the
ability of the Company and its Restricted Subsidiaries to incur additional
Indebtedness are contained in the covenant described under "--Certain
Covenants--Limitation on Indebtedness." Such restrictions can only be waived
with the consent of the Holders of a majority in principal amount of the New
Notes then outstanding. Except for the limitations contained in such covenants,
however, the Indenture will not contain any covenants or provisions that may
afford Holders protection in the event of a highly leveraged transaction.
If a Change of Control offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the purchase price for all
of the New Notes that might be delivered by Holders seeking to accept the Change
of Control offer. The failure of the Company to make or consummate the Change of
Control offer or pay the purchase price when due will give the Trustee and the
Holders the rights described under "--Defaults."
The existence of a Holder's right to require the Company to offer to
repurchase such Holder's New Notes upon a Change of Control may deter a third
party from acquiring the Company in a transaction which constitutes a Change of
Control.
The New Credit Facility contains, and future indebtedness of the Company may
contain, prohibitions on the occurrence of certain events that would constitute
a Change of Control or require such indebtedness to be repaid or repurchased
upon a Change of Control. Moreover, the exercise by the Holders of their right
to require the Company to repurchase the New Notes will cause a default under
the New Credit Facility, and could cause a default under such other
indebtedness, even if the Change of Control itself does not, due to the
financial effect of such repurchase on the Company. Finally, the Company's
ability to pay cash to the Holders following the occurrence of a Change of
Control may be limited by the Company's then existing financial resources. There
can be no assurance that sufficient funds will be available when necessary to
make any required repurchases. The provisions under the Indenture relating to
the Company's obligation to make an offer to repurchase the New Notes as a
result of a Change of Control may be waived or modified with the written consent
of the Holders of a majority in principal amount of the New Notes.
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CERTAIN COVENANTS
The Indenture contains covenants including, among others, the following:
LIMITATION ON INDEBTEDNESS. (a) (i) The Company shall not Incur, directly or
indirectly, any Indebtedness unless, on the date of such Incurrence, the
Consolidated Coverage Ratio exceeds 2.25 to 1.0 and (ii) none of the Restricted
Subsidiaries of the Company shall Incur, directly or indirectly, any
Indebtedness unless, on the date of such Incurrence, the Consolidated Coverage
Ratio exceeds 2.50 to 1.0.
(b) Notwithstanding the foregoing paragraph (a), the Company and the
Restricted Subsidiaries may Incur any or all of the following Indebtedness: (1)
Indebtedness (including reimbursement obligations in respect of letters of
credit outstanding under the Bank Credit Agreement that are Indebtedness)
Incurred pursuant to any Bank Credit Agreement or any other credit or loan
agreement in an aggregate principal amount which, when taken together (without
duplication) with the principal amount of all other Indebtedness Incurred
pursuant to this clause (1) and then outstanding, does not exceed $100.0
million; (2) Indebtedness of the Company or any Restricted Subsidiary owed to
and held by the Company or any Restricted Subsidiary; PROVIDED, HOWEVER, that
any subsequent issuance or transfer of any Capital Stock which results in any
such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any
subsequent transfer of such Indebtedness (other than to another Restricted
Subsidiary) shall be deemed, in each case, to constitute the Incurrence of such
Indebtedness by the Company or such Restricted Subsidiary; (3) the Notes, the
Subsidiary Guaranties or any Indebtedness, the proceeds of which are used to
Refinance the Notes in full; (4) Indebtedness (including reimbursement
obligations in respect of letters of credit or guaranties outstanding under
Foreign Credit Agreements that are Indebtedness) Incurred pursuant to any
Foreign Credit Agreement; provided, that the aggregate principal amount of all
such Indebtedness outstanding at any time under all such Foreign Credit
Agreements, shall not exceed $30.0 million; (5) Indebtedness outstanding on the
Issue Date (other than Indebtedness described in clause (1), (2), (3) or (4) of
this covenant); (6) Refinancing Indebtedness in respect of Indebtedness Incurred
pursuant to paragraph (a) or pursuant to clause (3), (5) or this clause (6); (7)
Indebtedness in respect of customs duties guarantees, equipment leases,
performance bonds, bankers' acceptances, letters of credit and surety or appeal
bonds entered into by the Company or any Restricted Subsidiary in the ordinary
course of business; (8) Hedging Obligations consisting of Interest Rate
Agreements directly related to Indebtedness permitted to be Incurred by the
Company or any Restricted Subsidiary pursuant to the Indenture; (9) Indebtedness
of the Company or any Restricted Subsidiary consisting of obligations in respect
of purchase price adjustments in connection with the acquisition or disposition
of assets by the Company or any Restricted Subsidiary permitted under the
Indenture; (10) Indebtedness incurred by the Company or any Restricted
Subsidiary, constituting reimbursement obligations with respect to letters of
credit issued in the ordinary course of business, including, without limitation,
letters of credit in respect of workers' compensation claims, self-insurance or
similar matters, or other Indebtedness with respect to reimbursement obligations
regarding workers' compensation claims, PROVIDED, HOWEVER, that upon the drawing
of such letters of credit or the Incurrence of such Indebtedness, such
obligations are reimbursed within 30 days following such drawing or Incurrence;
and (11) Indebtedness in an aggregate principal amount which, together with all
other Indebtedness of the Company and its Restricted Subsidiaries outstanding on
the date of such Incurrence (other than Indebtedness permitted by clauses (1)
through (10) above or paragraph (a)), does not exceed $15.0 million at any one
time outstanding.
(c) Notwithstanding the foregoing, neither the Company nor any Restricted
Subsidiary shall Incur any Indebtedness pursuant to the foregoing paragraph (b)
if the proceeds thereof are used, directly or indirectly, to Refinance any
Subordinated Obligations unless such Indebtedness shall be subordinated to the
Notes or the Subsidiary Guaranties, as applicable, to at least the same extent
as such Subordinated Obligations.
(d) For purposes of determining compliance with the covenant entitled
"--Limitation on Indebtedness," (i) in the event that an item of Indebtedness
meets the criteria of more than one of the types of Indebtedness described
above, the Company, in its sole discretion, will classify such item of
Indebtedness and only be required to include the amount and type of such
Indebtedness in one of the above clauses and (ii) an item of Indebtedness may be
divided and classified in more than one of the types of Indebtedness described
above.
LIMITATION ON LIENS. The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, create or permit to exist any Lien upon
any of its property or assets, now owned or hereafter acquired, securing any
obligation unless concurrently with the creation of such Lien effective
provision is made to secure the Notes and the Subsidiary Guaranties equally and
ratably with such obligation for so long as such obligation is so secured;
PROVIDED, THAT, if such obligation is a Subordinated Obligation, the Lien
securing such obligation shall be subordinated and junior to the Lien securing
the Notes and the Subsidiary Guaranties with the same or lesser relative
priority as such Subordinated Obligation shall have been with respect to the
Notes
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and the Subsidiary Guaranties. The preceding restriction shall not require the
Company or any Restricted Subsidiary to secure the Notes or the Subsidiary
Guaranties if the Lien consists of the following:
(a) Liens on accounts receivable of the Company and its Restricted
Subsidiaries to secure Indebtedness permitted to be incurred pursuant to
paragraph (a) or clause (7) or (10) of paragraph (b) of the covenant described
under "--Limitation on Indebtedness;"
(b) Liens created by the Indenture, Liens under any Bank Credit Agreement,
Liens under any Foreign Credit Agreement and Liens existing as of the Issue
Date;
(c) Permitted Liens;
(d) Liens to secure Indebtedness issued by the Company or a Restricted
Subsidiary for the purpose of financing all or a part of the purchase price of
assets or property acquired or constructed in the ordinary course of business
after the Issue Date; PROVIDED, HOWEVER, that (i) the aggregate principal amount
(or accreted value in the case of Indebtedness issued at a discount) of
Indebtedness so issued shall not exceed the lesser of the cost or fair market
value, as determined in good faith by the Board of Directors of the Company, of
the assets or property so acquired or constructed, (ii) the Indebtedness secured
by such Liens shall have been permitted to be Incurred under the "--Limitation
on Indebtedness" covenant and (iii) such Liens shall not encumber any other
assets or property of the Company or any of its Restricted Subsidiaries other
than such assets or property or any improvement on such assets or property and
shall attach to such assets or property within 90 days of the construction or
acquisition of such assets or property;
(e) Liens on the assets or property of a Restricted Subsidiary existing at
the time such Restricted Subsidiary becomes a Restricted Subsidiary and not
issued as a result of (or in connection with or in anticipation of) such
Restricted Subsidiary becoming a Restricted Subsidiary; PROVIDED, HOWEVER, that
such Liens do not extend to or cover any other property or assets of the Company
or any of its other Restricted Subsidiaries;
(f) Liens securing Capital Lease Obligations Incurred in accordance with the
"--Limitation on Indebtedness" covenant;
(g) Liens with respect to Sale/Leaseback Transactions or other Indebtedness
permitted by clause (b)(11) of the "--Limitation on Indebtedness" covenant;
(h) Liens securing Indebtedness issued to Refinance Indebtedness which has
been secured by a Lien permitted under the Indenture and is permitted to be
Refinanced under the Indenture; PROVIDED, HOWEVER, that such Liens do not extend
to or cover any property or assets of the Company or any of its Restricted
Subsidiaries not securing the Indebtedness so Refinanced; or
(i) Liens on assets of the Company, or any of its Restricted Subsidiaries,
securing Indebtedness in an aggregate principal amount not to exceed $10.0
million.
LIMITATION ON SALE/LEASEBACK TRANSACTIONS. The Company shall not, and shall not
permit any Restricted Subsidiary to, enter into any Sale/Leaseback Transaction
with respect to any property unless (i) the Company or such Restricted
Subsidiary would be (A) in compliance with the covenants described under
"--Limitation on Indebtedness" immediately after giving effect to such Sale/
Leaseback Transaction and (B) entitled to create a Lien on such property
securing the Attributable Debt with respect to such Sale/ Leaseback Transaction
without securing the Notes pursuant to the covenant described under
"--Limitation on Liens," (ii) the net proceeds received by the Company or any
Restricted Subsidiary in connection with such Sale/Leaseback Transaction are at
least equal to the fair market value (as determined by the Board of Directors of
the Company) of such property and (iii) the Company or such Restricted
Subsidiary applies the proceeds of such transaction in compliance with the
covenant described under "--Limitation on Sales of Assets and Subsidiary Stock."
LIMITATION ON RESTRICTED PAYMENTS. (a) The Company shall not, and shall not
permit any Restricted Subsidiary to, directly or indirectly, make a Restricted
Payment if at the time the Company or such Restricted Subsidiary makes, and
after giving effect to, the proposed Restricted Payment: (i) a Default shall
have occurred and be continuing (or would result therefrom); (ii) the Company or
such Restricted Subsidiary, as applicable, is not able to Incur an additional
$1.00 of Indebtedness pursuant to clause (i) or clause (ii), as applicable, of
paragraph (a) of the covenant described under "--Limitation on Indebtedness"; or
(iii) the aggregate amount of such Restricted Payment and all other Restricted
Payments since the Issue Date would exceed the sum of: (A) 50% of the
Consolidated Net Income accrued during the period (treated as one accounting
period) from the beginning of the fiscal quarter immediately following the
fiscal quarter during which the Notes are originally issued to the end of the
most recently ended fiscal quarter for which financial statements are available
at the time of such Restricted Payment (or, in case such Consolidated Net Income
shall be a deficit, minus 100% of such deficit); (B) the aggregate Net Cash
Proceeds received by the Company from
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capital contributions or the issuance or sale of its Capital Stock (other than
Disqualified Stock) subsequent to the Issue Date (other than an issuance or sale
to a Subsidiary of the Company); (C) the amount by which Indebtedness of the
Company is reduced on the Company's balance sheet upon the conversion or
exchange (other than by a Subsidiary of the Company) subsequent to the Issue
Date, of any Indebtedness of the Company or a Restricted Subsidiary for Capital
Stock (other than Disqualified Stock) of the Company (less the amount of any
cash, or the fair value of any other property, distributed by the Company upon
such conversion or exchange), whether pursuant to the terms of such Indebtedness
or pursuant to an agreement with a creditor to engage in an equity for debt
exchange; and (D) an amount equal to the sum of (i) the net reduction in
Investments in Unrestricted Subsidiaries resulting from the receipt of
dividends, repayments of loans or advances or other transfers of assets or
proceeds from the disposition of Capital Stock or other distributions or
payments, in each case to the Company or any Restricted Subsidiary from, or with
respect to, interests in Unrestricted Subsidiaries, and (ii) the portion
(proportionate to the Company's equity interest in such Subsidiary) of the fair
market value of the net assets of an Unrestricted Subsidiary at the time such
Unrestricted Subsidiary is designated a Restricted Subsidiary; PROVIDED,
HOWEVER, that the foregoing sum shall not exceed, in the case of any
Unrestricted Subsidiary, the amount of Investments previously made (and treated
as a Restricted Payment) by the Company or any Restricted Subsidiary in such
Unrestricted Subsidiary subsequent to the Issue Date.
(b) The provisions of the foregoing paragraph (a) shall not prohibit: (i)
any purchase or redemption of Capital Stock or Subordinated Obligations of the
Company made by exchange for, or out of the proceeds of the substantially
concurrent sale of, Capital Stock of the Company (other than (A) Disqualified
Stock or (B) Capital Stock issued or sold to a Subsidiary of the Company) or out
of the proceeds of a substantially concurrent capital contribution to the
Company; PROVIDED, HOWEVER, that (x) such purchase, capital contribution or
redemption shall be excluded in the calculation of the amount of Restricted
Payments and (y) the Net Cash Proceeds from such sale of Capital Stock or
capital contribution shall be excluded from clause (iii)(B) of paragraph (a)
above; (ii) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Obligations made by exchange
for, or out of the proceeds of the substantially concurrent sale of,
Indebtedness of the Company which is permitted to be Incurred pursuant to the
covenant described under "--Limitation on Indebtedness"; PROVIDED, HOWEVER, that
such purchase, repurchase, redemption, defeasance or other acquisition or
retirement for value shall be excluded in the calculation of the amount of
Restricted Payments; (iii) dividends paid within 60 days after the date of
declaration thereof if at such date of declaration such dividend would have
complied with this covenant; PROVIDED, HOWEVER, that such dividend shall be
included in the calculation of the amount of Restricted Payments; (iv) the
repurchase of Capital Stock of the Company from directors, officers or employees
of the Company pursuant to the terms of an employee benefit plan or employment
or other agreement; provided that the aggregate amount of all such repurchases
shall not exceed $3.0 million in any fiscal year, and $10.0 million in total;
(v) up to an aggregate of $10.0 million of Restricted Payments by the Company,
so long as after giving effect to any such Restricted Payment on a pro forma
basis the Company could incur an additional $1.00 of Indebtedness pursuant to
clause (i) of paragraph (a) of the covenant described under "-- Limitation on
Indebtedness"; and (vi) Investments in Unrestricted Subsidiaries or joint
ventures in an amount not to exceed $10.0 million at any time outstanding.
LIMITATION ON RESTRICTIONS ON DISTRIBUTIONS FROM RESTRICTED SUBSIDIARIES. The
Company shall not, and shall not permit any Restricted Subsidiary to, create or
otherwise cause or permit to exist or become effective any consensual
encumbrance or restriction on the ability of any Restricted Subsidiary (a) to
pay dividends or make any other distributions on its Capital Stock to the
Company or a Restricted Subsidiary or pay any Indebtedness owed to the Company,
(b) to make any loans or advances to the Company or (c) to transfer any of its
property or assets to the Company, except: (i) any encumbrance or restriction
pursuant to any Bank Credit Agreement, any Foreign Credit Agreement or any other
agreement in effect at or entered into on the Issue Date; (ii) any encumbrance
or restriction with respect to a Restricted Subsidiary pursuant to an agreement
relating to any Indebtedness Incurred by such Restricted Subsidiary on or prior
to the date on which such Restricted Subsidiary was acquired by the Company
(other than Indebtedness Incurred as consideration in, or to provide all or any
portion of the funds or credit support utilized to consummate, the transaction
or series of related transactions pursuant to which such Restricted Subsidiary
became a Restricted Subsidiary or was acquired by the Company) and outstanding
on such date; (iii) any encumbrance or restriction pursuant to an agreement
effecting Refinancing Indebtedness Incurred pursuant to an agreement referred to
in clause (i) or (ii) of this covenant or this clause (iii) or contained in any
amendment to an agreement referred to in clause (i) or (ii) of this covenant or
this clause (iii); PROVIDED, HOWEVER, that the encumbrances and restrictions
with respect to any such Restricted Subsidiary contained in any such refinancing
agreement or amendment are no less favorable to the Noteholders than
encumbrances and restrictions with respect to such Restricted Subsidiary
contained in such agreements; (iv) any such encumbrance or restriction (A)
consisting of customary non-assignment provisions in leases to the extent such
provisions restrict the subletting, assignment or transfer of the lease or the
property leased thereunder or in purchase money financings or (B) by virtue of
any Indebtedness, transfer, option or right with respect to, or any Lien on, any
property or assets of the Company or any Restricted Subsidiary not otherwise
prohibited by the Indenture; (v) in the case of clause (c) above, restrictions
contained in security agreements or mortgages securing Indebtedness of a
Restricted Subsidiary to the extent such restrictions restrict the transfer of
the property subject to such security agreements or mortgages; (vi) encumbrances
or restrictions imposed by operation of any applicable law, rule, regulation or
order; (vii) any restriction with respect to a Restricted Subsidiary imposed
pursuant to an agreement entered into for the sale or disposition of all or
substantially all the Capital Stock or assets of such Restricted
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Subsidiary pending the closing of such sale or disposition and (viii) any
restriction imposed during an event of default under an agreement governing
Indebtedness of any Foreign Subsidiary so long as such Indebtedness is permitted
by the covenant entitled "-- Limitation on Indebtedness."
LIMITATION ON SALES OF ASSETS AND SUBSIDIARY STOCK. (a) The Company shall not,
and shall not permit any Restricted Subsidiary to, directly or indirectly,
consummate any Asset Disposition unless (i) the Company or such Restricted
Subsidiary receives consideration at the time of such Asset Disposition at least
equal to the fair market value (including the value of all non-cash
consideration), as determined in good faith by the Board of Directors, of the
shares and assets subject to such Asset Disposition, and at least 75% of the
consideration thereof received by the Company or such Restricted Subsidiary is
in the form of cash or cash equivalents and (ii) an amount equal to 100% of the
Net Available Cash from such Asset Disposition is applied by the Company (or
such Restricted Subsidiary, as the case may be) (A) FIRST, to either (i) prepay,
repay, redeem or purchase (and permanently reduce the commitments under)
Indebtedness under any Bank Credit Agreement or any Foreign Credit Agreement or
that is otherwise secured by its assets subject to such Asset Disposition within
one year from the later of the date of such Asset Disposition or the receipt of
such Net Available Cash (the "Receipt Date") or (ii) to the extent the Company
elects, to acquire Additional Assets; PROVIDED, HOWEVER, that the Company shall
be required to commit such Net Available Cash to the acquisition of Additional
Assets within one year from the later of the date of such Asset Disposition or
the Receipt Date and shall be required to consummate the acquisition of such
Additional Assets within 18 months from the Receipt Date; (B) SECOND, to the
extent of the balance of such Net Available Cash after application in accordance
with clause (A), to make an offer pursuant to paragraph (b) below to the Holders
to purchase Notes pursuant to and subject to the conditions contained in the
Indenture; and (C) THIRD, to the extent of the balance of such Net Available
Cash after application in accordance with clauses (A) or (B) to any other
application or use not prohibited by the Indenture. Notwithstanding the
foregoing provisions of this paragraph, the Company and the Restricted
Subsidiaries shall not be required to apply the Net Available Cash in accordance
with this paragraph except to the extent that the aggregate Net Available Cash
from all Asset Dispositions which is not applied in accordance with this
paragraph exceeds $5.0 million (at which time, the entire unutilized Net
Available Cash, and not just the amount in excess of $5.0 million, shall be
applied pursuant to this paragraph). Pending application of Net Available Cash
pursuant to this covenant, such Net Available Cash shall be invested in
Permitted Investments.
For the purposes of this covenant, the following are deemed to be cash or
cash equivalents: (x) the express assumption of Indebtedness of the Company or
any Restricted Subsidiary and the release of the Company or such Restricted
Subsidiary from all liability on such Indebtedness in connection with such Asset
Disposition and (y) securities received by the Company or any Restricted
Subsidiary from the transferee that are converted by the Company or such
Restricted Subsidiary into cash within 90 days of closing the transaction.
(b) In the event of an Asset Disposition that requires the purchase of the
Notes pursuant to clause (a)(ii)(B) above, the Company will be required to
purchase Notes tendered pursuant to an offer by the Company for the Notes at a
purchase price of 100% of their principal amount (without premium) plus accrued
but unpaid interest in accordance with the procedures (including prorating in
the event of oversubscription) set forth in the Indenture. If the aggregate
purchase price of Notes tendered pursuant to such offer is less than the Net
Available Cash allotted to the purchase thereof, the Company will be required to
apply the remaining Net Available Cash in accordance with clause (a)(ii)(C)
above. The Company shall not be required to make such an offer to purchase Notes
pursuant to this covenant if the Net Available Cash available therefor is less
than $5.0 million (which lesser amount shall be carried forward for purposes of
determining whether such an offer is required with respect to any subsequent
Asset Disposition).
(c) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Notes pursuant to this
covenant. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, the Company shall comply
with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations under this clause by virtue thereof.
LIMITATION ON TRANSACTIONS WITH AFFILIATES. (a) The Company shall not, and shall
not permit any Restricted Subsidiary to, enter into any transaction (including
the purchase, sale, lease or exchange of any property or the rendering of any
service) with any Affiliate of the Company other than the Company or a
Restricted Subsidiary (an "Affiliate Transaction") unless the terms thereof (1)
are no less favorable to the Company or such Restricted Subsidiary than those
that could be obtained at the time of such transaction in a comparable
transaction in arm's-length dealings with a Person who is not such an Affiliate,
(2) if such Affiliate Transaction involves an amount in excess of $2.0 million,
(i) are set forth in writing and (ii) have been approved by a majority of the
members of the Board of Directors having no material personal financial stake in
such Affiliate Transaction and (3) if such Affiliate Transaction involves an
amount in excess of $7.5 million, have been determined by a nationally
recognized investment banking firm to be fair, from a financial standpoint, to
the Company or its Restricted Subsidiary, as the case may be.
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(b) The provisions of the foregoing paragraph (a) shall not prohibit (i) any
Permitted Investment or Restricted Payment permitted to be made pursuant to the
covenant described under "--Limitation on Restricted Payments," or any payment
or transaction specifically excepted from the definition of Restricted Payment,
(ii) any issuance of securities, or other payments, awards or grants in cash,
securities or otherwise pursuant to, or the funding of, employment arrangements,
collective bargaining arrangements, employee benefit plans, health and life
insurance plans, deferred compensation plans, directors' and officers'
indemnification agreements, retirement or savings plans, stock options and stock
ownership plans or any other similar arrangement heretofore or hereafter entered
into in the ordinary course of business and approved by the board of directors
of the Company or any Restricted Subsidiary, (iii) the grant of stock options or
similar rights to employees and directors pursuant to plans approved by the
Board of Directors or the board of directors of the relevant Restricted
Subsidiary, (iv) loans or advances to officers, directors or employees in the
ordinary course of business or pursuant to compensation plans or employment
agreements approved by the board of directors of the Company or any Restricted
Subsidiary, (v) the payment of reasonable fees to directors of the Company and
its Restricted Subsidiaries who are not employees of the Company or its
Restricted Subsidiaries, (vi) any transaction between the Company and a
Restricted Subsidiary or between Restricted Subsidiaries, (vii) the purchase of
or the payment of Indebtedness of or monies owed by the Company or any of its
Restricted Subsidiaries for goods or materials purchased, or services received,
in the ordinary course of business, (viii) management agreements between the
Company or any of its Restricted Subsidiaries and one or more Permitted Holders,
or any of their respective Affiliates providing for management fees not to
exceed $350,000 per year to WESS or any of its Affiliates and $350,000 per year
to Oaktree or any of its Affiliates; (ix) transaction fees to WESS, Oaktree, or
any of their respective Affiliates for services provided in connection with the
LIW Acquisition, the New Credit Facility and the Old Notes Offering in an amount
not to exceed $2.5 million in the aggregate and (x) the performance of the
agreement between WESS, W.E. Myers & Co. and William E. Myers, Jr. as in effect
on the Issue Date.
LIMITATION ON THE SALE OR ISSUANCE OF CAPITAL STOCK OF RESTRICTED
SUBSIDIARIES. The Company shall not sell or otherwise dispose of any shares of
Capital Stock of a Restricted Subsidiary, and shall not permit any Restricted
Subsidiary, directly or indirectly, to issue or sell or otherwise dispose of any
shares of its Capital Stock to any person (other than to the Company or a Wholly
Owned Subsidiary) or permit any Person (other than the Company or a Wholly Owned
Subsidiary) to own any Capital Stock of a Restricted Subsidiary, if in either
case as a result thereof such Restricted Subsidiary would no longer be a
Restricted Subsidiary; PROVIDED, HOWEVER, this provision shall not prohibit (x)
the Company or any Restricted Subsidiary from selling, leasing or otherwise
disposing of all of the Capital Stock of any Restricted Subsidiary or (y) the
designation of a Restricted Subsidiary as an Unrestricted Subsidiary in
compliance with the Indenture. The foregoing shall not apply to any Lien granted
on the Capital Stock of a Restricted Subsidiary.
MERGER AND CONSOLIDATION. (a) The Company shall not, and shall not cause or
permit any Subsidiary Guarantor to, and no Subsidiary Guarantor (other than any
Subsidiary Guarantor whose Subsidiary Guaranty is to be released in accordance
with the terms of the Subsidiary Guaranty and the Indebtedness in connection
with the provisions of "--Certain Covenants--Limitation on Sale of Assets and
Subsidiary Stock") shall consolidate with or merge with or into, or convey,
transfer or lease, in one transaction or a series of transactions, its assets
substantially as an entirety to, any Person (other than, in the case of a
Subsidiary Guarantor, to the Company or any other Subsidiary Guarantor), unless:
(i) the resulting, surviving or transferee Person (the "Successor Company")
shall be a Person organized and existing under the laws of the United States of
America, any State thereof or the District of Columbia and the Successor Company
(if not the Company or, in the case of a Subsidiary Guarantor, the Company or a
Subsidiary Guarantor) shall expressly assume, by an indenture supplemental
thereto, executed and delivered to the Trustee, in form satisfactory to the
Trustee, all the obligations of the Company under the Notes and the Indenture or
of a Subsidiary Guarantor under the applicable Subsidiary Guaranty, as
applicable; (ii) immediately after giving effect to such transaction (and
treating any Indebtedness which becomes an obligation of the Successor Company
or any Subsidiary as a result of such transaction as having been Incurred by
such Successor Company or such Subsidiary at the time of such transaction), no
Default shall have occurred and be continuing; (iii) immediately after giving
effect to such transaction, the Successor Company would be able to Incur an
additional $1.00 of Indebtedness pursuant to paragraph (a)(i) in the case of the
Company or paragraph (a)(ii) in the case of a Subsidiary Guarantor of the
covenant described under "--Certain Covenants--Limitation on Indebtedness"; (iv)
immediately after giving effect to such transaction, the Successor Company shall
have Consolidated Net Worth in an amount that is not less than the Consolidated
Net Worth of the Company or such Subsidiary Guarantor, as applicable, prior to
such transaction minus any costs incurred in connection with such transaction;
and (v) the Company or such Subsidiary Guarantor, as applicable, shall have
delivered to the Trustee an officer's certificate and an opinion of counsel,
each stating that such consolidation, merger or transfer and such supplemental
indenture (if any) comply with the Indenture.
The Successor Company shall be the successor to the Company or the
Subsidiary Guarantor, as applicable, and shall succeed to, and be substituted
for, and may exercise every right and power of, the Company or the Subsidiary
Guarantor, as applicable, under the Indenture, but the predecessor company, only
in the case of a conveyance, transfer or lease, shall not be released from the
obligation to pay the principal of and interest on the Notes.
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Notwithstanding the foregoing, (i) any Restricted Subsidiary may consolidate
with, merge into or transfer all or part of its properties and assets to the
Company and (ii) the Company may merge with an Affiliate incorporated for the
purpose of reincorporating the Company in another jurisdiction to realize tax or
other benefits.
FUTURE SUBSIDIARY GUARANTORS. The Company shall cause each Restricted Subsidiary
that is organized and existing under the laws of any State of the United States
or the District of Columbia and that at any time becomes an obligor or guarantor
with respect to any obligations under one or more Bank Credit Agreements to
execute and deliver to the Trustee a supplemental indenture pursuant to which
such Restricted Subsidiary will Guarantee payment of the Notes on the same terms
and conditions as those set forth in the Indenture. Each Subsidiary Guaranty
will be limited in amount to an amount not to exceed the maximum amount that can
be Guaranteed by the applicable Subsidiary Guarantor without rendering such
Subsidiary Guaranty voidable under applicable law relating to fraudulent
conveyance or fraudulent transfer or similar laws affecting the rights of
creditors generally.
SEC REPORTS. Notwithstanding that the Company may not be required to remain
subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act, the Company shall file with the SEC (unless the SEC will not accept such a
filing) and provide within 15 days to the Trustee and Noteholders such annual
reports and such information, documents and other reports as are specified in
Sections 13 and 15(d) of the Exchange Act and applicable to a U.S. corporation
subject to such Sections, such information, documents and other reports to be so
filed and provided at the times specified for the filing of such information,
documents and reports under such Sections.
DEFAULTS
An Event of Default is defined in the Indenture as (i) a default in the
payment of interest on the Notes when due, continued for 30 days, (ii) a default
in the payment of principal on any Note when due at its Stated Maturity, upon
optional redemption, upon required repurchase, upon acceleration or otherwise,
(iii) the failure by the Company to comply with its obligations under "--Certain
Covenants--Merger and Consolidation" above, (iv) the failure by the Company to
comply for 30 days after notice with any of its obligations in the covenants
described above under "Change of Control" (other than a failure to purchase
Notes) or under "-- Certain Covenants--Limitation on Indebtedness,"
"--Limitation on Restricted Payments," "--Limitation on Sales of Assets and
Subsidiary Stock," or "--Limitation on the Sale or Issuance of Capital Stock of
Restricted Subsidiaries," (v) the failure by the Company to comply for 60 days
after the Company receives written notice with its other agreements contained in
the Indenture, (vi) Indebtedness of the Company or any Significant Subsidiary is
not paid within any applicable grace period after final maturity or is
accelerated by the Holders thereof because of a default and the total amount of
such Indebtedness unpaid or accelerated exceeds $10.0 million (the "cross
acceleration provision"), (vii) certain events of bankruptcy, insolvency or
reorganization of the Company or any Significant Subsidiary (the "bankruptcy
provisions") or (viii) any judgment or decree for the payment of money in excess
of $10.0 million is entered against the Company or any Significant Subsidiary,
remains outstanding for a period of 60 days following entry of such judgment and
is not discharged, bonded, waived or stayed within 30 days after notice (the
"judgment default provision"). However, a default under clause (iv) or (v) will
not constitute an Event of Default until the Trustee or the Holders of 25% in
principal amount of the outstanding Notes notify the Company of the default and
the Company does not cure such default within the time specified after receipt
of such notice.
If an Event of Default (other than the bankruptcy provisions relating to the
Company) occurs and is continuing, the Trustee or the Holders of at least 25% in
principal amount of the outstanding Notes may declare the principal of and
accrued but unpaid interest on all the Notes to be due and payable. Upon such a
declaration, such principal and interest shall be due and payable immediately.
If an Event of Default relating to the bankruptcy provisions relating to the
Company occurs and is continuing, the principal of and interest on all the Notes
will ipso facto become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any Holders. The Holders
of a majority in principal amount of the outstanding Notes may by notice to the
Trustee rescind any acceleration and its consequences if the rescission would
not conflict with any judgment or decree and if all existing Events of Default
have been cured or waived except non-payment of principal or interest that has
become due solely because of acceleration. No such rescission shall affect any
subsequent Default or impair any right consequent thereto.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default occurs and is continuing, the Trustee will
be under no obligation to exercise any of the rights or powers under the
Indenture at the request or direction of any of the Holders unless such Holders
have offered to the Trustee reasonable indemnity or security against any loss,
liability or expense. Except to enforce the right to receive payment of
principal, premium (if any) or interest when due, no Holder of a Note may pursue
any remedy with respect to the Indenture or the Notes unless (i) such Holder has
previously given the Trustee notice that an Event of Default is continuing, (ii)
Holders of at least 25% in principal amount of the outstanding Notes have
requested the Trustee to pursue the remedy, (iii) such Holders have offered the
Trustee reasonable security or indemnity against any loss, liability or expense,
(iv) the Trustee has not complied with such request within 60 days after the
receipt thereof and the offer of security or indemnity and (v) the Holders of a
majority in principal amount of the outstanding Notes have not given the Trustee
a direction inconsistent with such request within such 60-day period. Subject to
certain restrictions, the Holders of a
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majority in principal amount of the outstanding Notes are given the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or of exercising any trust or power conferred on the
Trustee. The Trustee, however, may refuse to follow any direction that conflicts
with law or the Indenture or that the Trustee determines is unduly prejudicial
to the rights of any other Holder or that would involve the Trustee in personal
liability.
The Indenture provides that if a Default occurs and is continuing and is
known to the Trustee, the Trustee must mail to each Holder notice of the Default
within 90 days after it occurs. Except in the case of a Default in the payment
of principal of or interest on any Note, the Trustee may withhold notice if and
so long as the board of directors, the executive committee or a committee of its
trust officers determines that withholding notice is not opposed to the interest
of the Holders. In addition, the Company is required to deliver to the Trustee,
within 120 days after the end of each fiscal year, a certificate indicating
whether the signers thereof know of any Default that occurred during the
previous year. The Company also is required to deliver to the Trustee, within 30
days after the occurrence thereof, written notice of any event which would
constitute certain Defaults, their status and what action the Company is taking
or proposes to take in respect thereof.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the Indenture may be amended with the consent
of the Holders of a majority in principal amount of the Notes then outstanding
(including consents obtained in connection with a tender offer or exchange for
the Notes) and any past default or compliance with any provisions may also be
waived with the consent of the Holders of a majority in principal amount of the
Notes then outstanding.
Without the consent of each Holder of an outstanding Note affected thereby,
no amendment may (i) reduce the amount of Notes whose Holders must consent to an
amendment, (ii) reduce the rate of or extend the time for payment of interest on
any Note, (iii) reduce the principal of or extend the Stated Maturity of any
Note, (iv) reduce the premium payable upon the redemption of any Note or change
the time at which any Note may be redeemed as described under "--Optional
Redemption" above, (v) make any Note payable in money other than that stated in
the Note, (vi) impair the right of any Holder to receive payment of principal of
and interest on such Holder's Notes on or after the due dates therefor or to
institute suit for the enforcement of any payment on or with respect to such
Holder's Notes, (vii) make any change in the amendment provisions which require
each Holder's consent or in the waiver provisions or (viii) affect the ranking
of the Notes in any material respect.
Without the consent of any Holder, the Company and the Trustee may amend the
Indenture to cure any ambiguity, omission, defect or inconsistency, to provide
for the assumption by a successor corporation of the obligations of the Company
under the Indenture, to provide for uncertificated Notes in addition to or in
place of certificated Notes (provided that the uncertificated Notes are issued
in registered form for purposes of Section 163(f) of the Code, or in a manner
such that the uncertificated Notes are described in Section 163(f)(2)(B) of the
Code), to add guarantees with respect to the Notes, to secure the Notes, to add
to the covenants of the Company for the benefit of the Holders or to surrender
any right or power conferred upon the Company, to make any change that does not
adversely affect the rights of any Holder or to comply with any requirement of
the SEC in connection with the qualification of the Indenture under the Trust
Indenture Act.
The consent of the Holders is not necessary under the Indenture to approve
the particular form of any proposed amendment. It is sufficient if such consent
approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, the Company is
required to mail to Holders a notice briefly describing such amendment. However,
the failure to give such notice to all Holders, or any defect therein, will not
impair or affect the validity of the amendment.
TRANSFER
The New Notes will be issued in registered form and will be transferable
only upon the surrender of the New Notes being transferred for registration of
transfer. The Company may require payment of a sum sufficient to cover any tax,
assessment or other governmental charge payable in connection with certain
transfers and exchanges. The Company is not required to transfer or exchange any
New Note selected for redemption or repurchase or to transfer or exchange any
New Note for a period of 15 days prior to selection of New Notes to be redeemed
or repurchased.
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DEFEASANCE
The Company at its option at any time may terminate all of its obligations
under the Notes and the Indenture ("legal defeasance"), except for certain
obligations, including those respecting the defeasance trust and obligations to
register the transfer or exchange of the Notes, to replace mutilated, destroyed,
lost or stolen Notes and to maintain a registrar and paying agent in respect of
the Notes. In addition, the Company at its option at any time may terminate its
obligations under "Change of Control" and under the covenants described under
"Certain Covenants" (other than the covenant described under "--Merger and
Consolidation") (and any omission to comply with such obligations shall not
constitute a Default or Event of Default with respect to the Notes), the
operation of the cross acceleration provision, the bankruptcy provisions with
respect to Significant Subsidiaries and the judgment default provision described
under "--Defaults" above and the limitations contained in clauses (iii) and (iv)
of the first paragraph under "-- Certain Covenants--Merger and Consolidation"
above ("covenant defeasance").
The Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Company exercises its
legal defeasance option, payment of the Notes may not be accelerated because of
an Event of Default with respect thereto. If the Company exercises its covenant
defeasance option, payment of the Notes may not be accelerated because of an
Event of Default specified in clause (iv), (vi), (vii) (with respect only to
Significant Subsidiaries) or (viii) under "--Defaults" above or because of the
failure of the Company to comply with clause (iii) or (iv) of the first
paragraph under "--Certain Covenants -Merger and Consolidation" above.
In order to exercise either defeasance option, the Company must irrevocably
deposit in trust (the "defeasance trust") with the Trustee money or U.S.
Government Obligations for the payment of principal of and interest on the Notes
to redemption or maturity, as the case may be, and must comply with certain
other conditions, including delivery to the Trustee of an Opinion of Counsel to
the effect that Holders will not recognize income, gain or loss for Federal
income tax purposes as a result of such deposit and defeasance and will be
subject to Federal income tax on the same amount and in the same manner and at
the same times as would have been the case if such deposit and defeasance had
not occurred (and, in the case of legal defeasance only, such Opinion of Counsel
must be based on a ruling of the Internal Revenue Service or other change in
applicable Federal income tax law).
SATISFACTION AND DISCHARGE
The Indenture will cease to be of further effect (except as to surviving
rights of registration of transfer or exchange of the Notes, as expressly
provided for in the Indenture) as to all outstanding Notes when: (i) either (a)
all the Notes theretofore authenticated and delivered (except lost, stolen or
destroyed Notes which have been replaced or paid) have been delivered to the
Trustee for cancellation or (b) all Notes not theretofore delivered to the
Trustee for cancellation have become due and payable and the Company has
irrevocably deposited or caused to be deposited with the Trustee an amount in
United States dollars sufficient to pay and discharge the entire indebtedness on
the Notes not theretofore delivered to the Trustee for cancellation, for the
principal of, premium, if any, and interest to the date of deposit; (ii) the
Company has paid or caused to be paid all other sums payable under the Indenture
by the Company; and (iii) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel each stating that all conditions precedent
under the Indenture relating to the satisfaction and discharge of the Indenture
have been complied with.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
The Indenture provides that no recourse for the payment of the principal of,
premium, if any, or interest on any of the Notes or for any claim based thereon
or otherwise in respect thereof, and no recourse under or upon any obligation,
covenant or agreement of the Company in the Indenture, or in any of the Notes or
because of the creation of any Indebtedness represented thereby, shall be had
against any incorporator, stockholder, officer, director, employee or
controlling person of the Company or any successor Person thereof. Each Holder,
by accepting the Notes, waives and releases all such liability. Such waiver may
not be effective to waive liabilities under the federal securities laws and it
is the view of the SEC that such waiver is against public policy.
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CONCERNING THE TRUSTEE
First Trust National Association is to be the Trustee under the Indenture
and has been appointed by the Company as Registrar and Paying Agent with regard
to the Notes. Such bank may also act as a depository of funds for, or make loans
to and perform other services for, the Company or its affiliates in the ordinary
course of business in the future. The corporate trust office of the Trustee is
located at First Trust New York, 100 Wall Street, 20th Floor, New York, New
York, 10005.
The Holders of a majority in principal amount of the outstanding Notes will
have the right to direct the time, method and place of conducting any proceeding
for exercising any remedy available to the Trustee, subject to certain
exceptions. The Indenture provides that if an Event of Default occurs (and is
not cured), the Trustee will be required, in the exercise of its power, to use
the degree of care of a prudent man in the conduct of his own affairs. Subject
to such provisions, the Trustee will be under no obligation to exercise any of
its rights or powers under the Indenture at the request of any Holder of Notes,
unless such Holder shall have offered to the Trustee security and indemnity
satisfactory to it against any loss, liability or expense and then only to the
extent required by the terms of the Indenture. The Trustee may resign at any
time or may be removed by the Company. If the Trustee resigns, is removed or
becomes incapable of acting as Trustee or if a vacancy occurs in the office of
the Trustee for any cause, a successor Trustee shall be appointed in accordance
with the provisions of the Indenture.
If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and the Indenture. The Indenture also
contains certain limitations on the right of the Trustee, as a creditor of the
Company, to obtain payment of claims in certain cases, or to realize on certain
property received by it in respect of any such claims, as security or otherwise.
GOVERNING LAW
The Indenture provides that it and the Notes will be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to applicable principles of conflicts of law to the extent that the
application of the law of another jurisdiction would be required thereby.
CERTAIN DEFINITIONS
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) in a Related Business, (ii) the Capital Stock of
a Person that becomes a Restricted Subsidiary as a result of the acquisition of
such Capital Stock by the Company or another Restricted Subsidiary or (iii)
Capital Stock constituting a minority interest in any Person that at such time
is a Restricted Subsidiary; PROVIDED, HOWEVER, that any such Restricted
Subsidiary described in clause (ii) or (iii) above is primarily engaged in a
Related Business.
"Affiliate" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Asset Disposition" means any sale, lease, transfer or other disposition (or
series of related sales, leases, transfers or dispositions) by the Company or
any Restricted Subsidiary, including any disposition by means of a merger or
consolidation (each referred to for the purposes of this definition as a
"disposition"), of (i) any shares of Capital Stock of a Restricted Subsidiary
(other than directors' qualifying shares or shares required by applicable law to
be held by a Person other than the Company or a Restricted Subsidiary), (ii) all
or substantially all the assets (other than Capital Stock of an Unrestricted
Subsidiary) of any division or line of business of the Company or any Restricted
Subsidiary or (iii) any other assets (other than Capital Stock of an
Unrestricted Subsidiary) of the Company or any Restricted Subsidiary outside of
the ordinary course of business of the Company or such Restricted Subsidiary
(other than, in the case of (i), (ii) and (iii) above, (x) a disposition by a
Restricted Subsidiary to the Company or by the Company or a Restricted
Subsidiary to a Restricted Subsidiary and (y) for purposes of the covenant
described under "--Certain Covenants-- Limitation on Sales of Assets and
Subsidiary Stock" only, a disposition that constitutes a Restricted Payment
permitted by the covenant described under "--Certain Covenants - Limitation on
Restricted Payments" or a disposition specifically excepted from the definition
of Restricted Payment); PROVIDED, HOWEVER, that Asset Disposition shall not
include (a) a transaction or series of related transactions for which the
Company or its Restricted Subsidiaries receive aggregate consideration less than
or equal to $1.0 million, (b) the sale, lease, conveyance, disposition or other
transfer of all or substantially all of the assets of the Company as permitted
under "--Certain Covenants--Merger and Consolidation" and "--Certain
Covenants--Limitation on Sales of Assets and Subsidiary Stock" or (c) the
disposition of assets of the Company or any Restricted Subsidiary for
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aggregate non-cash consideration not in excess of $20.0 million so long as the
pro forma Consolidated Coverage Ratio after giving effect to any such
disposition is at least 2.5 to 1.0. The foregoing shall not apply to any Lien
granted on the Capital Stock of a Restricted Subsidiary.
"Attributable Debt" in respect of a Sale/Leaseback Transaction means, as at
the time of determination, the present value (discounted at the interest rate
borne by the Notes, compounded annually) of the total obligations of the lessee
for rental payments during the remaining term of the lease included in such
Sale/Leaseback Transaction (including any period for which such lease has been
extended).
"Average Life" means, as of the date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum
of the products of the numbers of years from the date of determination to the
dates of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied by
the amount of such payment by (ii) the sum of all such payments.
"Bank Credit Agreement" means the credit agreement, dated as of the Issue
Date, among the Company, ING (U.S.) Capital Corporation, as agent, and the other
financial institutions party thereto, as such agreement, in whole or in part,
may be amended, renewed, extended, increased (but only so long as such increase
is permitted under the terms of the Indenture), substituted, refinanced,
restructured, replaced (including, without limitation, any successive renewals,
extensions, increases, substitutions, refinancings, restructurings,
replacements, supplements or other modifications of the foregoing).
"Board of Directors" means the Board of Directors of the Company or any
committee thereof duly authorized to act on behalf of such Board.
"Business Day" means each day which is not a Legal Holiday.
"Capital Lease Obligations" means an obligation that is required to be
classified and accounted for as a capital lease for financial reporting purposes
in accordance with GAAP, and the amount of Indebtedness represented by such
obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP; and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.
"Capital Stock" of any Person means any and all shares, interests, rights to
purchase, warrants, options, participations or other equivalents of or interests
in (however designated) equity of such Person, including any Preferred Stock,
but excluding any debt securities convertible into such equity.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consolidated Coverage Ratio" as of any date of determination means the
ratio of (i) the aggregate amount of EBITDA for the period of the most recent
four consecutive fiscal quarters ending at least 45 days (or, if less than 45
days after the end of such fiscal quarter, ending as of the date the
consolidated financial statements of the Company shall be available) prior to
the date of such determination to (ii) Consolidated Interest Expense for such
four fiscal quarters; provided, however, that (1) if the Company or any
Restricted Subsidiary (x) has Incurred any Indebtedness (other than Indebtedness
Incurred for working capital purposes under a Bank Credit Agreement) since the
beginning of such period that remains outstanding or if the transaction giving
rise to the need to calculate the Consolidated Coverage Ratio is an Incurrence
of Indebtedness, or both, EBITDA and Consolidated Interest Expense for such
period shall be calculated after giving effect on a pro forma basis to such
Indebtedness as if such Indebtedness had been Incurred on the first day of such
period and the discharge of any other Indebtedness repaid, repurchased, defeased
or otherwise discharged with the proceeds of such new Indebtedness as if such
discharge had occurred on the first day of such period or (y) has repaid,
repurchased, defeased or otherwise discharged any Indebtedness since the
beginning of the period that is no longer outstanding on such date of
determination, or if the transaction giving rise to the need to calculate the
Consolidated Coverage Ratio involves a discharge of Indebtedness, EBITDA and
Consolidated Interest Expense for such period shall be calculated after giving
effect to such discharge of such Indebtedness, including with the proceeds of
such new Indebtedness, as if such discharge had occurred on the first day of
such period (except that, in making such computation, the amount of Indebtedness
under any revolving credit facility shall be computed based upon the average
daily balance of such Indebtedness during such four quarter period), (2) if
since the beginning of such period the Company or any Restricted Subsidiary
shall have made any Asset Disposition, the EBITDA for such period shall be
reduced by an amount equal to the EBITDA (if positive) directly attributable to
the assets which are the subject of such Asset Disposition for such period, or
increased by an amount equal to the EBITDA (if negative) directly attributable
thereto for such period and Consolidated Interest Expense for such period shall
be reduced by an amount equal to the Consolidated Interest Expense directly
attributable to any Indebtedness of the Company or any Restricted Subsidiary
repaid, repurchased, defeased or otherwise discharged with respect to the
Company and
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its continuing Restricted Subsidiaries in connection with such Asset Disposition
for such period (or, if the Capital Stock of any Restricted Subsidiary is sold,
the Consolidated Interest Expense for such period directly attributable to the
Indebtedness of such Restricted Subsidiary to the extent the Company and its
continuing Restricted Subsidiaries are no longer liable for such Indebtedness
after such sale), (3) if since the beginning of such period the Company or any
Restricted Subsidiary (by merger or otherwise) shall have made an Investment in
any Restricted Subsidiary (or any Person which becomes a Restricted Subsidiary)
or an acquisition of assets, including any acquisition of assets occurring in
connection with a transaction requiring a calculation to be made hereunder,
which constitutes all or substantially all of an operating unit of a business,
EBITDA and Consolidated Interest Expense for such period shall be calculated
after giving pro forma effect thereto (including the Incurrence of any
Indebtedness) as if such Investment or acquisition occurred on the first day of
such period or (4) if since the beginning of such period any Person (that
subsequently became a Restricted Subsidiary or was merged with or into the
Company or any Restricted Subsidiary since the beginning of such period) shall
have made any Asset Disposition, Investment or acquisition of assets that would
have required an adjustment pursuant to clause (2) or (3) above if made by the
Company or a Restricted Subsidiary during such period, EBITDA and Consolidated
Interest Expense for such period shall be calculated after giving pro forma
effect thereto as if such Asset Disposition, Investment or acquisition occurred
on the first day of such period. For purposes of this definition, whenever pro
forma effect is to be given to an acquisition of assets, the amount of income or
earnings relating thereto and the amount of Consolidated Interest Expense
associated with any Indebtedness Incurred in connection therewith, the pro forma
calculations shall be determined in good faith by a responsible financial or
accounting officer of the Company. If any Indebtedness bears a floating rate of
interest and is being given pro forma effect, the interest on such Indebtedness
shall be calculated as if the rate in effect on the date of determination had
been the applicable rate for the entire period (taking into account any Interest
Rate Agreement applicable to such Indebtedness if such Interest Rate Agreement
has a remaining term in excess of 12 months).
"Consolidated Interest Expense" means, for any period, the total interest
expense of the Company and its consolidated Restricted Subsidiaries, plus, to
the extent not included in such total interest expense, and to the extent
incurred by the Company or its Restricted Subsidiaries, (i) interest expense
attributable to Capital Lease Obligations, (ii) amortization of debt discount
and debt issuance costs, (iii) capitalized interest, (iv) non-cash interest
expense, (v) commissions, discounts and other fees and charges owed with respect
to letters of credit and bankers' acceptance financing, (vi) net costs
associated with Hedging Obligations (including amortization of fees), (vii)
dividends paid or payable in respect of any Disqualified Stock of the Company,
(viii) cash dividends paid or payable by the Company and all dividends paid or
payable by Restricted Subsidiaries, in each case in respect of all Preferred
Stock held by Persons other than the Company or a Wholly Owned Subsidiary, (ix)
interest incurred in connection with Investments in discontinued operations and
(x) interest accruing on any Indebtedness of any other Person to the extent such
Indebtedness is Guaranteed by the Company or any Restricted Subsidiary.
"Consolidated Net Income" means, for any period, the net income of the
Company and its consolidated Subsidiaries; PROVIDED, HOWEVER, that there shall
not be included in such Consolidated Net Income: (i) any net income of any
Person if such Person is not a Restricted Subsidiary, except that (A) subject to
the exclusion contained in clause (iv) below, the Company's equity in the net
income of any such Person for such period shall be included in such Consolidated
Net Income up to the aggregate amount of cash actually distributed by such
Person during such period to the Company or a Restricted Subsidiary as a
dividend or other distribution (subject, in the case of a dividend or other
distribution paid to a Restricted Subsidiary, to the limitations contained in
clause (iii) below) and (B) with respect to the calculation of EBITDA only, the
Company's equity in a net loss of any such Person for such period shall be
included in determining such Consolidated Net Income up to the aggregate amount
invested by the Company or any Restricted Subsidiary in such Person during such
period; (ii) any net income (or loss) of any Person acquired by the Company or a
Subsidiary of the Company in a pooling of interests transaction for any period
prior to the date of such acquisition; (iii) any net income of any Restricted
Subsidiary to the extent that such Restricted Subsidiary is subject to
restrictions, directly or indirectly, prohibiting the payment of dividends, the
repayment of intercompany debt and the making of distributions by such
Restricted Subsidiary, directly or indirectly, to the Company, except that (A)
subject to the exclusion contained in clause (iv) below, the Company's equity in
the net income of any such Restricted Subsidiary for such period shall be
included in such Consolidated Net Income up to the aggregate amount of cash
actually distributed by such Restricted Subsidiary during such period to the
Company or another Restricted Subsidiary as a dividend or other distribution
(subject, in the case of a dividend or other distribution paid to another
Restricted Subsidiary, to the limitation contained in this clause) and (B) the
Company's equity in a net loss of any such Restricted Subsidiary for such period
shall be included in determining such Consolidated Net Income up to the
aggregate amount invested by the Company or any Restricted Subsidiary in such
Person during such period; (iv) any gain or loss realized upon the sale or other
disposition of any assets of the Company or its consolidated Subsidiaries
(including pursuant to any sale-and-leaseback arrangement) which is not sold or
otherwise disposed of in the ordinary course of business and any gain or loss
realized upon the sale or other disposition of any Capital Stock of any Person;
(v) extraordinary gains or losses; and (vi) the cumulative effect of a change in
accounting principles.
"Consolidated Net Worth" means the total of the amounts shown on the balance
sheet of the Company and its Restricted Subsidiaries, determined on a
consolidated basis in accordance with GAAP, as of the most recent fiscal quarter
of the Company for which financial statements are available, as (i) the par or
stated value of all outstanding Capital Stock of the Company plus
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(ii) paid-in capital or capital surplus relating to such Capital Stock plus
(iii) any retained earnings or earned surplus less (A) any accumulated deficit
and (B) any amounts attributable to Disqualified Stock.
"Currency Agreement" means in respect of a Person any foreign exchange
contract, currency swap agreement or other similar agreement to which such
Person is a party or a beneficiary.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Depository" means The Depository Trust Company, its nominees and their
respective successors.
"Disqualified Stock" means, with respect to any Person, any Capital Stock
which by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable) or upon the happening of any event (other than
as a result of a Change of Control) (i) matures or is mandatorily redeemable
pursuant to a sinking fund obligation or otherwise, (ii) is convertible or
exchangeable for Indebtedness or Disqualified Stock or (iii) is redeemable at
the option of the holder thereof, in whole or in part, in each case on or prior
to the Stated Maturity of the Notes; PROVIDED, HOWEVER, that any Capital Stock
that would not constitute Disqualified Stock but for provisions thereof giving
holders thereof the right to require such Person to repurchase or redeem such
Capital Stock upon the occurrence of an "asset sale" or "change of control"
occurring prior to the Stated Maturity of the Notes shall not constitute
Disqualified Stock if the "asset sale" or "change of control" provisions
applicable to such Capital Stock are not more favorable to the holders of such
Capital Stock than the provisions described under "--Certain
Covenants--Limitation on Sales of Assets and Subsidiary Stock" and "Change of
Control."
"EBITDA" for any period means the sum of Consolidated Net Income plus
Consolidated Interest Expense plus the following to the extent deducted in
calculating such Consolidated Net Income: (a) all income tax expense of the
Company, (b) depreciation expense, (c) amortization expense and (d) all other
non-cash items reducing such Consolidated Net Income (excluding any non-cash
item to the extent it represents an accrual of, or reserve for, cash
disbursement for any subsequent period) less all non-cash items increasing such
Consolidated Net Income (such amount calculated pursuant to this clause (d) not
to be less than zero), in each case for such period. Notwithstanding the
foregoing, the provision for taxes based on the income or profits of, and the
depreciation and amortization of, a Subsidiary of the Company shall be added to
Consolidated Net Income to compute EBITDA only to the extent (and in the same
proportion) that the net income of such Subsidiary was included in calculating
Consolidated Net Income.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Foreign Credit Agreement" means any revolving credit agreement, invoice
discounting, overdraft or guarantee facility or other similar arrangement
providing for the Incurrence of Indebtedness by any Foreign Subsidiary, and the
agreements governing such Indebtedness which may, in whole or in part, be
amended, renewed, extended, substituted, refinanced, restructured, replaced
(including, without limitation, any successive renewals, extensions,
substitutions, refinancing, restructuring, replacement, supplements or other
modifications of the foregoing).
"Foreign Subsidiary" means a Restricted Subsidiary that is incorporated in a
jurisdiction other than the United States or a State thereof or the District of
Columbia and with respect to which more than 80% of any of its sales, earnings
or assets (determined on a consolidated basis in accordance with GAAP) are
located in, generated from or derived from operations located in territories
outside of the United States of America and jurisdictions outside the United
States of America.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Issue Date, including those set forth (i) in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants, (ii) in statements and
pronouncements of the Financial Accounting Standards Board, (iii) in such other
statements by such other entity as approved by a significant segment of the
accounting profession, and (iv) in the rules and regulations of the SEC
governing the inclusion of financial statements (including pro forma financial
statements) in periodic reports required to be filed pursuant to Section 13 of
the Exchange Act, including opinions and pronouncements in staff accounting
bulletins and similar written statements from the accounting staff of the SEC.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any Person and any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness of such Person (whether arising by virtue of agreements to keep
well, to purchase assets, goods, securities or services, to take-or-pay or to
maintain financial statement conditions or otherwise) or (ii) entered into for
the purpose of assuring in any other manner the obligee of such Indebtedness of
the payment thereof or to protect such obligee against loss in respect thereof
(in whole or in part); PROVIDED, HOWEVER, that the
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term "Guarantee" shall not include endorsements for collection or deposit in the
ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning. The term "Guarantor" shall mean any Person Guaranteeing
any obligation.
"Hedging Obligations" of any Person means the obligations of such Person
pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" or "Noteholder" means the Person in whose name a Note is registered
on the Registrar's books.
"Incur" means issue, assume, Guarantee, incur or otherwise become liable for
Indebtedness; provided, however, that any Indebtedness of a Person existing at
the time such Person becomes a Subsidiary (whether by merger, consolidation,
acquisition or otherwise) shall be deemed to be Incurred by such Subsidiary at
the time it becomes a Subsidiary. The term "Incurrence" when used as a noun
shall have a correlative meaning. The accretion of principal of a non-interest
bearing or other discount security shall be deemed the Incurrence of
Indebtedness.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication), (i) the principal of and premium (if any)
in respect of (A) indebtedness of such Person for money borrowed and (B)
indebtedness evidenced by notes, debentures, bonds or other similar instruments
for the payment of which such Person is responsible or liable; (ii) all Capital
Lease Obligations of such Person and all Attributable Debt in respect of
Sale/Leaseback Transactions entered into by such Person; (iii) all obligations
of such Person issued or assumed as the deferred purchase price of property
(which purchase price is due more than one year after taking title of such
property), all conditional sale obligations of such Person and all obligations
of such Person under any title retention agreement (but excluding trade accounts
payable arising in the ordinary course of business); (iv) all obligations of
such Person for the reimbursement of any obligor on any letter of credit,
banker's acceptance or similar credit transaction (other than obligations with
respect to letters of credit securing obligations (other than obligations
described in clauses (i) through (iii) above) entered into in the ordinary
course of business of such Person to the extent such letters of credit are not
drawn upon, or, if and to the extent drawn upon, such drawing is reimbursed no
later than the tenth Business Day following receipt by such Person of a demand
for reimbursement following payment on the letter of credit); (v) the amount of
all obligations of such Person with respect to the redemption, repayment or
other repurchase of any Disqualified Stock or, with respect to any Subsidiary of
such Person, any Preferred Stock (but excluding, in each case, any accrued
dividends); (vi) all obligations of the type referred to in clauses (i) through
(v) of other Persons and all dividends of other Persons for the payment of
which, in either case, such Person is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise, including by means of any
Subsidiary Guaranty (but only to the extent of the amount actually guaranteed);
(vii) all obligations of the type referred to in clauses (i) through (vi) of
other Persons secured by any Lien on any property or asset of such Person
(whether or not such obligation is assumed by such Person), the amount of such
obligation being deemed to be the lesser of the value of such property or assets
or the amount of the obligation so secured; and (viii) to the extent not
otherwise included in this definition, Hedging Obligations of such Person. The
amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and the
maximum liability, upon the occurrence of the contingency giving rise to the
obligation, of any contingent obligations at such date. For purposes of
clarification, (i) Indebtedness shall not include undrawn commitments under the
Bank Credit Agreement and the Foreign Credit Agreement or any obligation to
purchase Capital Stock of LIW pursuant to option agreements, purchase agreements
or otherwise or the Company's Capital Stock pursuant to employment agreements
and otherwise and (ii) any Guarantee of Indebtedness shall not be deemed to be
an Incurrence of Indebtedness to the extent that the Indebtedness so Guaranteed
is Incurred by the Company or any Restricted Subsidiary as permitted pursuant to
the terms of the Indenture.
"Interest Rate Agreement" means any interest rate swap agreement, interest
rate cap agreement or other financial agreement or arrangement designed solely
to protect the Company or any Restricted Subsidiary against fluctuations in
interest rates.
"Investment" in any Person means any direct or indirect advance, loan (other
than advances to customers in the ordinary course of business that are recorded
as accounts receivable on the balance sheet of the Person making the advance or
loan) or other extensions of credit (including by way of Subsidiary Guaranty or
similar arrangement) or capital contribution to (by means of any transfer of
cash or other property to others or any payment for property or services for the
account or use of others), or any purchase or acquisition of Capital Stock,
Indebtedness or other similar instruments issued by such Person. For purposes of
the definition of "Unrestricted Subsidiary," the definition of "Restricted
Payment" and the covenant described under "--Certain Covenants-- Limitation on
Restricted Payments," (i) "Investment" shall include the portion (proportionate
to the Company's equity interest in such Subsidiary) of the fair market value of
the net assets of any Subsidiary of the Company at the time that such Subsidiary
is designated an Unrestricted Subsidiary; PROVIDED, HOWEVER, that if such
designation is made in connection with the acquisition of such Subsidiary or the
assets owned by such Subsidiary, the "Investment" in such Subsidiary shall be
deemed to be the consideration paid in connection with such acquisition;
PROVIDED FURTHER, HOWEVER, that upon a redesignation of such Subsidiary as a
Restricted Subsidiary, the Company shall be deemed to continue to have a
permanent "Investment" in an
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Unrestricted Subsidiary in an amount (if positive) equal to (x) the Company's
"Investment" in such Subsidiary at the time of such redesignation less (y) the
portion (proportionate to the Company's equity interest in such Subsidiary) of
the fair market value of the net assets of such Subsidiary at the time of such
redesignation, and (ii) any property transferred to or from an Unrestricted
Subsidiary shall be valued at its fair market value at the time of such
transfer, in each case as determined in good faith by the Board of Directors.
"Issue Date" means the date of original issuance of the Old Notes.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the State of New York are authorized or required by law to
close. If a payment date is a Legal Holiday, payment shall be made on the next
succeeding day that is not a Legal Holiday, and no interest shall accrue for the
intervening period. If a regular record date is a Legal Holiday, the record
shall not be affected.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Moody's" means Moody's Investors Service, Inc.
"Net Available Cash" from an Asset Disposition means cash payments received
therefrom (including any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise, but only as
and when received, but excluding any other consideration received in the form of
assumption by the acquiring Person of Indebtedness or other obligations relating
to such properties or assets or received in any other noncash form) in each case
net of (i) all legal, title and recording tax expenses, brokerage commissions,
underwriting discounts or commissions or sales commissions and other reasonable
fees and expenses (including, without limitation, fees and expenses of counsel,
accountants and investment bankers) related to such Asset Disposition or
converting to cash any other proceeds received, and any relocation and severance
expenses as a result thereof, and all Federal, state, provincial, foreign and
local taxes required to be accrued or paid as a liability under GAAP, as a
consequence of such Asset Disposition, (ii) all payments made on any
Indebtedness which is secured by any assets subject to such Asset Disposition or
made in order to obtain a necessary consent to such Asset Disposition or to
comply with applicable law, (iii) all distributions and other payments required
to be made to minority interest holders in Subsidiaries or joint ventures as a
result of such Asset Disposition and (iv) appropriate amounts provided by the
seller as a reserve, in accordance with GAAP, against any liabilities associated
with the property or other assets disposed of in such Asset Disposition and
retained by the Company or any Restricted Subsidiary after such Asset
Disposition, including, without limitation, pension and other post-employment
benefit liabilities, liabilities related to environmental matters and
liabilities under any indemnification obligations associated with such Asset
Disposition. Further, with respect to an Asset Disposition by a Subsidiary which
is not a Wholly Owned Subsidiary, Net Available Cash shall be reduced pro rata
for the portion of the equity of such Subsidiary which is not owned by the
Company.
"Net Cash Proceeds," with respect to any issuance or sale of Capital Stock,
means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof. In addition, for purposes of the calculations described in
"--Certain Covenants--Limitation on Restricted Payments," Net Cash Proceeds
shall also mean any cash amounts paid to the Company by members of management in
respect of all promissory notes outstanding on the Issue Date and any amounts
reflected on the records of the Company as additional paid in capital or equity
contributions made in respect of employment-related stock price guarantees
entered into prior to the Issue Date.
"Permitted Holders" means (i) William E. Simon & Sons, L.L.C. and its
Affiliates, (ii) Oaktree Capital Management, LLC and its Affiliates, including
any partnerships, separate accounts, or other entities managed by Oaktree and
(iii) Roger E. Payton. For purposes of clarification, The TCW Group, Inc.,
Logistical Simon, L.L.C., OCM Principal Opportunities Fund, L.P., TCW Special
Credits Fund V--The Principal Fund and their respective Affiliates are Permitted
Holders.
"Permitted Investment" means an Investment by the Company or any Restricted
Subsidiary in (i) a Restricted Subsidiary or a Person that will, upon the making
of such Investment, become a Restricted Subsidiary; provided, however, that the
primary business of such Restricted Subsidiary is a Related Business; (ii)
another Person if as a result of such Investment such other Person is merged or
consolidated with or into, or transfers or conveys all or substantially all its
assets to, the Company or a Restricted Subsidiary; provided, however, that such
Person's primary business is a Related Business; (iii) Temporary Cash
Investments; (iv) receivables owing to the Company or any Restricted Subsidiary
if created or acquired in the ordinary course of business and payable or
dischargeable in accordance with customary trade terms; provided, however, that
such trade terms may include such concessionary trade terms as the Company or
any such Restricted Subsidiary deems reasonable under the circumstances; (v)
payroll, travel and similar advances to cover matters that are expected at the
time of such advances ultimately
106
<PAGE>
to be treated as expenses for accounting purposes and that are made in the
ordinary course of business; (vi) loans or advances to employees made in the
ordinary course of business consistent with past practices of the Company or
such Restricted Subsidiary, including without limitation, loans or advances made
to employees in respect of stock purchase or other employee benefit plans; (vii)
stock, obligations or securities received in settlement of debts created in the
ordinary course of business and owing to the Company or any Restricted
Subsidiary or in satisfaction of judgments; and (viii) any Person to the extent
such Investment represents the non-cash portion of the consideration received
for a disposition of Assets as permitted pursuant to the covenant described
under "--Certain Covenants--Limitation on Sales of Assets and Subsidiary Stock"
and as described in clause (c) of the definition of Asset Disposition.
"Permitted Liens" means, with respect to any Person, (a) pledges or deposits
by such Person under workers' compensation laws, unemployment insurance laws or
similar legislation, or good faith deposits in connection with bids, tenders,
contracts (other than for the payment of Indebtedness) or leases to which such
Person is a party, or deposits to secure public or statutory obligations of such
Person or deposits or cash or United States government bonds to secure surety or
appeal bonds to which such Person is a party, or deposits as security for
contested taxes or import duties or for the payment of rent, in each case
incurred in the ordinary course of business; (b) Liens imposed by law, such as
carriers', warehousemen's and mechanics' Liens, in each case for sums not yet
due or being contested in good faith by appropriate proceedings; (c) Liens
arising out of judgments or awards against such Person with respect to which
such Person shall then be proceeding with an appeal or other proceedings for
review or time for appeal has not yet expired; (d) Liens for taxes, assessments
or other governmental charges not yet subject to penalties for non-payment or
which are being contested in good faith by appropriate proceedings; (e) Liens in
favor of issuers of surety bonds or letters of credit issued pursuant to the
request of, and for the account of such Person in the ordinary course of its
business; provided, however, that such letters of credit do not constitute
Indebtedness; (f) survey exceptions, encumbrances, easements or reservations of
or rights of others for licenses, rights of way, sewers, electric lines,
telegraph and telephone lines and other similar purposes, or zoning or other
restrictions as to the use of real properties or Liens incidental to the conduct
of the business of such Person or to the ownership of its properties which were
not incurred in connection with Indebtedness and which do not in the aggregate
materially adversely affect the value of said properties or materially impair
their use in the operation of the business of such Person; (g) Liens securing an
Interest Rate Agreement so long as the related Indebtedness is, and is permitted
to be under the Indenture, secured by a Lien on the same property securing the
Interest Rate Agreement; and (h) leases and subleases of real property which do
not interfere with the ordinary conduct of the business of such Person, and
which are made on customary and usual terms applicable to similar properties.
"Person" means any individual, corporation, limited liability company,
limited or general partnership, joint venture, association, joint-stock company,
trust, unincorporated organization, government or any agency or political
subdivision thereof or any other entity.
"Preferred Stock," as applied to the Capital Stock of any corporation, means
Capital Stock of any class or classes (however designated) which is preferred as
to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such corporation, over
shares of Capital Stock of any other class of such corporation.
"principal" of a Note means the principal of the Note plus the premium,
if any, payable on the Note which is due or overdue or is to become due at
the relevant time.
"Public Equity Offering" means an underwritten primary public offering of
common stock of the Company pursuant to an effective registration statement
under the Securities Act.
"Refinance" means, in respect of any Indebtedness, to refinance, extend,
renew, refund, repay, prepay, redeem, defease or retire, or to issue other
Indebtedness in exchange or replacement for, such Indebtedness. "Refinanced" and
"Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means Indebtedness that Refinances any
Indebtedness of the Company or any Restricted Subsidiary existing on the Issue
Date or Incurred in compliance with the Indenture, including Indebtedness that
Refinances Refinancing Indebtedness; PROVIDED, HOWEVER, that (i) such
Refinancing Indebtedness has a Stated Maturity no earlier than the Stated
Maturity of the Indebtedness being Refinanced, (ii) such Refinancing
Indebtedness has an Average Life at the time such Refinancing Indebtedness is
Incurred that is equal to or greater than the Average Life of the Indebtedness
being Refinanced and (iii) such Refinancing Indebtedness has an aggregate
principal amount (or if Incurred with original issue discount, an aggregate
issue price) that is equal to or less than the aggregate principal amount (or if
Incurred with original issue discount, the aggregate accreted value) then
outstanding or committed (plus fees and expenses, including any premium and
defeasance costs) under the Indebtedness being Refinanced; PROVIDED, FURTHER,
HOWEVER, that Refinancing Indebtedness shall not include (x) Indebtedness of a
Restricted Subsidiary that Refinances Indebtedness of the Company or (y)
Indebtedness of the Company or a Restricted Subsidiary that Refinances
Indebtedness of an Unrestricted Subsidiary.
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"Related Business" means any business related, ancillary or complementary to the
businesses of the Company on the Issue Date.
"Restricted Payment" with respect to any Person means (i) the declaration or
payment of any dividends or any other distributions of any sort in respect of
its Capital Stock (including any payment in connection with any merger or
consolidation involving such Person), other than dividends or distributions
payable solely in its Capital Stock (other than Disqualified Stock) and
dividends or distributions payable solely to the Company or a Restricted
Subsidiary, and other than pro rata dividends or other distributions made by a
Subsidiary that is not a Wholly Owned Subsidiary to minority stockholders (or
owners of an equivalent interest in the case of a Subsidiary that is an entity
other than a corporation), (ii) the purchase, redemption or other acquisition or
retirement for value of any Capital Stock of the Company held by any Person or
of any Capital Stock of a Restricted Subsidiary held by any Affiliate of the
Company (other than a Restricted Subsidiary), including the exercise of any
option to exchange any Capital Stock (other than into Capital Stock of the
Company that is not Disqualified Stock), (iii) the purchase, repurchase,
redemption, defeasance or other acquisition or retirement for value, prior to
scheduled maturity, scheduled repayment or scheduled sinking fund payment of any
Subordinated Obligations (other than the purchase, repurchase or other
acquisition of Subordinated Obligations purchased in anticipation of satisfying
of a sinking fund obligation, principal installment or final maturity, in each
case due within one year of the date of acquisition) or (iv) the making of any
Investment in any Person (other than a Permitted Investment).
"Restricted Subsidiary" means any Subsidiary of the Company that is not an
Unrestricted Subsidiary.
"Sale/Leaseback Transaction" means an arrangement relating to property now
owned or hereafter acquired whereby the Company or a Restricted Subsidiary
transfers such property to a Person and the Company or a Restricted Subsidiary
leases it from such Person.
"SEC" means the Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of the Company secured by a
Lien. "Secured Indebtedness" of any Subsidiary Guarantor has a correlative
meaning.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of the Company within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC.
"Stated Maturity" means, with respect to any security, the date specified in
such security as the fixed date on which the final payment of principal of such
security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency unless such contingency has occurred).
"Subordinated Obligation" means any Indebtedness of the Company (whether
outstanding on the Issue Date or thereafter Incurred) which is subordinate or
junior in right of payment to the Notes pursuant to a written agreement to that
effect. "Subordinated Obligation" of any Subsidiary Guarantor has a correlative
meaning.
"Subsidiary" means, in respect of any Person, any corporation, association,
limited liability company, limited or general partnership or other business
entity (x) of which more than 50% of the total voting power of shares of Capital
Stock or other interests (including partnership interests) entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers, general partners or trustees thereof is at the time owned
or controlled, directly or indirectly, by (i) such Person, (ii) such Person and
one or more Subsidiaries of such Person or (iii) one or more Subsidiaries of
such Person, or (y) that is consolidated for purposes of the Company's
consolidated financial statements.
"Subsidiary Guarantor" means each Restricted Subsidiary designated as such
on the signature pages of the Indenture and any other Restricted Subsidiary that
has issued a Subsidiary Guaranty.
"Subsidiary Guaranty" means the Guarantee by a Subsidiary Guarantor of the
Company's obligations with respect to the Notes.
"S&P" means Standard & Poor's Ratings Service.
"Temporary Cash Investments" means any of the following: (i) any investment
in direct obligations of the United States of America or any agency thereof or
obligations guaranteed by the United States of America or any agency thereof,
(ii) investments in time deposit accounts, certificates of deposit and money
market deposits maturing within 180 days of the date of acquisition
108
<PAGE>
thereof issued by a bank or trust company which is organized under the laws of
the United States of America, any state thereof or any foreign country
recognized by the United States, and which bank or trust company has capital,
surplus and undivided profits aggregating in excess of $10,000,000 (or the
foreign currency equivalent thereof) and has outstanding debt which is rated "A"
(or such similar equivalent rating) or higher by at least one nationally
recognized statistical rating organization (as defined in Rule 436 under the
Securities Act) or any money-market fund sponsored by a registered broker dealer
or mutual fund distributor, (iii) repurchase obligations with a term of not more
than 30 days for underlying securities of the types described in clause (i)
above entered into with a bank meeting the qualifications described in clause
(ii) above, (iv) investments in commercial paper, maturing not more than 180
days after the date of acquisition, issued by a corporation (other than an
Affiliate of the Company) organized and in existence under the laws of the
United States of America or any foreign country recognized by the United States
of America with a rating at the time as of which any investment therein is made
of "P-1" (or higher) according to Moody's or "A-1" (or higher) according to S&P,
and (v) investments in securities with maturities of six months or less from the
date of acquisition issued or fully guaranteed by any state, commonwealth or
territory of the United States of America, or by any political subdivision or
taxing authority thereof, and rated at least "A" by S&P or "A" by Moody's.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at
the time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided below and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of
the Company (including any newly acquired or newly formed Subsidiary) to be an
Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns
any Capital Stock or Indebtedness of, or holds any Lien on any property of, the
Company or any other Restricted Subsidiary of the Company; provided, however,
that either (A) the Subsidiary to be so designated has total assets of $1,000 or
less or (B) if such Subsidiary has assets greater than $1,000, such designation
would be permitted under the covenant described under "-- Certain
Covenants--Limitation on Restricted Payments." The Board of Directors may
designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided,
however, that immediately after giving effect to such designation (x) if such
Unrestricted Subsidiary at such time has Indebtedness, the Company could Incur
$1.00 of additional Indebtedness under clause (i) of paragraph (a) of the
covenant described under "--Certain Covenants-- Limitation on Indebtedness" and
(y) no Default shall have occurred and be continuing. Any such designation by
the Board of Directors shall be evidenced by the Company to the Trustee by
promptly filing with the Trustee a copy of the board resolution giving effect to
such designation and an officers' certificate certifying that such designation
complied with the foregoing provisions.
"U.S. Government Obligations" means securities that are (x) direct
obligations of the United States of America for the timely payment of which its
full faith and credit is pledged or (y) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the timely payment of which is unconditionally guaranteed as a full
faith and credit obligation by the United States of America, which, in either
case, are not callable or redeemable at the option of the issuer thereof, and
shall also include a depository receipt issued by a bank (as defined in Section
3(a)(2) of the Securities Act), as custodian with respect to any such U.S.
Government Obligation held by such custodian for the account of the holder of
such depository receipt, provided that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to the
holder of such depository receipt from any amount received by the custodian in
respect of the U.S. Government Obligation or the specific payment of principal
of or interest on the U.S. Government Obligation evidenced by such depository
receipt.
"Voting Stock" of a Person means all classes of Capital Stock or other
interests (including partnership interests) of such Person then outstanding and
normally entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof.
"Wholly Owned Subsidiary" means a Restricted Subsidiary all the Capital
Stock of which (other than directors' qualifying shares and shares held by other
Persons to the extent such shares are required by applicable law to be held by a
Person other than the Company or a Restricted Subsidiary) is owned by the
Company or one or more Wholly Owned Subsidiaries.
109
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CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS RELATING TO THE EXCHANGE OFFER
The exchange of New Notes for the Old Notes pursuant to the Exchange Offer
will not be treated as an "exchange" for United States federal income tax
purposes because the New Notes will not be considered to differ materially in
kind or extent from the Old Notes. Rather, the New Notes received by a
Noteholder will be treated as a continuation of the Old Notes in the hands of
such Noteholder. As a result, there will be no United States federal income tax
consequences to Noteholders exchanging the Old Notes for the New Notes pursuant
to the Exchange Offer. The adjusted basis and holding period of the New Notes
for any Noteholder will be the same as the adjusted basis and holding period of
the Old Notes. Similarly, there would be no United States federal income tax
consequences to a Noteholder of Old Notes that does not participate in the
Exchange Offer.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired as a result of market-making activities or other
trading activities. The Issuer has agreed that, for a period of 180 days after
the Expiration Date it will make this Prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any such resale. In
addition, until , 199 , all dealers effecting transactions in the New
Notes may be required to deliver a prospectus.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such New Notes. Any broker-dealer that
resells New Notes that were received by it for its own account pursuant to the
Exchange Offer and any broker or dealer that participates in a distribution of
such New Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of New Notes and any commission
or concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal states that, by
acknowledging that it will deliver and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
For a period of 180 days after the Expiration Date the Company will promptly
send additional copies of this Prospectus and any amendment or supplement to
this Prospectus to any broker-dealer that requests such documents in the Letter
of Transmittal. The Company has agreed to pay all expenses incident to the
Exchange Offer (including the expenses of one counsel for the Holders of the
Securities) other than commissions or concessions of any brokers or dealers and
will indemnify the Holders of the Notes (including any broker-dealers) against
certain liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
Certain legal matters with regard to the validity of the New Notes will be
passed upon for the Company by Milbank, Tweed, Hadley & McCloy, Los Angeles,
California.
EXPERTS
The consolidated financial statements of the Company as of December 31, 1996
and for the period May 2, 1996 to December 31, 1996, and of the Company's
Predecessor for the period April 1, 1996 to May 1, 1996, included in this
Prospectus have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their reports appearing herein, and are included in reliance upon the
reports of such firm given upon their authority as experts in accounting and
auditing.
The consolidated financial statements of Bekins as of March 31, 1996 and for
each of the two years in the period ended March 31, 1996 included in this
Prospectus have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and are included
herein, in reliance upon the authority of said firm as experts in giving said
report.
The combined and consolidated financial statements of LIW and its
predecessor as of December 31, 1995 and 1996 and for the years ended December
31, 1994 and 1995 and for the periods January 1, 1996 to January 23, 1996 and
from January 24, 1996 to December 31, 1996 included in this Prospectus have been
audited by Price Waterhouse, Chartered Accountants and
110
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Registered Auditors, as stated in their report appearing herein, and are
included in reliance upon the report of such firm as experts in accounting and
auditing.
AVAILABLE INFORMATION
The Company is not currently subject to the periodic reporting and other
informational requirements of the Exchange Act. The Company has agreed that,
whether or not it is required to do so by the rules and regulations of the
Commission, for so long as any of the Notes remain outstanding, it will furnish
to the holders of the Notes and file with the Commission (unless the Commission
will not accept such a filing) (i) all quarterly and annual financial
information that would be required to be contained in a filing with the
Commission on Forms 10-Q and 10-K if the Company was required to file such
forms, including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and, with respect to the annual information only, a
report thereon by the Company's certified independent auditors and (ii) all
reports that would be required to be filed with the Commission on Form 8-K if
the Company was required to file such reports. In addition, for so long as any
of the Notes remain outstanding, the Company has agreed to make available to any
prospective purchaser of the Notes or beneficial owner of the Notes in
connection with any sale thereof the information required by Rule 144A(d)(4)
under the Securities Act.
FORWARD-LOOKING STATEMENTS
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT. DISCUSSIONS CONTAINING SUCH FORWARD-LOOKING
STATEMENTS MAY BE FOUND IN THE MATERIAL SET FORTH UNDER "PROSPECTUS SUMMARY,"
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION" AND "BUSINESS" AS WELL AS WITHIN THIS PROSPECTUS GENERALLY. IN
ADDITION, WHEN USED IN THIS PROSPECTUS, THE WORDS "ANTICIPATES," "EXPECTS,"
"ESTIMATES," "INTENDS" AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-
LOOKING STATEMENTS. SUCH STATEMENTS ARE SUBJECT TO A NUMBER OF RISKS AND
UNCERTAINTIES. ACTUAL RESULTS IN THE FUTURE COULD DIFFER MATERIALLY FROM THOSE
DESCRIBED IN THE FORWARD-LOOKING STATEMENTS AS A RESULT OF THE RISK FACTORS SET
FORTH HEREIN AND THE OTHER MATTERS SET FORTH IN THIS PROSPECTUS. THE COMPANY
UNDERTAKES NO OBLIGATION TO RELEASE THE RESULTS OF ANY REVISIONS TO THESE
FORWARD-LOOKING STATEMENTS THAT MAY BE MADE TO REFLECT ANY FUTURE EVENTS OR
CIRCUMSTANCES.
111
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
INTERNATIONAL LOGISTICS LIMITED
Independent Auditors' Reports............................................................................ F-2
Consolidated Balance Sheets.............................................................................. F-5
Consolidated Statements of Operations.................................................................... F-6
Consolidated Statements of Stockholders' Equity.......................................................... F-7
Consolidated Statements of Cash Flows.................................................................... F-8
Notes to Consolidated Financial Statements............................................................... F-9
LEP INTERNATIONAL WORLDWIDE LIMITED
Statement of Directors' Responsibilities................................................................. F-21
Accountants' Report...................................................................................... F-22
Combined and Consolidated Balance Sheets................................................................. F-23
Combined and Consolidated Statements of Profit and Loss Accounts......................................... F-24
Combined and Consolidated Statements of Cash Flow........................................................ F-25
Statements of Total Recognised Gains and Losses.......................................................... F-26
Note of Historical Cost Profits and Losses............................................................... F-26
Notes to Combined and Consolidated Financial Statements.................................................. F-27
Principal Subsidiary and Associated Undertakings......................................................... F-48
Unaudited Interim Consolidated Balance Sheets............................................................ F-49
Unaudited Interim Consolidated Statements of Profit and Loss Accounts.................................... F-50
Unaudited Interim Consolidated Statements of Cash Flow................................................... F-51
Unaudited Interim Statements of Total Recognised Gains and Losses........................................ F-52
Unaudited Interim Reconciliation of Movements in Shareholders' Funds..................................... F-52
Notes to the Unaudited Interim Consolidated Financial Statements......................................... F-53
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of International Logistics Limited
Hillside, Illinois:
We have audited the accompanying consolidated balance sheets of
International Logistics Limited and subsidiaries (the "Company") as of December
31, 1996, and the related consolidated statements of operations, stockholders'
equity, and cash flows for the period from May 2, 1996 (date operations
commenced) through December 31, 1996. 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, such consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
International Logistics Limited and subsidiaries as of December 31, 1996, and
the results of their operations and their cash flows for the period from May 2,
1996 (date operations commenced) through December 31, 1996, in conformity with
generally accepted accounting principles.
As described in Note 1 to the financial statements, on May 2, 1996, the net
assets of The Bekins Company were acquired by the Company. The acquisition has
been accounted for by the purchase method of accounting and, accordingly, the
acquisition price has been allocated to the assets acquired and liabilities
assumed based on the estimated fair values on the date of acquisition. As such,
the amounts reported for the Company are not comparable to the amounts shown for
The Bekins Company in prior periods.
DELOITTE & TOUCHE LLP
Chicago, Illinois
March 31, 1997
F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of The Bekins Company
Hillside, Illinois:
We have audited the consolidated statements of operations, stockholders'
equity and cash flows (the "Statements") of The Bekins Company (the "Company")
for the period from April 1, 1996 through May 1, 1996. These Statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these 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 Statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the Statements. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall presentation of the Statements. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the Statements referred to above present fairly, in all
material respects, the results of operations and cash flows of the Company for
the period from April 1, 1996 through May 1, 1996 in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
Chicago, Illinois
September 8, 1997
F-3
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of The Bekins Company
Hillside, Illinois:
We have audited the accompanying consolidated balance sheet of The Bekins
Company (a Delaware corporation) and Subsidiaries as of March 31, 1996, and the
related consolidated statements of operations, stockholders' equity and cash
flows for the years ended March 31, 1996 and 1995. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of The Bekins Company and
Subsidiaries as of March 31, 1996, and the results of their operations and their
cash flows for the years ended March 31, 1996 and 1995, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Minneapolis, Minnesota
May 16, 1996
F-4
<PAGE>
INTERNATIONAL LOGISTICS LIMITED
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMPANY
PREDECESSOR COMPANY
----------- ----------------------------
MARCH 31, DECEMBER 31, SEPTEMBER 30,
1996 1996 1997
----------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................................ $ 1,396 $ 3,424 $ 26,124
Accounts receivable:
Trade, net......................................................... 25,211 114,174 236,383
Other.............................................................. 4,260 8,979 33,318
Deferred income taxes................................................ -- 882 731
Prepaid expenses..................................................... 2,446 1,956 13,943
Net assets held for sale............................................. -- 5,621 --
----------- ------------- -------------
Total current assets............................................... 33,313 135,036 310,499
----------- ------------- -------------
PROPERTY AND EQUIPMENT:
Transportation equipment............................................. 7,572 5,971 6,639
Operating equipment and other........................................ 3,163 5,104 14,555
Buildings............................................................ -- 1,053 22,163
Leasehold improvements............................................... -- 839 1,650
Land................................................................. -- 481 5,840
----------- ------------- -------------
10,735 13,448 50,847
Less accumulated depreciation........................................ (2,469) (1,667) (4,151)
----------- ------------- -------------
Property and equipment, net........................................ 8,266 11,781 46,696
----------- ------------- -------------
NOTES RECEIVABLE, less current portion................................. 1,005 138 1,921
DEFERRED INCOME TAXES.................................................. -- 3,447 9,729
INTANGIBLE ASSETS, Net................................................. 20,283 85,144 71,974
OTHER ASSETS........................................................... 1,609 1,138 16,612
----------- ------------- -------------
TOTAL.............................................................. $ 64,476 $ 236,684 $ 457,431
----------- ------------- -------------
----------- ------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable..................................................... $ 7,443 $ 69,238 $ 139,422
Accrued expenses..................................................... 27,963 48,816 147,447
Income taxes payable................................................. -- 580 5,175
Note payable to related party........................................ 1,250 -- --
Current portion of long-term debt.................................... 11,532 4,510 18,590
----------- ------------- -------------
Total current liabilities.......................................... 48,188 123,144 310,634
LONG-TERM DEBT, Less current portion................................... 383 61,804 71,671
OTHER NONCURRENT LIABILITIES........................................... 7,768 11,117 35,624
----------- ------------- -------------
Total liabilities.................................................. 56,339 196,065 417,929
----------- ------------- -------------
MINORITY INTEREST...................................................... 2,205
REDEEMABLE PREFERRED STOCK............................................. 8,052
STOCKHOLDERS' EQUITY:
Common stock (March 31, 1996: authorised, 1,000,000 shares, par value
$.01; issued and outstanding, 119,032 shares--December 31, 1996:
authorised, 5,000,000 shares, par value $.001; issued and
outstanding, 2,016,667 shares--September 30, 1997 (unaudited):
authorised, 5,000,000 shares, par value $.001; issued and
outstanding, 2,076,726 shares)..................................... 1 2 2
Additional paid-in capital........................................... 5,716 50,050 52,101
Retained earnings (Accumulated deficit).............................. 2,420 (9,244) (22,497)
Notes receivable from stockholders................................... -- (150) (357)
Cumulative translation adjustment.................................... -- (39) (4)
----------- ------------- -------------
Total stockholders' equity......................................... 8,137 40,619 29,245
----------- ------------- -------------
TOTAL.............................................................. $ 64,476 $ 236,684 $ 457,431
----------- ------------- -------------
----------- ------------- -------------
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
INTERNATIONAL LOGISTICS LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMPANY PREDECESSOR COMPANY
--------------------------------------- ---------------------------------------------
PERIOD FROM PERIOD FROM NINE MONTHS
YEAR ENDED MARCH 31 PERIOD FROM MAY 2, 1996 TO MAY 2, 1996 TO ENDED
-------------------- APRIL 1, 1996 TO DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1995 1996 MAY 1, 1996 1996 1996 1997
--------- --------- ----------------- -------------- -------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
REVENUES............................. $ 242,966 $ 231,752 $ 17,458 $ 225,793 $ 89,975 $ 550,141
TRANSPORTATION AND OTHER DIRECT
COSTS.............................. 191,278 179,611 13,634 181,208 73,748 436,466
--------- --------- ------- -------------- -------------- -------------
NET REVENUES......................... 51,688 52,141 3,824 44,585 16,227 113,675
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES........................... 43,008 42,810 3,309 37,554 11,375 105,659
DEPRECIATION AND AMORTISATION........ 5,675 4,194 337 16,310 9,690 22,138
--------- --------- ------- -------------- -------------- -------------
OPERATING PROFIT (LOSS).............. 3,005 5,137 178 (9,279) (4,838) (14,122)
INTEREST EXPENSE, NET AND
AMORTISATION OF DEBT ISSUANCE
COSTS.............................. 2,252 2,397 230 2,981 1,419 5,765
OTHER (INCOME/GAINS) EXPENSE/
LOSSES............................. (259) 34 (73) -- (21) (88)
--------- --------- ------- -------------- -------------- -------------
INCOME (LOSS) BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM................. 1,012 2,706 21 (12,260) (6,236) (19,799)
INCOME TAX PROVISION (BENEFIT)....... 816 1,508 48 (4,013) (2,232) (6,546)
--------- --------- ------- -------------- -------------- -------------
INCOME (LOSS) BEFORE EXTRAORDINARY
ITEM............................... 196 1,198 (27) (8,247) (4,004) (13,253)
EXTRAORDINARY LOSS ON EARLY
EXTINGUISHMENT OF DEBT-- NET OF TAX
BENEFIT ($664)..................... -- -- -- (997) -- --
--------- --------- ------- -------------- -------------- -------------
NET INCOME (LOSS).................... $ 196 $ 1,198 $ (27) $ (9,244) $ (4,004) $ (13,253)
--------- --------- ------- -------------- -------------- -------------
--------- --------- ------- -------------- -------------- -------------
WEIGHTED AVERAGE SHARES
OUTSTANDING........................ 1,254,167 1,000,000 2,044,800
-------------- -------------- -------------
-------------- -------------- -------------
NET LOSS PER SHARE................... $ (7.37) $ (4.00) $ (6.48)
-------------- -------------- -------------
-------------- -------------- -------------
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
INTERNATIONAL LOGISTICS LIMITED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
RETAINED NOTES
COMMON STOCK ADDITIONAL EARNINGS RECEIVABLE CUMULATIVE
---------------------- PAID-IN (ACCUMULATED FROM TRANSLATION
COMPANY PREDECESSOR SHARES STOCK CAPITAL DEFICIT) STOCKHOLDERS ADJUSTMENT
- ------------------- --------- ----- ----------- ------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, APRIL 1, 1994.............. 117,647 $ 1 $ 5,237 $ 1,026 -- --
Net income........................ -- -- -- 196 -- --
Issuance of stock to directors.... 1,021 -- 169 -- -- --
Value of options granted in
conjunction with extension of
credit agreement................ -- -- 250 -- -- --
--------- --------- ----------- ------------- ---------- --------
BALANCE, MARCH 31, 1995............. 118,668 1 5,656 1,222 -- --
Net income........................ -- -- -- 1,198 -- --
Issuance of stock to directors.... 64 -- 10 -- -- --
Sale of stock..................... 300 -- 50 -- -- --
--------- --------- ----------- ------------- ---------- --------
BALANCE, MARCH 31, 1996............. 119,032 1 5,716 2,420 -- --
Net loss.......................... -- -- -- (27) -- --
Effect of merger.................. (119,032) (1) (5,716) (2,393) -- --
--------- --------- ----------- ------------- ---------- --------
COMPANY
- -------
BALANCE, MAY 2, 1996................ -- -- -- -- -- --
Sale of stock upon inception...... 2,009,155 2 49,702 -- -- --
Paid-in capital--warrants......... -- -- 198 -- -- --
Net loss.......................... -- -- -- (9,244) -- --
Foreign currency translation
adjustment...................... -- -- -- -- -- $ (39)
Sale of stock to officers......... 7,512 -- 150 -- $ (150) --
--------- --------- ----------- ------------- ---------- --------
BALANCE, DECEMBER 31, 1996.......... 2,016,667 2 50,050 (9,244) (150) (39)
Sale of stock (unaudited)......... 74,786 -- 2,242 -- -- --
Repurchase of common stock
(unaudited)..................... (25,060) -- (501) -- -- --
Net loss (unaudited).............. -- -- -- (13,253) -- --
Foreign currency translation
adjustment (unaudited).......... -- -- -- -- -- 35
Sale of stock to officers
(unaudited)..................... 10,333 -- 310 -- (207) --
--------- --------- ----------- ------------- ---------- --------
BALANCE, SEPTEMBER 30, 1997
(unaudited)....................... 2,076,726 $ 2 $ 52,101 $ (22,497) $ (357) $ (4)
--------- --------- ----------- ------------- ---------- --------
--------- --------- ----------- ------------- ---------- --------
<CAPTION>
TOTAL
STOCKHOLDERS'
COMPANY PREDECESSOR EQUITY
- ------------------------------------ -------------
<S> <C>
BALANCE, APRIL 1, 1994.............. $ 6,264
Net income........................ 196
Issuance of stock to directors.... 169
Value of options granted in
conjunction with extension of
credit agreement................ 250
-------------
BALANCE, MARCH 31, 1995............. 6,879
Net income........................ 1,198
Issuance of stock to directors.... 10
Sale of stock..................... 50
-------------
BALANCE, MARCH 31, 1996............. 8,137
Net loss.......................... (27)
Effect of merger.................. (8,110)
-------------
COMPANY
- -------
BALANCE, MAY 2, 1996................ --
Sale of stock upon inception...... 49,704
Paid-in capital--warrants......... 198
Net loss.......................... (9,244)
Foreign currency translation
adjustment...................... (39)
Sale of stock to officers......... --
-------------
BALANCE, DECEMBER 31, 1996.......... 40,619
Sale of stock (unaudited)......... 2,242
Repurchase of common stock
(unaudited)..................... (501)
Net loss (unaudited).............. (13,253)
Foreign currency translation
adjustment (unaudited).......... 35
Sale of stock to officers
(unaudited)..................... 103
-------------
BALANCE, SEPTEMBER 30, 1997
(unaudited)....................... $ 29,245
-------------
-------------
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE>
INTERNATIONAL LOGISTICS LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
COMPANY PREDECESSOR
-------------------------------------------
YEAR ENDED
MARCH 31, PERIOD FROM
-------------------- APRIL 1, 1996 TO
1995 1996 MAY 1, 1996
--------- --------- ---------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)........................ $ 196 $ 1,198 $ (27)
Adjustments to reconcile net income
(loss) to net cash provided by (used
for) operating activities:
Depreciation and amortisation.......... 6,175 4,700 337
Amortisation of deferred gains......... (324) (437) --
Deferred income taxes.................. 696 1,318 --
(Gain) loss on sale of assets.......... (259) 34 (69)
Extraordinary item, net of tax......... -- -- --
Change in operating assets and
liabilities:
Accounts receivable trade, net......... (398) 630 (205)
Prepaid expenses and other current
assets............................... (1,207) 1,639 356
Accounts payable and accrued
expenses............................. (4,208) 184 (1,910)
Other.................................. -- -- (1,149)
--------- --------- -------
Net cash provided by (used for)
operating activities............... 671 9,266 (2,667)
--------- --------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Business acquisitions, net of cash
acquired............................. -- -- --
Collection of insurance receivable..... -- 675 --
Purchases of property and equipment.... (3,251) (3,175) (130)
Proceeds from the sale of net assets
held for sale........................ 584 1,083 --
Collection of notes receivable......... 771 1,520 --
Issuance of notes receivable........... (2,146) (572) --
Other.................................. (500) -- (16)
--------- --------- -------
Net cash used for investing
activities......................... (4,542) (469) (146)
--------- --------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in revolving line........... 2,900 (8,600) 2,485
Proceeds from long-term debt........... 1,566 -- --
Payments on long-term debt............. (2,140) (793) --
Debt issuance costs.................... -- -- --
Issuance of common stock............... -- 50 --
Purchase of common stock............... -- -- --
Repayments from related party.......... 1,500 -- --
--------- --------- -------
Net cash provided by (used for)
financing activities............... 3,826 (9,343) 2,485
--------- --------- -------
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS................... -- -- --
--------- --------- -------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS............................ (45) (546) (328)
CASH AND CASH EQUIVALENTS OF ACQUIRED
COMPANIES.............................. -- -- --
--------- --------- -------
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD................................. 1,987 1,942 1,396
--------- --------- -------
CASH AND CASH EQUIVALENTS, END OF
PERIOD................................. $ 1,942 $ 1,396 $ 1,068
--------- --------- -------
--------- --------- -------
SUPPLEMENTAL DISCLOSURES:
Interest paid.......................... $ 2,558 $ 2,661 $ 78
--------- --------- -------
--------- --------- -------
Income taxes paid...................... $ 649 $ 385 $ 2
--------- --------- -------
--------- --------- -------
NONCASH COMMON STOCK TRANSACTIONS (See
Notes 3 and 9).........................
NONCASH WARRANT TRANSACTIONS (See Note
9).....................................
NEW CAPITAL LEASES.......................
<CAPTION>
COMPANY
---------------------------------------------------------------------------------
PERIOD FROM PERIOD FROM NINE MONTHS ENDED
MAY 2, 1996 TO MAY 2, 1996 TO SEPTEMBER 30,
DECEMBER 31, 1996 SEPTEMBER 30, 1996 1997
----------------------- ----------------------- -------------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)........................ $ (9,244) $ (4,004) $ (13,253)
Adjustments to reconcile net income
(loss) to net cash provided by (used
for) operating activities:
Depreciation and amortisation.......... 16,310 9,690 22,138
Amortisation of deferred gains......... -- -- --
Deferred income taxes.................. (4,180) (3,566) (8,638)
(Gain) loss on sale of assets.......... -- -- (25)
Extraordinary item, net of tax......... 997 -- --
Change in operating assets and
liabilities:
Accounts receivable trade, net......... (1,422) (7,735) (5,324)
Prepaid expenses and other current
assets............................... 1,180 6,750 (1,192)
Accounts payable and accrued
expenses............................. 1,119 1,689 4,667
Other.................................. (2,333) (1,385) (7,693)
---------- -------- --------
Net cash provided by (used for)
operating activities............... 2,427 1,439 (9,320)
---------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Business acquisitions, net of cash
acquired............................. (107,057) (49,354) (433)
Collection of insurance receivable..... -- -- --
Purchases of property and equipment.... (1,369) (950) (5,551)
Proceeds from the sale of net assets
held for sale........................ 1,477 29 7,036
Collection of notes receivable......... -- -- 89
Issuance of notes receivable........... -- -- (2,496)
Other.................................. -- (119) --
---------- -------- --------
Net cash used for investing
activities......................... (106,949) (50,394) (1,355)
---------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in revolving line........... 3,900 8,790 13,400
Proceeds from long-term debt........... 91,929 23,000 --
Payments on long-term debt............. (32,771) -- (4,038)
Debt issuance costs.................... (6,076) (1,786) --
Issuance of common stock............... 46,494 19,200 2,326
Purchase of common stock............... -- -- (501)
Repayments from related party.......... -- -- --
---------- -------- --------
Net cash provided by (used for)
financing activities............... 103,476 49,204 11,187
---------- -------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS................... (2) -- --
---------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS............................ (1,048) 249 512
CASH AND CASH EQUIVALENTS OF ACQUIRED
COMPANIES.............................. 4,472 546 22,188
---------- -------- --------
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD................................. -- -- 3,424
---------- -------- --------
CASH AND CASH EQUIVALENTS, END OF
PERIOD................................. $ 3,424 $ 795 $ 26,124
---------- -------- --------
---------- -------- --------
SUPPLEMENTAL DISCLOSURES:
Interest paid.......................... $ 1,878 $ 97 $ 3,311
---------- -------- --------
---------- -------- --------
Income taxes paid...................... $ 934 $ 37 $ 703
---------- -------- --------
---------- -------- --------
NONCASH COMMON STOCK TRANSACTIONS (See
Notes 3 and 9)......................... $ 3,360 $ 360 $ 207
NONCASH WARRANT TRANSACTIONS (See Note
9)..................................... $ 198 $ 198
NEW CAPITAL LEASES....................... $ 490
</TABLE>
See notes to consolidated financial statements.
F-8
<PAGE>
INTERNATIONAL LOGISTICS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS)
1. GENERAL INFORMATION
International Logistics Limited was formed and incorporated in Delaware in
1996 by William E. Simon and Sons, LLC ("WESS"), entities managed by Oaktree
Capital Management, LLC ("OCM") and Roger E. Payton, President and Chief
Executive Officer. The Company made three acquisitions during the period ended
December 31, 1996, and one acquisition during the nine months period ended
September 30, 1997, as a platform to become a major factor in both the domestic
and international logistics markets.
UNAUDITED INTERIM FINANCIAL STATEMENTS--In the opinion of management, the
unaudited interim financial statements for the period from May 2, 1996 to
September 30, 1996 and as of and for the nine months ended September 30, 1997
have been prepared on the same basis as the audited financial statements and
include all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the financial position and the results of
operations as of such dates and for such periods.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION--The accompanying consolidated financial
statements include the accounts of International Logistics Limited or The Bekins
Company (see Note 3) and their respective wholly-owned subsidiaries (each
referred to as the "Company"). Intercompany accounts and transactions have been
eliminated. The statements reflect a 24.8% minority interest for Ordinary Shares
of LEP International Worldwide Limited ("LIW") not owned by the Company at
September 30, 1997 and minority interests in foreign affiliates. From October
31, 1996 through September 30, 1997, the Company accounted for its 33.3%
interest in LIW under the equity method of accounting.
CASH AND CASH EQUIVALENTS--Cash and cash equivalents include cash on hand,
demand deposits, and short-term investments with original maturities of three
months or less.
PROPERTY AND EQUIPMENT--Property and equipment are stated at cost, less
accumulated depreciation. Depreciation on owned assets and amortisation on
capital lease assets is provided using the straight-line method over the
estimated useful lives of the related assets. Leasehold improvements are
amortised over the shorter of the life of the lease or the useful life of the
asset on a straight-line basis. Major repairs, refurbishments and improvements
that significantly extend the useful lives of the related assets are
capitalised. Maintenance and repairs are expensed as incurred:
<TABLE>
<CAPTION>
AMORTISATION
PERIODS
-------------------
<S> <C>
Transportation equipment................................................. 4-8 years
Operating equipment and other............................................ 3-8 years
Buildings and improvements............................................... 25-40 years
Furniture and fixtures................................................... 3-10 years
</TABLE>
INTANGIBLE ASSETS--Intangible assets includes cost in excess of net assets
acquired in connection with the acquisitions described in Note 3 which have been
allocated among certain intangible items determined by management to have value
such as the company name, software, agent and customer contracts and drivers'
network. Provision for amortisation has been made based upon the estimated
useful lives of the intangible asset categories.
IMPAIRMENT OF LONG-LIVED ASSETS--The carrying values of long-lived assets
are reviewed periodically and if future cash flows are believed insufficient to
recover the remaining carrying value of the related assets, the carrying value
is written down in the period the impairment is identified to its estimated
future recoverable value.
OTHER ASSETS--Other assets consists primarily of deposits related to certain
operating leases.
F-9
<PAGE>
INTERNATIONAL LOGISTICS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS--The carrying value of cash and cash
equivalents, accounts receivable, accounts payable and accrued expenses
approximates fair value at December 31, 1996 and September 30, 1997 (unaudited)
due to their short-term nature; the carrying value of the Company's long-term
debt approximates fair value due to its variable interest rates. The fair value
of the Company's interest rate cap agreement is based on termination value and
approximated $87 and $35 in favor of the Company at December 31, 1996 and
September 30, 1997 (unaudited), respectively.
FOREIGN CURRENCY TRANSLATION--The financial statements of subsidiaries
outside the United States are generally measured using the local currency as the
functional currency. Assets, including intangible assets, and liabilities of
this subsidiary are translated at the rate of exchange at the balance sheet
date. The resultant translation adjustments are included in the cumulative
translation adjustment, a separate component of stockholders' equity. Income and
expenses are translated at average monthly rates of exchange. Gains and loses
from foreign currency transactions of this subsidiary are included in net
earnings.
EMPLOYEE RETIREMENT SAVINGS PLANS--Retirement savings plans are available to
substantially all salaried and nonunion hourly employees, which allow eligible
employees to contribute a portion of their annual salaries to the plans.
Matching contributions are made at the discretion of each subsidiary.
Participants are immediately vested in their voluntary contributions plus
actual earnings thereon. Contributions are subject to various vesting schedules,
ranging from immediate to seven years. Matching contributions of $385, $367,
$207 and $525 were made for the years ended March 31, 1995 and 1996, for the
period ended December 31, 1996 and for the nine months ended September 30, 1997
(unaudited), respectively.
DEFERRED COMPENSATION PLAN--On July 1, 1996, the Company initiated a
nonqualified deferred compensation plan for certain key employees to supplement
the retirement savings plans. Under the deferred compensation plan, employees
sign an irrevocable contribution commitment for a plan year based on a
percentage of their salary. The Company matches this contribution subject to
certain limitations, and agrees to distribute the deferred compensation, plus
investment income, in accordance with the distribution method selected by the
employee. Matching expense of the Company in 1996 was $24, and was $47 for the
nine months ended September 30, 1997 (unaudited). Employee deferrals and Company
match funds have been deposited with a plan trustee. These funds and the related
deferred compensation obligations are recorded as both a noncurrent asset and a
noncurrent liability at December 31, 1996 and September 30, 1997 (unaudited) in
the amounts of $118 and $297, respectively. The Company has established a trust
with Key Trust Company as trustee (the "Trustee") to hold and invest amounts
contributed pursuant to the Deferred Plan. The Company may from time to time, at
its sole discretion, direct the Trustee to purchase shares of the Company's
common stock (the "Plan Shares"). The Company may, by written action, designate
which employees are entitled to receive Plan Shares. If at any time prior to an
initial public offering, a participant's employment is terminated for any reason
whatsoever, the Company has the option to repurchase any Plan Shares held in
such participant's account. As of September 30, 1997 (unaudited), 3,168 Plan
Shares were held by the Trustee on behalf of participants under the Deferred
Plan.
Participants are immediately vested in their voluntary contributions plus
actual earnings thereon. Company contributions are subject to various vesting
schedules, ranging from immediate to three years.
REVENUE RECOGNITION--The Company's policy is to recognise revenue when it
has performed substantially all services required under the terms of its
contracts, generally on the date shipment is completed. Revenue from
export-forwarding services is recognised at the time the freight departs the
terminal of origin. Customs brokerage revenue is recognised upon completing the
documents necessary for customs clearance. Storage revenue is recognised as
services are performed.
CREDIT RISK CONSIDERATIONS--Concentration of credit risk with respect to
accounts receivable is limited due to the wide variety of customers and markets
into which services are sold, as well as their dispersion across many different
geographic areas.
F-10
<PAGE>
INTERNATIONAL LOGISTICS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Company has recorded an allowance for doubtful accounts to estimate the
difference between recorded receivables and ultimate collections. The allowance
and provision for bad debts are adjusted periodically based upon the Company's
evaluation of historical collection experience, industry trends and other
relevant factors. The allowance for doubtful accounts was $2,991, $3,675 and
$14,882 at March 31, 1996, December 31, 1996 and September 30, 1997 (unaudited),
respectively.
INCOME TAXES--Deferred income taxes are provided for temporary differences
between the financial reporting basis and tax basis of assets and liabilities at
currently enacted tax rates. The deferred income tax provision or benefit
generally reflects the net change in deferred income tax assets and liabilities
during the year. The current income tax provision reflects the tax consequences
of revenues and expenses currently taxable or deductible in income tax returns
for the year reported.
EARNINGS PER SHARE--Earnings per share have been computed based on the
average number of common shares outstanding during each period presented.
Primary and fully diluted earnings per share have not been presented due to the
anti-dilutive effect of common stock equivalents. In February 1997, the
Financial Accounting Standards Board ("FASB") issued Statement No. 128, Earnings
per Share, which is required to be adopted on December 31, 1997. At that time,
the Company will be required to change the method currently used to compute
earnings per share and to restate all prior periods. The impact of Statement 128
is not expected to be material.
USE OF ESTIMATES--The financial statements have been prepared in conformity
with generally accepted accounting principles and, as such, include amounts
based on informed estimates and judgments of management. Actual results could
differ from those estimates. Accounts affected by significant estimates include
accounts receivable and accruals for insurance claims, cargo loss and damage
claims.
3. ACQUISITIONS
On May 2, 1996, International Logistics Limited acquired all of the
outstanding shares of The Bekins Company ("Bekins" or "Company Predecessor"), a
major provider, through its Bekins Van Lines ("BVL") subsidiary, of interstate
transportation of household goods and logistic services for high-tech,
electronic, medical, and high-end consumer products, for $49.7 million including
assumptions of debt and acquisition costs. The consideration was comprised of
$49.5 million in cash and the Company's common stock valued at $0.2 million. The
excess of the purchase price over the fair value of the net assets acquired was
$14.5 million, has been recorded as goodwill, and is being amortised on a
straight-line basis over 40 years.
Bekins has pursued a strategy of converting company-owned Bekins Moving and
Storage ("BMS") service centers into independent moving and storage agents, who
will become part of the BVL agent network. At December 31, 1996 seventeen
company-owned BMS service centers remained; at September 30, 1997 (unaudited) no
service centers remained. The operations of BMS have been treated as
discontinued as of the acquisition date; at December 31, 1996, the net assets
are classified as held for sale on the Company's balance sheet. At September 30,
1997 (unaudited), substantially all assets of BMS have been sold.
On October 31, 1996, the Company acquired all of the outstanding shares of
LEP Profit International, Inc. ("LEP-USA") and LEP International Inc.
("LEP-Canada") from LIW for $32 million in cash including assumption of debt and
acquisition costs. LEP-USA and LEP Canada (collectively "LEP") provide domestic
and international freight forwarding services, as well as value-added domestic
logistic services. The excess of the purchase price over the fair value of the
net assets acquired was $19.3 million, has been recorded as goodwill, and is
being amortised on a straight-line basis over 40 years. In addition to the
acquisition of LEP, the Company acquired 33.3% of the outstanding common stock
and warrants to purchase the remaining 66.7% of LIW for a nominal amount.
On November 7, 1996, the Company acquired all of the outstanding shares of
Matrix International Logistics, Inc. ("Matrix"), an international project cargo
freight forwarder that also specialises in premium international household
F-11
<PAGE>
INTERNATIONAL LOGISTICS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS)
3. ACQUISITIONS (CONTINUED)
relocation services, for $30 million including assumption of debt and
acquisition costs. The consideration was comprised of $27 million in cash and
Company common stock valued at $3 million. Additional consideration of up to $10
million in cash and stock is payable if certain earnings targets are achieved in
the five-year period from 1997 through 2001. The excess of the purchase price
over the fair value of the net assets acquired was $18.9 million, has been
recorded as goodwill, and is being amortised on a straight-line basis over 25
years.
On September 30, 1997, the Company increased its holdings in LIW, a United
Kingdom based international freight forwarder with operations primarily in
Europe and Asia, from 33.3% to 75.2%. Consideration included $0.4 million in
cash and warrants to purchase 19,045 shares of common stock of the Company at an
exercise price of $45 per share under terms similar to previously issued
warrants. The transaction has been accounted for under the purchase method of
accounting. The excess of purchase price over book value of the net assets
acquired of $21.3 million has been preliminarily allocated to property and
equipment, subject to further study and analysis, with useful lives ranging from
three to forty years.
The operating results of each acquired company have been included in the
consolidated statement of operations since the dates of acquisition.
Pro forma unaudited operating results assuming the acquisitions were made on
January 1, 1996 with respect to the year ended December 31, 1996 and January 1,
1997 with respect to the nine-months ended September 30, 1997 and interest on
long-term debt, are as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, 1997
YEAR ENDED ------------------
DECEMBER 31, 1996 (UNAUDITED)
-----------------
(UNAUDITED)
<S> <C> <C>
Revenues............................................... $ 1,638,841 $ 1,089,004
Net revenues........................................... 403,733 270,565
Operating loss......................................... 9,750 6,799
Net loss............................................... 22,955 12,430
</TABLE>
4. INTANGIBLE ASSETS
Intangible assets consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997 AMORTISATION
MARCH 31, 1996 DECEMBER 31, 1996 (UNAUDITED) PERIOD
-------------- ----------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Goodwill.............................. $ 18,989 $ 52,878 $ 56,617 25-40 years
Software.............................. 4,630 21,687 24,637 2-3 years
Agent contracts....................... 1,912 12,554 13,835 2-5 years
Customer contracts.................... -- 6,500 6,500 2 years
Debt issuance costs................... -- 4,359 4,594 7 years
Drivers' network...................... -- 1,750 1,750 2 years
Other................................. 350 255 255 4 years
-------------- -------- --------
25,881 99,983 108,188
Less accumulated amortisation......... (5,598) (14,839) (36,214)
-------------- -------- --------
$ 20,283 $ 85,144 $ 71,974
-------------- -------- --------
-------------- -------- --------
</TABLE>
F-12
<PAGE>
INTERNATIONAL LOGISTICS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS)
5. ACCOUNTS PAYABLE, ACCRUED EXPENSES, OTHER NONCURRENT
LIABILITIES AND REDEEMABLE PREFERRED STOCK
Accounts payable includes checks outstanding against the Company's central
disbursement accounts. Arrangements with the Company's banks do not call for
reimbursement until the checks are presented for payment. Such outstanding
checks were $3,982, $11,250 and $15,184 at March 31, 1996, December 31, 1996 and
September 30, 1997 (unaudited), respectively.
Accrued expenses and other noncurrent liabilities consist of the following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31, SEPTEMBER 30,
1996 1996 1997
---------- ------------ -------------
<S> <C> <C> <C>
(UNAUDITED)
ACCRUED EXPENSES
Transportation.......................................................... $ 13,926 $ 22,116 $ 65,343
Employee related........................................................ 2,508 8,722 23,588
Rents and utilities..................................................... -- -- 11,126
Insurance and litigation................................................ 8,055 7,621 10,396
Acquisition............................................................. -- 4,761 16,556
Customer programs....................................................... 1,078 1,825 3,529
VAT/Sales Tax Payables.................................................. -- -- 2,792
Other................................................................... 2,396 3,771 14,117
---------- ------------ -------------
$ 27,963 $ 48,816 $ 147,447
---------- ------------ -------------
---------- ------------ -------------
OTHER NONCURRENT LIABILITIES
Employee benefit programs............................................... -- -- $ 22,697
Insurance............................................................... $ 6,941 $ 5,717 5,586
Income taxes payable.................................................... -- -- 4,045
Acquisition............................................................. -- 4,526 2,064
Other................................................................... 827 874 1,232
---------- ------------ -------------
$ 7,768 $ 11,117 $ 35,624
---------- ------------ -------------
---------- ------------ -------------
</TABLE>
INSURANCE CLAIMS--Certain of the Company's insurance programs, primarily
workers' compensation, public liability and property damage, and cargo loss and
damage, are subject to substantial deductibles or retrospective adjustments.
Accruals for insurance claims, except for cargo claims, are estimated for the
ultimate cost of unresolved and unreported claims pursuant to actuarial
determination. Cargo claims are accrued for based on the Company's historical
claims experience and management's judgment.
ACQUISITION RESERVES--In conjunction with the acquisitions of Bekins, LEP
and Matrix (see Note 3), the Company recorded certain acquisition reserves
related to the closure of duplicate administrative and warehouse facilities,
consolidation of redundant business systems, and reduction of Bekins and LEP
personnel performing duplicate tasks. Termination benefits include approximately
$3.8 million for severance, wage continuation, medical and other benefits for
approximately 200 employees. Facility closures and related costs include
estimated net losses on disposal of property, plant and equipment, lease
payments and related costs of $3.9 million. Approximately $1.6 million was
accrued for all other consolidation, relocation and related activities. All
costs were accrued as part of the purchase accounting in accordance with
approved management plans.
REDEEMABLE PREFERRED STOCK (UNAUDITED)--Represents $8.1 million of 5.5%
Non-Voting Cumulative Redeemable Preferred Stock ("Preferred Shares") assumed in
connection with the LIW acquisition. The Preferred Shares are redeemable anytime
at the Company's option; however, must be redeemed by January, 2001. Dividends
are payable contingent upon profits of LIW.
F-13
<PAGE>
INTERNATIONAL LOGISTICS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS)
6. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31, SEPTEMBER 30,
INTEREST RATES 1996 1996 1997
----------------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
(UNAUDITED)
Term notes.......................................... 8.25%--9.50% -- $ 59,275 $ 57,452
Revolver............................................ 9.50 % $ 10,900 3,900 17,300
Bank overdrafts..................................... 4.88%--30.0% -- -- 12,251
Capital lease obligations, due in various
installments through 2007, collateralised by
certain computer equipment with a net book value
of $0, $2,441, and $1,696 at March 31, 1996,
December 31, 1996 and September 30, 1997,
respectively...................................... 8.25%--9.90 % 393 2,291 2,706
Other............................................... 622 848 552
----------- ------------ -------------
11,915 66,314 90,261
Less current portion................................ (11,532) (4,510) (18,590)
----------- ------------ -------------
$ 383 $ 61,804 $ 71,671
----------- ------------ -------------
----------- ------------ -------------
</TABLE>
Future minimum payments of the Company's long-term debt (exclusive of
payments for maintenance, insurance, taxes, and other expenses related to
capital leases) as of December 31, 1996 are as follows:
<TABLE>
<CAPTION>
CAPITAL VARIABLE
LEASES RATE DEBT TOTAL
--------- ----------- ---------
<S> <C> <C> <C>
1997.......................................................... $ 1,163 $ 3,105 $ 4,510
1998.......................................................... 1,076 5,105 6,418
1999.......................................................... 238 7,105 7,343
2000.......................................................... 125 7,105 7,230
2001.......................................................... 58 12,005 12,063
Thereafter.................................................... -- 28,750 28,750
--------- ----------- ---------
2,660 $ 63,175 $ 66,314
----------- ---------
Less amounts representing interest............................ 369 ----------- ---------
---------
Present value of future minimum capital lease payments........ $ 2,291
---------
---------
</TABLE>
The Company's loan agreement dated October 31, 1996 (the "Agreement")
provides for term notes of $60.0 million and a revolving credit facility
("Revolver") whereby the Company may borrow up to $50.0 million with a $25.0
million sublimit for the issuance of letters of credit. Maximum borrowings
available under the Agreement are based upon levels of receivables, notes
receivables, outstanding letters of credit, and property and equipment as
defined in the Agreement. The Company was contingently liable for letters of
credit of $8.4 million and $9.0 million at December 31, 1996 and September 30,
1997 (unaudited), respectively, which reduced the Company's borrowing capacity
by the same amounts under the Agreement.
Borrowings under the Agreement bear interest at the bank's prime rate plus
1.25% or the adjusted Eurodollar rate, as defined, plus 2.75%-3.25%, at the
Company's option. Commitment fees on the Revolver are equal to 1/2 of 1% per
annum times the average daily difference between the Revolver commitment and the
sum of the principal indebtedness then evidenced by the Revolver. Commitment
fees are paid quarterly and totaled $61.0 for the period May 2, 1996 to December
31, 1996 and $104.8 for the nine months ended September 30, 1997 (unaudited).
The Agreement is collateralised by substantially all assets of the Company.
The Agreement requires, among other matters, maintenance of certain financial
ratios, as defined, and places restrictions on additional borrowings, mergers,
dividends, capital expenditures, and the sale of Company assets. As of December
31, 1996, the Company obtained a
F-14
<PAGE>
INTERNATIONAL LOGISTICS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS)
6. LONG-TERM DEBT (CONTINUED)
waiver from the bank with respect to its compliance with certain earnings
requirements and capital expenditure limitations. Although the Company was not
in compliance with certain covenants at September 30, 1997 (unaudited) no waiver
was obtained and the debt was repaid in October 1997.
Interest is payable on the outstanding daily unpaid principal amount of each
loan from the date thereof until payment is made in full. Interest payments are
made with principal on a calendar quarter-end basis.
Additional information on the Company's bank borrowings is as follows:
<TABLE>
<CAPTION>
PERIOD FROM MAY 2,
YEAR ENDED 1996 TO NINE MONTHS ENDED
MARCH 31, 1996 DECEMBER 31, 1996 SEPTEMBER 30, 1997
-------------- ------------------ ------------------
<S> <C> <C> <C>
(UNAUDITED)
Average balance outstanding........... $ 17,500 $ 37,807 $ 71,611
Maximum balance outstanding........... 21,200 66,375 78,999
Weighted average interest rate........ 8.60% 9.52% 9.14%
</TABLE>
On May 2, 1996, the Company secured a $50.0 million loan under similar terms
as the Agreement. On October 31, 1996, the Company used proceeds from the
Agreement to retire the May 2, 1996 loan. In connection with this transaction,
the Company recorded an extraordinary loss of $1.7 million ($997.0 net of tax)
related to the write-off of unamortised deferred financing costs.
INTEREST RATE PROTECTION--The Company enters into interest rate agreements
to reduce the impact of changes in interest rates on its variable rate debt. The
initial cost of interest rate caps is recorded in intangible assets and is
amortised to interest expense over the life of the caps.
At December 31, 1996, the Company had an interest rate cap which limits the
maximum LIBOR rate on $16 million notional principal amount at 7.0% through
August 1999.
At September 30, 1997 (unaudited), the Company had an additional two and
one-half year interest rate cap on $25 million notional principal amount at 7.0%
maximum LIBOR.
The interest rate caps were subsequently cancelled concurrent with the
refinancing on October 28, 1997 and a nominal loss was recorded as part of the
unaudited extraordinary loss recorded in connection with the refinancing of the
Company's outstanding indebtedness (See Note 11).
F-15
<PAGE>
INTERNATIONAL LOGISTICS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS)
7. INCOME TAXES
The following summarises the effect of deferred income tax items and the
impact of "temporary differences" between amounts of assets and liabilities for
financial reporting purposes and such amounts as measured by tax laws. Temporary
differences and carry-forwards comprising the net deferred tax asset as of
December 31, 1996 are as follows:
<TABLE>
<S> <C>
Net operating loss carry-forwards.................................................. $ 4,196
Insurance reserves................................................................. 5,027
Allowance for doubtful accounts.................................................... 1,657
Other assets....................................................................... 7,379
---------
Gross deferred tax assets.......................................................... 18,259
---------
Deferred tax liabilities:
Property and equipment........................................................... 1,852
Other intangible assets.......................................................... 10,239
Other liabilities................................................................ 1,839
---------
Gross deferred tax liabilities..................................................... 13,930
---------
Net deferred tax assets............................................................ $ 4,329
---------
---------
</TABLE>
At December 31, 1996 the Company's net operating loss carry-forwards are
available to offset future taxable income of approximately $11.0 million and
expire in 2009 through 2011; approximately $7.0 million of such net operating
loss carry-forwards is available for use in the Company's 1997 tax return.
Management believes that the realisation of the net deferred tax asset is
more likely than not, based upon the expectation that the Company will generate
the necessary taxable income in future periods.
The income tax provision (benefit) (exclusive of the extraordinary loss for
the period ended December 31, 1996) consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31, PERIOD FROM
-------------------- MAY 2, 1996 TO
1995 1996 DECEMBER 31, 1996
--------- --------- -----------------
<S> <C> <C> <C>
Current:
Federal.................................................................... -- -- $ (300)
Provincial................................................................. -- -- 164
State...................................................................... $ 120 $ 190 303
--------- --------- -------
Total current................................................................ 120 190 167
--------- --------- -------
Deferred:
Federal.................................................................... 696 1,318 (3,644)
State...................................................................... -- -- (536)
--------- --------- -------
Total deferred............................................................... 696 1,318 (4,180)
--------- --------- -------
Total provision (benefit).................................................... $ 816 $ 1,508 $ (4,013)
--------- --------- -------
--------- --------- -------
</TABLE>
F-16
<PAGE>
INTERNATIONAL LOGISTICS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS)
7. INCOME TAXES (CONTINUED)
A reconciliation of the statutory federal income tax rate, exclusive of the
extraordinary loss, with the effective income tax rate is as follows:
<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31, PERIOD FROM
------------- MAY 2, 1996 TO
1995 1996 DECEMBER 31, 1996
----- ----- ---------------------
<S> <C> <C> <C>
Statutory federal rate (benefit)................................................. 35% 35% (35)%
State income taxes (benefit), net of federal income tax.......................... 6 4 (5)
Goodwill amortisation............................................................ 40 17 2
Other............................................................................ -- -- 5
-- -- --
Effective tax rate............................................................... 81% 56% (33)%
-- -- ----
-- -- ----
</TABLE>
8. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES--The Company leases facilities and equipment under
noncancelable operating leases which expire at various dates through 2006. Net
rental expense for the years ended March 31, 1995 and 1996 and for the period
from May 2, 1996 to December 31, 1996 and the nine months ended September 30,
1997 (unaudited) was $8.9 million, $8.3 million, $3.6 million and $8.7 million,
respectively.
Future minimum rental payments due under noncancelable operating leases at
December 31, 1996 were as follows:
<TABLE>
<S> <C>
1997............................................................... $ 10,205
1998............................................................... 7,889
1999............................................................... 6,170
2000............................................................... 4,439
2001............................................................... 2,699
Thereafter......................................................... 7,482
---------
Total............................................................ $ 38,884
---------
---------
</TABLE>
LITIGATION AND CONTINGENT LIABILITIES--At September 30, 1997 (unaudited),
LIW is contesting a claim made by Danish Customs and Excise for payment of
customs duties and excise taxes of approximately $4.7 million related to alleged
irregularities in connection with a number of shipments of freight out of
Denmark. Additionally, LIW is subject to a challenge by German tax authorities
relating to approximately $3.2 million of alleged liabilities relating to the
status of LIW's historical tax filings. LIW has other tax disputes which, in the
aggregate, involve amounts of $10.9 million. The Company believes it has a
number of defenses to the alleged tax liabilities and it intends to defend the
tax claims vigorously. LIW has not recorded any reserves for the Danish customs
matters but believes it has established adequate reserves for the remaining
total alleged tax liabilities.
The Company and certain of its subsidiaries are defendants in legal
proceedings arising in the ordinary course of business and are subject to
unasserted claims. Although the outcome of these proceedings cannot be
determined, it is the opinion of management, based on consultation with legal
counsel, that the litigation reserves recorded at December 31, 1996 and
September 30, 1997, and included in accrued expenses (see Note 5), are
sufficient to cover losses which are probable to occur.
F-17
<PAGE>
INTERNATIONAL LOGISTICS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS)
9. STOCKHOLDERS' EQUITY
WARRANTS--As part of the Company's acquisitions (see Note 3), fixed and
variable price stock warrant agreements for the purchase of 403,889 shares of
common stock were issued to certain employees and nonemployees. During the nine
months ended September 30, 1997 (unaudited), fixed price stock warrant
agreements for the purchase of 288,500 shares of common stock were issued to
certain employees, at an exercise price ranging from $32 to $60 per share, and
warrants to purchase 19,045 shares of common stock were issued in connection
with the purchase of LIW (See note 3) at an exercise price of $45 per share. All
warrants generally vest ratably over one to four years, although those issued to
certain non-employee entities in connection with the Company's financings and
acquisition-related activities vest immediately, and warrants issued prior to
January 1, 1997 fully vest upon a registered public offering. All warrants
expire in seven to ten years from the date of issuance. The following table
summarises the warrant activity:
<TABLE>
<CAPTION>
PRICE PER
WARRANTS SHARE
--------- -----------
<S> <C> <C>
Outstanding at May 2, 1996............................................ -- --
Granted............................................................... 403,889 $ 20-39
---------
Outstanding at December 31, 1996...................................... 403,889 $ 20-39
Granted (unaudited)................................................... 307,545 $ 32-60
---------
Outstanding at September 30, 1997 (unaudited)......................... 711,434 $ 20-60
---------
---------
Exercisable at:
December 31, 1996..................................................... 128,889 $ 20-30.50
---------
---------
September 30, 1997 (unaudited)........................................ 216,684 $ 20-45
---------
---------
</TABLE>
As permitted by SFAS No. 123, "Accounting for Stock-Based Compensation," the
Company measures compensation cost of warrants issued to employees in accordance
with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees." Accordingly, no compensation cost has been recognised for its fixed
price warrants. Had compensation cost for such warrants been determined
consistent with the fair value method outlined in SFAS No. 123, the impact on
the Company's net loss and net loss per share for the period from May 2, 1996 to
December 31, 1996 and for the nine months ended September 30, 1997 (unaudited)
would not have been significant.
The Company accounts for warrants issued to nonemployees under the fair
value method as required by SFAS No. 123. Approximately $200 of acquisition
costs were recorded as part of the purchase price for the fair value of fixed
price warrants issued to nonemployees for services rendered in connection with
the Company's acquisitions during 1996.
The fair value of each warrant is estimated on the date of grant using the
Black-Scholes option-pricing model. Assumptions used during 1996 to estimate the
fair value of warrants granted include a weighted average risk-free interest
rate of 6.42% and an expected life of 3 years. As the Company is newly formed
with no stock price or dividend payout history, dividend yield and expected
volatility assumptions approximating zero were used in the option-pricing model.
The weighted average fair value of warrants granted during the period from May
2, 1996 to December 31, 1996 is $49 per share. The same assumptions were used
resulting in similar values for the nine months ended September 30, 1997
(unaudited).
EMPLOYEE STOCK PURCHASE PLAN. The Company's Employee Stock Purchase Plans
(the "Purchase Plans") provided certain employees of the Company with the right
to purchase any or all of such employee's allocated portion, as determined by
the Board of Directors of the Company, of an aggregate of 8,500 shares of Common
Stock of the Company at a purchase price of $20.00 per share and 75,000 shares
of Common Stock at a purchase price of $30.00 per share. The right to acquire
shares of Common Stock under the Purchase Plans has terminated. A total of 33
employees purchased an aggregate of 55,150 shares of Common Stock pursuant to
the Purchase Plans.
F-18
<PAGE>
INTERNATIONAL LOGISTICS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS)
9. STOCKHOLDERS' EQUITY (CONTINUED)
The Purchase Plans provide that, if at any time prior to an initial public
offering, an employee who has purchased shares under the Purchase Plans is
terminated for any reason whatsoever, including without limitation, death,
disability, resignation, retirement or termination with or without cause, (i)
the Company has an option (a "call") to repurchase, in whole or in part, the
shares of Common Stock of the Company that are then owned by such employee or
any transferee which were acquired pursuant to the Purchase Plans and (ii) the
terminated employee has an option (a "put"), to sell to the Company, in whole or
in part, the shares of Common Stock then owned by such employee which were
acquired pursuant to the Purchase Plans. The purchase price for the exercise of
either the call or the put option is based on the Company's earnings for the
most recent fiscal quarter prior to termination and the number of shares of
Common Stock outstanding and subject to options and warrants to the extent such
options and warrants are in the money.
NOTES RECEIVABLE FROM STOCKHOLDERS--During the period ended December 31,
1996, the Company sold 7,512 shares of common stock to an officer of the Company
in exchange for a note receivable of $150. During the nine months ended
September 30, 1997 (unaudited), the Company sold 7,000 shares of stock to an
officer of the Company in exchange for cash of $52 and a note of $158 and 3,333
shares of stock to an officer of the Company in exchange for $50 cash and a note
receivable of $50. These notes have been recorded as a reduction of
stockholder's equity. The notes are secured by the issued common stock, carry
interest rates of 8% to 10%, and are payable in full by April 30, 2000, March 1,
1998 and January 1, 1998, respectively.
10. SEGMENT INFORMATION
The segment information is presented based on the historical businesses
which are part of the Company. Going forward, portions of each of these former
stand-alone businesses may be shifted to another business segment based on
operational expertise and infrastructure considerations. Each subsidiary offers
similar logistic services with compatible technology and marketing strategies.
The accounting policies of these segments are the same as those described in
Note 2. Selected information regarding the segments are as follows:
<TABLE>
<CAPTION>
AS OF AND FOR THE PERIOD FROM MAY 2, 1996 TO DECEMBER 31,
1996
---------------------------------------------------------
LEP
BEKINS LEP USA CANADA MATRIX ILL
--------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
Revenues............................................................ $ 135,420 $ 69,190 $ 15,023 $ 7,621 --
Depreciation and amortisation....................................... 15,435 497 113 265 --
Interest income..................................................... 38 -- 22 -- --
Interest expense and amortisation of debt issuance costs............ (1,812) (57) (88) -- $ (1,084)
Net income (loss)................................................... (7,782) (300) 236 (627) (771)
Total assets........................................................ 78,769 99,105 21,064 36,097 50,107
Capital expenditures................................................ 1,285 30 10 14 30
<CAPTION>
INTERSEGMENT
ELIMINATIONS TOTAL
------------- ---------
<S> <C> <C>
Revenues............................................................ $ (1,461) $ 225,793
Depreciation and amortisation....................................... -- 16,310
Interest income..................................................... -- 60
Interest expense and amortisation of debt issuance costs............ -- (3,041)
Net income (loss)................................................... -- (9,244)
Total assets........................................................ (48,458) 236,684
Capital expenditures................................................ -- 1,369
United States.......................................................
Canada..............................................................
<CAPTION>
LONG-LIVED
REVENUES ASSETS
--------- -----------
<S> <C> <C>
United States....................................................... $ 210,770 $ 93,705
Canada.............................................................. 15,023 7,943
--------- -----------
$ 225,793 $ 101,648
--------- -----------
--------- -----------
</TABLE>
F-19
<PAGE>
INTERNATIONAL LOGISTICS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS)
10. SEGMENT INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 (UNAUDITED)
--------------------------------------------------------------------
LEP
BEKINS LEP USA CANADA MATRIX LIW ILL
--------- ----------- ----------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues................................................... $ 152,743 $ 287,663 $ 70,763 $ 50,409 -- --
Depreciation and amortisation.............................. 17,715 2,543 688 1,184 -- $ 8
Interest income............................................ 45 5 86 3 -- 14
Interest expense and amortisation of debt issuance costs... (77) (64) (166) (63) -- (5,548)
Net income (loss).......................................... (7,122) (5,894) 379 (322) -- (294)
Total assets............................................... 74,147 94,375 23,952 40,388 $ 244,044 54,578
Capital expenditures....................................... 2,481 1,347 68 518 -- 1,137
<CAPTION>
INTERSEGMENT
ELIMINATIONS TOTAL
------------- -----------
<S> <C> <C>
Revenues................................................... $ (11,437) $ 550,141
Depreciation and amortisation.............................. -- 22,138
Interest income............................................ -- 153
Interest expense and amortisation of debt issuance costs... -- (5,918)
Net income (loss).......................................... -- (13,253)
Total assets............................................... (74,053) 457,431
Capital expenditures....................................... -- 5,551
United States..............................................
Canada.....................................................
Europe.....................................................
Asia.......................................................
<CAPTION>
LONG-LIVED
REVENUES ASSETS
--------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
United States.............................................. $ 479,378 $ 91,775
Canada..................................................... 70,763 7,177
Europe..................................................... -- 33,106
Asia....................................................... -- 14,874
--------- -----------
$ 550,141 $ 146,932
--------- -----------
--------- -----------
</TABLE>
11. SUBSEQUENT EVENTS (UNAUDITED)
On October 28, 1997 the Company refinanced its indebtedness with $110
million of 9.75% Senior Notes ("Notes") due in 2007. The Notes are unsecured
senior obligations of the Company that are guaranteed by certain of the
Company's domestic subsidiaries, representing substantially all of the Company's
assets. In connection with the refinancing, the Company recorded an
extraordinary loss of approximately $3.9 million ($2.3 million net of tax)
related to the write-off of unamortised deferred financing costs associated with
the retired indebtedness.
On October 28, 1997 the Company entered into a new revolving credit facility
(the "New Credit Facility") replacing the old Revolver. The New Credit Facility
provides for $100 million borrowing capacity with sublimits for LEP U.K. of $30
million and letters of credit of $60 million. The Amended Revolver bears
interest at the lesser of LIBOR plus 2.0% or prime plus 0.5% and expires in
2007. Effective April 1, 1998, the interest rate spreads on LIBOR and prime will
be based on a ratio of EBITDA to funded debt. Commitment fees are payable
quarterly at 0.125% of any unavailable and unused commitment, 0.25% of any
available but unused commitment up to $50 million and 0.375% of any available
but unused commitment in excess of $50 million.
On December 12 and 15, 1997 the Company exercised all of the remaining
LIW options for common and preference shares for an aggregate exercise price of
$9.4 million. Upon exercise, LIW became a wholly-owned subsidiary of the
Company.
F-20
<PAGE>
LEP INTERNATIONAL WORLDWIDE LIMITED
STATEMENT OF DIRECTORS' RESPONSIBILITIES
As described in the basis of preparation (Note 1 on page F-27), the combined
and consolidated financial statements do not constitute the statutory accounts
of LEP International Worldwide Limited (the "Company") prepared in accordance
with the Companies Act 1985. Nevertheless, the Directors acknowledge their
responsibility for the preparation of the combined and consolidated financial
statements and for ensuring that they present fairly the state of affairs of the
Company and its subsidiaries as at the end of each financial year and of the
loss of that group of companies for each financial year.
The Directors consider that in preparing the combined and consolidated
financial statements on pages F-22 to F-47 the Company has used appropriate
accounting policies, consistently applied and supported by reasonable and
prudent judgements and estimates, and that all the accounting standards which
they consider to be applicable have been followed.
F-21
<PAGE>
ACCOUNTANTS' REPORT TO THE DIRECTORS OF
LEP INTERNATIONAL WORLDWIDE LIMITED
To the Board of Directors and Shareholders of
LEP International Worldwide Limited:
We have audited the accompanying consolidated balance sheet of LEP
International Worldwide Limited and its subsidiaries (the Company or LIW) as of
31 December, 1996 and the combined balance sheet of its predecessor company and
subsidiaries (LIW Predecessor) as of 31 December 1995 and the related combined
and consolidated statements of profit and loss accounts and of cash flows for
the periods 24 January 1996 to 31 December 1996, 1 January 1996 to 23 January
1996 and the years ended 31 December 1995 and 1994. The basis of preparation of
these financial statements is set out in note 1. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United Kingdom which do not differ in any material respect from
auditing standards generally accepted in the United States. Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the combined and consolidated financial statements audited
by us present fairly, in all material respects, the financial position of the
Company and LIW Predecessor at 31 December 1996 and 1995, and the results of
their operations and their cash flows for the periods ended 31 December 1996, 23
January 1996, 31 December 1995 and 1994 in conformity with generally accepted
accounting principles in the United Kingdom consistently applied.
Accounting principles generally accepted in the United Kingdom vary in
certain significant respects from accounting principles generally accepted in
the United States. The application of the latter would have affected the
determination of combined and consolidated net income, expressed in pounds
sterling, for each of the periods ended 31 December 1996, 23 January 1996, 31
December 1995 and 1994 and the determination of the combined and consolidated
financial position expressed in pounds sterling at 31 December 1996 and 1995 to
the extent summarised in notes 24 and 25 to the combined and consolidated
financial statements.
Price Waterhouse
Chartered Accountants
London, England
3 October 1997
F-22
<PAGE>
LEP INTERNATIONAL WORLDWIDE LIMITED
COMBINED AND CONSOLIDATED BALANCE SHEETS
AT 31 DECEMBER:
<TABLE>
<CAPTION>
LIW PREDECESSOR LIW
--------- ---------
1995 1996
--------- ---------
NOTE L'000 L'000
--------- --------- ---------
<S> <C> <C> <C>
FIXED ASSETS
Tangible assets
- property.................................................................................. 9 25,865 18,718
- other..................................................................................... 10 7,715 3,588
Investments
- associated undertakings................................................................... 11 9,013 2,086
- other..................................................................................... 12 378 283
--------- ---------
42,971 24,675
--------- ---------
CURRENT ASSETS
Debtors......................................................................................... 13 164,012 112,913
Cash and short term deposits.................................................................... 17,877 14,618
--------- ---------
181,889 127,531
Creditors: amounts falling due within one year.................................................. 14 & 16 (186,304) (122,376)
--------- ---------
Net current (liabilities)/assets................................................................ (4,415) 5,155
--------- ---------
Total assets less current liabilities........................................................... 38,556 29,830
Creditors: amounts falling due after more than one year......................................... 15 & 16 (21,679) (17,160)
Provisions for liabilities and charges.......................................................... 18 (387) (101)
--------- ---------
16,490 12,569
--------- ---------
CAPITAL AND RESERVES --------- ---------
Shareholders' funds............................................................................. 20 15,035 11,122
Equity minority interests....................................................................... 1,455 1,447
--------- ---------
16,490 12,569
--------- ---------
--------- ---------
<CAPTION>
US$'000
---------
<S> <C>
FIXED ASSETS
Tangible assets
- property.................................................................................. 30,295
- other..................................................................................... 5,807
Investments
- associated undertakings................................................................... 3,376
- other..................................................................................... 458
---------
39,936
---------
CURRENT ASSETS
Debtors......................................................................................... 182,750
Cash and short term deposits.................................................................... 23,659
---------
206,409
Creditors: amounts falling due within one year.................................................. (198,066)
---------
Net current (liabilities)/assets................................................................ 8,343
---------
Total assets less current liabilities........................................................... 48,279
Creditors: amounts falling due after more than one year......................................... (27,773)
Provisions for liabilities and charges.......................................................... (163)
---------
20,343
---------
---------
CAPITAL AND RESERVES
Shareholders' funds............................................................................. 18,001
Equity minority interests....................................................................... 2,342
---------
20,343
---------
---------
</TABLE>
The combined and consolidated financial statements were approved by the
Board of Directors on 3 October 1997 and are signed on its behalf by
<TABLE>
<S> <C>
J Wasp M C Alexander Director
Director Director
</TABLE>
The notes on pages F-27 to F-47 form part of
these combined and consolidated financial statements.
F-23
<PAGE>
LEP INTERNATIONAL WORLDWIDE LIMITED
COMBINED AND CONSOLIDATED STATEMENTS OF PROFIT AND LOSS ACCOUNTS
<TABLE>
<CAPTION>
LIW PREDECESSOR
------------------------
YEAR END YEAR END
31 DEC 1994 31 DEC 1995
NOTE L'000 L'000
--------- ----------- -----------
<S> <C> <C> <C>
TURNOVER
Continuing operations.................................................................... 735,078 736,942
Discontinued operations.................................................................. 361,299 369,281
----------- -----------
3 1,096,377 1,106,223
----------- -----------
GROSS PROFIT
Continuing operations.................................................................... 134,393 140,337
Discontinued operations.................................................................. 61,284 59,143
----------- -----------
195,677 199,480
----------- -----------
OPERATING PROFIT/(LOSS) 4
Continuing operations.................................................................... 1,574 (9,547)
Discontinued operations.................................................................. 1,257 (47)
----------- -----------
3 2,831 (9,594)
SHARE OF LOSSES OF ASSOCIATED UNDERTAKINGS............................................... 14 (1,021)
TOTAL OPERATING PROFIT/(LOSS)............................................................ 2,845 (10,615)
EXCEPTIONAL ITEMS........................................................................ 21(a) -- --
----------- -----------
PROFIT/(LOSS) ON ORDINARY ACTIVITIES BEFORE INTEREST..................................... 2,845 (10,615)
Interest receivable and similar income................................................... 686 699
Interest payable and similar charges..................................................... 5 (2,671) (3,440)
----------- -----------
PROFIT/(LOSS) ON ORDINARY ACTIVITIES BEFORE TAXATION..................................... 860 (13,356)
Taxation................................................................................. 6 (1,780) (5,987)
----------- -----------
(LOSS)/(PROFIT) ON ORDINARY ACTIVITIES AFTER TAXATION.................................... (920) (19,343)
Equity minority interests................................................................ (353) (397)
----------- -----------
RETAINED (LOSS)/PROFIT................................................................... (1,273) (19,740)
----------- -----------
----------- -----------
<CAPTION>
LIW
--------------------
PERIOD PERIOD 24 JAN -
01 JAN - 31 DEC 1996
23 JAN 1996 --------------------
L'000 L'000 US$'000
------------- --------- ---------
<S> <C> <C> <C>
TURNOVER
Continuing operations.................................................................... 45,503 678,596 1,098,308
Discontinued operations.................................................................. 22,859 280,268 453,614
------ --------- ---------
68,362 958,864 1,551,922
------ --------- ---------
GROSS PROFIT
Continuing operations.................................................................... 8,946 133,406 215,918
Discontinued operations.................................................................. 3,798 46,561 75,359
------ --------- ---------
12,744 179,967 291,277
------ --------- ---------
OPERATING PROFIT/(LOSS)
Continuing operations.................................................................... 539 (2,477) (4,009)
Discontinued operations.................................................................. 13 (1,019) (1,649)
------ --------- ---------
552 (3,496) (5,658)
SHARE OF LOSSES OF ASSOCIATED UNDERTAKINGS (86) (1,283) (2,077)
TOTAL OPERATING PROFIT/(LOSS)............................................................ 466 (4,779) (7,735)
EXCEPTIONAL ITEMS........................................................................ -- 5,800 9,387
------ --------- ---------
PROFIT/(LOSS) ON ORDINARY ACTIVITIES BEFORE INTEREST..................................... 466 1,021 1,652
Interest receivable and similar income................................................... 54 809 1,309
Interest payable and similar charges..................................................... (152) (2,036) (3,295)
------ --------- ---------
PROFIT/(LOSS) ON ORDINARY ACTIVITIES BEFORE TAXATION..................................... 368 (206) (334)
Taxation................................................................................. (168) (2,420) (3,917)
------ --------- ---------
(LOSS)/(PROFIT) ON ORDINARY ACTIVITIES AFTER TAXATION.................................... 200 (2,626) (4,251)
Equity minority interests................................................................ (26) (386) (624)
------ --------- ---------
RETAINED (LOSS)/PROFIT................................................................... 174 (3,012) (4,875)
------ --------- ---------
------ --------- ---------
</TABLE>
The notes on pages F-27 to F-47 form part of
these combined and consolidated financial statements.
F-24
<PAGE>
LEP INTERNATIONAL WORLDWIDE LIMITED
COMBINED AND CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
LIW
PREDECESSOR
-------------
YEAR END
31 DEC 1994
NOTE L'000
--------- -------------
<S> <C> <C>
NET CASH INFLOW/(OUTFLOW) FROM OPERATING ACTIVITIES.......................................... 19(a) 5,274
------
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE INTEREST RECEIVED............................ 659
Interest paid................................................................................ (2,541)
Dividends paid to minority shareholders...................................................... (234)
Dividends from associated undertakings....................................................... 295
------
(1,821)
------
TAXATION
Net UK tax (paid)/received................................................................... --
Overseas tax paid............................................................................ (1,301)
------
(1,301)
------
INVESTING ACTIVITIES
Purchase of fixed assets..................................................................... (1,935)
Net disposals of trade investments........................................................... (8)
Loans (made)/repaid by associates............................................................ (278)
Proceeds on disposal of fixed assets......................................................... 878
Net proceeds on sale of North American operations............................................ 21(a) --
Sale of interest in Cronat Transport Holding AG.............................................. 21(b) --
Purchase of subsidiary....................................................................... (199)
Proceeds of sale of business................................................................. 183
------
(1,359)
------
Net cash inflow/(outflow) before financing................................................... 793
------
FINANCING
Additional loans (including finance leases).................................................. --
Repayment of loans (including finance leases)................................................ (6,801)
Net capital contribution (to)/from LEP Group plc............................................. (2,903)
------
Net cash (outflow)/inflow from financing..................................................... (9,704)
------
(Decrease)/increase in cash and cash equivalents............................................. 19(b) (8,911)
------
------
<CAPTION>
LIW
LIW ---------
Predecessor
---------------------- PERIOD 24
PERIOD JAN -
YEAR END 01 JAN - 31 DEC
31 DEC 1995 23 JAN 1996
L'000 1996 L'000 L'000
------------- ----------- ---------
<S> <C>
NET CASH INFLOW/(OUTFLOW) FROM OPERATING ACTIVITIES.......................................... (9,508) 108 1,292
------------- ----------- ---------
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE INTEREST RECEIVED............................ 699 54 809
Interest paid................................................................................ (3,440) (152) (2,547)
Dividends paid to minority shareholders...................................................... (235) -- (283)
Dividends from associated undertakings....................................................... 232 -- 57
------------- ----------- ---------
(2,744) (98) (1,964)
------------- ----------- ---------
TAXATION
Net UK tax (paid)/received................................................................... (985) -- 187
Overseas tax paid............................................................................ (2,044) (246) (2,380)
------------- ----------- ---------
(3,029) (246) (2,193)
------------- ----------- ---------
INVESTING ACTIVITIES
Purchase of fixed assets..................................................................... (2,981) -- (1,758)
Net disposals of trade investments........................................................... 716 -- --
Loans (made)/repaid by associates............................................................ 438 -- --
Proceeds on disposal of fixed assets......................................................... 1,288 1,720 931
Net proceeds on sale of North American operations............................................ -- -- 6,038
Sale of interest in Cronat Transport Holding AG.............................................. -- 5,404 --
Purchase of subsidiary....................................................................... -- -- --
Proceeds of sale of business................................................................. -- -- --
------------- ----------- ---------
(539) 7,124 5,211
------------- ----------- ---------
Net cash inflow/(outflow) before financing................................................... (15,820) 6,888 2,346
------------- ----------- ---------
FINANCING
Additional loans (including finance leases).................................................. 6,255 50 741
Repayment of loans (including finance leases)................................................ (2,351) (394) (6,268)
Net capital contribution (to)/from LEP Group plc............................................. 5,210 (148) --
------------- ----------- ---------
Net cash (outflow)/inflow from financing..................................................... 9,114 (492) (5,527)
------------- ----------- ---------
(Decrease)/increase in cash and cash equivalents............................................. (6,706) 6,396 (3,181)
------------- ----------- ---------
------------- ----------- ---------
<CAPTION>
US$'000
-----------
NET CASH INFLOW/(OUTFLOW) FROM OPERATING ACTIVITIES.......................................... 2,091
-----------
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE INTEREST RECEIVED............................ 1,309
Interest paid................................................................................ (4,122)
Dividends paid to minority shareholders...................................................... (458)
Dividends from associated undertakings....................................................... 92
-----------
(3,179)
-----------
TAXATION
Net UK tax (paid)/received................................................................... 303
Overseas tax paid............................................................................ (3,852)
-----------
(3,549)
-----------
INVESTING ACTIVITIES
Purchase of fixed assets..................................................................... (2,845)
Net disposals of trade investments........................................................... --
Loans (made)/repaid by associates............................................................ --
Proceeds on disposal of fixed assets......................................................... 1,507
Net proceeds on sale of North American operations............................................ 9,773
Sale of interest in Cronat Transport Holding AG.............................................. --
Purchase of subsidiary....................................................................... --
Proceeds of sale of business................................................................. --
-----------
8,435
-----------
Net cash inflow/(outflow) before financing................................................... 3,798
-----------
FINANCING
Additional loans (including finance leases).................................................. 1,199
Repayment of loans (including finance leases)................................................ (10,145)
Net capital contribution (to)/from LEP Group plc............................................. --
-----------
Net cash (outflow)/inflow from financing..................................................... (8,946)
-----------
(Decrease)/increase in cash and cash equivalents............................................. (5,148)
-----------
-----------
</TABLE>
The notes on pages F-27 to F-47 form part of
these combined and consolidated financial statements.
F-25
<PAGE>
LEP INTERNATIONAL WORLDWIDE LIMITED
STATEMENTS OF TOTAL RECOGNISED GAINS AND LOSSES
<TABLE>
<CAPTION>
YEAR END YEAR END
31 DEC 1994 31 DEC 1995
L'000 L'000
------------- -------------
<S> <C> <C>
(Loss)/profit for the period.................................................................... (1,273) (19,740)
Currency translation differences on foreign currency net investment............................. 1,068 (7)
Unrealised surplus on revaluation of property................................................... -- 266
------ -------------
Total recognised (loss)/profit for the period................................................... (205) (19,481)
------ -------------
------ -------------
<CAPTION>
PERIOD PERIOD
01 JAN - 24 JAN -
23 JAN 31 DEC
1996 L'000 1996 L'000
--------------- -------------
<S> <C> <C>
(Loss)/profit for the period.................................................................... 174 (3,012)
Currency translation differences on foreign currency net investment............................. (5) (922)
Unrealised surplus on revaluation of property................................................... -- --
------ ------
Total recognised (loss)/profit for the period................................................... 169 (3,934)
------ ------
------ ------
</TABLE>
NOTE OF HISTORICAL COST PROFITS AND LOSSES
<TABLE>
<CAPTION>
YEAR END YEAR END
31 DEC 1994 31 DEC 1995
L'000 L'000
------------- -------------
<S> <C> <C>
Reported profit/(loss) on ordinary activities before taxation................................ 860 (13,356)
Difference between historical cost depreciation charge and the actual depreciation charge for
the year calculated on the revalued amount................................................. 247 266
------ -------------
Historical cost profit/(loss) on ordinary activities before taxation......................... 1,107 (13,090)
------ -------------
------ -------------
Historical cost (loss)/profit transferred (from)/to reserves................................. (1,026) (19,474)
------ -------------
------ -------------
<CAPTION>
PERIOD PERIOD
01 JAN 1996- 24 JAN 1996-
23 JAN 1996 31 DEC 1996
L'000 L'000
--------------- -------------
<S> <C> <C>
Reported profit/(loss) on ordinary activities before taxation................................ 368 (206)
Difference between historical cost depreciation charge and the actual depreciation charge for
the year calculated on the revalued amount................................................. 16 --
---- ------
Historical cost profit/(loss) on ordinary activities before taxation......................... 384 (206)
--- ------
--- ------
Historical cost (loss)/profit transferred (from)/to reserves................................. 190 (3,012)
--- ------
--- ------
</TABLE>
The notes on pages F-27 to F-47 form part of
these combined and consolidated financial statements.
F-26
<PAGE>
LEP INTERNATIONAL WORLDWIDE LIMITED
NOTES TO THE COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS
1 BASIS OF PREPARATION
During 1994 and 1995 the operating companies comprising the freight
forwarding interests of Wayrol plc (formerly LEP Group plc) were reorganised so
as to separate these companies from the other interests of Wayrol plc and to
better reflect the management and operating structure of the freight forwarding
business. LEP International (Worldwide) Limited was formed in 1995 to be the new
ultimate holding company for the freight forwarding companies, and, on 10
November 1995, acquired the freight forwarding companies and certain of their
holding companies.
LEP International (Worldwide) Limited and its subsidiaries (LIW Predecessor)
thus comprised the freight forwarding interests under Wayrol plc, with the
exception of Intercontinentale Ostereiche Gesellschaft Fur Transport und
Verkehrswesen GmbH and LEP International A/S which were not acquired.
On 24 January 1996 LEP International (Worldwide) Limited and LEP
International A/S were acquired from Wayrol plc by LEP International Worldwide
Limited (the Company or "LIW").
These combined and consolidated financial statements have been prepared to
show the results of the Company and its subsidiaries from the date of
acquisition of LEP International (Worldwide) Limited (the Predecessor Company,
hereinafter referred to as "LIW Predecessor") and the results of LIW Predecessor
and its subsidiaries (the Predecessor Group) as if the Predecessor Group had
existed as a legal group from 1 January 1994. They have been prepared from the
audited financial statements of the individual subsidiaries which comprise the
freight forwarding business. The financial statements for the years ended 31
December 1994 and 1995 comprise the combined financial statements of the
companies forming the freight forwarding interests of Wayrol plc with the
exception of Intercontinentale Ostereiche Gesellschaft. The period from 1
January 1996 to 23 January 1996 comprises the consolidated financial statements
of LEP International (Worldwide) Limited combined with those of LEP
International A/S. The period from 24 January 1996 to 31 December 1996 comprises
the consolidated financial statements of LEP International Worldwide Limited.
Adjustments have been made to eliminate intercompany investments and other
balances as appropriate.
These financial statements do not constitute the Company's statutory
accounts prepared in accordance with section 227 of the Companies Act 1985.
On 31 October 1996 the Group sold its North American interests to
International Logistics Limited (see Note 21a). International Logistics Limited
also subscribed for shares in LEP International Worldwide Limited, giving it a
33.3% interest in the Group. International Logistics Limited also held an option
to acquire further shares, which was exercised on 30 September 1997, thereby
acquiring a controlling interest in the Group.
Amounts shown on the Accounts as of 31 December 1996 and for the period 24
January to 31 December 1996 have been converted into U.S. Dollars at a
convenience rate of L1= U.S.$1.6185 based on the closing rate on 30 September
1997.
2 ACCOUNTING POLICIES
The combined and consolidated financial statements have been prepared in
accordance with applicable accounting standards.
All accounting policies have been applied consistently in preparing these
combined and consolidated financial statements; a summary of the principal
disclosures is set out below.
(I) ACCOUNTING CONVENTION
The combined and consolidated financial statements are prepared under the
historical cost convention modified to include the revaluation of certain fixed
assets.
F-27
<PAGE>
LEP INTERNATIONAL WORLDWIDE LIMITED
NOTES TO THE COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2 ACCOUNTING POLICIES (CONTINUED)
(II) BASIS OF CONSOLIDATION
The combined and consolidated financial statements include, on the basis
described in Note 1 above, the results and net assets of the Company, including
its share of the results of associated undertakings accounted for under the
equity method of accounting.
Increases or reductions in inter-company balances with Wayrol plc and its
non-Freight Forwarding Division subsidiaries during the period to 24 January
1996 have been treated as capital increases or reductions. Interest payable and
receivable on these intercompany balances has been eliminated from the profit
and loss account. Intercompany balances outstanding when the Company acquired
the investment in the freight forwarding businesses were capitalised on 24
January 1996, the date of acquisition.
Companies in which the Company has an investment not exceeding 50% of the
voting capital and over which it exerts significant influence are defined as
associated undertakings. The combined and consolidated financial statements
include the appropriate share of these companies' results and retained reserves.
(III) TURNOVER
Turnover represents the total amount earned by the Company for services
provided in the ordinary course of business. Turnover includes disbursements,
customer VAT and customer duty payable on imports.
(IV) DEPRECIATION
Tangible assets are written off over their estimated useful lives. The
methods and rates are dependent on local conditions in the countries in which
the Company operates and are adjusted for consolidation purposes where
appropriate. Freehold land is not depreciated and other property, plant and
equipment are depreciated over their estimated useful lives on a straight line
basis principally as follows:
<TABLE>
<S> <C>
Freehold buildings.......................................................................... 50 years
Leasehold land and buildings................................................................ Lesser of 50 years
and the term of the
lease
Motor vehicles, plant and equipment......................................................... 3 to 10 years
Furniture and fittings...................................................................... 3 to 10 years
</TABLE>
(V) PENSIONS
The Company operates a number of pension schemes for the benefit of
employees. For defined benefit schemes, the expected cost of providing pensions,
as calculated periodically by professionally qualified actuaries, is charged to
the profit and loss account so as to spread the pension cost over the expected
service lives of employees who are in the plan. The basis used to spread the
expected pension cost is that it should represent a substantially level
percentage of the current and expected future pensionable salaries of the
members of the plan. Variations from the expected regular pension cost are
spread over the expected remaining service lives of the current employees who
are members of the plan. Contributions to defined contribution schemes are
charged to the profit and loss account as incurred.
(VI) HOLIDAY PAY
The accounting policy with regard to the treatment of holiday pay
entitlements reflects the matching of income and expenditure by accruing for
such liabilities in all countries where holiday pay can be carried forward at
the end of the year.
(VII) TAXATION
Deferred taxation is provided using the liability method on timing
differences which are expected to reverse in the foreseeable future, calculated
at the rate at which it is estimated that tax will be payable.
F-28
<PAGE>
LEP INTERNATIONAL WORLDWIDE LIMITED
NOTES TO THE COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2 ACCOUNTING POLICIES (CONTINUED)
The United Kingdom tax charge includes amounts payable to Wayrol plc and
certain of its non-freight forwarding subsidiaries in respect of group tax
relief transferred to the United Kingdom freight forwarding company.
No provision is made for any additional taxation which may arise on the
distribution of profits and reserves retained by overseas subsidiary and
associated undertakings. No account is taken of unrelieved tax losses which are
available for set-off against future taxable profits of the companies concerned,
except where these offset timing differences in the deferred tax account.
(VIII) FOREIGN CURRENCIES
The results of overseas subsidiary and associated undertakings have been
translated into sterling at average rates of exchange for the year. Assets and
liabilities of overseas subsidiary and associated undertakings have been
translated into sterling at year end rates of exchange. The difference on
translating opening net assets is recorded as a movement on reserves. All other
translation differences are taken to the profit and loss account.
(IX) GOODWILL
Goodwill, being cost less attributable fair value of net assets of
subsidiaries at the date of acquisition, is written off directly to reserves in
the year in which it arises. On the disposal of a subsidiary undertaking, the
attributable goodwill is transferred from reserves and is charged to the profit
and loss account.
(X) LEASING AND HIRE PURCHASE COMMITMENTS
Assets purchased under finance leases and hire purchase contracts are
capitalised in the balance sheet and are depreciated over their useful lives.
The interest element of the rental obligations is charged to the profit and loss
account over the period of the lease. Rentals paid under operating leases are
charged to the profit and loss account as incurred.
F-29
<PAGE>
LEP INTERNATIONAL WORLDWIDE LIMITED
NOTES TO THE COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3 ANALYSIS OF RESULTS AND NET OPERATING ASSETS
<TABLE>
<CAPTION>
PERIOD 01 PERIOD 24
JAN JAN
YEAR END YEAR END 1996 1996
31 DEC 31 DEC -23 JAN -31 DEC
1994 1995 1996 1996
L'000 L'000 L'000 L'000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Turnover by geographic segment:
United Kingdom............................................................ 164,622 157,660 10,420 155,397
Other Europe.............................................................. 413,350 398,528 23,728 353,864
The Americas.............................................................. 361,299 369,281 22,859 280,268
Asia Pacific and other.................................................... 157,106 180,754 11,355 169,335
--------- --------- --------- ---------
1,096,377 1,106,223 68,362 958,864
--------- --------- --------- ---------
--------- --------- --------- ---------
Turnover is shown by geographic origin.
Turnover by geographic destination is not materially different from that
shown above.
Operating profit:
Continuing operations
Operating profit/(loss) before restructuring costs and provisions....... 3,015 (3,711) 107 1,626
--------- --------- --------- ---------
Restructuring costs and provisions...................................... (1,441) (5,836) 432 (4,103)
Total continuing operations............................................. 1,574 (9,547) 539 (2,477)
Discontinued operations................................................. 1,257 (47) 13 (1,019)
--------- --------- --------- ---------
2,831 (9,594) 552 (3,496)
--------- --------- --------- ---------
--------- --------- --------- ---------
Operating (loss) / profit by geographic segment:
United Kingdom.......................................................... 1,678 (1,811) 198 (155)
Other Europe............................................................ (3,496) (10,884) 151 (6,029)
The Americas............................................................ 1,257 (47) 13 (1,019)
Asia Pacific and other.................................................. 3,392 3,148 190 3,707
--------- --------- --------- ---------
2,831 (9,594) 552 (3,496)
--------- --------- --------- ---------
--------- --------- --------- ---------
Operating assets by geographic segment:
United Kingdom.......................................................... (4,917) (519) (417) (2,825)
Other Europe............................................................ 14,681 7,635 2,239 (1,249)
The Americas............................................................ 14,226 18,816 18,774 --
Asia Pacific and other.................................................. 12,522 12,451 12,428 13,365
--------- --------- --------- ---------
36,512 38,383 33,024 9,291
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
F-30
<PAGE>
LEP INTERNATIONAL WORLDWIDE LIMITED
NOTES TO THE COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4 NET OPERATING COSTS
<TABLE>
<CAPTION>
PERIOD PERIOD
END END
YEAR END YEAR END 23 JAN 31 DEC
1994 1995 1996 1996
L'000 L'000 L'000 L'000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Continuing operations
Employee costs................................................................ 79,046 86,962 5,327 79,428
Other operating costs......................................................... 52,332 57,086 3,512 52,352
--------- --------- --------- ---------
131,378 144,048 8,839 131,780
Restructuring costs and provisions............................................ 1,441 5,836 (432) 4,103
--------- --------- --------- ---------
132,819 149,884 8,407 135,883
--------- --------- --------- ---------
--------- --------- --------- ---------
Discontinued operations
Employee costs................................................................ 37,292 37,755 2,315 28,379
Other operating costs......................................................... 22,673 20,772 1,470 18,034
--------- --------- --------- ---------
59,965 58,527 3,785 46,413
Restructuring costs and provisions............................................ 62 663 -- 1,167
--------- --------- --------- ---------
60,027 59,190 3,785 47,580
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
Net operating (income)/costs include:
<TABLE>
<CAPTION>
PERIOD
END
YEAR END YEAR END PERIOD END 31 DEC
1994 1995 23 JAN 1996 1996
L'000 L'000 L'000 L'000
--------- --------- ----- ---------
<S> <C> <C> <C> <C>
Investment income
--listed investments.............................................................. (21) (26) -- --
--unlisted investments............................................................ (336) (7) (2) (28)
Depreciation
--owned assets.................................................................... 3,769 3,370 189 2,697
--finance leased & hire purchase assets........................................... 901 864 55 727
Operating lease rentals
--plant and machinery............................................................. 7,163 7,561 517 7,251
--other........................................................................... 7,998 9,945 595 8,239
Profit on disposal of fixed assets.................................................. (82) (115) (76) --
</TABLE>
F-31
<PAGE>
LEP INTERNATIONAL WORLDWIDE LIMITED
NOTES TO THE COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5 INTEREST PAYABLE AND SIMILAR CHARGES
<TABLE>
<CAPTION>
PERIOD PERIOD
END END
YEAR END YEAR END 23 JAN 31 DEC
1994 1995 1996 1996
L'000 L'000 L'000 L'000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Interest payable and similar charges:
On bank loans, overdrafts and other loans wholly repayable within five years..... (1,931) (3,034) (644) (1,763)
On all other loans............................................................... (388) (27) (9) (129)
Waiver of interest during refinancing and restructuring.......................... -- -- 511 --
Finance charges:
In respect of finance leases and hire purchase contracts terminating within five
years.......................................................................... (337) (366) (10) (144)
All other finance charges........................................................ (15) (13) -- --
--------- --------- --------- ---------
(2,671) (3,440) (152) (2,036)
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
6 TAXATION
<TABLE>
<CAPTION>
PERIOD PERIOD
END END
YEAR END YEAR END 23 JAN 31 DEC
1994 1995 1996 1996
L'000 L'000 L'000 L'000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
United Kingdom:
Current taxation............................................................... (829) (939) -- (5)
Deferred taxation.............................................................. (25) (108) (3) (41)
Prior year..................................................................... 625 (549) 10 142
Overseas:
Current taxation............................................................... (1,207) (1,844) (163) (2,341)
Deferred taxation.............................................................. (256) 72 3 49
Prior year..................................................................... (88) (2,619) (15) (224)
--------- --------- --------- ---------
(1,780) (5,987) (168) (2,420)
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
The tax charge is disproportionate to the Company's loss before tax
primarily as a result of surplus losses in many countries which are not
recognised for deferred tax purposes.
The United Kingdom tax charge in 1995 represents group relief payable to
Wayrol plc and certain of its non-freight forwarding subsidiaries in respect of
tax losses transferred to the United Kingdom freight forwarding company.
Surplus advance corporation tax of approximately L595,000 (1995, L595,000)
is available for offset against future United Kingdom corporation tax
liabilities of the United Kingdom freight forwarding company.
F-32
<PAGE>
LEP INTERNATIONAL WORLDWIDE LIMITED
NOTES TO THE COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7 EMPLOYEES
<TABLE>
<CAPTION>
YEAR END YEAR END
31 DEC 31 DEC PERIOD END PERIOD END
1994 1995 23 JAN 1996 31 DEC 1996
NUMBER NUMBER NUMBER NUMBER
----------- ----------- --------------- -------------
<S> <C> <C> <C> <C>
The average number of employees during the year was:
United Kingdom.................................................. 908 956 954 899
Other Europe.................................................... 1,959 1,735 1,563 1,536
The Americas.................................................... 1,335 1,227 1,232 1,249
Asia Pacific.................................................... 1,273 1,493 1,504 1,520
----- ----- ----- -------------
5,475 5,411 5,253 5,204
----- ----- ----- -------------
----- ----- ----- -------------
L'000 L'000 L'000 L'000
----- ----- ----- -------------
Payroll costs were:
Wages and salaries.............................................. 96,974 103,717 6,357 89,681
Social security costs........................................... 15,752 17,618 1,101 15,390
Pension costs................................................... 3,495 3,382 184 2,736
----- ----- ----- -------------
116,221 124,717 7,642 107,807
----- ----- ----- -------------
----- ----- ----- -------------
</TABLE>
8 PENSIONS
<TABLE>
<CAPTION>
PERIOD
PERIOD 24 JAN
YEAR END YEAR END 01 JAN 1996 1996 -
31 DEC 31 DEC - 23 JAN 31 DEC
1994 1995 1996 1996
L'000 L'000 L'000 L'000
--------- --------- ----- ---------
<S> <C> <C> <C> <C>
Pension cost of the Company......................................................... 3,495 3,382 184 2,736
--------- --------- --- ---------
--------- --------- --- ---------
Amount attributable to overseas plans............................................... 1,814 1,329 78 1,159
--------- --------- --- ---------
--------- --------- --- ---------
</TABLE>
The Company operates a number of pension plans throughout the world. The
major plans are of the defined benefit type. With the exception of the plan in
Germany, the assets of the major plans are held in separate trustee administered
funds. The plans are funded in accordance with local practice and contributions
are assessed in accordance with the advice of local actuaries.
The pension cost relating to the United Kingdom plan is assessed in
accordance with the advice of a qualified actuary using the projected unit
method. The latest actuarial valuation of the main United Kingdom plan was at 31
December 1995. It was assumed that investment returns would be 2.5% higher than
the annual increase in pensionable salaries and 4.0% higher than the annual
increase in present and future pensions in payment. In aggregate, at the date of
the most recent actuarial valuation, the market value of the assets in the main
United Kingdom plan was L40,045,000 and the actuarial value of the assets was
sufficient to cover the benefits accrued to members on an ongoing basis after
allowing for 6.5% p.a. future salary increases. Following the valuation as at 31
December 1995 the Company's contribution to this pension plan was reduced.
F-33
<PAGE>
LEP INTERNATIONAL WORLDWIDE LIMITED
NOTES TO THE COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9 TANGIBLE ASSETS--PROPERTY
<TABLE>
<CAPTION>
LONG SHORT
FREEHOLD LEASEHOLD LEASEHOLD TOTAL
L'000 L'000 L'000 L'000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Cost or valuation:
At 1 January 1996................................................................ 15,754 2,580 17,482 35,816
Exchange adjustments............................................................. (1,511) (86) (2,493) (4,090)
Additions........................................................................ 4 -- 1 5
Disposals........................................................................ (1,792) -- -- (1,792)
Companies sold................................................................... (1,622) -- (1,776) (3,398)
--------- --------- --------- ---------
At 31 December 1996.............................................................. 10,833 2,494 13,214 26,541
--------- --------- --------- ---------
--------- --------- --------- ---------
Depreciation:
At 1 January 1996................................................................ (2,637) (193) (7,121) (9,951)
Exchange adjustments............................................................. 380 6 960 1,346
Charge for the year.............................................................. (354) (49) (612) (1,015)
Disposals........................................................................ 77 -- -- 77
Companies sold................................................................... 204 -- 1,516 1,720
--------- --------- --------- ---------
At 31 December 1996.............................................................. (2,330) (236) (5,257) (7,823)
--------- --------- --------- ---------
--------- --------- --------- ---------
Net book value:
At 31 December 1996.............................................................. 8,503 2,258 7,957 18,718
--------- --------- --------- ---------
--------- --------- --------- ---------
At 31 December 1995.............................................................. 13,117 2,387 10,361 25,865
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
F-34
<PAGE>
10 TANGIBLE ASSETS--OTHER
<TABLE>
<CAPTION>
FURNITURE
MOTOR VEHICLES COMPUTER AND
PLANT & EQUIPMENT FITTINGS
MACHINERY L'000 L'000 L'000 TOTAL L'000
----------------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
Cost or valuation:
At 1 January 1996......................................... 39,041 -- 10,102 49,143
Reclassification.......................................... (9,060) 10,445 (1,385) --
Exchange adjustments...................................... (3,032) (413) (707) (4,152)
Additions................................................. 827 352 574 1,753
Disposals................................................. (763) (790) (224) (1,777)
Companies sold............................................ (10,719) -- (3,153) (13,872)
------- ----------- ------ -----------
At 31 December 1996....................................... 16,294 9,594 5,207 31,095
------- ----------- ------ -----------
------- ----------- ------ -----------
Depreciation:
At 1 January 1996......................................... (32,343) -- (9,085) (41,428)
Reclassification.......................................... 7,779 (9,137) 1,358 --
Exchange adjustments...................................... 2,684 1,079 637 4,400
Charge for the year....................................... (1,629) (615) (409) (2,653)
Disposals................................................. 663 65 189 917
Companies sold............................................ 8,226 -- 3,031 11,257
------- ----------- ------ -----------
At 31 December 1996....................................... (14,620) (8,608) (4,279) (27,507)
------- ----------- ------ -----------
------- ----------- ------ -----------
Net book value:
At 31 December 1996....................................... 1,674 986 928 3,588
Finance leases included therein........................... 869 23 -- 892
------- ----------- ------ -----------
------- ----------- ------ -----------
At 31 December 1995....................................... 6,698 -- 1,017 7,715
Finance leases included therein........................... 2,351 -- 29 2,380
------- ----------- ------ -----------
------- ----------- ------ -----------
</TABLE>
Outstanding contracts for capital expenditure at 31 December 1996 not
provided in these combined and consolidated financial statements amounted to
LNIL (1995 -L271,000). Capital expenditure authorised but not contracted for at
31 December 1996 is estimated at LNIL (1995--L78,000).
11 INVESTMENTS--ASSOCIATED UNDERTAKINGS
The movement of the investment in associated undertakings is as follows:
<TABLE>
<CAPTION>
1995 1996
L'000 L'000
--------- ---------
<S> <C> <C>
At 1 January...................................................................................... 9,974 9,013
Exchange adjustments.............................................................................. 757 (97)
Additions......................................................................................... 109 --
Share of undistributed results.................................................................... (1,253) (1,426)
Reclassification to subsidiary.................................................................... (43) --
Decrease in loans................................................................................. (438) --
Investments written down.......................................................................... (93) --
Associated undertaking sold (see note 21 (b))..................................................... -- (5,404)
--------- ---------
At 31 December.................................................................................... 9,013 2,086
--------- ---------
--------- ---------
</TABLE>
F-35
<PAGE>
LEP INTERNATIONAL WORLDWIDE LIMITED
NOTES TO THE COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11 INVESTMENTS--ASSOCIATED UNDERTAKINGS (CONTINUED)
The values at 31 December in each of the years represents the Company's
share of the net tangible assets in its associated undertakings.
<TABLE>
<CAPTION>
YEAR END YEAR END PERIOD END PERIOD END
31 DEC 31 DEC 23 JAN 31 DEC
1994 1995 1996 1996
L'000 L'000 L'000 L'000
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Dividends from associated undertakings.............. 109 232 -- 57
</TABLE>
The principal associated undertaking is:
<TABLE>
<CAPTION>
NOMINAL AMOUNT OF EACH CLASS OF NUMBER IN PERCENTAGE NATURE OF
NAME OF COMPANY SHARE CAPITAL AND ISSUED DEBT ISSUE HELD BUSINESS
- ------------------------------------- ------------------------------------- ----------- --------------- ----------
<S> <C> <C> <C> <C>
LEP Albarelli SpA.................... 1000 Lire ordinary shares 9,000,000 50% Freight
forwarding
</TABLE>
The carrying values of the associated undertakings are as follows:
<TABLE>
<CAPTION>
1995 1996
L'000 L'000
--------- ---------
<S> <C> <C>
LEP Albarelli SpA.................................................................................. 3,511 1,994
Cronat Transport Holding AG (see note 21 (b))...................................................... 5,404 --
Other.............................................................................................. 98 92
--------- ---------
9,013 2,086
--------- ---------
--------- ---------
</TABLE>
In 1996, the Company entered negotiations to acquire the remaining 50%
interest in LEP Albarelli SpA.
12 INVESTMENTS--OTHER
<TABLE>
<CAPTION>
1995 1996
L'000 L'000
----- -----
<S> <C> <C>
Listed--recognised stock exchanges outside the United Kingdom...................................... 29 25
Unlisted........................................................................................... 349 258
--- ---
378 283
--- ---
--- ---
</TABLE>
The market value of investments is not materially different from their
carrying value shown in these combined and consolidated financial statements.
F-36
<PAGE>
LEP INTERNATIONAL WORLDWIDE LIMITED
NOTES TO THE COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13 DEBTORS
<TABLE>
<CAPTION>
1995 1996
L'000 L'000
--------- ---------
<S> <C> <C>
Trade debtors.................................................................................. 128,394 92,417
Amount owed by associated undertakings......................................................... 2,614 2,122
Other debtors.................................................................................. 27,266 13,781
Prepayments.................................................................................... 5,738 4,593
--------- ---------
164,012 112,913
--------- ---------
--------- ---------
</TABLE>
14 CREDITORS--AMOUNTS FALLING DUE WITHIN ONE YEAR
<TABLE>
<CAPTION>
1995 1996
L'000 L'000
--------- ---------
<S> <C> <C>
Bank loans and overdrafts
--secured.................................................................................... 33,391 8,722
--unsecured.................................................................................. 777 81
Other loans
--secured.................................................................................... 532 230
--unsecured.................................................................................. 53 --
Finance leases
--secured.................................................................................... 820 359
--------- ---------
35,573 9,392
Trade creditors................................................................................ 73,568 56,933
Amount owed to associated undertakings......................................................... 2,994 910
Taxation and social security................................................................... 3,973 5,151
Other creditors................................................................................ 40,167 30,799
Accruals and deferred income................................................................... 30,029 19,191
--------- ---------
186,304 122,376
--------- ---------
--------- ---------
</TABLE>
15 CREDITORS--AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
<TABLE>
<CAPTION>
1995 1996
L'000 L'000
--------- ---------
<S> <C> <C>
Bank loans and overdrafts
--secured...................................................................................... 1,723 1,370
Other loans
--secured...................................................................................... 384 --
Finance leases
--secured...................................................................................... 1,703 477
--------- ---------
3,810 1,847
Pension liabilities not separately funded........................................................ 13,911 11,816
Other long term creditors........................................................................ 3,958 3,497
--------- ---------
21,679 17,160
--------- ---------
--------- ---------
</TABLE>
F-37
<PAGE>
LEP INTERNATIONAL WORLDWIDE LIMITED
NOTES TO THE COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
16 NET (BORROWINGS)/CASH AT BANK
<TABLE>
<CAPTION>
1995 1996
L'000 L'000
--------- ---------
<S> <C> <C>
Bank loans, overdrafts, finance leases and other loans:
Included in creditors due after one year:
Not wholly repayable within five years.......................................................... (384) (897)
Wholly repayable within five years.............................................................. (3,426) (950)
--------- ---------
(3,810) (1,847)
Included in creditors due within one year....................................................... (35,573) (9,392)
--------- ---------
Gross borrowings................................................................................ (39,383) (11,239)
Cash and short term deposits.................................................................... 17,877 14,618
--------- ---------
Net (borrowings)/cash........................................................................... (21,506) 3,379
--------- ---------
--------- ---------
</TABLE>
<TABLE>
<CAPTION>
1995 1996
L'000 L'000
--------- ---------
<S> <C> <C>
Details of loans not wholly repayable within five years are as follows:
Bank borrowings.................................................................................. -- 897
Other borrowings................................................................................. 384 --
--------- ---------
384 897
--------- ---------
--------- ---------
Included in loans not wholly repayable within five years are aggregate installments due after
more than five years........................................................................... 154 100
--------- ---------
--------- ---------
Gross borrowings comprise amounts repayable as:
Bank borrowings:
On demand or within one year..................................................................... 34,168 8,803
Between one and two years........................................................................ 805 578
Between two and five years....................................................................... 918 692
In five years or more............................................................................ -- 100
--------- ---------
35,891 10,173
--------- ---------
Finance leases, hire purchase contracts and other borrowings:
On demand or within one year..................................................................... 1,405 589
Between one and two years........................................................................ 823 363
Between two and five years....................................................................... 1,110 114
In five years or more............................................................................ 154 --
--------- ---------
3,492 1,066
--------- ---------
Total borrowings................................................................................. 39,383 11,239
--------- ---------
--------- ---------
</TABLE>
F-38
<PAGE>
LEP INTERNATIONAL WORLDWIDE LIMITED
NOTES TO THE COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
17 LEASE COMMITMENTS
The Company's annual commitments under non-cancellable operating leases are
as follows:
<TABLE>
<CAPTION>
1995 1996
------------------------ ------------------------
<S> <C> <C> <C> <C>
LAND AND LAND AND
BUILDINGS OTHER BUILDINGS OTHER
L'000 L'000 L'000 L'000
----------- ----------- ----------- -----------
Operating leases which expire:
Within one year............................................................. 1,363 1,481 1,365 1,525
Between two and five years.................................................. 4,118 4,998 1,983 2,360
In five years or more....................................................... 4,258 925 3,299 103
----- ----- ----- -----
9,739 7,404 6,647 3,988
----- ----- ----- -----
----- ----- ----- -----
</TABLE>
18 PROVISIONS FOR LIABILITIES AND CHARGES
<TABLE>
<CAPTION>
1995 1996
L'000 L'000
----- -----
<S> <C> <C>
Deferred tax in respect of timing differences:
At 1 January....................................................................................... 290 387
(Charge)/credit for the year....................................................................... 79 (8)
Net transfers in respect of group relief........................................................... -- --
Exchange adjustment................................................................................ 18 5
Companies sold..................................................................................... -- (283)
--- ---
At 31 December..................................................................................... 387 101
--- ---
--- ---
</TABLE>
19 CASH FLOW STATEMENT
a) Reconciliation of operating profit to net cash inflow from operating
activities:
<TABLE>
<CAPTION>
YEAR END YEAR END PERIOD 01 JAN PERIOD 24 JAN
31 DEC 31 DEC 1996 1996
1994 1995 -23 JAN 1996 -31 DEC 1996
L'000 L'000 L'000 L'000
----------- ----------- ----------------- ---------------
<S> <C> <C> <C> <C>
Operating (loss) / profit...................................... 2,831 (9,594) 552 (3,496)
Depreciation................................................... 4,670 4,234 244 3,424
Profit on sale of fixed assets................................. 82 (115) (5) (71)
Write-down of unlisted investment.............................. -- -- -- 33
Increase in debtors............................................ (2,210) (7,262) (503) (7,499)
Decrease/increase in creditors................................. (99) 3,229 (180) 8,901
----------- ----------- --- ------
Net cash inflow/(outflow) from operating activities............ 5,274 (9,508) 108 1,292
----------- ----------- --- ------
----------- ----------- --- ------
</TABLE>
F-39
<PAGE>
LEP INTERNATIONAL WORLDWIDE LIMITED
NOTES TO THE COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
19 CASH FLOW STATEMENT (CONTINUED)
(b) Analysis of changes in cash and cash equivalents during the year:
<TABLE>
<CAPTION>
YEAR END YEAR END PERIOD END 23 PERIOD END 31
1994 L'000 1995 L'000 JAN 1996 L'000 DEC 1996 L'000
----------- ----------- --------------- ---------------
<S> <C> <C> <C> <C>
Opening balance........................................... 6,929 (1,280) (7,986) (1,590)
Net cash inflow/(outflow) before adjusting for the effect
of foreign exchange rate changes and non cash flow
items................................................... (8,911) (6,706) 6,396 (3,181)
Bank loans and overdrafts sold as part of the net assets
of the North American operation (see note 21a).......... -- -- -- 13,016
Waiver of interest during refinancing and restructuring... -- -- -- 511
Effect of foreign exchange rate changes................... 702 -- -- (958)
----------- ----------- ------ ------
Closing balance........................................... (1,280) (7,986) (1,590) 7,798
----------- ----------- ------ ------
----------- ----------- ------ ------
</TABLE>
(c) Analysis of the balance of cash and cash equivalents:
<TABLE>
<CAPTION>
YEAR END YEAR END
31 DEC 31 DEC PERIOD 01 JAN 1996 PERIOD 24 JAN 1996
1994 1995 -23 JAN 1996 -31 DEC 1996
L'000 L'000 L'000 L'000
----------- ----------- ------------------- -------------------
<S> <C> <C> <C> <C>
Cash at bank and in hand.............................. 14,274 17,877 17,672 14,618
Bank loans and overdrafts............................. (15,554) (25,863) (19,262) (6,820)
----------- ----------- ------- ------
(1,280) (7,986) (1,590) 7,798
----------- ----------- ------- ------
----------- ----------- ------- ------
</TABLE>
<TABLE>
<CAPTION>
CHANGE IN PERIOD CHANGE IN PERIOD
01 JAN 1996 - 24 JAN 1996 -
CHANGE IN CHANGE IN 23 JAN 1996 31 DEC 1996
1994 L'000 1995 L'000 L'000 L'000
----------- ----------- ------------------- -------------------
<S> <C> <C> <C> <C>
Cash at bank and in hand.............................. 2,014 3,603 (205) (3,054)
Bank loans plus overdrafts............................ (10,223) (10,309) 6,601 12,442
----------- ----------- ----- ------
(8,209) (6,706) 6,396 9,388
----------- ----------- ----- ------
----------- ----------- ----- ------
</TABLE>
Amounts receivable after more than three months from the date of deposit
included in cash at bank:
<TABLE>
<CAPTION>
1994 1995 1996
L'000 L'000 L'000
----- ----- -----
<S> <C> <C> <C>
445 63 --
--- -- --
--- -- --
</TABLE>
F-40
<PAGE>
20 SHAREHOLDERS' FUNDS
Up to 23 January 1996 shareholders' funds represented the net assets of the
constituent companies:
<TABLE>
<CAPTION>
23 JAN
1994 1995 1996
L'000 L'000 L'000
--------- --------- -----------
<S> <C> <C> <C>
Brought forward......................................................................... 35,944 29,306 15,035
Prior period adjustment re holiday pay.................................................. (3,493) -- --
Profit/(loss) written off for the period................................................ (1,165) (19,740) 174
Revaluations/goodwill write-off......................................................... (145) 266 --
Exchange adjustment..................................................................... 1,068 (7) --
Net capital (reduction)/contribution.................................................... (2,903) 5,210 --
--------- --------- -----------
At end of period........................................................................ 29,306 15,035 15,209
--------- --------- -----------
--------- --------- -----------
</TABLE>
Since 23 January 1996 the company's capital and reserves have been:
<TABLE>
<CAPTION>
SHARE
SHARE PREMIUM MERGER REVENUE TOTAL SHAREHOLDERS'
CAPITAL ACCOUNT RESERVE RESERVE FUNDS
L'000 L'000 L'000 L'000 L'000
------------- ----------- ----------- ----------- -------------------
<S> <C> <C> <C> <C> <C>
At 8 December 1995 and as at 23 January 1996........... -- -- -- -- --
Share capital subsequently subscribed.................. 1 4,974 -- -- 4,975
Loss for the period.................................... -- -- -- (3,012) (3,012)
Exchange adjustments................................... -- -- -- (922) (922)
Negative goodwill...................................... -- -- 10,081 -- 10,081
-- ----- ----------- ----------- ------
At 31 December 1996.................................... 1 4,974 10,081 (3,934) 11,122
-- ----- ----------- ----------- ------
-- ----- ----------- ----------- ------
</TABLE>
At incorporation the authorised share capital was 1000 L1 ordinary shares,
of which two were issued.
Since 24 January 1996 the authorised share capital has been:
<TABLE>
<C> <C> <S>
1,200,000 L0.01 Ordinary shares
50,000 L0.01 Preference shares
1 L1.00 Special share
</TABLE>
The issued share capital is:
<TABLE>
<C> <C> <S>
300 L0.01 Ordinary shares
50,000 L0.01 Preference shares
1 L1.00 Special share
</TABLE>
F-41
<PAGE>
LEP INTERNATIONAL WORLDWIDE LIMITED
NOTES TO THE COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
20 SHAREHOLDERS' FUNDS (CONTINUED)
In respect of unissued shares:
(a) options are outstanding in respect of:
i) 539,800 ordinary shares at a subscription price of L0.83 per share
exercisable on or before 31 December 1999.
ii) 419,900 ordinary shares at a subscription price of L0.01 per share
exercisable on or before 31 October 2003.
(b) 240,000 ordinary shares are reserved to provide sufficient unissued
share capital to satisfy the conversion rights attached to the Special Share
which converts on or before 31 December 2001.
In respect of the Preference Shares:
(a) The holders of the Preference Shares are entitled in priority to any
payment of dividend on any other class of shares to a fixed preferential
dividend at the rate of 5.5% on L5m. However no preference dividend is
payable in respect of the period from 24 January 1996 to 31 December 1996.
(b) i) The Preference Shares can be redeemed at any time at the
Company's option but unless redeemed previously must be redeemed on 24
January 2001 subject only to the company being able to comply with the
provisions of the Companies Legislation then in force relating to such
redemption.
ii) On redemption of the Preference Shares a premium is payable of
L99.99 per share.
(c) On winding-up the Preference Shares rank ahead of the other share
capital for any arrears of preference dividends, return of paid-up capital
and a premium of L99.99 per share.
(d) The Preference Share holders have no voting rights.
The Special Share is a L1 non participating share, convertible automatically
into fully paid ordinary shares in the event of one of certain events taking
place, or on the fifth anniversary of the issue of the special share.
On 24 January 1996, the Company issued 50,000 preference shares and the
special share to LEP Group plc in consideration for the investments and
inter-company debts acquired by the Company on that date.
In accounting for the share capital subscribed the Company has availed
itself of the merger relief provided by section 131 of the Companies Act 1985.
Of the loss attributable to shareholders, a profit of L44,000 was dealt with
through the profit and loss account of the Company.
The results of the subsidiaries, acquired in 1996, for the period up to
their acquisition by the Company, was a profit of L174,000 after tax and
minority interest. Their result for the year ended 31 December 1995 was a loss
of L19,740,000.
Revenue reserves include the Group's share of the post acquisition reserves
of associated undertakings, which at 31 December 1996 amounted to (L1,340,000).
Exchange adjustments include gains and losses arising on the Group's equity
investment in foreign subsidiary undertakings offset by losses arising on
foreign currency borrowings.
F-42
<PAGE>
LEP INTERNATIONAL WORLDWIDE LIMITED
NOTES TO THE COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
20 SHAREHOLDERS' FUNDS (CONTINUED)
The merger reserve is made up as follows:
<TABLE>
<CAPTION>
L'000
---------
<S> <C>
Fair value of consideration for investments purchased 24 January 1996 (note 1)............ (5,000)
Fair value of net assets acquired......................................................... 15,081
---------
10,081
---------
---------
</TABLE>
No fair value adjustments were made to the book values of the assets and
liabilities acquired.
21 SALE OF SUBSIDIARIES AND ASSOCIATED UNDERTAKINGS
(a) Sale of North American Operations
LEP International Inc. in Canada and LEP Profit International Inc. in the
USA comprised the North American operations, which were sold as at 31 October
1996.
The impact on the accounts of this transaction can be summarised as follows:
<TABLE>
<CAPTION>
1996
L'000
---------
<S> <C>
Net assets sold
Fixed assets........................................................................................... (4,293)
Investments............................................................................................ (9)
Debtors................................................................................................ (45,312)
Cash and cash equivalents.............................................................................. 13,016
Creditors.............................................................................................. 34,637
Long term loans........................................................................................ 1,440
Deferred tax........................................................................................... 283
---------
(238)
Net proceeds............................................................................................. 6,038
---------
Profit on sale........................................................................................... 5,800
---------
---------
</TABLE>
Within the terms of the Sale Contract of the North American operations,
there are provisions which entitle International Logistics Limited to require
repayment of part of the proceeds if the net asset value of the North American
operations is below a set threshold. International Logistics Limited has made no
such demand for repayment.
(b) Sale of interest in Cronat Transport Holding AG
The Company sold its 34% interest in Cronat Transport Holding AG as at 12
January 1996. The transaction can be summarised as follows:
<TABLE>
<CAPTION>
L'000
---------
<S> <C>
Carrying value at the date of sale........................................................................ 5,404
Net proceeds.............................................................................................. (5,404)
---------
Profit on sale............................................................................................ NIL
---------
---------
</TABLE>
F-43
<PAGE>
LEP INTERNATIONAL WORLDWIDE LIMITED
NOTES TO THE COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
22 RELATED PARTY TRANSACTIONS
(a) The following companies are considered to be related parties:
i) LEP Albarelli SpA, in which the Company hold a 50% interest (see
note 11)
ii) LEP International Inc. in Canada, which for the two months since
its sale by the Company, has been owned by International Logistics Limited.
iii) LEP Profit International Inc. in the USA, for the same reason as
explained in ii) above.
Revenues, all of which were generated from freight forwarding activities
on an "arms length" basis, for the year (two months only, with regard to ii)
and iii) above), and balances with these companies, at 31 December 1996, were
as follows:
<TABLE>
<CAPTION>
DEBTOR CREDITOR
SALES PURCHASES BALANCES BALANCES
--------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
L'000 L'000 L'000 L'000
LEP Albarelli SpA......................................................... 4,037 3,974 841 828
LEP International Inc..................................................... 1,291 845 1,517 993
LEP Profit Inc............................................................ 3,565 3,919 5,238 5,759
</TABLE>
(b) The LEP UK pension plan
The Company makes payments to this plan as per Note 8. The amount payable in
the year to 31 December 1996 was L1,557,000 (1995 -L2,053,000). The amounts due
to the scheme at 31 December 1996 were L13,000 (1995--L63,000).
23 CONTINGENT LIABILITIES
(a) As part of the management buy-out, the Company, together with those
subsidiaries identified on page F-48 and certain inactive UK subsidiaries have
granted a contingent charge to the financing group over their assets capped at
L25 million. The charge can only crystalise on the Company or any of the above
subsidiaries in the event of one of them becoming insolvent. The contingent
charge will be released on the redemption of the L5 million preference shares
which were issued by the Company on 24 January 1996 as consideration for the
acquisition.
(b) In Holland and Denmark, the Company has received claims for undischarged
Transit Forms from the respective customs authorities. These claims are rejected
by the Company and, based upon legal advice, the Board is of the opinion that no
provision needs to be made.
(c) There are contingent liabilities of the Company in respect of guarantees
entered into in the normal course of trade.
(d) LIW has a number of outstanding tax disputes but the directors believe
they have made sufficient provision for the eventual outcome of these disputes.
F-44
<PAGE>
LEP INTERNATIONAL WORLDWIDE LIMITED
NOTES TO THE COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
24 SUMMARY OF DIFFERENCES BETWEEN UK AND US GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES (GAAP)
The combined and consolidated financial statements have been prepared in
accordance with UK GAAP, which differ in certain significant respects from US
GAAP. A description of the relevant accounting principles which differ
materially is given below:
GOODWILL AND OTHER ACQUISITION ACCOUNTING ADJUSTMENTS
Under UK GAAP the Group has written off purchased goodwill (as well as
negative goodwill arising on purchases of businesses) against reserves. US GAAP
requires that any remaining goodwill after the allocation of purchase price to
separately identifiable intangible assets and the fair value of net tangible
assets acquired and liabilities assumed be capitalised as an intangible asset
and amortised over a period not in excess of 40 years. Furthermore, US GAAP
requires that any negative goodwill arising from a purchase transaction be
allocated to the assigned fair values of identifiable tangible and intangible
assets until these are reduced to a carrying amount of zero with the remainder
recorded as a deferred credit and amortised to income over a period not in
excess of 40 years.
PENSION COSTS
UK GAAP and US GAAP are conceptually similar in respect of accounting for
pension costs. However, US GAAP is more specific in its requirements as to the
selection of discount rates which must reflect current market conditions at each
balance sheet date. In addition, the amortisation of unrecognised gains and
losses arising from changes in assumptions and actuarial experience, under US
GAAP is affected through a corridor approach.
TAXES ON INCOME
Under UK GAAP, deferred taxes are accounted for to the extent that it is
considered probable that a liability or asset will crystalise in the foreseeable
future. Under US GAAP, deferred taxes are accounted for on all timing
differences and a valuation allowance is established in respect of those
deferred tax assets where it is more likely than not that some portion will
remain unrealised. Deferred tax also arises in relation to the tax effect of the
other US GAAP adjustments.
REVALUATION OF PROPERTY AND PROPERTY DEPRECIATION
Under UK GAAP property is carried either at original cost or at subsequent
valuation less related depreciation, calculated on the revalued amount where
applicable. Revaluation surpluses are taken directly to shareholders' funds,
while deficits below cost, less any related depreciation, are included in
attributable profit.
Under US GAAP revaluations of properties are not permitted in the accounts.
As a result, when a property is disposed of, a greater profit or lower loss is
generally recorded under US GAAP than under UK GAAP. Depreciation is based on
the historical cost.
DIVIDENDS
Under UK GAAP, dividends are provided for in the year in respect of which
they are declared or proposed. Under US GAAP, dividends and the related advance
corporation tax are given effect only in the period in which dividends are
formally declared.
The effects of these differing accounting principles are shown in note 25.
F-45
<PAGE>
LEP INTERNATIONAL WORLDWIDE LIMITED
NOTES TO THE COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
24 SUMMARY OF DIFFERENCES BETWEEN UK AND US GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES (GAAP) (CONTINUED)
CASH FLOW STATEMENTS
The Company's consolidated statements of cash flow set out on page F-25 are
prepared in accordance with UK Financial Reporting Standard No 1 (FRS 1) and
present substantially the same information as that required under US GAAP.
However, there are certain differences in classification of items within the
cash flow statement and with regard to the definition of cash and cash
equivalents between UK and US GAAP.
Cash flows from (i) operating activities; (ii) returns on investments and
servicing of finance; (iii) taxation; (iv) investing activities; and (v)
financing activities are presented separately under UK GAAP. However, US GAAP
cash flows are classified into only three categories of activities; (i)
operating, (ii) investing and (iii) financing.
Cash flows from returns on investments and servicing of finance are, with
the exception of dividends paid and interest paid but capitalised, included as
operating activities under US GAAP. The payment of dividends is included under
financing activities and capitalised interest is included under investing
activities for US GAAP purposes.
Cash flows from taxation are included as operating activities under US GAAP.
Cash for purposes of the cash flow statement under UK GAAP, includes bank
overdrafts and liquid resources. Under UK GAAP bank overdrafts are considered
loans and the movements thereon are included in financing activities; liquid
resources, to the extent that they have original maturities at date of
acquisition of three months or less, are considered cash equivalents and the
movements thereon are included in the overall cash movement.
<TABLE>
<CAPTION>
24 JAN TO
YEAR TO 31 DEC 1-23 JAN 31 DEC
1995 1996 1996
--------------- ----------- -----------
<S> <C> <C> <C>
L'000 L'000 L'000
Net cash flow from operating activities..................................... (15,281) (236) (2,865)
Net cash provided by (used in) investing activities......................... (539) 7,124 18,227
Net cash provided by (used in) financing activities......................... 19,423 (7,093) (17,458)
------- ----------- -----------
Net increase/(decrease) in cash and cash equivalents under US GAAP.......... 3,603 (205) (2,096)
------- ----------- -----------
Cash and cash equivalents under US GAAP at beginning of period.............. 14,274 17,877 17,672
Effect of exchange rates on cash and cash equivalents....................... -- -- (958)
------- ----------- -----------
Cash and cash equivalents under US GAAP at end of year...................... 17,877 17,672 14,618
Bank loans and overdrafts................................................... (25,863) (19,262) (6,820)
------- ----------- -----------
Cash and cash equivalents under US GAAP at end of year...................... (7,986) (1,590) 7,798
------- ----------- -----------
------- ----------- -----------
</TABLE>
F-46
<PAGE>
LEP INTERNATIONAL WORLDWIDE LIMITED
NOTES TO THE COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
25 NOTES ON SUMMARY OF DIFFERENCES BETWEEN UK AND US GAAP
<TABLE>
<CAPTION>
YEAR END PERIOD END PERIOD END
31 DEC 1995 23 JAN 1996 31 DEC 1996
L'000 L'000 L'000
------------- --------------- -------------
<S> <C> <C> <C>
Adjustments to net income
(Loss)/Profit attributable to shareholders in accordance with UK GAAP..... (19,740) 174 (3,012)
US GAAP adjustments:
Fixed asset revaluations excess depreciation.............................. 351 22 --
Depreciation adjustments.................................................. -- -- 1,129
Profit on sale of fixed assets............................................ -- -- 482
Disposal of North American operations..................................... -- -- 2,904
Pension scheme charges.................................................... 351 55 518
Taxation effect on the above items........................................ (116) (18) (1,129)
Deferred taxation......................................................... -- -- (22)
------------- --- ------
Approximate net income in accordance with US GAAP......................... (19,154) 233 870
------------- --- ------
------------- --- ------
</TABLE>
<TABLE>
<CAPTION>
31 DEC 1995 31 DEC 1996
L'000 L'000
------------- -------------
<S> <C> <C>
Adjustments to shareholders' equity
Capital employed before minority interests in accordance with UK GAAP.................. 15,035 11,122*
US GAAP adjustments:
Elimination of fixed asset revaluations................................................ (14,196) --
Pension scheme liabilities............................................................. (483) 518
Acquisition of predecessor companies................................................... -- (10,081)
Depreciation........................................................................... -- 1,129
Sale of fixed assets................................................................... -- 482
Disposal of North American operations.................................................. -- 2,904
Taxation effect on above items......................................................... (1,129)
Deferred taxation...................................................................... 279 (22)
------------- ------
Approximate shareholders' equity in accordance with US GAAP............................ 635 4,923*
------------- ------
------------- ------
</TABLE>
- ------------------------------
* Includes L4,975 of mandatorily redeemable preference shares (See Note 20).
F-47
<PAGE>
LEP INTERNATIONAL WORLDWIDE LIMITED
PRINCIPAL SUBSIDIARY AND ASSOCIATED UNDERTAKINGS
The undertakings listed below comprise the principal subsidiary and
associated undertakings which have been included in these combined and
consolidated financial statements as of December 31, 1996, as detailed in Note 1
to the financial statements. The percentage shareholding (in all cases in
ordinary shares) is given for each undertaking. Each of the companies listed
below operates in freight forwarding, and operates principally in their country
of incorporation.
<TABLE>
<CAPTION>
PERCENTAGE
PRINCIPAL SUBSIDIARY AND ASSOCIATED UNDERTAKINGS COUNTRY OF INCORPORATION OWNED
- ---------------------------------------------------------------------------- ------------------------ -------------
<S> <C> <C>
EUROPE
+*LEP International Limited................................................. England 100%
+*LEP International Management Limited...................................... England 100%
LEP International Limited................................................... Republic of Ireland 100%
LEP International NV........................................................ Belgium 100%
LEP-Transportgruppen AS..................................................... Denmark 100%
LEP International (France) SA............................................... France 100%
LEP International GmbH...................................................... Germany 100%
LEP-Albarelli SpA........................................................... Italy 50%
LEP International BV........................................................ Netherlands 100%
Lassen Transport Ltda....................................................... Portugal 100%
LEP International SA........................................................ Spain 100%
Olson and Wright AB......................................................... Sweden 100%
PACIFIC BASIN
LEP International (Pty) Limited............................................. Australia 100%
LEP International (China) Limited........................................... Hong Kong 100%
LEP International (Far East) Limited........................................ Hong Kong 100%
LEP International (Singapore) Pte Limited................................... Singapore 100%
LEP International (Japan) Limited........................................... Japan 100%
LEP International (Korea) Limited........................................... Korea 49%
LEP International (Malaysia) Sdn Bhd........................................ Malaysia 30%
LEP Freightways International Limited....................................... New Zealand 25%
LEP International Philippines Inc........................................... Philippines 30%
LEP International Limited................................................... Taiwan 33%
LEP International (Thailand) Co Limited..................................... Thailand 49%
HOLDING COMPANIES
+LEP International (Asia /Pacific) Limited.................................. British Virgin Islands 100%
+*LEP European Holdings BV.................................................. The Netherlands 100%
Telmidas AMS BV............................................................. The Netherlands 100%
+*LEP Holdings (Bermuda) Limited............................................ Bermuda 100%
+*LEP Holdings (North America) Limited...................................... England 100%
LEP Holdings GmbH........................................................... Germany 100%
</TABLE>
- ------------------------
* Owned directly by the company after the reorganisation (see Note 1)
+ Companies referred to in Note 23 (a).
F-48
<PAGE>
LEP INTERNATIONAL WORLDWIDE LIMITED
UNAUDITED INTERIM CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
31 DECEMBER 1996 30 SEPTEMBER 1997 30 SEPTEMBER 1997
<S> <C> <C> <C>
L'000 L'000 US $'000
----------------- ----------------- -----------------
FIXED ASSETS
Tangible assets......................................... 22,306 20,488 33,160
Investments
-Associated undertakings............................... 2,086 3,457 5,595
-Other................................................. 283 279 451
-------- -------- --------
24,675 24,224 39,206
-------- -------- --------
CURRENT ASSETS
Debtors................................................. 112,913 109,030 176,465
Cash and short term deposits............................ 14,618 13,709 22,188
-------- -------- --------
127,531 122,739 198,653
CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR.......... (122,376) (121,839) (197,196)
-------- -------- --------
NET CURRENT (LIABILITIES)/ASSETS........................ 5,155 900 1,457
-------- -------- --------
TOTAL ASSETS LESS CURRENT LIABILITIES................... 29,830 25,124 40,663
CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE
YEAR.................................................. (17,160) (16,399) (26,542)
PROVISIONS FOR LIABILITIES AND CHARGES.................. (101) -- --
-------- -------- --------
12,569 8,725 14,121
-------- -------- --------
-------- -------- --------
CAPITAL AND RESERVES
Shareholders' funds..................................... 11,122 7,240 11,718
Equity minority interests............................... 1,447 1,485 2,403
-------- -------- --------
12,569 8,725 14,121
-------- -------- --------
-------- -------- --------
</TABLE>
The accompanying notes are an integral part of the unaudited
interim consolidated financial statements.
F-49
<PAGE>
LEP INTERNATIONAL WORLDWIDE LIMITED
UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF PROFIT AND LOSS ACCOUNTS
<TABLE>
<CAPTION>
UNREVIEWED
--------------------------------------
24 JAN - COMBINED
1-23 JAN 30 SEPT NINE MONTHS TO NINE MONTHS TO
1996 1996 30 SEPT 1996 30 SEPTEMBER 1997
----------- --------- -------------- --------------------
L'000 L'000 L'000 L'000 US $'000
<S> <C> <C> <C> <C> <C>
TURNOVER
Continuing operations................................. 45,503 496,806 542,309 505,026 817,385
Discontinued operations............................... 22,859 252,094 274,953 -- --
----------- --------- ------- --------- ---------
68,362 748,900 817,262 505,026 817,385
----------- --------- ------- --------- ---------
GROSS PROFIT
Continuing operations................................. 8,946 93,791 102,737 96,590 156,330
Discontinued operations............................... 3,798 41,703 45,501 -- --
----------- --------- ------- --------- ---------
12,744 135,494 148,238 96,590 156,330
----------- --------- ------- --------- ---------
OPERATING (LOSS/PROFIT)
Continuing operations................................. 539 (2,631) (2,092) 36 58
Discontinued operations............................... 13 (846) (833) -- --
----------- --------- ------- --------- ---------
552 (3,477) (2,925) 36 58
SHARE OF LOSSES OF ASSOCIATED UNDERTAKINGS............ (86) (612) (698) (565) (914)
----------- --------- ------- --------- ---------
TOTAL OPERATING PROFIT/(LOSS)......................... 466 (4,089) (3,623) (529) (856)
EXCEPTIONAL ITEMS..................................... -- -- -- (275) (445)
----------- --------- ------- --------- ---------
(LOSS)/PROFIT ON ORDINARY ACTIVITIES BEFORE
INTEREST............................................ 466 (4,089) (3,623) (804) (1,301)
Interest receivable and similar income................ 54 517 571 346 560
Interest payable and similar charges.................. (152) (1,563) (1,715) (852) (1,379)
----------- --------- ------- --------- ---------
LOSS)/PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION... 368 (5,135) (4,767) (1,310) (2,120)
Taxation.............................................. (168) (1,431) (1,599) (1,246) (2,017)
----------- --------- ------- --------- ---------
LOSS ON ORDINARY ACTIVITIES AFTER TAXATION............ 200 (6,566) (6,366) (2,556) (4,137)
Equity minority interests............................. (26) (461) (487) (223) (361)
----------- --------- ------- --------- ---------
RETAINED LOSS......................................... 174 (7,027) (6,853) (2,779) (4,498)
----------- --------- ------- --------- ---------
----------- --------- ------- --------- ---------
</TABLE>
The accompanying notes are an integral part of the unaudited
interim consolidated financial statements.
F-50
<PAGE>
LEP INTERNATIONAL WORLDWIDE LIMITED
UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
UNREVIEWED
-----------------------------------------------
PERIOD 24
JAN- COMBINED NINE
PERIOD 1 - 30 SEPTEMBER MONTHS TO NINE MONTHS TO
23 JAN 1996 1996 30 SEPTEMBER 1996 30 SEPTEMBER 1997
L'000 L'000 L'000 L'000 US $000
----------- ------------- ------------------- ----------------------
<S> <C> <C> <C> <C> <C>
NET CASH INFLOW FROM OPERATING ACTIVITIES
Result for the period......................... 552 (3,477) (2,925) 36 58
Depreciation and profit on sales of fixed
assets...................................... 239 2,494 2,733 1,545 2,501
Working capital movement...................... (683) (1,109) (1,792) 2,311 3,740
----------- ------------- ------ --------- -----------
108 (2,092) (1,984) 3,892 6,299
----------- ------------- ------ --------- -----------
RETURNS ON INVESTMENTS AND SERVICING OF
FINANCE
Interest received............................. 54 517 571 346 560
Interest paid................................. (152) (2,074) (2,226) (852) (1,379)
----------- ------------- ------ --------- -----------
(98) (1,557) (1,655) (506) (819)
----------- ------------- ------ --------- -----------
TAXATION
Net UK tax received........................... -- 4 4 -- --
Overseas tax paid............................. (246) (1,109) (1,355) (820) (1,327)
----------- ------------- ------ --------- -----------
(246) (1,105) (1,351) (820) (1,327)
----------- ------------- ------ --------- -----------
INVESTING ACTIVITIES
Purchase of fixed assets...................... -- (1,249) (1,249) (955) (1,546)
Loans to associates........................... -- -- -- (954) (1,544)
Proceeds on disposal of fixed assets.......... 1,720 345 2,065 61 99
Dividends paid to minority shareholders....... (88) (88) (40) (65)
Dividends from associated undertakings........ 58 58 -- --
Proceeds on sale of businesses................ 5,404 -- 5,404 -- --
Costs of disposal of North American
operations.................................. -- -- -- (275) (445)
----------- ------------- ------ --------- -----------
7,124 (934) 6,190 (2,163) (3,501)
----------- ------------- ------ --------- -----------
NET CASH INFLOW/(OUTFLOW) BEFORE FINANCING.... 6,888 (5,688) 1,200 403 652
FINANCING
Additional loans (including finance leases)... 50 440 490 211 341
Repayment of loans (including finance
leases)..................................... (394) (6,795) (7,189) (2,188) (3,541)
Net capital contribution of Wayrol plc........ (148) -- (148) -- --
----------- ------------- ------ --------- -----------
NET CASH (OUTFLOW)/INFLOW FROM FINANCING...... (492) (6,355) (6,847) (1,977) (3,200)
Increase/(decrease) in cash and cash ----------- ------------- ------ --------- -----------
equivalents................................. 6,396 (12,043) (5,647) (1,574) (2,548)
----------- ------------- ------ --------- -----------
----------- ------------- ------ --------- -----------
</TABLE>
The accompanying notes are an integral part of the unaudited
interim consolidated financial statements
F-51
<PAGE>
LEP INTERNATIONAL WORLDWIDE LIMITED
UNAUDITED INTERIM STATEMENTS OF TOTAL RECOGNISED GAINS AND LOSSES
<TABLE>
<CAPTION>
NINE MONTHS TO
30 SEPTEMBER 1997
L'000
-------------------
<S> <C>
Loss for the period............................................................................ (2,779)
Currency translation differences on foreign currency net investment............................ (1,103)
------
Total recognised loss for the period........................................................... (3,882)
------
------
</TABLE>
UNAUDITED INTERIM RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
<TABLE>
<CAPTION>
L'000
---------
<S> <C>
At 1 January 1997........................................................................... 11,122
Loss for the period......................................................................... (2,779)
Revaluations................................................................................ --
Exchange adjustment......................................................................... (1,103)
Net capital (reduction)/contribution........................................................ --
---------
At 30 September 1997........................................................................ 7,240
---------
---------
</TABLE>
F-52
<PAGE>
LEP INTERNATIONAL WORLDWIDE LIMITED
NOTES TO THE UNAUDITED
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
1 BACKGROUND--BUSINESS OPERATION AND LEGAL RESOURCING
During 1994 and 1995 the operating companies comprising the freight
forwarding interests of Wayrol plc (formerly LEP Group plc) were reorganised so
as to separate these companies from the other interests of Wayrol plc and to
better reflect the management and operating structure of the freight forwarding
business. LEP International (Worldwide) Limited was formed in 1995 to be the new
ultimate holding company for the freight forwarding companies, and, on 10
November 1995, acquired the freight forwarding companies and certain of their
holding companies.
LEP International (Worldwide) Ltd. and its subsidiaries thus comprised the
freight forwarding interests under Wayrol plc, with the exception of
Intercontinentale Ostereiche Gesellschaft Fur Transport and Verkenhrswesen GmbH
and LEP International A/S which were not acquired.
On 24 January 1996 LEP International (Worldwide) Ltd. and LEP International
A/S were acquired from Wayrol plc by LEP International Worldwide Ltd.
These combined and consolidated financial statements have been prepared to
show the results of the Company and its subsidiaries from the date of
acquisition of LEP International (Worldwide) Ltd. (the predecessor company,
hereinafter referred to as "LIW Predecessor"), and the results of LIW
Predecessor and its subsidiaries (the "Predecessor Group") as if the Predecessor
Group had existed as a legal group from 1 January 1996. They have been prepared
from the audited financial statements of the individual subsidiaries which
comprise the freight forwarding business. The period from 1 January 1996 to 23
January 1996 comprises the consolidated financial statements of LEP
International Worldwide Ltd. combined with those of LEP International A/S. The
period from 24 January 1996 to 31 December 1996 comprises the consolidated
financial statements of LEP International Worldwide Ltd. Adjustments have been
made to eliminate intercompany investments and other balances as appropriate.
On 31 October 1996 the Predecessor Group sold its North American interests
to International Logistics Limited who also subscribed for shares in LEP
International Worldwide Ltd., giving it a 33% interest in the Group.
International Logistics Limited subsequently acquired options to purchase and
subscribe further shares, which were exercised on 30 September 1997, thereby
giving them a controlling interest in the Predecessor Group.
Amounts shown in the Accounts at 30 September 1997 have been converted at a
convenience rate of L1 = US$ 1.6185, based on the closing rate at 30 September
1997.
2 BASIS OF PREPARATION
Unaudited Interim Financial Statements--In the opinion of management, the
unaudited interim financial statements for the nine months to 30 September 1997
have been prepared on the same basis as the audited financial statements and
include all adjustments, consisting of normal recurring adjustments, necessary
for a fair presentation of the financial position and the results of operations
as of such date and for such period.
With respect to the period ended 30 September 1996, LIW did not produce
financial statements in accordance with its normal year end financial reporting
procedures. The financial statements of LIW for this period have, therefore,
been derived from management reports. Management have made such adjustments to
these reports as they believe are necessary for a fair presentation of the
results of operations as of 30 September 1996.
F=53
<PAGE>
LEP INTERNATIONAL WORLDWIDE LIMITED
NOTES TO THE UNAUDITED
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
3 Debtors
<TABLE>
<CAPTION>
31 DEC 1996 30 SEPTEMBER
L'000 1997 L'000
----------- ------------
<S> <C> <C>
Trade debtors......................................................................... 85,662 79,505
Amount owed by related parties........................................................ 8,877 8,507
Other debtors and prepayments......................................................... 18,374 21,545
----------- ------------
112,913 109,557
----------- ------------
----------- ------------
</TABLE>
4 Creditors--amounts falling due within one year
<TABLE>
<CAPTION>
31 DEC 1996 30 SEPTEMBER 1997
L'000 L'000
----------- -----------------
<S> <C> <C>
Bank loans and overdrafts.................................... 8,803 8,018
Other loans.................................................. 230 140
Finance leases............................................... 359 343
----------- -------
9,392 8,501
Trade creditors.............................................. 50,181 52,220
Amount owed to related parties............................... 7,662 7,193
Corporation taxation......................................... 1,604 2,178
Other creditors, accruals and deferred income................ 53,537 51,747
----------- -------
122,376 121,839
----------- -------
----------- -------
</TABLE>
5 INVESTMENTS--ASSOCIATED UNDERTAKINGS
The movement of the investment in associated undertakings is as follows:
<TABLE>
<CAPTION>
L'000
---------
<S> <C>
At 1 January 1997......................................................................................... 2,086
Exchange and other adjustments............................................................................ (154)
Share of undistributed results............................................................................ (565)
Reclassification to subsidiary............................................................................ --
Increase in loans......................................................................................... 1,563
Investments written down.................................................................................. --
Associated undertaking sold............................................................................... --
Prepayments for future acquisitions....................................................................... 527
---------
At 30 September 1997...................................................................................... 3,457
---------
---------
</TABLE>
F=54
<PAGE>
LEP INTERNATIONAL WORLDWIDE LIMITED
NOTES TO THE UNAUDITED
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
6 CREDITORS--AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
<TABLE>
<CAPTION>
31 DEC 1996 30 SEPTEMBER 1997
L'000 L'000
----------- -----------------
<S> <C> <C>
Bank loans and overdrafts--secured............................................... 1,370 921
Finance leases--secured.......................................................... 477 268
----------- ------
1,847 1,189
Pension liabilities not separately funded........................................ 11,816 11,466
Other long term creditors........................................................ 3,497 3,744
----------- ------
17,160 16,399
----------- ------
----------- ------
</TABLE>
7 CONTINGENT LIABILITIES
(a) As part of the management buy-out, the Company, together with its
subsidiaries granted a contingent charge to the financing group over their
assets capped at L25 million. The charge can only crystalise on the Company or
any of the above subsidiaries in the event that one of them becomes insolvent.
The contingent charge will be released on the redemption of the L5 million
preference shares which were issued by the Company on 24 January 1996 as
consideration for the acquisition.
(b) In Holland and Denmark, the Group has received claims for undischarged
Transit Forms from the respective customs authorities. These claims are rejected
by the Company and, based upon legal advice, the Board is of the opinion that no
provision needs to be made.
(c) There are contingent liabilities of the Company in respect of guarantees
entered into in the normal course of trade.
(d) LIW has a number of outstanding tax disputes but the directors believe
they have made sufficient provision for the eventual outcome of these disputes.
(e) The Company has signed a contract to purchase the 50% of the share of
LEP Albarelli SpA, not already owned by the Company, for L1,014,000 plus certain
amounts based on the proceeds of specified properties. Under this contract,
payments amounting to L527,000 have already been made which have been included
as part of the investment in the associated undertakings which will be completed
by July 31, 1999.
F=55
<PAGE>
LEP INTERNATIONAL WORLDWIDE LIMITED
NOTES TO THE UNAUDITED
INTERIM CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8 NOTES ON SUMMARY OF DIFFERENCES BETWEEN UK AND US GAAP
<TABLE>
<CAPTION>
UNREVIEWED
-------------------------------------------------
<S> <C> <C> <C> <C>
PERIOD 1 - PERIOD 24 JAN - COMBINED PERIOD PERIOD TO
23 JAN 30 SEPTEMBER TO 30 SEPTEMBER 30 SEPTEMBER
1996 1996 1996 1997
L'000 L'000 L'000 L'000
------------- --------------- ----------------- ---------
Adjustment to net income:
(Loss)/profit attributable to shareholders in accordance
with UK GAAP............................................. 174 (7,027) (6,853) (2,779)
US GAAP adjustments:
Fixed asset revaluations excess depreciation............... 22 (22) -- --
Depreciation adjustments................................... -- 1,081 1,081 1,179
Profit on sale of fixed assets............................. -- 209 209 29
Pension scheme changes..................................... 55 325 380 415
Taxation effect on the above items......................... (18) (581) (599) (536)
Deferred taxation.......................................... -- (16) (16) (16)
---------- --------- ------- --------
Approximate net income in accordance with US GAAP.......... 233 (6,031) (5,798) (1,708)
---------- --------- ------- --------
---------- --------- ------- --------
</TABLE>
<TABLE>
<CAPTION>
31 DEC 1996 30 SEPTEMBER 1997
L'000 L'000
----------- -----------------
<S> <C> <C> <C>
Adjustments to shareholders' equity:
Capital employed before minority interests in accordance with UK GAAP 11,122* 7,240
US GAAP adjustments:
Elimination of fixed asset revaluations.................................. -- --
Pension scheme liabilities............................................... 518 933
Acquisition of predecessor companies..................................... (10,081) (10,081)
Depreciation............................................................. 1,129 2,308
Sale of fixed assets..................................................... 3,386 3,415
Taxation effect on the above items....................................... (1,129) (2,197)
Deferred taxation........................................................ (22) (38)
----------- ------
Approximate shareholders' equity in accordance with US GAAP.............. 4,923* 1,580
----------- ------
----------- ------
</TABLE>
* Includes L4,975 of mandatorily redeemable preference shares.
F=56
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATES AS OF WHICH
INFORMATION IS GIVEN IN THIS PROSPECTUS. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary............................. 1
Risk Factors................................... 12
Use of Proceeds................................ 21
Historical and Pro Forma Consolidated
Capitalization............................... 22
Unaudited Pro Forma Condensed Combined
Financial Statements......................... 23
Selected Consolidated Financial Data of the
Company...................................... 32
Selected Consolidated Financial Data of LIW.... 35
Management's Discussion and Analysis of
Financial Condition and Results of Operations 39
Pro Forma.................................. 39
Company Predecessor........................ 44
LIW........................................ 48
Business....................................... 53
Management..................................... 66
Principal Stockholders......................... 72
Certain Relationships and Related
Transactions................................. 74
Recent Acquisitions............................ 76
New Credit Facility............................ 78
The Exchange Offer............................. 80
Description of the New Notes................... 88
Certain U.S. Federal Income Tax Considerations
Relating to the Exchange Offer............... 110
Plan of Distribution........................... 110
Legal Matters.................................. 110
Experts........................................ 110
Available Information.......................... 111
Forward-Looking Statements..................... 111
Index to Financial Statements.................. F-1
</TABLE>
------------------------
UNTIL , 1998 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE NOTES, WHETHER OR NOT PARTICIPATING IN
THIS EXCHANGE OFFER, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INTERNATIONAL LOGISTICS LIMITED
$110,000,000
9 3/4% SENIOR NOTES
DUE 2007
---------------------
PROSPECTUS
, 1998
---------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Delaware General Corporation Law and the Company's Articles of
Incorporation and Bylaws contain provisions for indemnification of officers and
directors of the Company and in certain cases employees and other persons. The
Bylaws require the Company to indemnify such persons to the full extent
permitted by Delaware law. Each such person will be indemnified in any
proceeding if such person acted in good faith and in a manner which such person
reasonably believed to be in, or not opposed to, the best interests of the
Company. Indemnification would cover expenses, including attorney's fees,
judgments, fines and amounts paid in settlement.
The Company's Bylaws also provide that the Company's Board of Directors may
cause the Company to purchase and maintain insurance on behalf of any present or
past director or officer insuring against any liability asserted against such
person incurred in the capacity of director or officer or arising out of such
status, whether or not the Company would have the power to indemnify such
person. The Company maintains directors' and officers' liability insurance.
The Company has entered into an indemnification agreement (the
"Indemnification Agreement") with each director and certain officers, employees
and agents of the Company. Each Indemnification Agreement provides for, among
other things: (i) indemnification to the fullest extent permitted by law against
any and all expenses, judgments, fines, penalties and amounts paid in settlement
of any claim against any indemnified party (the "Indemnitee") unless it is
determined, as provided in the Indemnification Agreement, that indemnification
is not permitted under laws and (ii) prompt advancement of expenses to any
Indemnitee in connection with his or her defense against any claim.
ITEM 21. EXHIBITS AND FINANCIAL SCHEDULE TABLES
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
----------------------------------------------------------------------
<S> <C>
3.1 Amended and Restated Certificate of Incorporation of the
Registrant.
3.2 Amended and Restated Bylaws of the Registrant.
4.1 Indenture dated as of October 29, 1997 between the Company
and First Trust National Association, as Trustee.
4.2 Form of New Note (included as Exhibit B to Exhibit 4.1).
4.3 Form of Guarantee (included as Exhibit B to Exhibit 4.1).
4.4 Registration Rights Agreement, dated as of October 29, 1997,
between the Company and Credit Suisse First Boston
Corporation, BT Alex. Brown Incorporated, Smith Barney Inc.
and ING Baring (U.S.) Securities, Inc.
5.1 Opinion of Milbank, Tweed, Hadley & McCloy.
10.1 Third Amended and Restated Stockholders Agreement dated as
of September 30, 1997 among the Company and each of the
Holders listed on Exhibit A thereto.
10.2 Amended and Restated Loan Agreement dated as of October 28,
1997 by and among the Company, The Bekins Company, Matrix
International Logistics, Inc., ILLCAN, Inc., ILLSCOT, Inc.,
LEP Profit International, Inc. and LEP International
Limited, as Borrowers and ING (US) Capital Corporation as
administrative agents and the Lenders party thereto.
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
----------------------------------------------------------------------
<S> <C>
10.3 Second Amended and Restated Registration Rights Agreement
dated as of November 7, 1996 by and between the Company and
each of the Holders listed on Exhibit A thereto.
10.4 Executive Management Agreement dated as of October 31, 1996
by and between the Company and William E. Simon & Sons,
L.L.C.
10.5 Employment Agreement dated as of April 30, 1996 between the
Company and Roger E. Payton.
10.6 Form of Employment Agreement between the Company and each of
Messrs. Holter, Solis, Tieman and Jackson.
10.7 Promissory Note made by Mr. Payton in favor of the Company.
10.8 Promissory Note made by Mr. Solis in favor of the Company.
10.9 Form of Pledge Agreement executed by Messrs. Payton and
Solis.
10.10* Form of Warrant issued by the Company to Roger E. Payton.
10.11* Form of Subscription Agreement executed by Roger E. Payton
and the Company.
10.12* Form of Warrant issued by the Company to Messrs. Tieman,
Solis and Holter.
10.13* Form of Subscription Agreement executed by the Company and
each of Messrs. Tieman, Solis and Holter.
10.14 Form of Indemnification Agreement.
10.15 Deferred Compensation Plan.
10.16 Employee Stock Purchase Plan dated March 3, 1997.
10.17 Executive Management Agreement dated as of November 1, 1997
by and between the Company, TCW Special Credits Fund V--The
Principal Fund and Oaktree Capital Management, LLC.
10.18 Agreement and Plan of Merger dated as of April 10, 1996, by
and among the Company, Trasub, Inc., The Bekins Company, IMR
General Inc., and IMR Fund, L.P.
10.19* Form of Warrant Agreement between the Company and Mr. Myers.
10.20 Stock Purchase Agreement dated as of October 31, 1996 by and
among LEP International Worldwide Limited, LEP International
Holdings Limited, LEP Holdings (North America) Limited, LEP
Holdings U.S.A. Inc. and the Company.
10.21* Stock Purchase Agreement dated as of October 31, 1996 by and
among LEP International Worldwide Limited, LEP International
Holdings Limited, LEP Holdings (North America) Limited and
International Logistics (Canada) Company.
10.22 Stock Purchase Agreement dated as of November 7, 1996 by and
among the Company and Douglas Cruikshank, Ronald S. Cruse,
Steve Hitchcock and Paul D. Smith.
12.1 Computation of Ratio of Earnings to Fixed Charges.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Deloitte & Touche LLP.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
----------------------------------------------------------------------
<S> <C>
23.2 Consent of Price Waterhouse LLP.
23.3 Consent of Arthur Andersen LLP.
23.4 Consent of Milbank, Tweed, Hadley & McCloy (included in
exhibit 5.1).
24.1 Power of Attorney (included on signature pages).
25.1* Statement of Eligibility under the Trust Indenture Act of
1939 on Form T-1 of First Bank National Association.
27 Financial Data Schedule.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
</TABLE>
- ------------------------
* To be filed by amendment.
(b) Financial Statement Schedules:
All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission have been omitted because
they are not required, are inapplicable or the required information has already
been provided elsewhere in the registration statement.
ITEM 22. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, 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 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 Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes to file an application for the
purpose of determining the eligibility of the trustee to act under subsection
(a) of Section 310 of the Trust Indenture Act in accordance with the rules and
regulations prescribed by the Commission under Section 305(b)(2) of the Act.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this form, within one day of receipt of such request,
and to send the incorporated documents by first class mail or other equally
prompt means. This includes information contained in documents filed subsequent
to the effective date of the registration statement through the date of
responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved herein, that was not subject of and included in
the registration statement when it became effective.
II-3
<PAGE>
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 Hillside,
State of Illinois, on this 18th day of December, 1997.
INTERNATIONAL LOGISTICS LIMITED
/S/ Roger E. Payton
---------------------------------------------
Name: Roger E. Payton
Title: President, Chief Executive
Officer and Director
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Roger E.
Payton and Gary S. Holter, and each of them, his or her true and lawful
attorneys-in-fact and agents, with full power of substitution and resubstitution
for him or her and in his or her name, place and stead, in any and all
capacities to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and any registration statement of the Company to
be filed after the date hereof pursuant to Rule 462(b) under the Securities Act
of 1933, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, and to take
such actions in, and file with the appropriate authorities in, whatever states
said attorneys-in-fact and agents, and each of them, shall determine, such
applications, statements, consents, and other documents, as may be necessary or
expedient to register securities of the Company for sale, granting unto said
attorneys-in-fact and agents full power and authority to do so and perform each
and every act and thing requisite or necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agents or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof and the registrant hereby confers like
authority on its behalf. This Registration Statement and Power of Attorney,
pursuant to the requirement of the Securities Act of 1933, as amended, have been
signed below by the following persons in the capacities and on the dates
indicated.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
President, Chief Executive
/s/ ROGER E. PAYTON Officer and Director
- ------------------------------ (Principal Executive December 18, 1997
Roger E. Payton Officer)
/s/ GARY S. HOLTER Chief Financial Officer
- ------------------------------ (Principal Financial December 18, 1997
Gary S. Holter Officer)
/s/ KENNETH R. BATKO Chief Accounting Officer
- ------------------------------ (Principal Accounting December 18, 1997
Kenneth R. Batko Officer)
II-4
<PAGE>
<TABLE>
<C> <S> <C>
/s/ Vincent J. Cebula Director
- ------------------------------ December 18, 1997
Vincent J. Cebula
/s/ Richard J. Goldstein Director
- ------------------------------ December 18, 1997
Richard J. Goldstein
/s/ Stephen A. Kaplan Director
- ------------------------------ December 18, 1997
Stephen A. Kaplan
/s/ Michael B. Lenard Director
- ------------------------------ December 18, 1997
Michael B. Lenard
/s/ Conor T. Mullett Director
- ------------------------------ December 18, 1997
Conor T. Mullett
/s/ William E. Myers, JR. Director
- ------------------------------ December 18, 1997
William E. Myers, Jr.
</TABLE>
II-5
<PAGE>
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 Hillside,
State of Illinois, on this 18th day of December, 1997.
THE BEKINS COMPANY
/S/ Roger E. Payton
---------------------------------------------
Name: Roger E. Payton
Title: President, Chief Executive Officer and
Director
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Roger E.
Payton and Gary S. Holter, and each of them, his or her true and lawful
attorneys-in-fact and agents, with full power of substitution and resubstitution
for him or her and in his or her name, place and stead, in any and all
capacities to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and any registration statement of the Company to
be filed after the date hereof pursuant to Rule 462(b) under the Securities Act
of 1933, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, and to take
such actions in, and file with the appropriate authorities in, whatever states
said attorneys-in-fact and agents, and each of them, shall determine, such
applications, statements, consents, and other documents, as may be necessary or
expedient to register securities of the Company for sale, granting unto said
attorneys-in-fact and agents full power and authority to do so and perform each
and every act and thing requisite or necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agents or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof and the registrant hereby confers like
authority on its behalf. This Registration Statement and Power of Attorney,
pursuant to the requirement of the Securities Act of 1933, as amended, have been
signed below by the following persons in the capacities and on the dates
indicated.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
President, Chief Executive
/s/ Roger E. Payton Officer and Director
- ------------------------------ (Principal Executive December 18, 1997
Roger E. Payton Officer)
Treasurer and Chief
/s/ Paul Stone Financial Officer
- ------------------------------ (Principal Financial and December 18, 1997
Paul Stone Accounting Officer)
/s/ Gary S. Holter Assistant Secretary and
- ------------------------------ Director December 18, 1997
Gary S. Holter
II-6
<PAGE>
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 Hillside,
State of Illinois, on this 18th day of December, 1997.
BEKINS VAN LINES CO.
/S/ Roger E. Payton
---------------------------------------------
Name: Roger E. Payton
Title: Vice President and Director
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Roger E.
Payton and Gary S. Holter, and each of them, his or her true and lawful
attorneys-in-fact and agents, with full power of substitution and resubstitution
for him or her and in his or her name, place and stead, in any and all
capacities to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and any registration statement of the Company to
be filed after the date hereof pursuant to Rule 462(b) under the Securities Act
of 1933, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, and to take
such actions in, and file with the appropriate authorities in, whatever states
said attorneys-in-fact and agents, and each of them, shall determine, such
applications, statements, consents, and other documents, as may be necessary or
expedient to register securities of the Company for sale, granting unto said
attorneys-in-fact and agents full power and authority to do so and perform each
and every act and thing requisite or necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agents or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof and the registrant hereby confers like
authority on its behalf. This Registration Statement and Power of Attorney,
pursuant to the requirement of the Securities Act of 1933, as amended, have been
signed below by the following persons in the capacities and on the dates
indicated.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ Roger E. Payton Vice President and Director
- ------------------------------ (Principal Executive December 18, 1997
Roger E. Payton Officer)
/s/ Paul Stone Chief Financial Officer
- ------------------------------ (Principal Financial and December 18, 1997
Paul Stone Accounting Officer)
/s/ Gary S. Holter Vice President, Assistant
- ------------------------------ Treasurer, Assistant December 18, 1997
Gary S. Holter Secretary and Director
II-7
<PAGE>
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 Marietta,
State of Georgia, on this 18th day of December, 1997.
LEP PROFIT INTERNATIONAL, INC.
/S/ Anthony Quinn
---------------------------------------------
Name: Anthony Quinn
Title: President, Chief Executive Officer and Director
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Roger E.
Payton and Gary S. Holter, and each of them, his or her true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution for him or her and in his or her name, place and stead, in any
and all capacities to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and any registration statement of
the Company to be filed after the date hereof pursuant to Rule 462(b) under
the Securities Act of 1933, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, and to take such actions in, and file with the appropriate
authorities in, whatever states said attorneys-in-fact and agents, and each
of them, shall determine, such applications, statements, consents, and other
documents, as may be necessary or expedient to register securities of the
Company for sale, granting unto said attorneys-in-fact and agents full power
and authority to do so and perform each and every act and thing requisite or
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all that said attorney-in-fact and agents or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof and the registrant hereby confers like authority on its behalf. This
Registration Statement and Power of Attorney, pursuant to the requirement of
the Securities Act of 1933, as amended, have been signed below by the
following persons in the capacities and on the dates indicated.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
President, Chief Executive
/s/ Anthony Quinn Officer and Director
- ------------------------------ (Principal Executive December 18, 1997
Anthony Quinn Officer)
Senior Vice President and
/s/ Daniel D. Moore Chief Financial Officer
- ------------------------------ (Principal Financial and December 18, 1997
Daniel D. Moore Accounting Officer)
II-8
<PAGE>
/s/ Mark A. Jerome Executive Vice President,
- ------------------------------ Chief Operating Officer December 18, 1997
Mark A. Jerome and Director
/s/ Louis J. Mitchell Vice President, Secretary,
- ------------------------------ General Counsel and December 18, 1997
Louis J. Mitchell Director
/s/ Roger E. Payton Director
- ------------------------------ December 18, 1997
Roger E. Payton
II-9
<PAGE>
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 Marietta,
State of Georgia, on this 18th day of December, 1997.
LEP FAIRS, INC.
/S/ Margaret Churchill-Miller
---------------------------------------------
Name: Margaret Churchill-Miller
Title: Vice President, Operations
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Roger E.
Payton and Gary S. Holter, and each of them, his or her true and lawful
attorneys-in-fact and agents, with full power of substitution and resubstitution
for him or her and in his or her name, place and stead, in any and all
capacities to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and any registration statement of the Company to
be filed after the date hereof pursuant to Rule 462(b) under the Securities Act
of 1933, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, and to take
such actions in, and file with the appropriate authorities in, whatever states
said attorneys-in-fact and agents, and each of them, shall determine, such
applications, statements, consents, and other documents, as may be necessary or
expedient to register securities of the Company for sale, granting unto said
attorneys-in-fact and agents full power and authority to do so and perform each
and every act and thing requisite or necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agents or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof and the registrant hereby confers like
authority on its behalf. This Registration Statement and Power of Attorney,
pursuant to the requirement of the Securities Act of 1933, as amended, have been
signed below by the following persons in the capacities and on the dates
indicated.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
Vice President, Operations
/s/ Margaret Churchill-Miller (Principal Executive
- ------------------------------ Officer) December 18, 1997
Margaret Churchill-Miller
Chief Financial Officer,
/s/ Daniel D. Moore Treasurer and Director
- ------------------------------ (Principal Financial and December 18, 1997
Daniel D. Moore Accounting Officer)
/s/ Louis J. Mitchell Vice President, Secretary,
- ------------------------------ General Counsel and December 18, 1997
Louis J. Mitchell Director
/s/ Mark A. Jerome Director
- ------------------------------ December 18, 1997
Mark A. Jerome
II-10
<PAGE>
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 Marietta,
State of Georgia, on this 18th day of December, 1997.
AIR FREIGHT CONSOLIDATORS INTERNATIONAL, INC.
/S/ Patrick Keelaghan
---------------------------------------------
Name: Patrick Keelaghan
Title: President, Chief Executive Officer and
Director
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Roger E.
Payton and Gary S. Holter, and each of them, his or her true and lawful
attorneys-in-fact and agents, with full power of substitution and resubstitution
for him or her and in his or her name, place and stead, in any and all
capacities to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and any registration statement of the Company to
be filed after the date hereof pursuant to Rule 462(b) under the Securities Act
of 1933, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, and to take
such actions in, and file with the appropriate authorities in, whatever states
said attorneys-in-fact and agents, and each of them, shall determine, such
applications, statements, consents, and other documents, as may be necessary or
expedient to register securities of the Company for sale, granting unto said
attorneys-in-fact and agents full power and authority to do so and perform each
and every act and thing requisite or necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agents or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof and the registrant hereby confers like
authority on its behalf. This Registration Statement and Power of Attorney,
pursuant to the requirement of the Securities Act of 1933, as amended, have been
signed below by the following persons in the capacities and on the dates
indicated.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
President, Chief Executive
/s/ Patrick Keelaghan Officer and Director
- ------------------------------ (Principal Executive December 18, 1997
Patrick Keelaghan Officer)
/s/ Daniel D. Moore Treasurer (Principal
- ------------------------------ Financial and Accounting December 18, 1997
Daniel D. Moore Officer)
/s/ Joseph P. Monaghan Director
- ------------------------------ December 18, 1997
Joseph P. Monaghan
/s/ Louis J. Mitchell Secretary and Director
- ------------------------------ December 18, 1997
Louis J. Mitchell
II-11
<PAGE>
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 Norwalk,
State of Connecticut, on this 18th day of December, 1997.
MATRIX INTERNATIONAL LOGISTICS, INC.
/S/ Ronald S. Cruse
---------------------------------------------
Name: Ronald S. Cruse
Title: Co-President, Treasurer and Director
/s/ Paul D. Smith
---------------------------------------------
Name: Paul D. Smith
Title: Co-President, Secretary and Director
/s/ Steve Hitchcock
---------------------------------------------
Name: Steve Hitchcock
Title: Co-President, and Director
/s/ Douglas Cruikshank
---------------------------------------------
Name: Douglas Cruikshank
Title: Co-President, and Director
II-12
<PAGE>
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Roger E.
Payton and Gary S. Holter, and each of them, his or her true and lawful
attorneys-in-fact and agents, with full power of substitution and resubstitution
for him or her and in his or her name, place and stead, in any and all
capacities to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and any registration statement of the Company to
be filed after the date hereof pursuant to Rule 462(b) under the Securities Act
of 1933, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, and to take
such actions in, and file with the appropriate authorities in, whatever states
said attorneys-in-fact and agents, and each of them, shall determine, such
applications, statements, consents, and other documents, as may be necessary or
expedient to register securities of the Company for sale, granting unto said
attorneys-in-fact and agents full power and authority to do so and perform each
and every act and thing requisite or necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agents or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof and the registrant hereby confers like
authority on its behalf. This Registration Statement and Power of Attorney,
pursuant to the requirement of the Securities Act of 1933, as amended, have been
signed below by the following persons in the capacities and on the dates
indicated.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
/s/ RONALD S. CRUSE
- ------------------------------ Co-President, Treasurer December 18, 1997
Ronald S. Cruse and Director
/s/ PAUL D. SMITH
- ------------------------------ Co-President, Secretary December 18, 1997
Paul D. Smith and Director
/s/ STEVE HITCHCOCK
- ------------------------------ Co-President and Director December 18, 1997
Steve Hitchcock
/s/ DOUGLAS CRUIKSHANK
- ------------------------------ Co-President and Director December 18, 1997
Douglas Cruikshank
/s/ DIEGO HILDAGO Chief Financial Officer
- ------------------------------ (Principal Financial and December 18, 1997
Diego Hildago Accounting Officer)
/s/ ROGER E. PAYTON
- ------------------------------ Director December 18, 1997
Roger E. Payton
II-13
<PAGE>
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 Norwalk,
State of Connecticut, on this 18th day of December, 1997.
BAY AREA MATRIX, INC.
/s/ Ronald S. Cruse
----------------------------------------
Name: Ronald S. Cruse
Title: Co-President, Treasurer and
Director
/s/ Paul D. Smith
----------------------------------------
Name: Paul D. Smith
Title: Co-President, Secretary and
Director
/s/ Steve Hitchcock
----------------------------------------
Name: Steve Hitchcock
Title: Co-President and Director
/s/ Douglas Cruikshank
----------------------------------------
Name: Douglas Cruikshank
Title: Co-President and Director
II-14
<PAGE>
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Roger E.
Payton and Gary S. Holter, and each of them, his or her true and lawful
attorneys-in-fact and agents, with full power of substitution and resubstitution
for him or her and in his or her name, place and stead, in any and all
capacities to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and any registration statement of the Company to
be filed after the date hereof pursuant to Rule 462(b) under the Securities Act
of 1933, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, and to take
such actions in, and file with the appropriate authorities in, whatever states
said attorneys-in-fact and agents, and each of them, shall determine, such
applications, statements, consents, and other documents, as may be necessary or
expedient to register securities of the Company for sale, granting unto said
attorneys-in-fact and agents full power and authority to do so and perform each
and every act and thing requisite or necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agents or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof and the registrant hereby confers like
authority on its behalf. This Registration Statement and Power of Attorney,
pursuant to the requirement of the Securities Act of 1933, as amended, have been
signed below by the following persons in the capacities and on the dates
indicated.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -----------------
/s/ RONALD S. CRUSE Co-President, Treasurer and December 18, 1997
- ------------------------------ Director
Ronald S. Cruse
/s/ PAUL D. SMITH Co-President, Secretary and December 18, 1997
- ------------------------------ Director
Paul D. Smith
/s/ STEVE HITCHCOCK Co-President and Director December 18, 1997
- ------------------------------
Steve Hitchcock
/s/ DOUGLAS CRUIKSHANK Co-President and Director December 18, 1997
- ------------------------------
Douglas Cruikshank
/s/ DIEGO HILDAGO Chief Financial Officer December 18, 1997
- ------------------------------ (Principal Financial and
Diego Hildago Accounting Officer)
/s/ ROGER E. PAYTON Director December 18, 1997
- ------------------------------
Roger E. Payton
II-15
<PAGE>
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 Norwalk,
State of Connecticut, on this 18th day of December, 1997.
L.A. MATRIX, INC.
/s/ Ronald S. Cruse
----------------------------------------
Name: Ronald S. Cruse
Title: Co-President, Treasurer and
Director
/s/ Paul D. Smith
----------------------------------------
Name: Paul D. Smith
Title: Co-President, Secretary and
Director
/s/ Steve Hitchcock
----------------------------------------
Name: Steve Hitchcock
Title: Co-President and Director
/s/ Douglas Cruikshank
----------------------------------------
Name: Douglas Cruikshank
Title: Co-President and Director
II-16
<PAGE>
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Roger E.
Payton and Gary S. Holter, and each of them, his or her true and lawful
attorneys-in-fact and agents, with full power of substitution and resubstitution
for him or her and in his or her name, place and stead, in any and all
capacities to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and any registration statement of the Company to
be filed after the date hereof pursuant to Rule 462(b) under the Securities Act
of 1933, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, and to take
such actions in, and file with the appropriate authorities in, whatever states
said attorneys-in-fact and agents, and each of them, shall determine, such
applications, statements, consents, and other documents, as may be necessary or
expedient to register securities of the Company for sale, granting unto said
attorneys-in-fact and agents full power and authority to do so and perform each
and every act and thing requisite or necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agents or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof and the registrant hereby confers like
authority on its behalf. This Registration Statement and Power of Attorney,
pursuant to the requirement of the Securities Act of 1933, as amended, have been
signed below by the following persons in the capacities and on the dates
indicated.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -----------------
/s/ RONALD S. CRUSE Co-President, Treasurer and December 18, 1997
- ------------------------------ Director
Ronald S. Cruse
/s/ PAUL D. SMITH Co-President, Secretary and December 18, 1997
- ------------------------------ Director
Paul D. Smith
/s/ STEVE HITCHCOCK Co-President and Director December 18, 1997
- ------------------------------
Steve Hitchcock
/s/ DOUGLAS CRUIKSHANK Co-President and Director December 18, 1997
- ------------------------------
Douglas Cruikshank
/s/ DIEGO HILDAGO Chief Financial Officer December 18, 1997
- ------------------------------ (Principal Financial and
Diego Hildago Accounting Officer)
/s/ ROGER E. PAYTON Director December 18, 1997
- ------------------------------
Roger E. Payton
II-17
<PAGE>
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 Norwalk,
State of Connecticut, on this 18th day of December, 1997.
SOUTHWEST MATRIX, INC.
/s/ Ronald S. Cruse
----------------------------------------
Name: Ronald S. Cruse
Title: Co-President, Treasurer and
Director
/s/ Paul D. Smith
----------------------------------------
Name: Paul D. Smith
Title: Co-President, Secretary and
Director
/s/ Steve Hitchcock
----------------------------------------
Name: Steve Hitchcock
Title: Co-President and Director
/s/ Douglas Cruikshank
----------------------------------------
Name: Douglas Cruikshank
Title: Co-President and Director
II-18
<PAGE>
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Roger E.
Payton and Gary S. Holter, and each of them, his or her true and lawful
attorneys-in-fact and agents, with full power of substitution and resubstitution
for him or her and in his or her name, place and stead, in any and all
capacities to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and any registration statement of the Company to
be filed after the date hereof pursuant to Rule 462(b) under the Securities Act
of 1933, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, and to take
such actions in, and file with the appropriate authorities in, whatever states
said attorneys-in-fact and agents, and each of them, shall determine, such
applications, statements, consents, and other documents, as may be necessary or
expedient to register securities of the Company for sale, granting unto said
attorneys-in-fact and agents full power and authority to do so and perform each
and every act and thing requisite or necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agents or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof and the registrant hereby confers like
authority on its behalf. This Registration Statement and Power of Attorney,
pursuant to the requirement of the Securities Act of 1933, as amended, have been
signed below by the following persons in the capacities and on the dates
indicated.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -----------------
/s/ RONALD S. CRUSE Co-President, Treasurer and December 18, 1997
- ------------------------------ Director
Ronald S. Cruse
/s/ PAUL D. SMITH Co-President, Secretary and December 18, 1997
- ------------------------------ Director
Paul D. Smith
/s/ STEVE HITCHCOCK Co-President and Director December 18, 1997
- ------------------------------
Steve Hitchcock
/s/ DOUGLAS CRUIKSHANK Co-President and Director December 18, 1997
- ------------------------------
Douglas Cruikshank
/s/ DIEGO HILDAGO Chief Financial Officer December 18, 1997
- ------------------------------ (Principal Financial and
Diego Hildago Accounting Officer)
/s/ ROGER E. PAYTON Director December 18, 1997
- ------------------------------
Roger E. Payton
II-19
<PAGE>
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 Norwalk,
State of Connecticut, on this 18th day of December, 1997.
MATRIX CT., INC.
/s/ Ronald S. Cruse
----------------------------------------
Name: Ronald S. Cruse
Title: Co-President, Treasurer and
Director
/s/ Paul D. Smith
----------------------------------------
Name: Paul D. Smith
Title: Co-President, Secretary and
Director
/s/ Steve Hitchcock
----------------------------------------
Name: Steve Hitchcock
Title: Co-President and Director
/s/ Douglas Cruikshank
----------------------------------------
Name: Douglas Cruikshank
Title: Co-President and Director
II-20
<PAGE>
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Roger E.
Payton and Gary S. Holter, and each of them, his or her true and lawful
attorneys-in-fact and agents, with full power of substitution and resubstitution
for him or her and in his or her name, place and stead, in any and all
capacities to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and any registration statement of the Company to
be filed after the date hereof pursuant to Rule 462(b) under the Securities Act
of 1933, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, and to take
such actions in, and file with the appropriate authorities in, whatever states
said attorneys-in-fact and agents, and each of them, shall determine, such
applications, statements, consents, and other documents, as may be necessary or
expedient to register securities of the Company for sale, granting unto said
attorneys-in-fact and agents full power and authority to do so and perform each
and every act and thing requisite or necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agents or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof and the registrant hereby confers like
authority on its behalf. This Registration Statement and Power of Attorney,
pursuant to the requirement of the Securities Act of 1933, as amended, have been
signed below by the following persons in the capacities and on the dates
indicated.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -----------------
/s/ RONALD S. CRUSE Co-President, Treasurer and December 18, 1997
- ------------------------------ Director
Ronald S. Cruse
/s/ PAUL D. SMITH Co-President, Secretary and December 18, 1997
- ------------------------------ Director
Paul D. Smith
/s/ STEVE HITCHCOCK Co-President and Director December 18, 1997
- ------------------------------
Steve Hitchcock
/s/ DOUGLAS CRUIKSHANK Co-President and Director December 18, 1997
- ------------------------------
Douglas Cruikshank
/s/ DIEGO HILDAGO Chief Financial Officer December 18, 1997
- ------------------------------ (Principal Financial and
Diego Hildago Accounting Officer)
/s/ ROGER E. PAYTON Director December 18, 1997
- ------------------------------
Roger E. Payton
II-21
<PAGE>
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 Hillside,
State of Illinois, on this 18th day of December, 1997.
LIW HOLDINGS CORP.
/s/ Roger E. Payton
----------------------------------------
Name: Roger E. Payton
Title: President, Chairman of the Board
and Director
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Roger E.
Payton and Gary S. Holter, and each of them, his or her true and lawful
attorneys-in-fact and agents, with full power of substitution and resubstitution
for him or her and in his or her name, place and stead, in any and all
capacities to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and any registration statement of the Company to
be filed after the date hereof pursuant to Rule 462(b) under the Securities Act
of 1933, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, and to take
such actions in, and file with the appropriate authorities in, whatever states
said attorneys-in-fact and agents, and each of them, shall determine, such
applications, statements, consents, and other documents, as may be necessary or
expedient to register securities of the Company for sale, granting unto said
attorneys-in-fact and agents full power and authority to do so and perform each
and every act and thing requisite or necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agents or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof and the registrant hereby confers like
authority on its behalf. This Registration Statement and Power of Attorney,
pursuant to the requirement of the Securities Act of 1933, as amended, have been
signed below by the following persons in the capacities and on the dates
indicated.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ ROGER E. PAYTON President, Chairman of the
- ------------------------------ Board and Director December 18, 1997
Roger E. Payton
Vice President, Treasurer,
/s/ GARY S. HOLTER Assistant Secretary and
- ------------------------------ Director (Principal December 18, 1997
Gary S. Holter Financial and Accounting
Officer)
II-22
<PAGE>
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 Hillside,
State of Illinois, on this 18th day of December, 1997.
ILLCAN, INC.
/s/ Michael B. Lenard
----------------------------------------
Name: Michael B. Lenard
Title: President and Director
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Roger E.
Payton and Gary S. Holter, and each of them, his or her true and lawful
attorneys-in-fact and agents, with full power of substitution and resubstitution
for him or her and in his or her name, place and stead, in any and all
capacities to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and any registration statement of the Company to
be filed after the date hereof pursuant to Rule 462(b) under the Securities Act
of 1933, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, and to take
such actions in, and file with the appropriate authorities in, whatever states
said attorneys-in-fact and agents, and each of them, shall determine, such
applications, statements, consents, and other documents, as may be necessary or
expedient to register securities of the Company for sale, granting unto said
attorneys-in-fact and agents full power and authority to do so and perform each
and every act and thing requisite or necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agents or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof and the registrant hereby confers like
authority on its behalf. This Registration Statement and Power of Attorney,
pursuant to the requirement of the Securities Act of 1933, as amended, have been
signed below by the following persons in the capacities and on the dates
indicated.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ MICHAEL B. LENARD President and Director
- ------------------------------ (Principal Executive December 18, 1997
Michael B. Lenard Officer)
/s/ GARY S. HOLTER Chief Financial Officer
- ------------------------------ (Principal Financial and December 18, 1997
Gary S. Holter Accounting Officer)
/s/ ROGER E. PAYTON Vice President and Chairman
- ------------------------------ of the Board December 18, 1997
Roger E. Payton
II-23
<PAGE>
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 Hillside,
State of Illinois, on this 18th day of December, 1997.
ILLSCOT, INC.
/s/ Michael B. Lenard
----------------------------------------
Name: Michael B. Lenard
Title: President and Director
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Roger E.
Payton and Gary S. Holter, and each of them, his or her true and lawful
attorneys-in-fact and agents, with full power of substitution and resubstitution
for him or her and in his or her name, place and stead, in any and all
capacities to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and any registration statement of the Company to
be filed after the date hereof pursuant to Rule 462(b) under the Securities Act
of 1933, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, and to take
such actions in, and file with the appropriate authorities in, whatever states
said attorneys-in-fact and agents, and each of them, shall determine, such
applications, statements, consents, and other documents, as may be necessary or
expedient to register securities of the Company for sale, granting unto said
attorneys-in-fact and agents full power and authority to do so and perform each
and every act and thing requisite or necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agents or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof and the registrant hereby confers like
authority on its behalf. This Registration Statement and Power of Attorney,
pursuant to the requirement of the Securities Act of 1933, as amended, have been
signed below by the following persons in the capacities and on the dates
indicated.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ MICHAEL B. LENARD President and Director
- ------------------------------ (Principal Executive December 18, 1997
Michael B. Lenard Officer)
/s/ GARY S. HOLTER Chief Financial Officer
- ------------------------------ (Principal Financial and December 18, 1997
Gary S. Holter Accounting Officer)
/s/ ROGER E. PAYTON Vice President and Chairman
- ------------------------------ of the Board December 18, 1997
Roger E. Payton
II-24
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- --------------------------------------------------------------------------------------------------------
<S> <C>
3.1 Amended and Restated Certificate of Incorporation of the Registrant.
3.2 Amended and Restated Bylaws of the Registrant.
4.1 Indenture dated as of October 29, 1997 between the Company and First Trust National Association, as
Trustee.
4.2 Form of New Note (included as Exhibit B to Exhibit 4.1).
4.3 Form of Guarantee (included as Exhibit B to Exhibit 4.1).
4.4 Registration Rights Agreement, dated as of October 29, 1997, between the Company and Credit Suisse First
Boston Corporation, BT Alex. Brown Incorporated, Smith Barney Inc. and ING Baring (U.S.) Securities,
Inc.
5.1 Opinion of Milbank, Tweed, Hadley & McCloy.
10.1 Third Amended and Restated Stockholders Agreement dated as of September 30, 1997 among the Company and
each of the Holders listed on Exhibit A thereto.
10.2 Amended and Restated Loan Agreement dated as of October 28, 1997 by and among the Company, The Bekins
Company, Matrix International Logistics, Inc., ILLCAN, Inc., ILLSCOT, Inc., LEP Profit International,
Inc. and LEP International Limited, as Borrowers and ING (US) Capital Corporation as administrative
agents and the Lenders party thereto.
10.3 Second Amended and Restated Registration Rights Agreement dated as of November 7, 1996 by and between
the Company and each of the Holders listed on Exhibit A thereto.
10.4 Executive Management Agreement dated as of October 31, 1996 by and between the Company and William E.
Simon & Sons, L.L.C.
10.5 Employment Agreement dated as of April 30, 1996 between the Company and Roger E. Payton.
10.6 Form of Employment Agreement between the Company and each of Messrs. Holter, Solis, Tieman and Jackson.
10.7 Promissory Note made by Mr. Payton in favor of the Company.
10.8 Promissory Note made by Mr. Solis in favor of the Company.
10.9 Form of Pledge Agreement executed by Messrs. Payton and Solis.
10.10* Form of Warrant issued by the Company to Roger E. Payton.
10.11* Form of Subscription Agreement executed by Roger E. Payton and the Company.
10.12* Form of Warrant issued by the Company to Messrs. Tieman, Solis and Holter.
10.13* Form of Subscription Agreement executed by the Company and each of Messrs. Tieman, Solis and Holter.
10.14 Form of Indemnification Agreement.
10.15 Deferred Compensation Plan.
</TABLE>
II-25
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- --------------------------------------------------------------------------------------------------------
<S> <C>
10.16 Employee Stock Purchase Plan dated March 3, 1997.
10.17 Executive Management Agreement dated as of November 1, 1997 by and between the Company, TCW Special
Credits Fund V--The Principal Fund and Oaktree Capital Management, LLC.
10.18 Agreement and Plan of Merger dated as of April 10, 1996, by and among the Company, Trasub, Inc., The
Bekins Company, IMR General Inc., and IMR Fund, L.P.
10.19* Form of Warrant Agreement between the Company and Mr. Myers.
10.20 Stock Purchase Agreement dated as of October 31, 1996 by and among LEP International Worldwide Limited,
LEP International Holdings Limited, LEP Holdings (North America) Limited, LEP Holdings U.S.A. Inc. and
the Company.
10.21* Stock Purchase Agreement dated as of October 31, 1996 by and among LEP International Worldwide Limited,
LEP International Holdings Limited, LEP Holdings (North America) Limited and International Logistics
(Canada) Company.
10.22 Stock Purchase Agreement dated as of November 7, 1996 by and among the Company and Douglas Cruikshank,
Ronald S. Cruse, Steve Hitchcock and Paul D. Smith.
12.1 Computation of Ratio of Earnings to Fixed Charges.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Price Waterhouse LLP.
23.3 Consent of Arthur Andersen LLP.
23.4 Consent of Milbank, Tweed, Hadley & McCloy (included in exhibit 5.1).
24.1 Power of Attorney (included on signature page).
25.1* Statement of Eligibility under the Trust Indenture Act of 1939 on Form T-1 of First Bank National
Association.
27 Financial Data Schedule.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
</TABLE>
- ------------------------
* To be filed by amendment.
II-26
<PAGE>
CERTIFICATE OF INCORPORATION
OF
INTERNATIONAL LOGISTICS LIMITED
ARTICLE I
The name of the corporation is: International Logistics Limited.
ARTICLE II
The address of its registered office in the State of Delaware is 1013
Centre Road, in the City of Wilmington, County of New Castle, Delaware. The
name of its registered agent at such address is The Prentice-Hall Corporation
System, Inc.
ARTICLE III
The nature of the business or purpose to be conducted or promoted is
to engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware.
ARTICLE IV
The total number of shares of all classes of stock which the
Corporation shall have authority to issue is ten thousand (10,000), all of which
shall be without par value, consisting of (i) five thousand (5,000) shares of
Class A Common Stock and (ii) five thousand (5,000) shares of Class B Common
Stock.
The Relative rights, preferences and limitations of the Class A Common
Stock and Class B Common Stock of the Corporation shall be in all respects
identical, share for share, except that the voting power for the election of
directors and for all other purposes shall be vested exclusively in the holders
of the Class A Common Stock, and, except as otherwise required by law, the
holders of the Class B Common Stock shall not have any voting power or be
entitled to receive any notice of meetings of shareholders. In all matters in
which they shall have the right to vote, the holders of the Class A Common Stock
and the Class B Common Stock shall have one vote per share.
<PAGE>
ARTICLE V
The board of directors is authorized to make, alter or repeal the
by-laws of the corporation. Election of the directors need not be by written
ballot.
ARTICLE VI
The name and mailing address of the incorporator is: Christine W.
Jenkins, 310 South Street, Morristown, NJ 07962-1913.
ARTICLE VII
The business of the Corporation shall be managed by or under the
direction of its Board of Directors. The number of directors constituting the
entire board shall be one or more, as determined by the by-laws.
To the fullest extent permitted by the General Corporation Law of the
State of Delaware, as the same exists or may hereafter be amended, 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.
Any repeal or modification of this Article VII shall not adversely
affect any right or protection of an existing director at the time of such
repeal or modification.
IN WITNESS WHEREOF, I, THE UNDERSIGNED, being the incorporator
hereinbefore named, for the purpose of forming a corporation pursuant to the
General Corporation Law of Delaware, do make this certificate, hereby declaring
and certifying that this is my act and deed and the facts herein stated are
true, and accordingly have hereunto set my hand this 13th day of February, 1996.
/s/ CHRISTINE W. JENKINS
--------------------------------------
Christine W. Jenkins
- 2 -
<PAGE>
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
INTERNATIONAL LOGISTICS LIMITED
(Originally incorporated on February 14, 1996)
The undersigned sole director hereby certifies that (i) this Amended
and Restated Certificate of Incorporation of International Logistics Limited was
duly adopted and is being filed pursuant to Sections 241 and 245 of the General
Corporation Law of the State of Delaware and supersedes the heretofore existing
Certificate of Incorporation of International Logistics Limited and all
amendments thereto; (ii) the Company (as defined below) as of the date hereof
has not received any payment for any of its stock and (iii) that the Certificate
of Incorporation is amended and restated as follows.
ARTICLE I
The name of the corporation is International Logistics Limited
(hereinafter referred to as the "Company").
ARTICLE II
The address of its registered office in the State of Delaware is 1013
Centre Road, in the City of Wilmington, County of New Castle, Delaware. The
name of its registered agent at such address is The Prentice-Hall Corporation
System, Inc.
ARTICLE III
The nature of the business or purpose to be conducted or promoted is
to engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware.
ARTICLE IV
The corporation is authorized to issue two million (2,000,000) shares
of Common Stock, par value $.001 per share (the "COMMON STOCK").
- 1 -
<PAGE>
ARTICLE V
The holders of the Common Stock shall be entitled to the payment of
dividends when and as declared by the Board of Directors out of funds legally
available therefor.
ARTICLE VI
The Board of Directors shall not be authorized to adopt, amend or
repeal the Bylaws of the Company or this Certificate of Incorporation except as
set forth in the Bylaws. The holders of Common Stock shall not be authorized to
adopt, amend or repeal the Bylaws of the Company or this Certificate of
Incorporation except as set forth in the Bylaws.
ARTICLE VII
If the Company issues any Common Stock or securities convertible into
Common Stock, or any right, title or interest therein to any Person, then the
Company shall make the offer to sell pursuant to, and otherwise comply with the
requirements set forth in this Article VII. Notwithstanding the foregoing, the
Company may Transfer Common Stock or securities convertible into Common Stock,
and any right, title or interest therein without making the offer to sell as set
forth in this Article VII in connection with (i) an Initial Public Offering,
(ii) the issuance of shares of Common Stock in connection with the exercise of
warrants issued and outstanding as of May 5, 1996; (iii) the issuance of up to
ten percent (10%) of the number of Securities issued and issuable, in connection
with the acquisition of certain companies by the Company, to certain employees,
executive officers and directors of the Company pursuant to any stock option
plan approved by the Board of Directors; and (iv) the issuance of Securities to
any employee, director or officer of the Company or any of its subsidiaries.
Notwithstanding the foregoing, any rights or obligations pursuant to this
Article VII shall terminate no later than the date of an Initial Public
Offering. The rights in this Article VII shall not inure to the benefit of the
Warrantholder (as defined below).
A. COMPANY TRANSFER NOTICE. If the Company desires in good faith to
Transfer Common Stock or securities convertible into Common Stock, the Company
shall deliver a written notice of the proposed Transfer (the "COMPANY TRANSFER
NOTICE") to each stockholder that in the reasonable judgment of the Company is
an Accredited Investor, or who can provide the Company with an opinion of
counsel, reasonably satisfactory in form and substance to the Company, that the
Company Transfer Securities (as defined
- 2 -
<PAGE>
below) may be sold to such stockholder without registration under the Securities
Act (each an "ACCREDITED OFFEREE"). The Company Transfer Notice shall contain a
description of the proposed transaction and the terms thereof including the
number of Securities and type of Securities proposed to be transferred
(collectively, the "COMPANY TRANSFER SECURITIES"), the name of each person to
whom or in favor of whom the proposed Transfer is to be made (the "COMPANY
TRANSFEREE"), and a description of the consideration to be received by the
Company upon Transfer of the Company Transfer Securities. The Company Transfer
Notice shall be accompanied by a copy of the offer to issue Securities to any
Person (for purposes of this Article VII, and executed letter of intent stating
the terms of such offer, or incorporating by reference a separate summary of
terms shall be deemed a written offer). On a day which is not earlier than the
ten (10) days following delivery of the Company Transfer Notice and after having
received the requisite approval from the Board of Directors, the Company may
issue the Company Transfer Securities to the Company Transferee on the terms set
forth in the Company Transfer Notice.
B. TERMS OF OFFER. Upon completion of the issuance of the Company
Transfer Securities referred to in SUBSECTION (A) above, the Company shall
deliver to each stockholder a written offer to sell (the "OFFER TO SELL") a Pro
Rata portion of an equivalent number of the Company Transfer Securities based
upon such stockholder's holdings of Securities. The Offer to Sell shall be on
the same terms and conditions, and shall be for cash. If the consideration
described in the Company Transfer Notice is for something other than cash, the
purchase price paid by each stockholder for shares purchased pursuant to this
SUBSECTION (B) shall be in cash at the Trading Price (or if no trading price is
available, then the Fair Market Value) of such Securities determined as of the
issue date of the Company Transfer Securities.
C. ACCEPTANCE OF OFFER. Within thirty (30) days after receipt of an
Offer to Sell, any Accredited Offeree may, by written notice delivered to the
Company, accept the Offer to Sell in whole or in part.
D. ADDITIONAL OFFER. If, within the thirty (30) day period specified
in SECTION (C) above, the Accredited Offerees do not agree to purchase all of
the Company Transfer Securities offered pursuant to the initial Offers to Sell,
the Company shall make an additional offer to sell the remainder of the Company
Transfer Securities (the "ADDITIONAL OFFER") proportionately to the stockholders
who accepted in whole their respective initial Offers to Sell. The Additional
Offer shall be made within five (5) days after expiration of the initial thirty
(30) day period,
- 3 -
<PAGE>
and may be accepted, in whole or in part, by written notice delivered to the
Company within ten (10) days after receipt. Notwithstanding any other provision
of this Article VII, the Accredited Offerees may permit, by written agreement
signed by each Accredited Offeree, any Accredited Offeree to purchase more or
less than such Accredited Offeree's Pro Rata portion of the Company Transfer
Securities.
E. TRANSFER OF SHARES. Transfers of Securities pursuant to offers
made and accepted in accordance with this Article VII or to a Company Transferee
shall occur simultaneously on a Business Day not more than thirty (30) days
after the last date on which any offer in accordance with this Article VII could
have been accepted.
F. DEFINITIONS. For the purpose of this Article VII capitalized
terms not otherwise defined in this Article VII shall have the following
meanings assigned to them:
"ACCREDITED INVESTOR" shall have the meaning set forth for such term
in Regulation D under the Securities Act.
"BUSINESS DAY" shall mean a day other than Saturday, Sunday or any
other day on which banks located in the State of California are authorized or
obligated to close.
"FAIR MARKET VALUE" shall mean the fair market value of the Company's
Common Stock (or other securities if in the context of untraded securities
distributed in connection with a Qualified Sale) as determined on a
fully-distributed basis without regard to liquidity or size relative to the
number of shares outstanding; PROVIDED, that such valuation (x) be performed by
a nationally recognized investment banking, valuation or appraisal firm paid for
by the Company and (y) shall ascribe value to warrants as the amount, if any, by
which the value of the Common Stock underlying the warrant shall exceed the
aggregate exercise price related thereto.
"INITIAL PUBLIC OFFERING" means the first underwritten public offering
of Common Stock by the Company pursuant to a registration of shares under the
Securities Act on a Form S-1 Registration Statement (or equivalent or successor
form).
"PRO RATE" shall mean, with respect to any offer of shares of Common
Stock or securities exercisable or convertible into shares of Common Stock, an
offer based on the relative percentages of Securities then held by or issuable
to all of the stockholders to whom such offer is made.
- 4 -
<PAGE>
"QUALIFIED SALE" shall mean (i) any sale of all or substantially all
of the assets of the Company or (ii) any sale, merger or liquidation of the
Company with or into any other entity whereby at least a majority of the voting
stock or other voting interests of such surviving entity shall be owned or
controlled by a person other than a stockholder.
"SECURITIES" shall mean the shares of Common Stock and any securities
convertible or exercisable into shares of Common Stock.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"TRADING PRICE" means the trading price for each trading day: (a) if
the Common Stock is traded on a national securities exchange, its last reported
sale price on the preceding Business Day on such national securities exchange on
the next preceding Business Day on which there was a sale, all as made available
over the Consolidated Last Sale Reporting System of the CTA Plan (the "CLSRS")
or, if the Common Stock is not then eligible for reporting over the CLSRS, its
last reported sale price on the preceding Business Day on such national
securities exchange or, if there was no sale on that day, on the next preceding
Business Day on which there was a sale on such exchange or (b) if the principal
market for the Common Stock is the over-the-counter market, but the Common Stock
is not then eligible for reporting over the CLSRS, but the Common Stock is
quoted on the National Association of Securities Dealers Automated Quotations
System ("NASDAQ"), the last sale price reported on NASDAQ on the preceding
Business Day or, if the Common Stock is an issue for which last sale prices are
not reported on NASDAQ, the closing bid quotation on such day, but in each of
the next preceding two cases, if the relevant NASDAQ price or quotation did not
exist on such day, then the price or quotation on the next preceding Business
Day in which there was such a price or quotation.
"TRANSFER" shall mean the issuance, sale, assignment, transfer, giving
away, or disposal in any way of any Securities.
"WARRANTHOLDER" shall mean the holder (or any successors in interest
thereto) of that certain Warrant, issued and outstanding as of May 5, 1996,
which is exercisable into 66,489 shares of Common Stock; PROVIDED, HOWEVER, that
upon the full exercise of all, but not less than all, of the shares of Common
Stock underlying such Warrant, such holder (or any successors in interest
thereto) shall not be deemed a "Warrantholder" for purposes of this Article VII.
- 5 -
<PAGE>
ARTICLE VIII
If an investment opportunity for the Company is presented to the Board
of Directors and such investment opportunity is not approved within a reasonable
time by the Board of Directors in accordance with the terms and provisions of
the By-Laws, then any non-employee stockholder or director of the Company may
pursue, either alone or in concert with other parties, such investment
opportunity independently of the Company and shall be permitted to manage such
investment without regard to the potential impact, competitive or otherwise, on
the Company, and such stockholder or director shall have no liability to the
Company or its stockholders for such actions or any actions in connection
therewith, including sharing trade secrets of other confidential information.
ARTICLE IX
Subject to Article VIII, a director of the Company shall not be
personally liable to the Company or its stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability (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 which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived any
improper personal benefit. If the Delaware General Corporation Law is amended
after the date of the filing of this Certificate to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director of the Company shall be eliminated or limited to the
fullest extent permitted by the Delaware General Corporation Law, as so amended.
No repeal or modification of this Article IX shall apply to or have any effect
on the liability or alleged liability of any director of the Company for or with
respect to any acts or omissions of such director occurring prior to such repeal
or modification.
ARTICLE X
To the fullest extent authorized by law, the Board of Directors of the
Company, acting on behalf of the Company, shall indemnify or advance costs of
defense, or commit the Company to indemnify or advance costs of defense in the
future, to any person who is made, or threatened to be made, a party to an
action, suit or proceeding, whether civil, criminal, administrative,
investigative or otherwise (including an action,
- 6 -
<PAGE>
suit or proceeding by or in the right of the Company) by reason of the fact that
the person is or was a director, officer, employee or agent of the Company or a
fiduciary within the meaning of the Employee Retirement Income Security Act of
1974 with respect to any employee benefit plan of the Company, or serves or
served at the request of the Company as a director, officer, partner, trustee,
agent or employee, or fiduciary of an employee benefit plan, of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise. This Article X shall not be deemed exclusive of any other provision
for indemnification of directors, officers, fiduciaries, employees or agents
that may be included in any statute, bylaw, resolution of shareholders or
directors, agreement or otherwise, either as to action in any official capacity
or action in another capacity while holding office.
IN WITNESS WHEREOF, I, the undersigned, being the sole director
hereinbefore named, for the purpose of forming a corporation pursuant to the
General Corporation Law of Delaware, do make this certificate, hereby declaring
and certifying that this is my act and deed and the facts herein are true, and
accordingly have hereunto set my hand this 1st day of May, 1996.
/s/ MICHAEL B. LENARD
------------------------------
Michael B. Lenard
- 7 -
<PAGE>
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
INTERNATIONAL LOGISTICS LIMITED
International Logistics Limited, a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), DOES HEREBY CERTIFY:
FIRST: That, at a meeting of the Board of Directors of the
Corporation held on October 28, 1996, resolutions were duly adopted setting
forth proposed amendments to the Restated Certificate of Incorporation of the
Corporation, declaring said amendments to be advisable and directing its
officers to submit said amendments to the stockholders of the Corporation for
consideration thereof. The resolutions setting forth the proposed amendments
are as follows:
RESOLVED, that Article IV of the Corporation 's Restated
Certificate of Incorporation be amended to read as follows:
"IV: The corporation is authorized to issue five million
(5,000,000) shares of Common Stock, par value $.001 per share ("Common
Stock")."
RESOLVED FURTHER, that Article VII, Section F. of the
Corporation's Restated Certificate of Incorporation's Restated
Certificate of Incorporation be amended to add thereto a definition of
the term "Person", which definition shall read as follows:
"PERSON" shall mean any individual, corporation, partnership,
limited liability company, joint venture, association, joint stock
company, trust, unincorporated organization or government or agency or
political subdivision thereof."
SECOND: That, thereafter, by written consent of the holders of at
least 75% of the voting stock of the Corporation, the necessary number of shares
required by statute were voted in
- 1 -
<PAGE>
favor of the amendments. Prompt written notice in accordance with Section 228
of the General Corporation Law of the State of Delaware has been given to those
stockholders of the Corporation who have not consented in writing.
THIRD: That said amendments were duly adopted in accordance with the
provisions of Sections 242 and 228 of the General Corporation Law of the State
of Delaware.
IN WITNESS WHEREOF, International Logistics Limited has caused this
certificate to be signed by Roger E. Payton, its Chief Executive Officer, this
28th day of October, 1996.
/s/ ROGER E. PAYTON
-----------------------------------
Roger E. Payton
- 2 -
<PAGE>
Effective 10/31/96
AMENDED AND RESTATED
BYLAWS
OF
INTERNATIONAL LOGISTICS LIMITED
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I Office and Records. . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Delaware Office. . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 Other Offices. . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.3 Books and Records. . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2.1 Annual Meeting . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2.2 Special Meetings . . . . . . . . . . . . . . . . . . . . . . 1
Section 2.3 Notice of Meetings . . . . . . . . . . . . . . . . . . . . . 2
Section 2.4 Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.5 Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.6 Proxies. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.7 List of Stockholders . . . . . . . . . . . . . . . . . . . . 3
Section 2.8 Written Consent of Stockholders in Lieu of Meeting . . . . . 4
ARTICLE III Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3.1 Number of Directors. . . . . . . . . . . . . . . . . . . . . 5
Section 3.2 Election and Term of Directors . . . . . . . . . . . . . . . 6
Section 3.3 Vacancies and Newly Created Directorships. . . . . . . . . . 7
Section 3.4 Resignation. . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.5 Removal. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.6 Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.7 Quorum and Voting. . . . . . . . . . . . . . . . . . . . . . 8
Section 3.8 Written Consent of Directors in Lieu of a Meeting. . . . . . 8
Section 3.9 Compensation . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.10 Committees of the Board of Directors. . . . . . . . . . . . 9
ARTICLE IV Officers, Agents and Employees . . . . . . . . . . . . . . . . . . 9
Section 4.1 Appointment and Term of Office . . . . . . . . . . . . . . . 9
Section 4.2 Resignation and Removal. . . . . . . . . . . . . . . . . . 10
Section 4.3 Compensation and Bond. . . . . . . . . . . . . . . . . . . 10
Section 4.4 Chairman of the Board. . . . . . . . . . . . . . . . . . . 10
Section 4.5 Chief Executive Officer and President. . . . . . . . . . . 10
Section 4.6 Vice Presidents. . . . . . . . . . . . . . . . . . . . . . 11
Section 4.7 Treasurer. . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 4.8 Secretary. . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 4.9 Assistant Treasurers . . . . . . . . . . . . . . . . . . . 12
Section 4.10 Assistant Secretaries . . . . . . . . . . . . . . . . . . 12
Section 4.11 Delegation of Duties. . . . . . . . . . . . . . . . . . . 12
ARTICLE V Indemnification and Insurance . . . . . . . . . . . . . . . . . . 12
Section 5.1 Right to Indemnification . . . . . . . . . . . . . . . . . 12
Section 5.2 Right to Advancement of Expenses . . . . . . . . . . . . . 13
Section 5.3 Right of Indemnitee to Bring Suit. . . . . . . . . . . . . 13
- i -
<PAGE>
Section 5.4 Non-Exclusivity of Rights. . . . . . . . . . . . . . . . . 14
Section 5.5 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 5.6 Indemnification of Employees and Agents of the Company . . 14
Section 5.7 Contract Rights. . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE VI Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 6.1 Certificates . . . . . . . . . . . . . . . . . . . . . . . 15
Section 6.2 Transfers of Stock . . . . . . . . . . . . . . . . . . . . 15
Section 6.3 Lost, Stolen or Destroyed Certificates . . . . . . . . . . 15
Section 6.4 Stockholder Record Date. . . . . . . . . . . . . . . . . . 16
ARTICLE VII Seal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 7.1 Seal . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE VIII Waiver of Notice . . . . . . . . . . . . . . . . . . . . . . . 16
Section 8.1 Waiver of Notice . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE IX Checks, Notes, Drafts, Etc.. . . . . . . . . . . . . . . . . . . 17
Section 9.1 Checks, Notes, Drafts, Etc . . . . . . . . . . . . . . . . 17
ARTICLE X Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 10.1 Amendments. . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE XI Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
- ii -
<PAGE>
AMENDED AND RESTATED
BYLAWS
OF
INTERNATIONAL LOGISTICS LIMITED
ARTICLE I
OFFICE AND RECORDS
SECTION 1.1 DELAWARE OFFICE. The principal office of the Company in
the State of Delaware shall be located in the City of Wilmington, County of New
Castle, and the name and address of its registered agent is The Prentice-Hall
Corporation, Inc., 1209 Orange Street, Wilmington, Delaware.
SECTION 1.2 OTHER OFFICES. The Company may have such other offices,
either within or without the State of Delaware, as the Board of Directors may
designate or as the business of the Company may from time to time require.
SECTION 1.3 BOOKS AND RECORDS. The books and records of the Company
may be kept at the Company's principal executive offices in 310 South Street,
Morristown, New Jersey, 07962 or at such other locations outside the State of
Delaware as may from time to time be designated by the Board of Directors.
ARTICLE II
STOCKHOLDERS
SECTION 2.1 ANNUAL MEETING. Except as otherwise provided in
Section 2.8 of these Bylaws, an annual meeting of stockholders of the Company
shall be held at such time and date in each year as the Board of Directors, the
Chairman of the Board, if any, or the President may from time to time determine.
The annual meeting in each year shall be held at such place within or without
the State of Delaware as may be fixed by the Board of Directors, or if not so
fixed, at 12:00 P.M., local time, at the principal executive offices of the
Company.
SECTION 2.2 SPECIAL MEETINGS. A special meeting of the holders of
stock of the Company entitled to vote on any business to be considered at any
such meeting may be called only by the Chairman of the Board, if any, or the
President or any Vice President, and shall be called by the Chairman of the
Board,
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if any, or the President or the Secretary when directed to do so by resolution
of the Board of Directors or at the written request of directors representing a
majority of the total number of directors which the Company would at the time
have if there were no vacancies (the "Whole Board"). Any such request shall
state the purpose or purposes of the proposed meeting. The Board of Directors
may designate the place of meeting for any special meeting of stockholders, and
if no such designation is made, the place of meeting shall be the principal
executive offices of the Company.
SECTION 2.3 NOTICE OF MEETINGS. Whenever stockholders are required
or permitted to take any action at a meeting, unless notice is waived as
provided in Section 8.1 of these Bylaws, a written notice of the meeting shall
be given which shall state the place, date and hour of the meeting, and, in the
case of a special meeting, the purpose or purposes for which the meeting is
called.
Unless otherwise provided by law, and except as to any stockholder
duly waiving notice, the written notice of any meeting shall be given personally
or by mail, not less than ten nor more than sixty (60) days before the date of
the meeting to each stockholder entitled to vote at such meeting. If mailed,
notice shall be deemed given when deposited in the mail, postage prepaid,
directed to the stockholder at his or her address as it appears on the records
of the Company.
When a meeting is adjourned to another time or place, notice need not
be given of the adjourned meeting if the time and place thereof are announced at
the meeting at which the adjournment is taken. At the adjourned meeting the
Company may transact any business which might have been transacted at the
original meeting. If, however, the adjournment is for more than thirty (30)
days, or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote at the meeting.
SECTION 2.4 QUORUM. Prior to a Voting Termination Event, at any
meeting of stockholders the holders of eighty percent (80%) of the outstanding
stock entitled to vote thereat, either present or represented by proxy, shall
constitute a quorum for the transaction of any business. Except as otherwise
provided by law or by the Certificate of Incorporation, upon a Voting
Termination Event, at any meeting of stockholders the holders of a majority of
the outstanding stock entitled to vote thereat, either present or represented by
proxy, shall constitute a quorum for the transaction of any business, but the
stockholders present, although less than a quorum, may adjourn the meeting to
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another time or place and, except as provided in the last paragraph of
Section 2.3 of these Bylaws, notice need not be given of the adjourned meeting.
SECTION 2.5 VOTING. Prior to a Voting Termination Event, all such
actions taken by, in the name of or on behalf of the holders of Common Stock
shall require an affirmative vote of the holders representing at least eighty
percent (80%) of the issued and outstanding shares entitled to vote. Upon a
Voting Termination Event, all such actions taken by, in the name of or on behalf
of the holders of Common Stock shall require an affirmative vote of a majority
of the issued and outstanding shares entitled to vote.
Except as otherwise required by these Bylaws, whenever directors are
to be elected at a meeting, they shall be elected by a plurality of the votes
cast at the meeting by the holders of stock entitled to vote. Whenever any
corporate action, other than the election of directors, is to be taken by vote
of stockholders at a meeting, it shall, except as otherwise required by law or
by the Certificate of Incorporation or by these Bylaws, be authorized by a
majority of the votes cast with respect thereto at the meeting (including
abstentions) by the holders of stock entitled to vote thereon.
Except as otherwise provided by law or by the Certificate of
Incorporation, each holder of record of stock of the Company entitled to vote on
any matter at any meeting of stockholders shall be entitled to one vote for each
share of such stock standing in the name of such holder on the stock ledger of
the Company on the record date for the determination of the stockholders
entitled to vote at the meeting.
Upon the demand of any stockholder entitled to vote, the vote for
directors or the vote on any other matter at a meeting shall be by written
ballot, but otherwise the method of voting and the manner in which votes are
counted shall be discretionary with the presiding officer at the meeting.
SECTION 2.6 PROXIES. Each stockholder entitled to vote at a meeting
of stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him or her
by proxy, but no such proxy shall be voted or acted upon after three years from
its date, unless the proxy provides for a longer period. Every proxy shall be
signed by the stockholder or by his duly authorized attorney.
SECTION 2.7 LIST OF STOCKHOLDERS. The officer who has charge of the
stock ledger of the Company shall prepare and make,
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at least ten (10) days before every meeting of stockholders, a complete list of
the stockholders entitled to vote at the meeting, arranged in alphabetical
order, and showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list required by this
Section or the books of the Company, or to vote in person or by proxy at any
meeting of stockholders.
SECTION 2.8 WRITTEN CONSENT OF STOCKHOLDERS IN LIEU OF MEETING. Any
action required by the General Corporation Law of the state of Delaware (the
"GCL") to be taken at any annual or special meeting of stockholders of the
Company, or any action which may be taken at any annual or special meeting of
the stockholders, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. Prompt written notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing. Any such written consent may be
given by one or any number of substantially concurrent written instruments of
substantially similar tenor signed by such stockholders, in person or by
attorney or proxy duly appointed in writing, and filed with the Secretary or an
Assistant Secretary of the Company. Any such written consent shall be effective
as of the effective date thereof as specified therein, provided that such date
is not more than sixty (60) days prior to the date such written consent is filed
as aforesaid, or, if no such date is so specified, on the date such written
consent is filed as aforesaid.
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ARTICLE III
DIRECTORS
SECTION 3.1 NUMBER OF DIRECTORS.
a. PRE-VOTING TERMINATION EVENT. Prior to the first to occur of
(i) an Initial Public Offering, (ii) a Sell-Down Event, (iii) a WES&S Purchase
Default, (iv) a WES&S Funding Default, (v) a Financial Default Disagreement,
(vi) an OCM Entity Purchase Default, (vii) an OCM Entity Funding Default or
(viii) May 2, 2002 (in each case a "VOTING TERMINATION EVENT"), the Board of
Directors of the Company (the "BOARD OF DIRECTORS") shall at all times consist
of eight (8) members. OCM shall have the right, at its election, to appoint two
(2) members of the Board of Directors of the Company (an "OCM DIRECTOR"), TCW
shall have the right, at its election, to appoint one (1) member of the Board of
Directors of the Company (a "TCW DIRECTOR"), WES&S shall have the right, at its
election, to appoint three (3) members of the Board of Directors of the Company
(a "WES&S DIRECTOR")
William E. Myers, Jr. shall be the seventh member of the Board of
Directors and the eighth member of the Board of Directors shall be the Chief
Executive Officer of the Company. Only OCM shall have the right to remove an
OCM Director, or to fill a vacancy caused by the resignation, removal (with or
without cause) or death of such OCM Director. Only TCW shall have the right to
remove a TCW Director, or to fill a vacancy caused by the resignation, removal
(with or without cause) or death of such TCW Director. Only WES&S shall have
the right to remove a WES&S Director, or to fill a vacancy caused by the
resignation, removal (with or without cause) or death of such WES&S Director.
b. POST-VOTING TERMINATION EVENT. Except as may be otherwise
provided herein or by law, upon a Voting Termination Event that is not caused by
an Initial Public offering, the Board of Directors of the Company shall at all
times consist of at least five (5) members or such greater number that shall be
needed to satisfy the terms of this SECTION 3.l(b) consisting of:
(A) (i) a majority of Board of Directors seats designated by an OCM
Entity, PROVIDED, that the combined holdings of the OCM Entities are
fifty percent (50%) or more of the voting stock and the Voting
Termination Event is due to an event other than an OCM Entity Funding
Default or an OCM Entity Purchase Default, (ii) one (1) Board of
Directors seat less than a majority designated by an OCM Entity,
PROVIDED, that either (x) the combined holdings of the OCM Entities
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are at least twenty-five percent (25%) but less than fifty percent
(50%) of the voting stock or (y) the combined holdings of the OCM
Entities are fifty percent (50%) or more of the voting stock and the
voting Termination Event is due solely to an OCM Entity Funding
Default or an OCM Entity Purchase Default, or (iii) one (1) Board of
Directors seat designated by an OCM Entity, PROVIDED, that the
combined holdings of the OCM Entities are at least ten percent (10%)
but less than twenty-five (25%) of the voting stock (in each case, an
"OCM ENTITY TERMINATION DIRECTOR");
(B) one (1) Board of Directors seat to be the Chief Executive
Officer;
(C) one (1) Board of Directors seat to be William E. Myers, Jr.; and
(D) the remainder of the board seats to be designated by WES&S (a
"WES&S TERMINATION DIRECTOR"); PROVIDED, HOWEVER, that in no event
shall WES&S designate less than one (1) Board of Directors seat.
Only OCM shall have the right to remove an OCM Entity Termination Director
appointed by OCM or to fill a vacancy caused by the resignation, removal (with
or without cause) or death of such OCM Entity Termination Director. Only TCW
shall have the right to remove an OCM Entity Termination Director appointed by
TCW or to fill a vacancy caused by the resignation, removal (with or without
cause) or death of such OCM Entity Termination Director. Only WES&S shall have
the right to remove a WES&S Termination Director or to fill a vacancy caused by
the resignation, removal (with or without cause) or death of such WES&S
Termination Director.
c. NUMBER OF DIRECTORS.
Upon a Voting Termination event that is caused by an Initial Public
Offering, the number of directors may be changed at any time and from time to
time by vote at a meeting or by written consent of the holders of stock
entitled to vote on the election of directors, or by a resolution of the
Board of Directors passed by a majority of the Whole Board, except that no
decrease shall shorten the term of any incumbent director unless such
director is specifically removed pursuant to Section 3.5 of these Bylaws at
the time of such decrease.
SECTION 3.2 ELECTION AND TERM OF DIRECTORS. Subject to SECTION 3.1,
the Directors shall be elected annually, by election at the annual meeting of
stockholders or by written
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consent of the holders of stock entitled to vote thereon in lieu of such
meeting if the annual election of directors is not held on the date
designated therefor, the directors shall cause such election to be held as soon
thereafter as convenient. Each director shall hold office from the time of his
or her election and qualification until his successor is elected and qualified
or until his or her earlier resignation, or removal.
SECTION 3.3 VACANCIES AND NEWLY CREATED DIRECTORSHIPS. At any time a
vacancy is created on the Board by the death, removal (with or without cause) or
resignation of any one of the Directors, no action shall be taken by the Board
until the Board is reconstituted with the appropriate number of directors. Only
OCM or an OCM Affiliate shall have the right to remove an OCM Director or an OCM
Entity Termination Director appointed by OCM, or to fill a vacancy caused by the
resignation, removal (with or without cause) or death of such OCM Director or
OCM Entity Termination Director. Only TCW or an TCW Affiliate shall have the
right to remove a TCW Director or an OCM Entity Termination Director appointed
by TCW, or to fill a vacancy caused by the resignation, removal (with or without
cause) or death of such TCW Director or OCM Entity Termination Director. Only
WES&S or a WES&S Affiliate shall have the right to remove a WES&S Director or to
fill a vacancy caused by the resignation, removal (with or without cause) or
death of such WES&S Director or WES&S Termination Director. For all other
vacancies, the remaining directors shall meet in person or by telephone for the
purpose of approving and appointing a director in accordance with the provisions
set forth in SECTION 3.1 hereof.
SECTION 3.4 RESIGNATION. Any director may resign at any time upon
written notice to the Company. Any such resignation shall take effect at the
time specified therein or, if the time be not specified, upon receipt thereof,
and the acceptance of such resignation, unless required by the terms thereof,
shall not be necessary to make such resignation effective.
SECTION 3.5 REMOVAL. Except as otherwise set forth in these Bylaws,
any or all of the directors may be removed at any time, with or without cause,
by vote at a meeting or by written consent of the holders of stock entitled to
vote on the election of directors.
SECTION 3.6 MEETINGS. Meetings of the Board of Directors, regular or
special, may be held at any place within or without the State of Delaware.
Members of the Board of Directors, or of any committee designated by the Board
of Directors, may participate in a meeting of the Board of Directors or such
committee by means of conference telephone or similar communications equipment
by means of which all persons participating in
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the meeting can hear each other, and participation in a meeting by such means
shall constitute presence in person at such meeting. An annual meeting of the
Board of Directors shall be held after each annual election of directors. If
such election occurs at an annual meeting of stockholders, the annual meeting of
the Board of Directors shall be held at the same place and immediately following
such meeting of stockholders, and no further notice thereof need be given other
than this Bylaw. If an annual election of directors occurs by written consent
in lieu of the annual meeting of stockholders, the annual meeting of the Board
of Directors shall take place as soon after such written consent is duly filed
with the Company as is practicable, either at the next regular meeting of the
Board of Directors or at a special meeting. The Board of Directors may fix
times and places for additional regular meetings of the Board of Directors and
no notice of such meetings need be given. A special meeting of the Board of
Directors shall be held whenever called by the Chairman of the Board, if any, or
by the President or by at least one-third of the directors for the time being in
office, at such time and place as shall be specified in the notice or waiver
thereof. Notice of each special meeting shall be given by the Secretary or by a
person calling the meeting to each director by mailing the same, postage
prepaid, not later than the second day before the meeting, or personally or by
telegraphing or telephoning the same not later than the day before the meeting.
SECTION 3.7 QUORUM AND VOTING. Prior to a Voting Termination Event
and except with respect to the daily affairs and operations of the Company
arising in the ordinary course of business, which affairs shall be attended to
by the officers of the Company under the ultimate direction of the Board of
Directors, six (6) of the directors present at a meeting shall constitute a
quorum. Prior to a Voting Termination Event, no action shall be taken,
securities issued, monies borrowed, sum expended, decision made or obligation
incurred by or on behalf of the Company with respect to any matter, unless
approved by six (6) Directors of the Company. Upon a Voting Termination Event,
a whole number of directors equal to at least a majority of the Whole Board
shall constitute a quorum for the transaction of business, but if there be less
than a quorum at any meeting of the Board of Directors, a majority of the
directors present may adjourn the meeting from time to time, and no further
notice thereof need be given other than announcement at the meeting which shall
be so adjourned. Upon a Voting Termination Event, the vote of a majority of the
directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors.
SECTION 3.8 WRITTEN CONSENT OF DIRECTORS IN LIEU OF A MEETING. Any
action required or permitted to be taken at any
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meeting of the Board of Directors or of any committee thereof may be taken
without a meeting if all members of the Board of Directors or of such committee,
as the case may be, consent thereto in writing, and the writing or writings are
filed with the minutes of proceedings of the Board of Directors or such
committee.
SECTION 3.9 COMPENSATION. Directors may receive compensation for
services to the Company in their capacities as directors or otherwise in such
manner and in such amounts as may be fixed from time to time by the Board of
Directors.
SECTION 3.10 COMMITTEES OF THE BOARD OF DIRECTORS.
(a) Prior to a Voting Termination Event, an Executive Committee (the
"EXECUTIVE COMMITTEE") consisting of three (3) members of the Board of Directors
shall be authorized to take any action on behalf of the Board of Directors (in
between meetings of the Board of Directors) upon the unanimous approval of such
Executive Committee. Each of OCM and WES&S shall designate one (1) OCM Director
(an "OCM EXECUTIVE DIRECTOR") and one (1) WES&S Director (a "WES&S EXECUTIVE
DIRECTOR"), respectively, to sit on the Executive Committee; and the third
member of the Executive Committee shall be the Chief Executive officer of the
Company.
Only OCM shall have the right to remove an OCM Executive Director or
to fill a vacancy caused by the resignation, removal (with or without cause) or
death of such OCM Executive Director. only WES&S shall have the right to remove
a WES&S Executive Director or to fill a vacancy caused by the resignation,
removal (with or without cause) or death of such WES&S Executive Director.
(b) Upon a Voting Termination Event, the Board of Directors may from
time to time, by resolution passed by majority of the Whole Board, designate one
or more committees, each committee to consist of one or more directors of the
Company. Each such committee shall keep a record of its acts and proceedings
and shall report thereon to the Board of Directors whenever requested so to do.
Any or all members of any such committee may be removed, with or without cause,
by resolution of the Board of Directors, passed by a majority of the whole
Board.
ARTICLE IV
OFFICERS, AGENTS AND EMPLOYEES
SECTION 4.1 APPOINTMENT AND TERM OF OFFICE. The officers of the
Company may include a President, a Chief Executive officer, a Secretary and a
Treasurer, and may also
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include a Chairman of the Board, one or more Vice Presidents, one or more
Assistant Secretaries and one or more Assistant Treasurers. All such
officers shall be appointed by the Board of Directors or by a duly authorized
committee thereof, and shall each have such powers and duties as generally
pertain to their respective offices, subject to the specific provisions of
this Article IV, together with such other powers and duties as from time to
time may be conferred by the Board of Directors or any committee thereof.
Any number of such offices may be held by the same person, but no officer
shall execute, acknowledge or verify any instrument in more than one
capacity. Except as may be prescribed otherwise by the Board of Directors or
a committee thereof in a particular case, all such officers shall hold their
offices at the pleasure of the Board of Directors for an unlimited term and
need not be reappointed annually or at any other periodic interval. The
Board of Directors may appoint, and may delegate power to appoint, such other
officers, agents and employees as it may deem necessary or proper, who shall
hold their offices or positions for such terms, have such authority and
perform such duties as may from time to time be determined by or pursuant to
authorization of the Board of Directors.
SECTION 4.2 RESIGNATION AND REMOVAL. Any officer may resign at any
time upon written notice to the Company. Any officer, agent or employee of the
Company may be removed by the Board of Directors, or by a duly authorized
committee thereof, with or without cause at any time. The Board of Directors or
such a committee thereof may delegate such power of removal as to officers,
agents and employees not appointed by the Board of Directors or such a
committee. Such removal shall be without prejudice to a person's contract
rights, if any, but the appointment of any person as an officer, agent or
employee of the Company shall not of itself create contract rights.
SECTION 4.3 COMPENSATION AND BOND. The compensation of the officers
of the Company shall be fixed by the Board of Directors, but this power may be
delegated to any officer in respect of other officers under his or her control.
The Company may secure the fidelity of any or all of its officers, agents or
employees by bond or otherwise.
SECTION 4.4 CHAIRMAN OF THE BOARD. The Chairman of the Board, if
there be one, shall preside at all meetings of stockholders and of the Board of
Directors, and shall have such other powers and duties as may be delegated to
him or her by the Board of Directors.
SECTION 4.5 CHIEF EXECUTIVE OFFICER AND PRESIDENT. In the absence of
the Chairman of the Board (or if there be none), the Chief Executive Officer
shall preside at all meetings of the
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stockholders and of the Board of Directors. The Chief Executive officer and
President shall have general charge of the business affairs of the Company. The
Chief Executive officer and President may employ and discharge employees and
agents of the Company, except such as shall be appointed by the Board of
Directors, and he or she may delegate these powers. The Chief Executive Officer
may vote the stock or other securities of any other domestic or foreign
corporation of any type or kind which may at any time be owned by the Company,
may execute any stockholders' or other consents in respect thereof and may in
his or her discretion delegate such powers by executing proxies, or otherwise,
on behalf of the Company. The Board of Directors by resolution from time to
time may confer like powers upon any other person or persons. In the absence or
inability to act of the Chief Executive Officer, unless the Board of Directors
shall otherwise provide, the President who has served in that capacity for the
longest time and who shall be present and able to act, shall perform all the
duties and may exercise any of the powers of the Chief Executive Officer.
SECTION 4.6 VICE PRESIDENTS. Each Vice President shall have such
powers and perform such duties as the Board of Directors, the Chief Executive
Officer or the President may from time to time prescribe. In the absence or
inability to act of the President, unless the Board of Directors shall otherwise
provide, the Vice President who has served in that capacity for the longest time
and who shall be present and able to act, shall perform all the duties and may
exercise any of the powers of the President.
SECTION 4.7 TREASURER. The Treasurer shall have charge of all funds
and securities of the Company, shall endorse the same for deposit or collection
when necessary and deposit the same to the credit of the Company in such banks
or depositories as the Board of Directors may authorize. He or she may endorse
all commercial documents requiring endorsements for or on behalf of the Company
and may sign all receipts and vouchers for payments made to the Company. He or
she shall have all such further powers and duties as generally are incident to
the position of Treasurer or as may be assigned to him or her by the President,
Chief Executive Officer or the Board of Directors.
SECTION 4.8 SECRETARY. The Secretary shall record all the
proceedings of the meetings of the stockholders and directors in a book to be
kept for that purpose and shall also record therein all action taken by written
consent of the stockholders or directors in lieu of a meeting. He or she shall
attend to the giving and serving of all notices of the Company. He or she shall
have custody of the seal of the Company and shall attest the same by his or her
signature whenever required. He or she
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shall have charge of the stock ledger and such other books and papers as the
Board of Directors may direct, but he or she may delegate responsibility for
maintaining the stock ledger to any transfer agent appointed by the Board of
Directors. He or she shall have all such further powers and duties as generally
are incident to the position of Secretary or as may be assigned to him or her by
the President, Chief Executive officer or the Board of Directors.
SECTION 4.9 ASSISTANT TREASURERS. In the absence or inability to act
of the Treasurer, any Assistant Treasurer may perform all the duties and
exercise all the powers of the Treasurer. An Assistant Treasurer shall also
perform such other duties as the Treasurer or the Board of Directors may assign
to him or her.
SECTION 4.10 ASSISTANT SECRETARIES. In the absence or inability to
act of the Secretary, any Assistant Secretary may perform all the duties and
exercise all the powers of the Secretary. An Assistant Secretary shall also
perform such other duties as the Secretary or the Board of Directors may assign
to him or her.
SECTION 4.11 DELEGATION OF DUTIES. In case of the absence of any
officer of the Company, or for any other reason that the Board of Directors may
deem sufficient, the Board of Directors may confer for the time being the powers
or duties, or any of them, of such officer upon any other officer or upon any
director.
ARTICLE V
INDEMNIFICATION AND INSURANCE
SECTION 5.1 RIGHT TO INDEMNIFICATION. Each person who was or is made
a party or is threatened to be made a party to or is otherwise involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding") , by reason of the fact that he or
she or a person of whom he or she is the legal representative is or was a
director or an officer of the Company or is or was serving at the request of the
Company as a director, officer, employee or agent of any other corporation or of
a partnership, joint venture, trust or other enterprise, including service with
respect to any employee benefit plan (hereinafter an "indemnitee"), whether the
basis of such proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity while serving as a
director, officer, employee or agent, shall be indemnified and held harmless by
the Company to the
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fullest extent authorized by the GCL, as the same exists or may hereafter be
amended (but, in the case of any such amendment, only to the extent that such
amendment permits the Company to provide broader indemnification rights than
said law permitted the Company to provide prior to such amendment), against all
expense, liability and loss (including, without limitation, attorneys, fees,
judgments, fines, excise taxes or penalties under the Employee Retirement Income
Security Act of 1974, as amended, and amounts paid or to be paid in settlement)
reasonably incurred by such indemnitee in connection therewith; PROVIDED,
HOWEVER, that except as provided in Section 5.3 with respect to proceedings
seeking to enforce rights to indemnification, the Company shall indemnify any
such indemnitee seeking indemnification in connection with a proceeding (or part
thereof) initiated by such indemnitee only if such proceeding (or part thereof)
was authorized by the Board of Directors.
SECTION 5.2 RIGHT TO ADVANCEMENT OF EXPENSES. The right to
indemnification conferred in Section 5.1 shall include the right to be paid by
the Company the expenses (including attorneys, fees) incurred in defending any
such proceeding in advance of its final disposition (hereinafter an "advancement
of expenses") ; PROVIDED, HOWEVER, that, if the GCL requires, an advancement of
expenses incurred by an indemnitee in his or her capacity as a director or
officer (and not in any other capacity in which service was or is rendered by
such indemnitee, including, without limitation, service to an employee benefit
plan) shall be made only upon delivery to the Company of an undertaking
(hereinafter an "undertaking"), by or on behalf of such indemnitee, to repay all
amounts so advanced if it shall ultimately be determined by final judicial
decision from which there is no further right to appeal (hereinafter a "final
adjudication") that such indemnitee is not entitled to be indemnified for such
expenses under this Section 5.2 or otherwise.
SECTION 5.3 RIGHT OF INDEMNITEE TO BRING SUIT. If a claim under
Section 5.1 or Section 5.2 is not paid in full by the Company within thirty (30)
days after a written claim has been received by the Company, except in the case
of a claim for an advancement of expenses, in which case the applicable period
shall be twenty (20) days, the indemnitee may at any time thereafter bring suit
against the Company to recover the unpaid amount of the claim. If successful in
whole or in part in any such suit, or in a suit brought by the Company to
recover an advancement of expenses pursuant to the terms of an undertaking, the
indemnitee shall be entitled to be paid also the expense of prosecuting or
defending such suit. In (i) any suit brought by the indemnitee to enforce a
right to indemnification hereunder (but not in a suit brought by the indemnitee
to enforce a right of an advancement of expenses) it shall be a defense that,
and
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(ii) in any suit brought by the Company to recover an advancement of expenses
pursuant to the terms of an undertaking, the Company shall be entitled to
recover such expenses upon a final adjudication that, the indemnitee has not met
any applicable standard for indemnification set forth in the GCL. Neither the
failure of the Company (including its Board of Directors, independent legal
counsel or stockholders) to have made a determination prior to the commencement
of such action that indemnification of the indemnitee is proper in the
circumstances because the indemnitee has met the applicable standard of conduct
set forth in the GCL, nor an actual determination by the Company (including its
Board of Directors, independent legal counsel or stockholders) that the
indemnitee has not met such applicable standard of conduct, shall create a
presumption that the indemnitee has not met the applicable standard of conduct
or, in the case of such a suit brought by the indemnitee, be a defense to such
suit. In any suit brought by the indemnitee to enforce a right to
indemnification or to an advancement of expenses hereunder, or brought by the
Company to recover an advancement of expenses pursuant to the terms of an
undertaking, the burden of proving that the indemnitee is not entitled to be
indemnified, or to such advancement of expenses, under this Article V or
otherwise shall be on the Company.
SECTION 5.4 NON-EXCLUSIVITY OF RIGHTS. The right to indemnification
and the advancement of expenses conferred in this Article V shall not be
exclusive of any other right which any person may have or hereafter acquire
under any statute, provision of the Certificate of Incorporation, provision of
these Bylaws, agreement, vote of stockholders or disinterested directors or
otherwise.
SECTION 5.5 INSURANCE. The Company may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
Company or another corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss, whether or not the Company
would have the power to indemnify such person against such expense, liability or
loss under the GCL.
SECTION 5.6 INDEMNIFICATION OF EMPLOYEES AND AGENTS OF THE COMPANY.
The Company may, to the extent authorized from time to time by the Board of
Directors, grant rights to indemnification, and rights to the advancement of
expenses, to any employee or agent of the Company to the fullest extent of the
provisions of this Article V with respect to the indemnification and advancement
of expenses of directors and officers of the Company.
SECTION 5.7 CONTRACT RIGHTS. The rights to indemnification and to
the advancement of expenses conferred in Section 5.1 and Section 5.2 shall be
contract rights and such
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<PAGE>
rights shall continue as to an indemnitee who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the indemnitee's
heirs, executors and administrators.
ARTICLE VI
COMMON STOCK
SECTION 6.1 CERTIFICATES. Certificates for stock of the Company
shall be in such form as shall be approved by the Board of Directors and shall
be signed in the name of the Company by the Chairman of the Board, if any, or
the Chief Executive Officer, the President or a Vice President, and by the
Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary.
Such certificates may be sealed with the seal of the Company or a facsimile
thereof. Any of or all the signatures on a certificate may be a facsimile. In
case any officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued,, it may
be issued by the Company with the same effect as if he or she were such officer,
transfer agent or registrar at the date of issue.
SECTION 6.2 TRANSFERS OF STOCK. Transfers of stock shall be made
only upon the books of the Company by the holder, in person or by duly
authorized attorney, and on the surrender of the certificate or certificates for
the same number of shares, properly endorsed. The Board of Directors shall have
the power to make all such rules and regulations, not inconsistent with the
Certificate of Incorporation and these Bylaws and the GCL, as the Board of
Directors may deem appropriate concerning the issue, transfer and registration
of certificates for stock of the Company. The Board of Directors may appoint
one or more transfer agents or registrars of transfers, or both, and may require
all stock certificates to bear the signature of either or both.
SECTION 6.3 LOST, STOLEN OR DESTROYED CERTIFICATES. Except as
otherwise set forth in the Certificate of Incorporation, the Company may issue a
new stock certificate in the place of any certificate theretofore issued by it,
alleged to have been lost, stolen or destroyed, and the Company may require the
owner of the lost, stolen or destroyed certificate or his or her legal
representative to give the Company a bond sufficient to indemnify it against any
claim that may be made against it on account of the alleged loss, theft or
destruction of any such certificate or the issuance of any such new certificate.
The Board of Directors may require such owner to satisfy other reasonable
requirements as it deems appropriate under the circumstances.
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<PAGE>
SECTION 6.4 STOCKHOLDER RECORD DATE. In order that the Company may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend
[PAGE MISSING]
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
PROVIDED, HOWEVER, that the Board of Directors may fix a new record date for the
adjourned meeting.
Only such stockholders as shall be stockholders of record on the date
so fixed shall be entitled to notice of, and to vote at, such meeting and any
adjournment thereof, or to give such consent, or to receive payment of such
dividend or other distribution, or to exercise such rights in respect of any
such change, conversion or exchange of stock, or to participate in such action,
as the case may be, notwithstanding any transfer of any stock on the books of
the Company after any record date so fixed.
ARTICLE VII
SEAL
SECTION 7.1 SEAL. The seal of the Company shall be circular in form
and shall bear, in addition to any other emblem or device approved by the Board
of Directors, the name of the Company, the year of its incorporation and the
words "Corporate Seal" and "Delaware". The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or in any other manner reproduced.
ARTICLE VIII
WAIVER OF NOTICE
SECTION 8.1 WAIVER OF NOTICE. Whenever notice is required to be
given to any stockholder or director of the Company under any provision of the
GCL or the Certificate of Incorporation or these Bylaws, a written waiver
thereof, signed by the person or persons entitled to notice, whether before or
after the time stated therein, shall be deemed equivalent to the giving of such
notice. In the case of a stockholder, such waiver
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<PAGE>
of notice may be signed by such stockholder's attorney or proxy duly appointed
in writing. Attendance of a person at a meeting shall constitute a waiver of
notice of such meeting, except when the person attends a meeting for the express
purpose of objecting at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the stockholders, directors or members of a committee of directors need be
specified in any written waiver of notice.
ARTICLE IX
CHECKS, NOTES, DRAFTS, ETC.
SECTION 9.1 CHECKS, NOTES, DRAFTS, ETC. Checks, notes, drafts,
acceptances, bills of exchange and other orders or obligations for the payment
of money shall be signed by such officer or officers or person or persons as the
Board of Directors or a duly authorized committee thereof may from time to time
designate.
ARTICLE X
AMENDMENTS
SECTION 10.1 AMENDMENTS. Prior to a Voting Termination Event, these
Bylaws and the Certificate of Incorporation may be altered, amended or repealed
at any time by the stockholders beneficially owning at least eighty percent
(80%) of the issued and outstanding shares of Common Stock entitled to Vote.
Upon a Voting Termination Event, these Bylaws and the Certificate of
Incorporation may be altered, amended, or repealed at any time by the
stockholders beneficially owning a majority of the issued and outstanding shares
of Common Stock entitled to vote. Notwithstanding the foregoing, no amendment
or modification to ARTICLES II OR III hereof may be made without the consent of
the stockholders beneficially owning ninety percent (90%) of the issued and
outstanding shares of Common Stock entitled to vote. No amendment, modification
or waiver of any provision hereof shall extend to or affect any obligation not
expressly amended, modified or waived or impair any right consequent thereon.
No course of dealing, and no failure to exercise or delay in exercising any
right, remedy, power or privilege hereunder, shall operate as a waiver,
amendment or modification of any provision of the Company's Certificate of
Incorporation or these Bylaws.
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<PAGE>
ARTICLE XI
DEFINITIONS
The following terms shall have the following meanings, which meanings
shall be equally applicable to the singular and plural forms of such terms:
"AFFILIATE" of any person or entity means any person or entity which
directly or indirectly controls, is controlled by, or is under common control
with such person or entity.
"CONTROL," "CONTROLLED BY" and "UNDER COMMON CONTROL WITH" means
direct or indirect possession of the power to direct or cause the direction of
management or policies (whether through ownership of voting securities, by
contract or otherwise); provided that control shall be conclusively presumed
when any person or entity or affiliated group directly or indirectly owns ten
percent (10%) or more of the securities having ordinary voting power for the
election of a majority of the directors of a corporation.
"CLOSING DATE" means October 31, 1996.
"FINANCIAL DEFAULT" shall mean with respect to the Company or any
Subsidiary, any of the following: (i) the occurrence of a default under any
indebtedness with a principal amount in excess of $20 million (either
individually or in the aggregate) to the extent that such default is not cured
or waived within thirty (30) days; (ii) the acceleration of any indebtedness
with a principal amount in excess of $10 million (either individually or in the
aggregate) to the extent not paid or rescinded within five (5) days; (iii) the
imposition of any final and non-appealable judgments in excess of $10 million
(either individually or in the aggregate) to the extent not paid or rescinded
within five (5) days; or (iv) the filing of any voluntary or involuntary
bankruptcy petition with respect to the Company or any Subsidiary to the extent
not withdrawn within five (5) days.
"FINANCIAL DEFAULT DISAGREEMENT" shall mean that, upon the occurrence
of a Financial Default, the Board of Directors of the Company is unable to agree
on the Company's course of action in response to a Financial Default.
"INITIAL PUBLIC OFFERING" means the first underwritten public offering
of Common Stock by the Company pursuant to a registration of shares under the
Securities Act on a Form S-1 Registration Statement (or equivalent or successor
form).
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<PAGE>
"OCM" means OCM Principal Opportunities Fund, L.P., a Delaware limited
partnership.
"OCM DIRECTORS" has the meaning assigned to such term in
SECTION 3.1(a).
"OCM ENTITY" means either or both of TCW and OCM, as the context
indicates.
"OCM AFFILIATE" means any investor in or any employee of OCM or
Oaktree Capital Management, LLC ("OAKTREE"), a California limited liability
company, or in any company, joint venture, limited liability company,
association or partnership of which OCM or Oaktree, is a shareholder, manager or
general partner, as the case may be.
[PAGE MISSING]
Securities transferred to such Person and (B) the cumulative number of
Securities so transferred (or the economic capital interest therein) by WES&S
shall not exceed the Threshold Amount.
"SIMON ENTITY" means Logistical Simon, L.L.C., a Delaware limited
liability company, WESINVEST, Inc., a Delaware corporation or William E. Simon &
Sons, L.L.C, a Delaware limited liability company.
"STOCKHOLDERS AGREEMENT" means the Amended and Restated Stockholder's
Agreement, dated as of October 31, 1996, among the Company and all of the
holders of the Securities on such date as the same may be modified or amended
from time to time.
"SUBSIDIARY" means any corporation at least a majority of the Voting
Stock of which is, at the time as of which any determination is being made,
owned by the Company either directly or indirectly through one or more
Subsidiaries.
"TCW" means TCW Special Credits Fund V -- The Principal Fund, a
California limited partnership.
"TCW DIRECTOR" has the meaning assigned to such term in
SECTION 3.1(a).
"TCW AFFILIATE" means any investor in or any employee of TCW, TCW
Asset Management Company, a California corporation ("TAMCO") , Trust Company of
the West, a California trust company ("TRUSTCO") or Oaktree Capital Management,
LLC ("OAKTREE"), a California limited liability company, or in any company,
joint
- 19 -
<PAGE>
venture, limited liability company, association or partnership of which TCW,
TAMCO, Trustco or Oaktree, is a shareholder, manager or general partner, as the
case may be.
"THRESHOLD AMOUNT" means thirty Percent (30%) of the shares held by
WES&S as of the Closing Date (excluding for the purpose of this calculation any
shares owned by WES&S to the extent received upon the exercise of warrants or
otherwise acquired from parties other than the Company).
"VOTING STOCK" means any shares of stock having general voting power
to elect the Board of Directors (whether or not stock of any other class or
classes has or might have voting power by reason of the occurrence of any
contingency).
"VOTING TERMINATION EVENT" means the first to occur of (i) an Initial
Public Offering, (ii) a Sell-Down Event, (iii) a WES&S Purchase Default, (iv) a
WES&S Funding Default, (v) a Financial Default Disagreement, (vi) an OCM Entity
Purchase Default, (vii) an OCM Entity Funding Default or (viii) May 2, 2002.
"WES&S" means Logistical Simon, L.L.C., a Delaware limited liability
company.
"WES&S DIRECTOR" has the meaning assigned to such term in
SECTION 3.1(a).
"WES&S AFFILIATE" means any Simon Entity or any partnership, limited
liability company or corporation that directly or indirectly, through one or
more intermediaries, has control of, is controlled by or is under common control
with (i) any Simon Entity or (ii) any shareholder, partner or member of a Simon
Entity or any such shareholder's, partner's or member's spouse, siblings,
children, children's spouses, grandchildren or their spouses or any trusts for
the benefit of any of the foregoing.
"WES&S FUNDING DEFAULT" means a circumstance whereby (i) an OCM
Entity and WES&S have entered into a commitment to purchase the Securities of
the Company pursuant to a purchase agreement; (ii) WES&S is in breach of its
commitment to purchase such Securities; and (iii) an OCM Entity ultimately
completes its purchase under such purchase agreement.
"WES&S PURCHASE DEFAULT" means WES&S is in breach of its purchase
obligation under a WES&S Acceptance Notice in connection with certain transfers
of the OCM Entity Shares as set forth in the Stockholders Agreement.
- 20 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INTERNATIONAL LOGISTICS LIMITED
as Issuer
and
THE GUARANTORS NAMED HEREIN
and
FIRST TRUST NATIONAL ASSOCIATION
as Trustee
--------------------------
INDENTURE
Dated as of October 29, 1997
--------------------------
9 3/4% Senior Notes Due 2007
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
CROSS-REFERENCE TABLE
TIA Indenture
Section Section
- ------- ---------
310(a)(1). . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(3) . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . . . . . . . . 7.8; 7.10
(c) . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
311(a) . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(b) . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
312(a) . . . . . . . . . . . . . . . . . . . . . . . . . 2.5
(b) . . . . . . . . . . . . . . . . . . . . . . . . . 2.5; 10.3
(c) . . . . . . . . . . . . . . . . . . . . . . . . . 10.3
313(a) . . . . . . . . . . . . . . . . . . . . . . . . . 10.3
(b)(1) . . . . . . . . . . . . . . . . . . . . . . . . . 7.6
(b)(2) . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(c) . . . . . . . . . . . . . . . . . . . . . . . . . 10.2
(d) . . . . . . . . . . . . . . . . . . . . . . . . . 7.6
314(a) . . . . . . . . . . . . . . . . . . . . . . . . . 4.2; 4.10; 10.2
(b). . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(c)(1) . . . . . . . . . . . . . . . . . . . . . . . . . 10.4
(c)(2) . . . . . . . . . . . . . . . . . . . . . . . . . 10.4
(c)(3) . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(d) . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(e) . . . . . . . . . . . . . . . . . . . . . . . . . 10.5
(f) . . . . . . . . . . . . . . . . . . . . . . . . . 4.10
315(a) . . . . . . . . . . . . . . . . . . . . . . . . . 7.1
(b) . . . . . . . . . . . . . . . . . . . . . . . . . 7.5; 10.2
(c) . . . . . . . . . . . . . . . . . . . . . . . . . 7.1
(d) . . . . . . . . . . . . . . . . . . . . . . . . . 7.1
(e) . . . . . . . . . . . . . . . . . . . . . . . . . 6.11
316(a)(last sentence). . . . . . . . . . . . . . . . . . . 10.6
(a)(1)(A). . . . . . . . . . . . . . . . . . . . . . . . 6.5
(a)(1)(B). . . . . . . . . . . . . . . . . . . . . . . . 6.4
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . . . . . . . . 6.7
317(a)(1). . . . . . . . . . . . . . . . . . . . . . . . . 6.9
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . 6.9
(b) . . . . . . . . . . . . . . . . . . . . . . . . . 2.4
318(a) . . . . . . . . . . . . . . . . . . . . . . . . . 10.1
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.2. Other Definitions . . . . . . . . . . . . . . . . . . . . . 22
SECTION 1.3. Incorporation By Reference Of Trust Indenture Act . . . . . 22
SECTION 1.4. Rules Of Construction . . . . . . . . . . . . . . . . . . . 23
ARTICLE 2
THE SECURITIES
SECTION 2.1. Form And Dating . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 2.2. Execution And Authentication . . . . . . . . . . . . . . . 24
SECTION 2.3. Registrar and Paying Agent . . . . . . . . . . . . . . . . 25
SECTION 2.4. Paying Agent to Hold Money in Trust . . . . . . . . . . . . 25
SECTION 2.5. Securityholder Lists . . . . . . . . . . . . . . . . . . . 25
SECTION 2.6. Replacement Securities . . . . . . . . . . . . . . . . . . 26
SECTION 2.7. Outstanding Securities . . . . . . . . . . . . . . . . . . 26
SECTION 2.8. Temporary Securities . . . . . . . . . . . . . . . . . . . 27
SECTION 2.9. Cancellation . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 2.10. Defaulted Interest . . . . . . . . . . . . . . . . . . . . 27
SECTION 2.11. CUSIP Numbers . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE 3
REDEMPTION
SECTION 3.1. Notices To Trustee . . . . . . . . . . . . . . . . . . . . 28
SECTION 3.2. Selection of Securities to be Redeemed . . . . . . . . . . 28
SECTION 3.3. Notice of Redemption . . . . . . . . . . . . . . . . . . . 29
SECTION 3.4. Effect of Notice of Redemption . . . . . . . . . . . . . . 29
SECTION 3.5. Deposit Of Redemption Price . . . . . . . . . . . . . . . . 30
SECTION 3.6. Securities Redeemed In Part . . . . . . . . . . . . . . . . 30
ARTICLE 4
COVENANTS
SECTION 4.1. Payment of Securities . . . . . . . . . . . . . . . . . . . 30
SECTION 4.2. SEC Reports . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 4.3. Limitation on Indebtedness . . . . . . . . . . . . . . . . 31
-1-
<PAGE>
SECTION 4.4. Limitation on Restricted Payments . . . . . . . . . . . . . 33
SECTION 4.5. Limitation on Restrictions on Distributions from Restricted
Subsidiaries . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 4.6. Limitation on Sales of Assets and
Subsidiary Stock . . . . . . . . . . . . . . . . . . . . 37
SECTION 4.7. Limitation on Affiliate Transactions . . . . . . . . . . . 41
SECTION 4.8. Change of Control . . . . . . . . . . . . . . . . . . . . . 42
SECTION 4.9. Compliance Certificate . . . . . . . . . . . . . . . . . . 44
SECTION 4.10. Further Instruments and Acts . . . . . . . . . . . . . . . 44
SECTION 4.11. Limitation on Liens . . . . . . . . . . . . . . . . . . . . 44
SECTION 4.12. Limitation on Sale/Leaseback Transactions . . . . . . . . . 46
SECTION 4.13. Limitation on Sale or Issuance of Capital
Stock of Restricted Subsidiaries . . . . . . . . . . . . 46
SECTION 4.14. Payment of Taxes and Other Claims . . . . . . . . . . . . . 47
SECTION 4.15. Maintenance of Office or Agency . . . . . . . . . . . . . . 47
SECTION 4.16. Corporate Existence . . . . . . . . . . . . . . . . . . . . 48
SECTION 4.17. Future Subsidiary Guarantors. . . . . . . . . . . . . . . . 47
ARTICLE 5
SUCCESSOR COMPANY
SECTION 5.1. Merger, Consolidation and Sale of Assets . . . . . . . . . . 48
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.1. Events of Default. . . . . . . . . . . . . . . . . . . . . . 50
SECTION 6.2. Acceleration . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 6.3. Other Remedies . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 6.4. Waiver of Past Defaults. . . . . . . . . . . . . . . . . . . 53
SECTION 6.5. Control by Majority. . . . . . . . . . . . . . . . . . . . . 53
SECTION 6.6. Limitation on Suits. . . . . . . . . . . . . . . . . . . . . 54
SECTION 6.7. Rights Of Holders to Receive Payment . . . . . . . . . . . . 54
SECTION 6.8. Collection Suit by Trustee . . . . . . . . . . . . . . . . . 55
SECTION 6.9. Trustee May File Proofs of Claim . . . . . . . . . . . . . . 55
SECTION 6.10. Priorities . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 6.11. Undertaking for Costs. . . . . . . . . . . . . . . . . . . . 56
SECTION 6.12. Waiver of Stay or Extension Laws . . . . . . . . . . . . . . 56
ARTICLE 7
TRUSTEE
SECTION 7.1. Duties of Trustee. . . . . . . . . . . . . . . . . . . . . . 56
SECTION 7.2. Rights of Trustee. . . . . . . . . . . . . . . . . . . . . . 58
SECTION 7.3. Individual Rights of Trustee . . . . . . . . . . . . . . . . 59
<PAGE>
SECTION 7.4. Trustee's Disclaimer . . . . . . . . . . . . . . . . . . . . 59
SECTION 7.5. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . 59
SECTION 7.6. Reports by Trustee to Holders. . . . . . . . . . . . . . . . 59
SECTION 7.7. Compensation and Indemnity . . . . . . . . . . . . . . . . . 59
SECTION 7.8. Replacement of Trustee . . . . . . . . . . . . . . . . . . . 61
SECTION 7.9. Successor Trustee by Merger. . . . . . . . . . . . . . . . . 62
SECTION 7.10. Eligibility; Disqualification. . . . . . . . . . . . . . . . 62
SECTION 7.11. Preferential Collection of Claims Against Company. . . . . . 62
ARTICLE 8
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.1. Discharge of Liability on Securities; Defeasance . . . . . . 63
SECTION 8.2. Conditions to Defeasance . . . . . . . . . . . . . . . . . . 64
SECTION 8.3. Application of Trust Money . . . . . . . . . . . . . . . . . 66
SECTION 8.4. Repayment to Company . . . . . . . . . . . . . . . . . . . . 66
SECTION 8.5. Indemnity for Government Obligations . . . . . . . . . . . . 66
SECTION 8.6. Reinstatement. . . . . . . . . . . . . . . . . . . . . . . . 66
ARTICLE 9
AMENDMENTS
SECTION 9.1. Without Consent of Holders . . . . . . . . . . . . . . . . . 67
SECTION 9.2. With Consent of Holders. . . . . . . . . . . . . . . . . . . 68
SECTION 9.3. Compliance with Trust Indenture Act. . . . . . . . . . . . . 69
SECTION 9.4. Revocation and Effect of Consents and
Waivers . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 9.5. Notation on or Exchange of Securities. . . . . . . . . . . . 69
SECTION 9.6. Trustee To Sign Amendments . . . . . . . . . . . . . . . . . 69
ARTICLE 10
SUBSIDIARY GUARANTIES
SECTION 10.1. Guaranties . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 10.2. Limitation on Liability . . . . . . . . . . . . . . . . . . 72
SECTION 10.3. Successors and Assigns . . . . . . . . . . . . . . . . . . 72
SECTION 10.4. No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 10.5. Modification . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 10.6. Release of Subsidiary Guarantor . . . . . . . . . . . . . . 73
<PAGE>
ARTICLE 11
MISCELLANEOUS
SECTION 11.1. Trust Indenture Act Controls . . . . . . . . . . . . . . . 73
SECTION 11.2. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 11.3. Communication by Holders with Other Holders. . . . . . . . 75
SECTION 11.4. Certificate and Opinion as to Conditions
Precedent . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 11.5. Statements Required in Certificate or
Opinion . . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 11.6. When Securities Disregarded. . . . . . . . . . . . . . . . 76
SECTION 11.7. Rules by Trustee, Paying Agent and
Registrar . . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 11.8. Legal Holidays . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 11.9. Governing Law. . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 11.10. No Recourse Against Others . . . . . . . . . . . . . . . . 76
SECTION 11.11. Successors . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 11.12. Multiple Originals . . . . . . . . . . . . . . . . . . . . 77
SECTION 11.13. Table of Contents; Headings. . . . . . . . . . . . . . . . 77
SECTION 11.14. Severability Clause. . . . . . . . . . . . . . . . . . . . 77
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Appendix 1 - Rule 144A/Regulation S Appendix
Exhibit A - Form of Initial Security
Exhibit B - Form of Exchange Security
Note: This Table of Contents shall not, for any purpose, be deemed to be part
of the Indenture.
<PAGE>
INDENTURE dated as of October 29, 1997, among INTERNATIONAL LOGISTICS
LIMITED, a Delaware corporation (the "Company"), the GUARANTORS listed on the
signature pages hereto and FIRST TRUST NATIONAL ASSOCIATION, a National banking
corporation, as trustee (the "Trustee").
Each party agrees as follows for the benefit of the other party and
for the equal and ratable benefit of the Holders of the Company's 9 3/4% Senior
Notes Due 2007 (the "Securities"):
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1. DEFINITIONS.
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) in a Related Business, (ii) the Capital Stock of
a Person that becomes a Restricted Subsidiary as a result of the acquisition of
such Capital Stock by the Company or another Restricted Subsidiary or (iii)
Capital Stock constituting a minority interest in any Person that at such time
is a Restricted Subsidiary; PROVIDED, HOWEVER, that, any such Restricted
Subsidiary described in clause (ii) or (iii) above is primarily engaged in a
Related Business.
"Affiliate" of any specified Person means any other Person, directly
or indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Asset Disposition" means any sale, lease, transfer or other
disposition (or series of related sales, leases, transfers or dispositions) by
the Company or any Restricted Subsidiary, including any disposition by means of
a merger or consolidation (each referred to for the purposes of this definition
as a "disposition"), of (i) any shares of Capital Stock of a Restricted
Subsidiary (other than directors' qualifying shares or shares required by
applicable law to be held by a Person other than the Company or a Restricted
Subsidiary), (ii) all or substantially all the assets (other
<PAGE>
than Capital Stock of an Unrestricted Subsidiary) of any division or line of
business of the Company or any Restricted Subsidiary or (iii) any other assets
(other than Capital Stock of an Unrestricted Subsidiary) of the Company or any
Restricted Subsidiary outside of the ordinary course of business of the Company
or such Restricted Subsidiary (other than, in the case of (i), (ii) and (iii)
above, (x) a disposition by a Restricted Subsidiary to the Company or by the
Company or a Restricted Subsidiary to a Restricted Subsidiary and (y) for
purposes of Section 4.6 only, a disposition that constitutes a Restricted
Payment permitted by Section 4.4 or a disposition specifically excepted from the
definition of Restricted Payment) PROVIDED, HOWEVER, that Asset Disposition
shall not include (a) a transaction or series of related transactions for which
the Company or its Restricted Subsidiaries receive aggregate consideration less
than or equal to $1.0 million, (b) the sale, lease, conveyance, disposition or
other transfer of all or substantially all of the assets of the Company as
permitted by Section 5.1 and Section 4.6 or (c) the disposition of assets of the
Company or any Restricted Subsidiary for aggregate non-cash consideration not in
excess of $20.0 million so long as the pro forma Consolidated Coverage Ratio
after giving effect to any such disposition is at least 2.5 to 1.0. The
foregoing shall not apply to any Lien granted on the Capital Stock of a
Restricted Subsidiary.
"Attributable Debt" in respect of a Sale/Leaseback Transaction means,
as at the time of determination, the present value (discounted at the interest
rate borne by the Securities, compounded annually) of the total obligations of
the lessee for rental payments during the remaining term of the lease included
in such Sale/Leaseback Transaction (including any period for which such lease
has been extended).
"Average Life" means, as of the date of determination, with respect to
any Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the
sum of the products of the numbers of years from the date of determination to
the dates of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied by
the amount of such payment by (ii) the sum of all such payments.
"Bank Credit Agreement" means the credit agreement, dated as of the
Issue Date, among the Company, ING (U.S.) Capital Corporation, as agent, and the
other financial institutions party thereto, as such agreement, in whole or in
part, may be amended, renewed, extended, increased (but only so
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long as such increase is permitted under the terms of the Indenture),
substituted, refinanced, restructured, replaced (including, without limitation,
any successive renewals, extensions, increases, substitutions, refinancings,
restructurings, replacements, supplements or other modifications of the
foregoing).
"Board of Directors" means the Board of Directors of the Company or
any committee thereof duly authorized to act on behalf of such Board.
"Business Day" means each day which is not a Legal Holiday.
"Capital Lease Obligation" means an obligation that is required to be
classified and accounted for as a capital lease for financial reporting purposes
in accordance with GAAP, and the amount of Indebtedness represented by such
obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP; and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.
"Capital Stock" of any Person means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible into such equity.
"Change of Control" means the occurrence of any of the following
events with respect to the Company:
(i) any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act), other than one or more Permitted Holders, is or becomes
the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act, except that for purposes of this clause (i) such person shall
be deemed to have "beneficial ownership" of all shares that such person has
the right to acquire, whether such right is exercisable immediately or only
after the passage of time), directly or indirectly, of more than 50% of the
total voting power of the then outstanding Voting Stock of the Company;
PROVIDED, HOWEVER, that for purposes of this clause (i), the Permitted
Holders shall be deemed to beneficially own any Voting Stock of a
corporation (the "specified
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corporation") held by any other corporation (the "parent corporation") so
long as the Permitted Holders beneficially own (as so defined), directly or
indirectly, in the aggregate a majority of the voting power of the Voting
Stock of the parent corporation;
(ii) during any period of two consecutive years commencing after the
Company's initial Public Equity Offering, individuals who at the beginning
of such period constituted the Board of Directors (together with any new
directors whose election by such Board of Directors or whose nomination for
election by the shareholders of the Company was approved by a vote of
66 2/3% of the directors of the Company then still in office who were either
directors at the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason to constitute
a majority of the Board of Directors then in office; or
(iii) the merger or consolidation of the Company with or into another
Person or the merger of another Person with or into the Company, or the
sale of all or substantially all the assets of the Company to another
Person (in each case other than a Person that is controlled by the
Permitted Holders), and, in the case of any such merger or consolidation,
the securities of the Company that are outstanding immediately prior to
such transaction and which represent 100% of the aggregate voting power of
the Voting Stock of the Company are changed into or exchanged for cash,
securities or property, unless pursuant to such transaction such securities
are changed into or exchanged for, in addition to any other consideration,
securities of the surviving corporation or a parent corporation that owns
all of the capital stock of such corporation that represent immediately
after such transaction, at least a majority of the aggregate voting power
of the Voting Stock of the surviving corporation or such parent
corporation, as the case may be.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consolidated Coverage Ratio" as of any date of determination means
the ratio of (i) the aggregate amount of EBITDA for the period of the most
recent four consecutive fiscal quarters ending at least 45 days (or, if less
than 45 days after the end of such fiscal quarter, ending as of the date the
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consolidated financial statements of the Company shall be available) prior to
the date of such determination to (ii) Consolidated Interest Expense for such
four fiscal quarters; PROVIDED, HOWEVER, that (1) if the Company or any
Restricted Subsidiary (x) has Incurred any Indebtedness (other than Indebtedness
Incurred for working capital purposes under a Bank Credit Agreement) since the
beginning of such period that remains outstanding or if the transaction giving
rise to the need to calculate the Consolidated Coverage Ratio is an Incurrence
of Indebtedness, or both, EBITDA and Consolidated Interest Expense for such
period shall be calculated after giving effect on a pro forma basis to such
Indebtedness as if such Indebtedness had been Incurred on the first day of such
period and the discharge of any other Indebtedness repaid, repurchased, defeased
or otherwise discharged with the proceeds of such new Indebtedness as if such
discharge had occurred on the first day of such period or (y) has repaid,
repurchased, defeased or otherwise discharged any Indebtedness since the
beginning of the period that is no longer outstanding on such date of
determination, or if the transaction giving rise to the need to calculate the
Consolidated Coverage Ratio involves a discharge of Indebtedness, EBITDA and
Consolidated Interest Expense for such period shall be calculated after giving
effect to such discharge of such Indebtedness, including with the proceeds of
such new Indebtedness, as if such discharge had occurred on the first day of
such period (except that, in making such computation, the amount of Indebtedness
under any revolving credit facility shall be computed based upon the average
daily balance of such Indebtedness during such four quarter period), (2) if
since the beginning of such period the Company or any Restricted Subsidiary
shall have made any Asset Disposition, the EBITDA for such period shall be
reduced by an amount equal to the EBITDA (if positive) directly attributable to
the assets which are the subject of such Asset Disposition for such period, or
increased by an amount equal to the EBITDA (if negative) directly attributable
thereto for such period and Consolidated Interest Expense for such period shall
be reduced by an amount equal to the Consolidated Interest Expense directly
attributable to any Indebtedness of the Company or any Restricted Subsidiary
repaid, repurchased, defeased or otherwise discharged with respect to the
Company and its continuing Restricted Subsidiaries in connection with such Asset
Disposition for such period (or, if the Capital Stock of any Restricted
Subsidiary is sold, the Consolidated Interest Expense for such period directly
attributable to the Indebtedness of such Restricted Subsidiary to the extent the
Company and its continuing Restricted Subsidiaries are no longer liable for such
Indebtedness after such sale), (3) if since the beginning of such period the
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Company or any Restricted Subsidiary (by merger or otherwise) shall have made an
Investment in any Restricted Subsidiary (or any Person which becomes a
Restricted Subsidiary) or an acquisition of assets, including any acquisition of
assets occurring in connection with a transaction requiring a calculation to be
made hereunder, which constitutes all or substantially all of an operating unit
of a business, EBITDA and Consolidated Interest Expense for such period shall be
calculated after giving pro forma effect thereto (including the Incurrence of
any Indebtedness) as if such Investment or acquisition occurred on the first day
of such period or (4) if since the beginning of such period any Person (that
subsequently became a Restricted Subsidiary or was merged with or into the
Company or any Restricted Subsidiary since the beginning of such period) shall
have made any Asset Disposition, Investment or acquisition of assets that would
have required an adjustment pursuant to clause (2) or (3) above if made by the
Company or a Restricted Subsidiary during such period, EBITDA and Consolidated
Interest Expense for such period shall be calculated after giving pro forma
effect thereto as if such Asset Disposition, Investment or acquisition occurred
on the first day of such period. For purposes of this definition, whenever pro
forma effect is to be given to an acquisition of assets, the amount of income or
earnings relating thereto and the amount of Consolidated Interest Expense
associated with any Indebtedness Incurred in connection therewith, the pro forma
calculations shall be determined in good faith by a responsible financial or
accounting Officer of the Company. If any Indebtedness bears a floating rate of
interest and is being given pro forma effect, the interest on such Indebtedness
shall be calculated as if the rate in effect on the date of determination had
been the applicable rate for the entire period (taking into account any Interest
Rate Agreement applicable to such Indebtedness if such Interest Rate Agreement
has a remaining term in excess of 12 months).
"Consolidated Interest Expense" means, for any period, the total
interest expense of the Company and its consolidated Restricted Subsidiaries,
plus, to the extent not included in such total interest expense, and to the
extent incurred by the Company or its Restricted Subsidiaries, (i) interest
expense attributable to Capital Lease Obligations, (ii) amortization of debt
discount and debt issuance costs, (iii) capitalized interest, (iv) non-cash
interest expense, (v) commissions, discounts and other fees and charges owed
with respect to letters of credit and bankers' acceptance financing, (vi) net
costs associated with Hedging Obligations (including amortization of fees),
(vii) dividends paid or payable in
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respect of any Disqualified Stock of the Company, (viii) cash dividends paid or
payable by the Company and all dividends paid or payable by Restricted
Subsidiaries, in each case in respect of all Preferred Stock held by Persons
other than the Company or a Wholly Owned Subsidiary, (ix) interest incurred in
connection with Investments in discontinued operations and (x) interest accruing
on any Indebtedness of any other Person to the extent such Indebtedness is
Guaranteed by the Company or any Restricted Subsidiary.
"Consolidated Net Income" means, for any period, the net income of the
Company and its consolidated Subsidiaries; PROVIDED, HOWEVER, that there shall
not be included in such Consolidated Net Income: (i) any net income of any
Person if such Person is not a Restricted Subsidiary, except that (A) subject to
the exclusion contained in clause (iv) below, the Company's equity in the net
income of any such Person for such period shall be included in such Consolidated
Net Income up to the aggregate amount of cash actually distributed by such
Person during such period to the Company or a Restricted Subsidiary as a
dividend or other distribution (subject, in the case of a dividend or other
distribution paid to a Restricted Subsidiary, to the limitations contained in
clause (iii) below) and (B) with respect to the calculation of EBITDA only, the
Company's equity in a net loss of any such Person for such period shall be
included in determining such Consolidated Net Income up to the aggregate amount
invested by the Company or any Restricted Subsidiary in such Person during such
period; (ii) any net income (or loss) of any Person acquired by the Company or a
Subsidiary of the Company in a pooling of interests transaction for any period
prior to the date of such acquisition; (iii) any net income of any Restricted
Subsidiary to the extent that such Restricted Subsidiary is subject to
restrictions, directly or indirectly, prohibiting the payment of dividends, the
repayment of intercompany debt and the making of distributions by such
Restricted Subsidiary, directly or indirectly, to the Company, except that (A)
subject to the exclusion contained in clause (iv) below, the Company's equity in
the net income of any such Restricted Subsidiary for such period shall be
included in such Consolidated Net Income up to the aggregate amount of cash
actually distributed by such Restricted Subsidiary during such period to the
Company or another Restricted Subsidiary as a dividend or other distribution
(subject, in the case of a dividend or other distribution paid to another
Restricted Subsidiary, to the limitation contained in this clause) and (B) the
Company's equity in a net loss of any such Restricted Subsidiary for such period
shall be included in determining such Consolidated Net Income up to the
aggregate amount invested by
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the Company or any Restricted Subsidiary in such Person during such period; (iv)
any gain or loss realized upon the sale or other disposition of any assets of
the Company or its consolidated Subsidiaries (including pursuant to any
sale-and-leaseback arrangement) which is not sold or otherwise disposed of in
the ordinary course of business and any gain or loss realized upon the sale or
other disposition of any Capital Stock of any Person; (v) extraordinary gains or
losses; and (vi) the cumulative effect of a change in accounting principles.
"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of the Company and its Restricted Subsidiaries, determined on a
consolidated basis in accordance with GAAP, as of the most recent fiscal quarter
of the Company for which financial statements are available, as (i) the par or
stated value of all outstanding Capital Stock of the Company plus (ii) paid-in
capital or capital surplus relating to such Capital Stock plus (iii) any
retained earnings or earned surplus less (A) any accumulated deficit and (B) any
amounts attributable to Disqualified Stock.
"Currency Agreement" means in respect of a Person any foreign exchange
contract, currency swap agreement or other similar agreement to which such
Person is a party or a beneficiary.
"Default" means any event which is, or after notice or passage of time
or both would be, an Event of Default.
"Depository" means The Depository Trust Company, its nominees and
their respective successors.
"Disqualified Stock" means, with respect to any Person, any Capital
Stock which by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable) or upon the happening of any event
(other than as a result of a Change of Control) (i) matures or is mandatorily
redeemable pursuant to a sinking fund obligation or otherwise, (ii) is
convertible into or exchangeable for Indebtedness or Disqualified Stock or (iii)
is redeemable at the option of the holder thereof, in whole or in part, in each
case on or prior to the Stated Maturity of the Securities; PROVIDED, HOWEVER,
that any Capital Stock that would not constitute Disqualified Stock but for
provisions thereof giving holders thereof the right to require such Person to
repurchase or redeem such Capital Stock upon the occurrence of an "asset sale"
or "change
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of control" occurring prior to the Stated Maturity of the Securities shall not
constitute Disqualified Stock if the "asset sale" or "change of control"
provisions applicable to such Capital Stock are not more favorable to the
holders of such Capital Stock than the provisions described under Section 4.6
and Section 4.8.
"EBITDA" for any period means the sum of Consolidated Net Income plus
Consolidated Interest Expense plus the following to the extent deducted in
calculating such Consolidated Net Income: (a) all income tax expense of the
Company, (b) depreciation expense, (c) amortization expense, and (d) all other
non-cash items reducing such Consolidated Net Income (excluding any non-cash
item to the extent it represents an accrual of, or reserve for, cash
disbursement for any subsequent period) less all non-cash items increasing such
Consolidated Net Income (such amount calculated pursuant to this clause (d) not
to be less than zero), in each case for such period. Notwithstanding the
foregoing, the provision for taxes based on the income or profits of, and the
depreciation and amortization of, a Subsidiary of the Company shall be added to
Consolidated Net Income to compute EBITDA only to the extent (and in the same
proportion) that the net income of such Subsidiary was included in calculating
Consolidated Net Income.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Security" shall have the meaning set forth in Appendix 1.
"Foreign Credit Agreement" means any revolving credit agreement,
invoice discounting, overdraft or guarantee facility or other similar
arrangement providing for the Incurrence of Indebtedness by any Foreign
Subsidiary, and the agreements governing such Indebtedness which may, in whole
or in part, be amended, renewed, extended, substituted, refinanced,
restructured, replaced (including, without limitation, any successive renewals,
extensions, substitutions, refinancing, restructuring, replacement, supplements
or other modifications of the foregoing).
"Foreign Subsidiary" means a Restricted Subsidiary that is
incorporated in a jurisdiction other than the United States or a State thereof
or the District of Columbia and with respect to which more than 80% of any of
its sales, earnings or assets (determined on a consolidated basis in accordance
with GAAP) are located in, generated from or derived from operations located in
territories outside of the United States of America and jurisdictions outside
the United States of America.
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"GAAP" means generally accepted accounting principles in the United
States of America as in effect as of the Issue Date, including those set forth
(i) in the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants, (ii) in statements and
pronouncements of the Financial Accounting Standards Board, (iii) in such other
statements by such other entity as approved by a significant segment of the
accounting profession, and (iv) in the rules and regulations of the SEC
governing the inclusion of financial statements (including pro forma financial
statements) in periodic reports required to be filed pursuant to Section 13 of
the Exchange Act, including opinions and pronouncements in staff accounting
bulletins and similar written statements from the accounting staff of the SEC.
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness of any Person and
any obligation, direct or indirect, contingent or otherwise, of such Person (i)
to purchase or pay (or advance or supply funds for the purchase or payment of)
such Indebtedness of such Person (whether arising by virtue of agreements to
keep-well, to purchase assets, goods, securities or services, to take-or-pay, or
to maintain financial statement conditions or otherwise) or (ii) entered into
for the purpose of assuring in any other manner the obligee of such Indebtedness
of the payment thereof or to protect such obligee against loss in respect
thereof (in whole or in part); PROVIDED, HOWEVER, that the term "Guarantee"
shall not include endorsements for collection or deposit in the ordinary course
of business. The term "Guarantee" used as a verb has a corresponding meaning.
The term "Guarantor" shall mean any Person Guaranteeing any obligation.
"Hedging Obligations" of any Person means the obligations of such
Person pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" or "Securityholder" means the Person in whose name a Security
is registered on the Registrar's books.
"Incur" means issue, assume, Guarantee, incur or otherwise become
liable for Indebtedness; PROVIDED, HOWEVER, that any Indebtedness of a Person
existing at the time such Person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be Incurred by such
Subsidiary at the time it becomes a Subsidiary. The term "Incurrence" when used
as a noun shall have a correlative meaning. The accretion of principal in a
non-interest bearing
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or other discount security shall be deemed the Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication), (i) the principal of and premium (if any)
in respect of (A) indebtedness of such Person for money borrowed and (B)
indebtedness evidenced by notes, debentures, bonds or other similar instruments
for the payment of which such Person is responsible or liable; (ii) all Capital
Lease Obligations of such Person and all Attributable Debt in respect of
Sale/Leaseback Transactions entered into by such Person; (iii) all obligations
of such Person issued or assumed as the deferred purchase price of property
(which purchase price is due more than one year after taking title of such
property), all conditional sale obligations of such Person and all obligations
of such Person under any title retention agreement (but excluding trade accounts
payable arising in the ordinary course of business); (iv) all obligations of
such Person for the reimbursement of any obligor on any letter of credit,
banker's acceptance or similar credit transaction (other than obligations with
respect to letters of credit securing obligations (other than obligations
described in clauses (i) through (iii) above) entered into in the ordinary
course of business of such Person to the extent such letters of credit are not
drawn upon, or, if and to the extent drawn upon, such drawing is reimbursed no
later than the tenth Business Day following receipt by such Person of a demand
for reimbursement following payment on the letter of credit); (v) the amount of
all obligations of such Person with respect to the redemption, repayment or
other repurchase of any Disqualified Stock or, with respect to any Subsidiary of
such Person, any Preferred Stock (but excluding, in each case, any accrued
dividends); (vi) all obligations of the type referred to in clauses (i) through
(v) of other Persons and all dividends of other Persons for the payment of
which, in either case, such Person is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise, including by means of any
Subsidiary Guaranty (but only to the extent of the amount actually guaranteed);
(vii) all obligations of the type referred to in clauses (i) through (vi) of
other Persons secured by any Lien on any property or asset of such Person
(whether or not such obligation is assumed by such Person), the amount of such
obligation being deemed to be the lesser of the value of such property or assets
or the amount of the obligation so secured; and (viii) to the extent not
otherwise included in this definition, Hedging Obligations of such Person. The
amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and the
maximum
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liability, upon the occurrence of the contingency giving rise to the obligation,
of any contingent obligations at such date. For purposes of clarification, (i)
Indebtedness shall not include undrawn commitments under the Bank Credit
Agreement or the Foreign Credit Agreement or any obligation to purchase Capital
Stock of LIW pursuant to option agreements, purchase agreements or otherwise or
the Company's Capital Stock pursuant to employment agreements and otherwise and
(ii) any Guarantee of Indebtedness shall not be deemed to be an Incurrence of
Indebtedness to the extent that the Indebtedness so Guaranteed is Incurred by
the Company or any Restricted Subsidiary as permitted pursuant to the terms of
this Indenture.
"Indenture" means this Indenture as amended or supplemented from time
to time by one or more supplemental indentures entered into pursuant to the
applicable provisions hereof or otherwise in accordance with the terms hereof.
"Interest Rate Agreement" means any interest rate swap agreement,
interest rate cap agreement or other financial agreement or arrangement designed
solely to protect the Company or any Restricted Subsidiary against fluctuations
in interest rates.
"Investment" in any Person means any direct or indirect advance, loan
(other than advances to customers in the ordinary course of business that are
recorded as accounts receivable on the balance sheet of the Person making the
advance or loan) or other extensions of credit (including by way of Subsidiary
Guaranty or similar arrangement) or capital contribution to (by means of any
transfer of cash or other property to others or any payment for property or
services for the account or use of others), or any purchase or acquisition of
Capital Stock, Indebtedness or other similar instruments issued by such Person.
For purposes of the definition of "Unrestricted Subsidiary," the definition of
"Restricted Payment" and Section 4.4, (i) "Investment" shall include the portion
(proportionate to the Company's equity interest in such Subsidiary) of the fair
market value of the net assets of any Subsidiary of the Company at the time that
such Subsidiary is designated an Unrestricted Subsidiary; PROVIDED, HOWEVER,
that if such designation is made in connection with the acquisition of such
Subsidiary or the assets owned by such Subsidiary, the "Investment" in such
Subsidiary shall be deemed to be the consideration paid in connection with such
acquisition; PROVIDED, FURTHER, HOWEVER, that upon a redesignation of such
Subsidiary as a Restricted Subsidiary, the Company shall be deemed to continue
to have a permanent "Investment" in an Unrestricted Subsidiary in an
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amount (if positive) equal to (x) the Company's "Investment" in such Subsidiary
at the time of such redesignation less (y) the portion (proportionate to the
Company's equity interest in such Subsidiary) of the fair market value of the
net assets of such Subsidiary at the time of such redesignation, and (ii) any
property transferred to or from an Unrestricted Subsidiary shall be valued at
its fair market value at the time of such transfer, in each case as determined
in good faith by the Board of Directors.
"Issue Date" means the date of original issuance of the Securities.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the State of New York are authorized or required by law to
close. If a payment date is a Legal Holiday, payment shall be made on the next
succeeding day that is not a Legal Holiday, and no interest shall accrue for the
intervening period. If a regular record date is a Legal Holiday, the record
shall not be affected.
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including any conditional sale or other title
retention agreement or lease in the nature thereof).
"Moody's" means Moody's Investors Service, Inc.
"Net Available Cash" from an Asset Disposition means cash payments
received therefrom (including any cash payments received by way of deferred
payment of principal pursuant to a note or installment receivable or otherwise,
but only as and when received, but excluding any other consideration received in
the form of assumption by the acquiring Person of Indebtedness or other
obligations relating to such properties or assets or received in any other
noncash form) in each case net of (i) all legal, title and recording tax
expenses, brokerage commissions, underwriting discounts or commissions or sales
commissions and other reasonable fees and expenses (including, without
limitation, fees and expenses of counsel, accountants and investment bankers)
related to such Asset Disposition or converting to cash any other proceeds
received, and any relocation and severance expenses as a result thereof, and all
Federal, state, provincial, foreign and local taxes required to be accrued or
paid as a liability under GAAP, as a consequence of such Asset Disposition, (ii)
all payments made on any Indebtedness which is secured by any assets subject to
such Asset Disposition or made in order to obtain a necessary consent
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to such Asset Disposition or to comply with applicable law, (iii) all
distributions and other payments required to be made to minority interest
holders in Subsidiaries or joint ventures as a result of such Asset Disposition
and (iv) appropriate amounts provided by the seller as a reserve, in accordance
with GAAP, against any liabilities associated with the property or other assets
disposed of in such Asset Disposition and retained by the Company or any
Restricted Subsidiary after such Asset Disposition, including, without
limitation, pension and other post-employment benefit liabilities, liabilities
related to environmental matters and liabilities under any indemnification
obligations associated with such Asset Disposition. Further, with respect to an
Asset Disposition by a Subsidiary which is not a Wholly Owned Subsidiary, Net
Available Cash shall be reduced pro rata for the portion of the equity of such
Subsidiary which is not owned by the Company.
"Net Cash Proceeds", with respect to any issuance or sale of Capital
Stock, means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof. In addition, for purposes of the calculations described in
Section 4.4, Net Cash Proceeds shall also mean any cash amounts paid to the
Company by members of management of the Company or its Subsidiaries in respect
of all promissory notes outstanding on the Issue Date and any amounts reflected
on the records of the Company as additional paid in capital or equity
contributions made in respect of employment-related stock price guarantees
entered into prior to the Issue Date.
"Officer" means the Chairman of the Board, any Vice Chairman, the
Chief Executive Officer, the Chief Financial Officer, the President, any
Executive Vice President, Vice President -- Finance (or any such other officer
that performs similar duties), or the Secretary of the Company.
"Officers' Certificate" means a certificate signed by two Officers,
one of which is the Chairman of the Board, the Chief Executive Officer, the
Chief Financial Officer, the President, any Executive Vice President (or any
such other officer that performs similar duties).
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company or the
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Trustee.
"Permitted Holders" means (i) William E. Simon & Sons, L.L.C. and its
Affiliates, (ii) Oaktree Capital Management, LLC and its Affiliates, including
any partnerships, separate accounts, or other entities managed by Oaktree and
(ii) Roger E. Payton. For purposes of clarification, The TCW Group, Inc.,
Logistical Simon, L.L.C., OCM Principal Opportunities Fund, L.P., TCW Special
Credits Fund V--The Principal Fund and their respective Affiliates are Permitted
Holders.
"Permitted Investment" means an Investment by the Company or any
Restricted Subsidiary in (i) a Restricted Subsidiary or a Person that will, upon
the making of such Investment, become a Restricted Subsidiary; PROVIDED,
HOWEVER, that the primary business of such Restricted Subsidiary is a Related
Business; (ii) another Person if as a result of such Investment such other
Person is merged or consolidated with or into, or transfers or conveys all or
substantially all of its assets to, the Company or a Restricted Subsidiary;
PROVIDED, HOWEVER, that such Person's primary business is a Related Business;
(iii) Temporary Cash Investments; (iv) receivables owing to the Company or any
Restricted Subsidiary if created or acquired in the ordinary course of business
and payable or dischargeable in accordance with customary trade terms; PROVIDED,
HOWEVER, that such trade terms may include such concessionary trade terms as the
Company or any such Restricted Subsidiary deems reasonable under the
circumstances; (v) payroll, travel and similar advances to cover matters that
are expected at the time of such advances ultimately to be treated as expenses
for accounting purposes and that are made in the ordinary course of business;
(vi) loans or advances to employees made in the ordinary course of business
consistent with past practices of the Company or such Restricted Subsidiary,
including without limitation, loans or advances made to employees in respect of
stock purchase or other employee benefit plans; (vii) stock, obligations or
securities received in settlement of debts created in the ordinary course of
business and owing to the Company or any Restricted Subsidiary or in
satisfaction of judgments and (viii) any Person to the extent such Investment
represents the non-cash portion of the consideration received for a disposition
of Assets as permitted under Section 4.6 and as described in clause (c) of the
definition of Asset Disposition.
"Permitted Liens" means, with respect to any Person, (a) pledges or
deposits by such Person under workers' compensation laws, unemployment insurance
laws or similar
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legislation, or good faith deposits in connection with bids, tenders, contracts
(other than for the payment of Indebtedness) or leases to which such Person is a
party, or deposits to secure public or statutory obligations of such Person or
deposits or cash or United States government bonds to secure surety or appeal
bonds to which such Person is a party, or deposits as security for contested
taxes or import duties or for the payment of rent, in each case incurred in the
ordinary course of business; (b) Liens imposed by law, such as carriers',
warehousemen's and mechanics' Liens, in each case for sums not yet due or being
contested in good faith by appropriate proceedings; (c) Liens arising out of
judgments or awards against such Person with respect to which such Person shall
then be proceeding with an appeal or other proceedings for review or time for
appeal has not yet expired; (d) Liens for taxes, assessments or other
governmental charges not yet subject to penalties for non-payment or which are
being contested in good faith by appropriate proceedings; (e) Liens in favor of
issuers of surety bonds or letters of credit issued pursuant to the request of
and for the account of such Person in the ordinary course of its business;
PROVIDED, HOWEVER, that such letters of credit do not constitute Indebtedness;
(f) survey exceptions, encumbrances, easements or reservations of, or rights of
others for licenses, rights of way, sewers, electric lines, telegraph and
telephone lines and other similar purposes, or zoning or other restrictions as
to the use of real properties or Liens incidental to the conduct of the business
of such Person or to the ownership of its properties which were not incurred in
connection with Indebtedness and which do not in the aggregate materially
adversely affect the value of said properties or materially impair their use in
the operation of the business of such Person; (g) Liens securing an Interest
Rate Agreement so long as the related Indebtedness is, and is permitted to be
under this Indenture, secured by a Lien on the same property securing the
Interest Rate Agreement; and (h) leases and subleases of real property which do
not interfere with the ordinary conduct of the business of such Person, and
which are made on customary and usual terms applicable to similar properties.
"Person" means any individual, corporation, limited liability company,
limited or general partnership, joint venture, association, joint-stock company,
trust, unincorporated organization, government or any agency or political
subdivision thereof or any other entity.
"Preferred Stock," as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes
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(however designated) which is preferred as to the payment of dividends, or as to
the distribution of assets upon any voluntary or involuntary liquidation or
dissolution of such corporation, over shares of Capital Stock of any other class
of such corporation.
"principal" of a Security means the principal of the Security plus the
premium, if any, payable on the Security which is due or overdue or is to become
due at the relevant time.
"Public Equity Offering" means an underwritten primary public offering
of common stock of the Company pursuant to an effective registration statement
under the Securities Act.
"Refinance" means, in respect of any Indebtedness, to refinance,
extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue
other Indebtedness in exchange or replacement for, such Indebtedness.
"Refinanced" and "Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means Indebtedness that Refinances any
Indebtedness of the Company or any Restricted Subsidiary existing on the Issue
Date or Incurred in compliance with this Indenture, including Indebtedness that
Refinances Refinancing Indebtedness; PROVIDED, HOWEVER, that (i) such
Refinancing Indebtedness has a Stated Maturity no earlier than the Stated
Maturity of the Indebtedness being Refinanced, (ii) such Refinancing
Indebtedness has an Average Life at the time such Refinancing Indebtedness is
Incurred that is equal to or greater than the Average Life of the Indebtedness
being Refinanced and (iii) such Refinancing Indebtedness has an aggregate
principal amount (or if Incurred with original issue discount, an aggregate
issue price) that is equal to or less than the aggregate principal amount (or if
Incurred with original issue discount, the aggregate accreted value) then
outstanding or committed (plus fees and expenses, including any premium and
defeasance costs) under the Indebtedness being Refinanced; PROVIDED, FURTHER,
HOWEVER, that Refinancing Indebtedness shall not include (x) Indebtedness of a
Restricted Subsidiary that Refinances Indebtedness of the Company or (y)
Indebtedness of the Company or a Restricted Subsidiary that Refinances
Indebtedness of an Unrestricted Subsidiary.
"Related Business" means any business related, ancillary or
complementary to the businesses of the Company on the Issue Date.
"Restricted Payment" with respect to any Person
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means (i) the declaration or payment of any dividends or any other distributions
of any sort in respect of its Capital Stock (including any payment in connection
with any merger or consolidation involving such Person), other than dividends or
distributions payable solely in its Capital Stock (other than Disqualified
Stock) and dividends or distributions payable solely to the Company or a
Restricted Subsidiary, and other than pro rata dividends or other distributions
made by a Subsidiary that is not a Wholly Owned Subsidiary to minority
stockholders (or owners of an equivalent interest in the case of a Subsidiary
that is an entity other than a corporation), (ii) the purchase, redemption or
other acquisition or retirement for value of any Capital Stock of the Company
held by any Person or of any Capital Stock of a Restricted Subsidiary held by
any Affiliate of the Company (other than a Restricted Subsidiary), including the
exercise of any option to exchange any Capital Stock (other than into Capital
Stock of the Company that is not Disqualified Stock), (iii) the purchase,
repurchase, redemption, defeasance or other acquisition or retirement for value,
prior to scheduled maturity, scheduled repayment or scheduled sinking fund
payment of any Subordinated Obligations (other than the purchase, repurchase or
other acquisition of Subordinated Obligations purchased in anticipation of
satisfying of a sinking fund obligation, principal installment or final
maturity, in each case due within one year of the date of acquisition) or (iv)
the making of any Investment in any Person (other than a Permitted Investment).
"Restricted Subsidiary" means any Subsidiary of the Company that is
not an Unrestricted Subsidiary.
"Sale/Leaseback Transaction" means an arrangement relating to property
now owned or hereafter acquired whereby the Company or a Restricted Subsidiary
transfers such property to a Person and the Company or a Restricted Subsidiary
leases it from such Person.
"SEC" means the Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of the Company secured
by a Lien. "Secured Indebtedness" of any Subsidiary Guarantor has a correlative
meaning.
"Securities" has the meaning set forth in the second paragraph of this
Indenture.
"Significant Subsidiary" means any Restricted Subsidiary that would be
a "Significant Subsidiary" of the
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Company within the meaning of Rule 1-02 under Regulation S-X promulgated by the
SEC.
"Stated Maturity" means, with respect to any security, the date
specified in such security as the fixed date on which the final payment of
principal of such security is due and payable, including pursuant to any
mandatory redemption provision (but excluding any provision providing for the
repurchase of such security at the option of the holder thereof upon the
happening of any contingency unless such contingency has occurred).
"Subordinated Obligation" means any Indebtedness of the Company
(whether outstanding on the Issue Date or thereafter Incurred) which is
subordinate or junior in right of payment to the Securities pursuant to a
written agreement to that effect. "Subordinated Obligation" of any Subsidiary
Guarantor has a correlative meaning.
"Subsidiary" means, in respect of any Person, any corporation,
association, limited liability company, limited or general partnership or other
business entity (x) of which more than 50% of the total voting power of shares
of Capital Stock or other interests (including partnership interests) entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, managers, general partners or trustees thereof is at the time owned
or controlled, directly or indirectly, by (i) such Person, (ii) such Person and
one or more Subsidiaries of such Person or (iii) one or more Subsidiaries of
such Person, or (y) that is consolidated for purposes of the Company's
consolidated financial statements.
"Subsidiary Guarantor" means each Restricted Subsidiary designated as
such on the signature pages of the Indenture and any other Restricted Subsidiary
that has issued a Subsidiary Guaranty.
"Subsidiary Guaranty" means the Guarantee by a Subsidiary Guarantor of
the Company's obligations with respect to the Securities.
"S&P" means Standard and Poor's Ratings Service.
"Temporary Cash Investments" means any of the following: (i) any
investment in direct obligations of the United States of America or any agency
thereof or obligations guaranteed by the United States of America or any agency
thereof, (ii) investments in time deposit accounts, certificates
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of deposit and money market deposits maturing within 180 days of the date of
acquisition thereof issued by a bank or trust company which is organized under
the laws of the United States of America, any state thereof or any foreign
country recognized by the United States, and which bank or trust company has
capital, surplus and undivided profits aggregating in excess of $10.0 million
(or the foreign currency equivalent thereof) and has outstanding debt which is
rated "A" (or such similar equivalent rating) or higher by at least one
nationally recognized statistical rating organization (as defined in Rule 436
under the Securities Act) or any money-market fund sponsored by a registered
broker dealer or mutual fund distributor, (iii) repurchase obligations with a
term of not more than 30 days for underlying securities of the types described
in clause (i) above entered into with a bank meeting the qualifications
described in clause (ii) above, (iv) investments in commercial paper, maturing
not more than 180 days after the date of acquisition, issued by a corporation
(other than an Affiliate of the Company) organized and in existence under the
laws of the United States of America or any foreign country recognized by the
United States of America with a rating at the time as of which any investment
therein is made of "P-1" (or higher) according to Moody's or "A-1" (or higher)
according to S&P and (v) investments in securities with maturities of six months
or less from the date of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States of America, or by any political
subdivision or taxing authority thereof, and rated at least "A" by S&P or "A" by
Moody's.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections 1
77aaa-77bbbb) as in effect on the date of this Indenture, except as provided in
Section 9.3.
"Trustee" means the party named as such in this Indenture until a
successor replaces it and, thereafter, means the successor.
"Trust Officer" means the Chairman of the Board, the President or any
other officer or assistant officer of the Trustee assigned by the Trustee to
administer its corporate trust matters.
"Uniform Commercial Code" means the New York Uniform Commercial Code
as in effect from time to time.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that
at the time of determination shall be designated an Unrestricted Subsidiary by
the Board of Directors
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in the manner provided below and (ii) any Subsidiary of an Unrestricted
Subsidiary. The Board of Directors may designate any Subsidiary of the Company
(including any newly acquired or newly formed Subsidiary) to be an Unrestricted
Subsidiary unless such Subsidiary or any of its Subsidiaries owns any Capital
Stock or Indebtedness of, or holds any Lien on any property of, the Company or
any other Restricted Subsidiary of the Company; PROVIDED, HOWEVER, that either
(A) the Subsidiary to be so designated has total assets of $1,000 or less or (B)
if such Subsidiary has assets greater than $1,000, such designation would be
permitted under Section 4.4. The Board of Directors may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; PROVIDED, HOWEVER, that
immediately after giving effect to such designation (x) if such Unrestricted
Subsidiary at such time has Indebtedness, the Company could Incur $1.00 of
additional Indebtedness under Section 4.3(a) and (y) no Default shall have
occurred and be continuing. Any such designation by the Board of Directors
shall be evidenced by the Company to the Trustee by promptly filing with the
Trustee a copy of the board resolution giving effect to such designation and an
officers' certificate certifying that such designation complied with the
foregoing provisions.
"U.S. Government Obligations" means securities that are (x) direct
obligations of the United States of America for the timely payment of which its
full faith and credit is pledged or (y) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the timely payment of which is unconditionally guaranteed as a full
faith and credit obligation by the United States of America, which, in either
case, are not callable or redeemable at the option of the issuer thereof, and
shall also include a depository receipt issued by a bank (as defined in Section
3(a)(2) of the Securities Act), as custodian with respect to any such U.S.
Government Obligation held by such custodian for the account of the holder of
such depository receipt, provided that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to the
holder of such depository receipt from any amount received by the custodian in
respect of the U.S. Government Obligation or the specific payment of principal
of or interest on the U.S. Government Obligation evidenced by such depository
receipt.
"Voting Stock" of a Person means all classes of Capital Stock or other
interests (including partnership interests) of such Person then outstanding and
normally entitled (without regard to the occurrence of any contingency) to vote
in
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the election of directors, managers or trustees thereof.
"Wholly Owned Subsidiary" means a Restricted Subsidiary all the
Capital Stock of which (other than directors' qualifying shares and shares held
by other Persons to the extent such shares are required by applicable law to be
held by a Person other than the Company or a Restricted Subsidiary) is owned by
the Company or one or more Wholly Owned Subsidiaries.
SECTION 1.2. OTHER DEFINITIONS.
Term Defined In Section
---- ------------------
"Affiliate Transaction" 4.7
"Bankruptcy Law" 6.1
"covenant defeasance option" 8.1(b)
"Custodian" 6.1
"Event of Default" 6.1
"Global Securities" 2.1(b)
"legal defeasance option" 8.1(b)
"Legal Holiday" 10.8
"Notice of Default" 6.1
"Offer" 4.6(b)
"Offer Amount" 4.6(d)
"Offer Period" 4.6(d)
"Participants" 2.6
"Paying Agent" 2.3
"Purchase Date" 4.6(c)
"Receipt Date" 4.6(a)
"Registrar" 2.3
"Securities Register" 2.3
"Successor Company" 5.1
SECTION 1.3. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT. This
Indenture is subject to the mandatory provisions of the TIA, which are
incorporated by reference in and made a part of this Indenture. The following
TIA terms have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
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"obligor" on the Securities means the Company and any other obligor on
the indenture securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule have the
meanings assigned to them by such definitions.
SECTION 1.4. RULES OF CONSTRUCTION. Unless the context otherwise
requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) "including" means including without limitation;
(5) words in the singular include the plural and words in the plural
include the singular;
(6) the principal amount of any non-interest-bearing or other
discount security at any date shall be the principal amount thereof that
would be shown on a balance sheet of the issuer dated such date prepared in
accordance with GAAP;
(7) all references to $, US$, dollars or United States dollars shall
refer to the lawful currency of the United States; and
(8) "herein", "hereof" and other words of similar import refer to
this Indenture as a whole and not to any particular Article, Section or
other subdivision.
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ARTICLE 2
THE SECURITIES
SECTION 2.1. FORM AND DATING. Provisions relating to the Initial
Securities, the Private Exchange Securities and the Exchange Securities are set
forth in Appendix 1, the Rule 144A/ Regulation S Appendix, attached hereto (the
"Appendix") which is hereby incorporated in and expressly made part of this
Indenture. The Initial Securities and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit A to the Appendix
which is hereby incorporated in and expressly made a part of this Indenture.
The Exchange Securities, the Private Exchange Securities and the Trustee's
certificate of authentication shall be substantially in the form of Exhibit B,
which is hereby incorporated in and expressly made a part of this Indenture.
The Securities may have notations, legends or endorsements requirement by law,
stock exchange rule, agreements to which the Company is subject, if any, or
usage (provided that any such notation, legend or endorsement in a form
acceptable to the Company). Each Security shall be dated the date of its
authentication The terms of the Securities set forth in the Appendix, Exhibit A
and Exhibit B are part of the terms of this Indenture.
SECTION 2.2. EXECUTION AND AUTHENTICATION. Two Officers of the
Company shall sign the Securities for the Company by manual or facsimile
signature. If an Officer whose signature is on a Security no longer holds that
office at the time the Trustee authenticates the Security, the Security shall be
valid nevertheless. A Security shall not be valid until an authorized signatory
of the Trustee manually signs the certificate of authentication on the Security.
The signature shall be conclusive evidence that the Security has been
authenticated under this Indenture. The Trustee shall authenticate and make
available for delivery Securities for original issue in an aggregate principal
amount of $110,000,000, upon a written order of the Company signed by an Officer
of the Company. Such order shall specify the amount of the Securities to be
authenticated and the date on which the original issue of Securities is to be
authenticated. The aggregate principal amount of Securities outstanding at any
time may not exceed that amount except as provided in Section 2.6. The Trustee
may appoint an authenticating agent acceptable to the Company to authenticate
the Securities, upon the consent of the Company to such appointment. Unless
limited by the terms of such appointment, an authenticating agent may
authenticate Securities whenever the Trustee may do so. Each reference in this
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Indenture to authentication by the Trustee includes authentication by such
agent. An authenticating agent has the same rights as any Registrar, Paying
Agent or agent for service of notices and demands.
SECTION 2.3. REGISTRAR AND PAYING AGENT. The Company shall maintain
an office or agency where Securities may be presented for registration of
transfer or for exchange (the "Registrar") and an office or agency where
Securities may be presented for payment (the "Paying Agent"). The Registrar,
acting on behalf of and as agent for the Company, shall keep a register (the
"Securities Register") of the Securities and of their transfer and exchange.
The Company may have one or more co-registrars and one or more additional paying
agents.
The term "Paying Agent" includes any additional paying agent. The
Company shall enter into an appropriate agency agreement with any Registrar,
Paying Agent or co-registrar not a party to this Indenture, which shall
incorporate the terms of the TIA. The agreement shall implement the provisions
of this Indenture that relate to such agent. The Company shall notify the
Trustee of the name and address of any such agent. If the Company fails to
maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be
entitled to appropriate compensation therefor pursuant to Section 7.7. The
Company may act as Paying Agent, Registrar, co-Registrar or transfer agent.
The Company initially appoints the Trustee as Registrar and Paying
Agent in connection with the Securities.
SECTION 2.4. PAYING AGENT TO HOLD MONEY IN TRUST. On or prior to
each due date of the principal and interest on any Security, the Company shall
deposit with the Paying Agent a sum sufficient to pay such principal and
interest when so becoming due. The Company shall require each Paying Agent
(other than the Trustee) to agree in writing that the Paying Agent shall hold in
trust for the benefit of Securityholders or the Trustee all money held by the
Paying Agent for the payment of principal of or interest on the Securities and
shall notify the Trustee of any default by the Company in making any such
payment. The Company at any time may require a Paying Agent to pay all money
held by it to the Trustee and to account for any funds disbursed by the Paying
Agent. Upon complying with this Section, the Paying Agent shall have no further
liability for the money delivered to the Trustee.
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SECTION 2.5. SECURITYHOLDER LISTS. The Trustee shall preserve in as
current a form as is reasonably practicable the most recent list available to it
of the names and addresses of Securityholders. If the Trustee is not the
Registrar, the Company shall furnish to the Trustee, in writing at least five
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of Securityholders;
PROVIDED that as long as the Trustee is the Registrar, no such list need be
furnished.
SECTION 2.6. REPLACEMENT SECURITIES. If a mutilated Security is
surrendered to the Trustee or Registrar or if the Holder of a Security claims
that the Security has been lost, destroyed or wrongfully taken, the Company
shall issue and the Trustee shall authenticate a replacement Security if the
requirements of Section 8-405 of the Uniform Commercial Code are met and the
Holder satisfies any other reasonable requirements of the Trustee and the
Company. Such Holder shall furnish an indemnity bond sufficient in the judgment
of the Company and the Trustee to protect the Company, the Trustee, the Paying
Agent, the Registrar and any co-registrar from any loss which any of them may
suffer if a security is replaced. The Company and the Trustee may charge the
Holder for their expenses in replacing a Security.
Every replacement Security issued pursuant to the terms of this
Section is an obligation of the Company under this Indenture.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 2.7. OUTSTANDING SECURITIES. Securities outstanding at any
time are all Securities authenticated by the Trustee except for those canceled
by it, those delivered to it for cancellation and those described in this
Section as not outstanding. Subject to the provisions of Section 11.6, a
Security does not cease to be outstanding because the Company or an Affiliate of
the Company holds the security.
If a Security is replaced pursuant to Section 2.6, it ceases to be
outstanding unless the Trustee and the Company receive proof satisfactory to
them that the replaced Security is held by a bona fide purchaser.
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If the Paying Agent segregates and holds in trust, in accordance with
this Indenture, on a redemption date or maturity date or, pursuant to Section
8.1(a), within 91 days prior thereto, money sufficient to pay all principal and
interest payable on that redemption or maturity date with respect to the
Securities (or portions thereof) to be redeemed or maturing, as the case may be,
then on and after such date such Securities (or portions thereof) cease to be
outstanding and on and after such redemption or maturity date interest on them
ceases to accrue.
SECTION 2.8. TEMPORARY SECURITIES. Until definitive Securities are
ready for delivery, the Company may prepare and the Trustee shall authenticate
temporary Securities. Temporary Securities shall be substantially in the form
of definitive Securities but may have variations that the Company considers
appropriate for temporary Securities. Without unreasonable delay, the Company
shall prepare and the Trustee shall authenticate definitive Securities and
deliver them in exchange for temporary securities.
SECTION 2.9. CANCELLATION. The Company at any time may deliver
Securities to the Trustee for cancellation. The Registrar and the Paying Agent
shall forward to the Trustee any Securities surrendered to them for registration
of transfer, exchange or payment. The Trustee and no one else shall cancel all
Securities surrendered for registration of transfer, exchange, payment or
cancellation and destroy such cancelled Securities and provide a destruction
certificate to the Company in respect of such cancelled Securities. The Trustee
shall from time to time provide the Company a list of all Securities that have
been canceled as requested by the Company. The Company may not issue new
Securities to replace Securities it has redeemed, paid or delivered to the
Trustee for cancellation.
SECTION 2.10. DEFAULTED INTEREST. If the Company defaults in a
payment of interest on the Securities, the Company shall pay defaulted interest
(plus interest on such defaulted interest to the extent lawful) in any lawful
manner. The Company may pay the defaulted interest to the persons who are
Securityholders on a subsequent special record date. The Company shall fix or
cause to be fixed any such special record date and payment date to the
reasonable satisfaction of the Trustee and shall promptly mail to each
Securityholder a notice that states the special record date, the payment date
and the amount of defaulted interest to be paid.
SECTION 2.11. CUSIP NUMBERS. The Company in issuing the Securities
may use "CUSIP" numbers (if then generally in
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use), and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption
as a convenience to Holders; provided that any such notice may state that no
representation is made as to the correctness of such numbers either as printed
on the Securities or as contained in any notice of a redemption and that
reliance may be placed only on the other identification numbers printed on the
Securities, and any such redemption shall not be affected by any defect in or
omission of such numbers. The Company will promptly notify the Trustee of any
change in the CUSIP numbers.
ARTICLE 3
REDEMPTION
SECTION 3.1. NOTICES TO TRUSTEE. If the Company elects to redeem
Securities pursuant to paragraph 5 of the Securities, they shall notify the
Trustee in writing of the redemption date, the principal amount of Securities to
be redeemed and the paragraph of the Securities pursuant to which the redemption
will occur. The Company shall give each notice to the Trustee provided for in
this Section not less than 30 not more than 60 days before the redemption date
unless the Trustee consents to a shorter period. Such notice shall be
accompanied by an Officers' Certificate from the Company to the effect that such
redemption will comply with the provisions herein.
SECTION 3.2. SELECTION OF SECURITIES TO BE REDEEMED. If fewer than
all the Securities are to be redeemed, the Trustee shall select the Securities
to be redeemed pro rata or by lot or by a method that complies with applicable
legal and securities exchange requirements, if any, and that the Trustee
considers fair and appropriate and in accordance with methods generally used at
the time of selection by fiduciaries in similar circumstances. The Trustee
shall make the selection from outstanding Securities not previously called for
redemption. The Trustee may select for redemption portions of the principal of
Securities that have denominations larger than $1,000. Securities and portions
of them the Trustee selects shall be in amounts of $1,000 or a whole multiple of
$1,000. Provisions of this Indenture that apply to Securities called for
redemption also apply to portions of Securities called for redemption. The
Trustee shall notify the Company promptly of the Securities or portions of
Securities to be redeemed. In the event the Company is required to make an
offer to repurchase Securities pursuant to Sections 4.6 or 4.8 and the amount
available for such offer is not evenly divisible by $1,000, the Trustee shall
promptly refund to the Company any remaining funds, which in no
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event will exceed $1,000.
SECTION 3.3. NOTICE OF REDEMPTION. At least 30 days but not more
than 60 days before a date for redemption of Securities, the Company shall mail
a notice of redemption by first-class mail to the registered address appearing
in the Security Register of each Holder of Securities to be redeemed. The
notice shall identify the Securities (including CUSIP numbers, if any) to be
redeemed and shall state:
(1) the redemption date;
(2) the redemption price;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(5) if fewer than all the outstanding Securities are to be redeemed,
the identification and principal amounts of the particular Securities to be
redeemed;
(6) that, unless the Company defaults in making such redemption
payment, interest on Securities (or portion thereof) called for redemption
ceases to accrue on and after the redemption date;
(7) the paragraph of the Securities pursuant to which the Securities
called for redemption are being redeemed;
(8) the CUSIP number, if any, printed on the Securities being
redeemed; and
(9) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the
Securities.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense. In such event,
the Company shall provide the Trustee with the information required by this
Section.
SECTION 3.4. EFFECT OF NOTICE OF REDEMPTION. Once notice of
redemption is mailed, Securities called for redemption become due and payable on
the redemption date and at the
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redemption price stated in the notice. Upon surrender to the Paying Agent, such
Securities shall be paid at the redemption price stated in the notice, plus
accrued interest to the redemption date. Such notice if mailed in the manner
herein provided shall be conclusively presumed to have been given, whether or
not the Holder receives such notice. Failure to give notice or any defect in
the notice to any Holder shall not affect the validity of the notice to any
other Holder.
SECTION 3.5. DEPOSIT OF REDEMPTION PRICE. Prior to 11:00 a.m. (New
York City time) on the redemption date, the Company shall deposit with the
Trustee or Paying Agent (or, if the Company or a Subsidiary is the Paying Agent,
shall segregate and hold in trust) money sufficient to pay the redemption price
of and accrued interest (if any) on all Securities or portions thereof to be
redeemed on that date other than Securities or portions of Securities called for
redemption which have been delivered by the Company to the Trustee for
cancellation.
SECTION 3.6. SECURITIES REDEEMED IN PART. Upon surrender of a
Security that is redeemed in part (with, if the Company or the Trustee so
requires, due endorsement by, or a written instrument of transfer in form
satisfactory to the Company and the Trustee duly executed by, the Holder thereof
or his attorney duly authorized in writing), the Company shall execute, and the
Trustee shall authenticate and deliver to the Holder of such Security without
service charge, a new Security or Securities of any authorized denomination as
requested by such Holder, in aggregate principal amount equal to and in exchange
for the unredeemed portion of the principal of the Security so surrendered.
ARTICLE 4
COVENANTS
SECTION 4.1. PAYMENT OF SECURITIES. The Company shall promptly pay
the principal of and interest on the Securities on the dates and in the manner
provided in the Securities and in this Indenture. Principal and interest shall
be considered paid on the date due if on such date the Trustee or the Paying
Agent holds in accordance with this Indenture money sufficient to pay all
principal and interest then due. The Company shall pay interest on overdue
principal at the rate specified therefor in the Securities, and it shall pay
interest on overdue installments of interest at the same rate to the extent
lawful.
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SECTION 4.2. SEC REPORTS. The Company shall file with the SEC and
provide to the Trustee and Securityholders, as their names appear in the
Security Register, within 15 days after it files them with the SEC, copies of
the annual reports and the information, documents and other reports which it is
required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange
Act. Notwithstanding that the Company may not be required to remain subject to
the reporting requirements of Section 13 or 15(d) of the Exchange Act, the
Company shall file with the SEC (unless the SEC will not accept such a filing)
and provide the Trustee and Securityholders with the annual reports and the
information, documents and other reports as are specified in Sections 13 and
15(d) of the Exchange Act and applicable to a U.S. corporation subject to such
Sections, such information, documents and other reports to be so filed and
provided at the times specified for the filing of such information, documents
and reports under such Sections. The Company also shall comply with the other
provisions of TIA Section 314(a).
Delivery of such reports, information and documents to the Trustee is
for informational purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
SECTION 4.3. LIMITATION ON INDEBTEDNESS. (a) (i) The Company shall
not Incur, directly or indirectly, any Indebtedness unless, on the date of such
Incurrence, the Consolidated Coverage Ratio exceeds 2.25 to 1.0 and (ii) none of
the Restricted Subsidiaries of the Company shall Incur, directly or indirectly,
any Indebtedness unless, on the date of such Incurrence, the Consolidated
Coverage Ratio exceeds 2.50 to 1.0.
(b) Notwithstanding Section 4.3(a), the Company and the Restricted
Subsidiaries may Incur any or all of the following Indebtedness:
(i) Indebtedness (including reimbursement obligations in respect of
letters of credit outstanding under the Bank Credit Agreement that are
Indebtedness) Incurred pursuant to any Bank Credit Agreement or any other
credit or loan agreement in an aggregate principal amount which, when taken
together (without duplication) with the principal amount of all
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other Indebtedness Incurred pursuant to this clause (i) and then
outstanding, does not exceed $100.0 million;
(ii) Indebtedness of the Company or any Restrict Subsidiary owed to
and held by the Company or any Restricted Subsidiary; PROVIDED, HOWEVER,
that any subsequent issuance or transfer of any Capital Stock which results
in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or
any subsequent transfer of such Indebtedness (other than to another
Restricted Subsidiary) shall be deemed, in each case, to constitute the
Incurrence of such Indebtedness by the Company or such Restricted
Subsidiary;
(iii) the Securities, the Subsidiary Guaranties or any Indebtedness
(including the Exchange Securities) the proceeds of which are used to
Refinance the Securities in full;
(iv) Indebtedness (including reimbursement obligations in respect of
letters of credit or guarantees outstanding under Foreign Credit Agreements
that are Indebtedness) Incurred pursuant to any Foreign Credit Agreement;
PROVIDED, that the aggregate principal amount of all such Indebtedness
outstanding at any time under all such Foreign Credit Agreements shall not
exceed $30.0 million;
(v) Indebtedness outstanding on the Issue Date (other than
Indebtedness described in clause (i), (ii), (iii) or (iv) of this Section
4.3(b));
(vi) Refinancing Indebtedness in respect of Indebtedness Incurred
pursuant to paragraph (a) of this Section 4.3 or pursuant to clause (iii)
or (v) of this Section 4.3 or this Section 4.3(b)(vi);
(vii) Indebtedness in respect of customs duties guarantees, equipment
leases, performance bonds, bankers' acceptances, letters of credit and
surety or appeal bonds entered into by the Company or any Restricted
Subsidiary in the ordinary course of business;
(viii) Hedging Obligations consisting of Interest Rate Agreements
directly related to Indebtedness permitted to be Incurred by the Company or
any Restricted Subsidiary hereunder;
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(ix) Indebtedness of the Company or any Restricted Subsidiary
consisting of obligations in respect of purchase price adjustments in
connection with the acquisition or disposition of assets by the Company or
any Restricted Subsidiary permitted hereunder;
(x) Indebtedness incurred by the Company or any Restricted
Subsidiary, constituting reimbursement obligations with respect to letters
of credit issued in the ordinary course of business, including, without
limitation, letters of credit in respect of workers' compensation claims,
self-insurance or similar matters, or other Indebtedness with respect to
reimbursement obligations regarding workers' compensation claims; provided,
however, that upon the drawing of such letters of credit or the Incurrence
of such Indebtedness, such obligations are reimbursed within 30 days
following such drawing or Incurrence; and
(xi) Indebtedness in an aggregate principal amount which, together
with all other Indebtedness of the Company and its Restricted Subsidiaries
outstanding on the date of such Incurrence (other than Indebtedness
permitted by clauses (i) through (x) above or Section 4.3(a)), does not
exceed $15.0 million at any one time outstanding.
(c) Notwithstanding the foregoing, neither the Company nor any
Restricted Subsidiary shall Incur any Indebtedness pursuant to the foregoing
Section 4.3(b) if the proceeds thereof are used, directly or indirectly, to
Refinance any Subordinated Obligations unless such Indebtedness shall be
subordinated to the Securities or the Subsidiary Guaranties, as applicable, to
at least the same extent as such Subordinated Obligations.
(d) For purposes of determining compliance with this Section 4.3, (i)
in the event that an item of Indebtedness meets the criteria of more than one of
the types of Indebtedness described above, the Company, in its sole discretion,
will classify such item of Indebtedness and only be required to include the
amount and type of such Indebtedness in one of the above clauses and (ii) an
item of Indebtedness may be divided and classified in more than one of the types
of Indebtedness described above.
SECTION 4.4. LIMITATION ON RESTRICTED PAYMENTS. (a) The Company
shall not, and shall not permit any Restricted Subsidiary to, directly or
indirectly, make a Restricted Payment
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if at the time the Company or such Restricted Subsidiary makes, and after giving
effect to, the proposed Restricted Payment: (i) a Default shall have occurred
and be continuing (or would result therefrom); (ii) the Company or such
Restricted Subsidiary, as applicable, is not able to Incur an additional $1.00
of Indebtedness under Section 4.3(a); or (iii) the aggregate amount of such
Restricted Payment and all other Restricted Payments since the Issue Date would
exceed the sum of:
(A) 50% of the Consolidated Net Income accrued during the period
(treated as one accounting period) from the beginning of the fiscal quarter
immediately following the fiscal quarter during which the Securities are
originally issued to the end of the most recently ended fiscal quarter for
which financial statements are available at the time of such Restricted
Payment (or, in case such Consolidated Net Income shall be a deficit, minus
100% of such deficit);
(B) the aggregate Net Cash Proceeds received by the Company from
capital contributions or the issuance or sale of its Capital Stock (other
than Disqualified Stock) subsequent to the Issue Date (other than an
issuance or sale to a Subsidiary of the Company);
(C) the amount by which Indebtedness of the Company is reduced on
the Company's balance sheet upon the conversion or exchange (other than by
a Subsidiary of the Company) subsequent to the Issue Date, of any
Indebtedness of the Company or a Restricted Subsidiary for Capital Stock
(other than Disqualified Stock) of the Company (less the amount of any
cash, or the fair market value of any other property, distributed by the
Company upon such conversion or exchange), whether pursuant to the terms of
such Indebtedness or pursuant to an agreement with a creditor to engage in
an equity for debt exchange; and
(D) an amount equal to the sum of (i) the net reduction in
Investments in Unrestricted Subsidiaries resulting from the receipt of
dividends, repayments of loans or advances or other transfers of assets or
proceeds from the disposition of Capital Stock or other distributions or
payments, in each case to the Company or any Restricted Subsidiary from, or
with respect to interests in Unrestricted Subsidiaries, and (ii) the
portion (proportionate to the Company's equity interest in such Subsidiary)
of the fair market value of the net
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assets of an Unrestricted Subsidiary at the time such Unrestricted
Subsidiary is designated a Restricted Subsidiary; PROVIDED, HOWEVER, that
the foregoing sum shall not exceed, in the case of any Unrestricted
Subsidiary, the amount of Investments previously made (and treated as a
Restricted Payment) by the Company or any Restricted Subsidiary in such
Unrestricted Subsidiary subsequent to the Issue Date.
(b) The provisions of Section 4.4(a) shall not prohibit:
(i) any purchase or redemption of Capital Stock or Subordinated
Obligations of the Company made by exchange for, or out of the proceeds of
the substantially concurrent sale of, Capital Stock of the Company (other
than (A) Disqualified Stock or (B) Capital Stock issued or sold to a
Subsidiary of the Company) or out of the proceeds of a substantially
concurrent capital contribution to the Company; PROVIDED, HOWEVER, that (x)
such purchase, capital contribution or redemption shall be excluded in the
calculation of the amount of Restricted Payments and (y) the Net Cash
Proceeds from such sale of Capital Stock or capital contribution shall be
excluded from Section 4.4(a)(iii)(B);
(ii) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Obligations made by
exchange for, or out of the net proceeds of the substantially concurrent
sale of, Indebtedness of the Company which is permitted to be Incurred
pursuant to Section 4.3; PROVIDED, HOWEVER, that such purchase, repurchase,
redemption, defeasance or other acquisition or retirement for value shall
be excluded in the calculation of the amount of Restricted Payments;
(iii) dividends paid within 60 days after the date of declaration
thereof if at such date of declaration such dividend would have complied
with Section 4.4(a); PROVIDED, HOWEVER, that such dividend will be included
in the calculation of the amount of Restricted Payments;
(iv) the repurchase of Capital Stock of the Company from directors,
officers or employees of the Company pursuant to the terms of an employee
benefit plan or employment or other agreement; provided that the aggregate
amount of all such repurchases shall not exceed $3.0 million in any fiscal
year, and $10.0 million in total;
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(v) up to an aggregate of $10.0 million of Restricted Payments by
the Company, so long as after giving effect to any such Restricted Payment
on a pro forma basis the Company could incur an additional $1.00 of
Indebtedness under Section 4.3(a)(i); and
(vi) Investments in Unrestricted Subsidiaries or joint ventures in
an amount not to exceed $10.0 million at any time outstanding.
SECTION 4.5. LIMITATION ON RESTRICTIONS ON DISTRIBUTIONS FROM
RESTRICTED SUBSIDIARIES. The Company shall not, and shall not permit any
Restricted Subsidiary to, create or otherwise cause or permit to exist or become
effective any consensual encumbrance or restriction on the ability of any
Restricted Subsidiary (a) to pay dividends or make any other distributions on
its Capital Stock to the Company or a Restricted Subsidiary or pay any
Indebtedness owed to the Company, (b) to make any loans or advances to the
Company or (c) to transfer any of its property or assets to the Company, except:
(i) any encumbrance or restriction pursuant to any Bank Credit
Agreement, any Foreign Credit Agreement or any other agreement in effect at
or entered into on the Issue Date;
(ii) any encumbrance or restriction with respect to a Restricted
Subsidiary pursuant to an agreement relating to any Indebtedness Incurred
by such Restricted Subsidiary on or prior to the date on which such
Restricted Subsidiary was acquired by the Company (other than Indebtedness
Incurred as consideration in, or to provide all or any portion of funds or
credit support utilized to consummate, the transaction or series of related
transactions pursuant to which such Restricted Subsidiary became a
Restricted Subsidiary or was acquired by the Company) and outstanding on
such date;
(iii) any encumbrance or restriction pursuant to an agreement
effecting a Refinancing Indebtedness Incurred pursuant to an agreement
referred to in clause (i) or (ii) of this Section 4.5 or this clause (iii)
or contained in any amendment to an agreement referred to in clause (i) or
(ii) of this Section 4.5 or this clause (iii); PROVIDED, HOWEVER, that the
encumbrances and restrictions with respect to any such Restricted
Subsidiary contained in any such refinancing agreement or amendment are no
less
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favorable to the Securityholders than encumbrances and restrictions with
respect to such Restricted Subsidiary contained in such agreements;
(iv) any such encumbrance or restriction (A) consisting of customary
non-assignment provisions in leases to the extent such provisions restrict
the subletting, assignment or transfer of the lease or the property leased
thereunder or in purchase money financing or (B) by virtue of any
Indebtedness, transfer, option or right with respect to, or any Lien on,
any property or assets of the Company or any Restricted Subsidiary not
otherwise prohibited by this Indenture;
(v) in the case of Section 4.5(c), restrictions contained in
security agreements or mortgages securing Indebtedness of a Restricted
Subsidiary to the extent such restrictions restrict the transfer of the
property subject to such security agreements or mortgages;
(vi) encumbrances or restrictions imposed by operation of any
applicable law, rule, regulation or order;
(vii) any restriction with respect to a Restricted Subsidiary imposed
pursuant to an agreement entered into for the sale or disposition of all or
substantially all the Capital Stock or assets of such Restricted Subsidiary
pending the closing of such sale or disposition; and
(viii) any restriction imposed during an event of default under an
agreement governing Indebtedness of any Foreign Subsidiary so long as such
Indebtedness is permitted by Section 4.3.
SECTION 4.6. LIMITATION ON SALES OF ASSETS AND SUBSIDIARY STOCK.
(a) The Company shall not, and shall not permit any Restricted Subsidiary to,
directly or indirectly, consummate any Asset Disposition unless (i) the Company
or such Restricted Subsidiary receives consideration at the time of such Asset
Disposition at least equal to the fair market value (including the value of all
non-cash consideration), as determined in good faith by the Board of Directors,
of the shares and assets subject to such Asset Disposition, and at least 75% of
the consideration thereof received by the Company or such Restricted Subsidiary
is in the form of cash or cash equivalents and (ii) an amount equal to 100% of
the Net Available Cash from such Asset Disposition is applied by the
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Company (or such Restricted Subsidiary, as the case may be) (A) FIRST, to either
(i) prepay, repay, redeem or purchase (and permanently reduce the commitments
under) Indebtedness under any Bank Credit Agreement or any Foreign Credit
Agreement or that is otherwise secured by its assets subject to such Asset
Disposition within one year from the later of the date of such Asset Disposition
or the receipt of such Net Available Cash (the "Receipt Date") or (ii) to the
extent the Company elects, to acquire Additional Assets, PROVIDED, HOWEVER, that
the Company shall be required to commit such Net Available Cash to the
acquisition of Additional Assets within one year from the later of the date of
such Asset Disposition or the Receipt Date and shall be required to consummate
the acquisition of such Additional Assets within 18 months from the Receipt
Date; (B) SECOND, to the extent of the balance of such Net Available Cash after
application in accordance with clause (A), to make an offer pursuant to
paragraph (b) below to the Holders to purchase Securities pursuant to and
subject to the conditions contained in this Indenture; and (C) THIRD, to the
extent of the balance of such Net Available Cash after application in accordance
with clauses (A) and (B) to any other application or use not prohibited by this
Indenture. Notwithstanding the foregoing provisions of this paragraph, the
Company and the Restricted Subsidiaries shall not be required to apply the Net
Available Cash in accordance with this paragraph except to the extent that the
aggregate Net Available Cash from all Asset Dispositions which is not applied in
accordance with this paragraph exceeds $5.0 million (at which time, the entire
unutilized Net Available Cash, and not just the amount in excess of $5.0
million, shall be applied pursuant to this paragraph). Pending application of
Net Available Cash pursuant to this Section 4.6, such Net Available Cash shall
be invested in Permitted Investments.
For the purposes of this Section 4.6, the following are deemed to be
cash or cash equivalents: (x) the express assumption of Indebtedness of the
Company or any Restricted Subsidiary and the release of the Company or such
Restricted Subsidiary from all liability on such Indebtedness in connection with
such Asset Disposition, and (y) securities received by the Company or any
Restricted Subsidiary from the transferee that are converted by the Company or
such Restricted Subsidiary into cash within 90 days of closing the transaction.
(b) In the event of an Asset Disposition that requires the purchase
of Securities pursuant to Section 4.6(a)(ii)(B), the Company will be required to
purchase Securities tendered pursuant to an offer by the Company for the
Securities (the "Offer") at a purchase price of 100% of their
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principal amount (without premium) plus accrued but unpaid interest in
accordance with the procedures (including prorating in the event of
oversubscription) set forth in Section 4.6(c). If the aggregate purchase price
of Securities tendered pursuant to the Offer is less than the Net Available Cash
allotted to the purchase of the Securities, the Company will apply the remaining
Net Available Cash in accordance with Section 4.6(a)(ii)(C) above. The Company
shall not be required to make an Offer to purchase Securities pursuant to this
Section 4.6 if the Net Available Cash available therefor after application of
the proceeds as provided in Sections 4.6(a)(ii)(A) and 4.6(a)(ii)(B) is less
than $5.0 million (which lesser amount shall be carried forward for purposes of
determining whether such an Offer is required with respect to any subsequent
Asset Disposition).
(c) Promptly, and in any event within 30 days after the Company
becomes obligated to make an Offer, the Company shall be obligated to deliver to
the Trustee and send, by first-class mail to each Holder, at the address
appearing in the Security Register, a written notice stating that the Holder may
elect to have his Securities purchased by the Company either in whole or in part
(subject to prorationing as hereinafter described in the event the Offer is
oversubscribed) in integral multiples of $1,000 of principal amount, at the
applicable purchase price. The notice, which shall govern the terms of the
Offer, shall include such disclosures as are required by law and shall specify
(i) that the Offer is being made pursuant to this Section 4.6; (ii) the purchase
price (including the amount of accrued interest, if any) for each Security and
the purchase date not less than 30 days nor more than 60 days after the date of
such notice (the "Purchase Date"); (iii) that any Security not tendered or
accepted for payment will continue to accrue interest in accordance with the
terms thereof; (iv) that, unless the Company defaults on making the payment, any
Security accepted for payment pursuant to the Offer shall cease to accrue
interest on and after the Purchase Date; (v) that Securityholders electing to
have Securities purchased pursuant to an Offer will be required to surrender
their Securities to the Paying Agent at the address specified in the notice at
least three business days prior to the Purchase Date and must complete any form
letter of transmittal proposed by the Company and acceptable to the Trustee and
the Paying Agent; (vi) that Securityholders will be entitled to withdraw their
election if the Paying Agent receives, not later than one business day prior to
the Purchase Date, a tested telex, facsimile transmission or letter setting
forth the name of the Securityholder, the principal amount of Securities the
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Securityholder delivered for purchase, the Security certificate number (if any)
and a statement that such Security holder is withdrawing its election to have
such Securities purchased; (vii) that if Securities in a principal amount in
excess of the aggregate principal amount which the Company has offered to
purchase are tendered pursuant to the Offer, the Company shall purchase
Securities on a PRO RATA basis among the Securities tendered (with such
adjustments as may be deemed appropriate by the Company so that only Securities
in denominations of $1,000 or integral multiples of $1,000 shall be acquired);
(viii) that Securityholders whose Securities are purchased only in part will be
issued new Securities equal in principal amount to the unpurchased portion of
the Securities surrendered; and (ix) the instructions that Security holders must
follow in order to tender their Securities.
(d) Not later than the date upon which written notice of an Offer is
delivered to the Trustee as provided below, the Company shall deliver to the
Trustee an Officers' Certificate as to (i) the amount of the Offer (the "Offer
Amount"), (ii) the allocation of the Net Available Cash from the Asset
Dispositions pursuant to which such Offer is being made and (iii) the compliance
of such allocation with the provisions of Section 4.6(a). Upon the expiration
of the period for which the Offer remains open (the "Offer Period"), the Company
shall deliver to the Trustee for cancellation the Securities or portions thereof
which have been properly tendered to and are to be accepted by the Company. Not
later than 11:00 a.m. (New York City time) on the Purchase Date, the Company
shall irrevocably deposit with the Trustee or with a paying agent (or, if the
Company is acting as Paying Agent, segregate and hold in trust) an amount in
cash sufficient to pay the Offer Amount for all Securities properly tendered to
and accepted by the Company. The Trustee shall, on the Purchase Date, mail or
deliver payment to each tendering Holder in the amount of the purchase price.
(e) Holders electing to have a Security purchased will be required to
surrender the Security, together with all necessary endorsements and other
appropriate materials duly completed, to the Company at the address specified in
the notice at least three Business Days prior to the Purchase Date. Holders
will be entitled to withdraw their election in whole or in part if the Trustee
or the Company receives not later than one Business Day prior to the Purchase
Date, a facsimile transmission or letter setting forth the name of the Holder,
the principal amount of the Security (which shall be $1,000 or an integral
multiple thereof) which was delivered for purchase by the Holder, the aggregate
principal amount of such Security (if
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any) that remains subject to the original notice of the Offer and that has been
or will be delivered for purchase by the Company and a statement that such
Holder is withdrawing his election to have such Security purchased. If at the
expiration of the Offer Period the aggregate principal amount of Securities
surrendered by Holders exceeds the Offer Amount, the Company shall select the
Securities to be purchased on a pro rata basis (with such adjustments as may be
deemed appropriate by the Company so that only securities in denominations of
$1,000, or integral multiples thereof, shall be purchased). Holders whose
Securities are purchased only in part will be issued new Securities equal in
principal amount to the unpurchased portion of the Securities surrendered.
(f) A Security shall be deemed to have been accepted for purchase at
the time the Trustee, directly or through an agent, mails or delivers payment
therefor to the surrendering Holder.
(g) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Securities pursuant to this
Section 4.6. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section 4.6, the Company shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this Section 4.6 by virtue
thereof.
SECTION 4.7. LIMITATION ON TRANSACTIONS WITH AFFILIATES. (a) The
Company shall not, and shall not permit any Restricted Subsidiary to, enter into
any transaction (including the purchase, sale, lease or exchange of any property
or the rendering of any service) with any Affiliate of the Company other than
the Company or a Restricted Subsidiary (an "Affiliate Transaction") unless the
terms thereof (1) are no less favorable to the Company or such Restricted
Subsidiary than those that could be obtained at the time of such transaction in
a comparable transaction in arm's-length dealings with a Person who is not such
an Affiliate, (2) if such Affiliate Transaction involves an amount in excess of
$2.0 million, (i) are set forth in writing and (ii) have been approved by a
majority of the members of the Board of Directors having no material personal
financial stake in such Affiliate Transaction, and (3) if such Affiliate
Transaction involves an amount in excess of $7.5 million, have been determined
by a nationally recognized investment banking firm to be fair, from a financial
standpoint,
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to the Company or its Restricted Subsidiary, as the case may be.
(b) The foregoing provisions of Section 4.7(a) shall not prohibit (i)
any Permitted Investment or Restricted Payment permitted to be made pursuant to
Section 4.4, or any payment or transaction specifically excepted from the
definition of Restricted Payment, (ii) any issuance of securities, or other
payments, awards or grants in cash, securities or otherwise pursuant to, or the
funding of, employment arrangements, collective bargaining arrangements,
employee benefit plans, health and life insurance plans, deferred compensation
plans, directors' and officers' indemnification agreements, retirement or
savings plans, stock options and stock ownership plans or any other similar
arrangement heretofore or hereafter entered into in the ordinary course of
business and approved by the Board of Directors of the Company or any Restricted
Subsidiary, (iii) the grant of stock options or similar rights to employees and
directors pursuant to plans approved by the Board of Directors or the board of
directors of the relevant Restricted Subsidiary (iv) loans or advances to
officers, directors or employees heretofore or hereafter entered into in the
ordinary course of business or pursuant to compensation plans or employment
agreements approved by the board of directors of the Company or any Restricted
Subsidiary, (v) the payment of reasonable fees to directors of the Company and
its Restricted Subsidiaries who are not employees of the Company or its
Restricted Subsidiaries, (vi) any transaction between the Company and a
Restricted Subsidiary or between Restricted Subsidiaries, (vii) the purchase of
or the payment of Indebtedness of or monies owed by the Company or any of its
Restricted Subsidiaries for goods or materials purchased, or services received,
in the ordinary course of business, (viii) management agreements between the
Company or any of its Restricted Subsidiaries and one or more Permitted Holders,
or any of their respective Affiliates providing for management fees not to
exceed $350,000 per year to WESS or any of its Affiliates and $350,000 per year
to Oaktree or any of its Affiliates; (ix) transaction fees to WESS, Oaktree, or
any of their respective Affiliates for services provided in connection with the
acquisition of a majority of the outstanding ordinary shares of LEP
International Worldwide Limited, the Bank Credit Agreement and the Offering in
an amount not to exceed $2.5 million in the aggregate and (x) the performance of
the agreement between WESS, W.E. Myers & Co. and William E. Myers, Jr. as in
effect on the Issue Date.
SECTION 4.8. CHANGE OF CONTROL. (a) Upon a the occurrence of
Change of Control, each Holder shall have the right to require that the Company
repurchase such Holder's
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Securities at a purchase price in cash equal to 101% of the principal amount
thereof, plus accrued and unpaid interest, if any, to the date of repurchase
(subject to the right of Holders of record on the relevant record date to
receive interest due on the related interest payment date), in accordance with
the terms contemplated in Section 4.8(b).
(b) Within 30 days following any Change of Control, unless notice of
redemption of the Securities has been given pursuant to paragraph 5 of the
Securities, the Company shall mail a notice to each Holder with a copy to the
Trustee stating:
(1) that a Change of Control has occurred and that such Holder has
the right to require the Company to purchase such Holder's Securities at a
purchase price in cash equal to 101% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the date of purchase (subject to
the right of Holders of record on a record date to receive interest on the
relevant interest payment date);
(2) the circumstances and relevant facts regarding such Change of
Control;
(3) the repurchase date (which shall be no earlier than 30 days nor
later than 60 days from the date such notice is mailed); and
(4) the instructions determined by the Company, consistent with
this Section, that a Holder must follow in order to have its Securities
repurchased.
(c) Holders electing to have a Security purchased will be required to
surrender the Security, together with all necessary endorsements and other
appropriate materials duly completed, to the Company at the address specified in
the notice at least three Business Days prior to the purchase date. Holders
will be entitled to withdraw their election if the Trustee or the Company
receives not later than one Business Day prior to the purchase date, a facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Security which was delivered for purchase by the Holder as to
which such notice of withdrawal is being submitted and a statement that such
Holder is withdrawing his election to have such Security purchased.
(d) On the purchase date, all Securities purchased by the Company
under this Section shall be delivered to the
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Trustee for cancellation, and the Company shall pay the purchase price plus
accrued and unpaid interest, if any, to the Holders entitled thereto.
(e) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Securities pursuant to this
Section. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section, the Company shall comply
with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations under this Section by virtue thereof.
(f) Notwithstanding the occurrence of a Change of Control, the
Company shall not be obligated to repurchase the Securities or otherwise comply
with this Section if the Company has irrevocably elected to redeem all the
Securities in accordance with Article Three; PROVIDED that the Company does not
default in its redemption obligations pursuant to such election.
SECTION 4.9. COMPLIANCE CERTIFICATE. The Company shall deliver to
the Trustee within 120 days after the end of each fiscal year of the Company an
Officers' Certificate, one of the signers of which shall be the principal
executive, financial or accounting officer of the Company, stating that in the
course of the performance by the signers of their duties as Officers of the
Company they would normally have knowledge of any Default and whether or not the
signers know of any Default that occurred during the previous year. If they do,
the certificate shall describe the Default, its status and what action the
Company is taking or proposes to take with respect thereto. The Company also
shall comply with TIA Section 314(a)(4).
SECTION 4.10. FURTHER INSTRUMENTS AND ACTS. Upon request of the
Trustee, the Company will execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
SECTION 4.11. LIMITATION ON LIENS. The Company shall not, and shall
not permit any Restricted Subsidiary to, directly or indirectly, create or
permit to exist any Lien on any of its property or assets, now owned or
hereafter acquired, securing any obligation unless concurrently with the
creation of such Lien effective provision is made to secure the Securities and
the Subsidiary Guaranties equally and ratably with such
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obligation for so long as such obligation is so secured; PROVIDED, that, if such
obligation is a Subordinated Obligation, the Lien securing such obligation shall
be subordinated and junior to the Lien securing the Securities and the
Subsidiary Guaranties with the same or lesser relative priority as such
Subordinated Obligation shall have been with respect to the Securities and the
Subsidiary Guaranties. The preceding restriction shall not require the Company
or any Restricted Subsidiary to secure the Securities or the Subsidiary
Guaranties if the Lien consists of the following:
(a) Liens on accounts receivable of the Company and its Restricted
Subsidiaries to secure Indebtedness permitted to be incurred pursuant to
paragraph (a) or clause (vii) or (x) of paragraph (b) of Section 4.3;
(b) Liens created by the Indenture, Liens under any Bank Credit
Agreement, Liens under any Foreign Credit Agreement and Liens existing as
of the Issue Date;
(c) Permitted Liens;
(d) Liens to secure Indebtedness issued by the Company or a
Restricted Subsidiary for the purpose of financing all or a part of the
purchase price of assets or property acquired or constructed in the
ordinary course of business after the Issue Date; PROVIDED, HOWEVER, that
(a) the aggregate principal amount (or accreted value in the case of
Indebtedness issued at a discount) of Indebtedness so issued shall not
exceed the lesser of the cost or fair market value, as determined in good
faith by the Board of Directors of the Company, of the assets or property
so acquired or constructed, (b) the Indebtedness secured by such Liens
shall have been permitted to be Incurred under Section 4.3 and (c) such
Liens shall not encumber any other assets or property of the Company or any
of its Restricted Subsidiaries other than such assets or property or any
improvement on such assets or property and shall attach to such assets or
property within 90 days of the construction or acquisition of such assets
or property;
(e) Liens on the assets or property of a Restricted Subsidiary
existing at the time such Restricted Subsidiary becomes a Restricted
Subsidiary and not issued as a result of (or in connection with or in
anticipation of) such Restricted Subsidiary becoming a Restricted
Subsidiary; PROVIDED, HOWEVER, that such Liens do not extend to or
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cover any other property or assets of the Company or any of its other
Restricted Subsidiaries;
(f) Liens securing Capital Lease Obligations Incurred in accordance
with Section 4.3;
(g) Liens with respect to Sale/Leaseback Transactions or other
Indebtedness permitted by Section 4.3(b)(xi);
(h) Liens securing Indebtedness issued to Refinance Indebtedness
which has been secured by a Lien permitted under this Indenture and is
permitted to be Refinanced under this Indenture; PROVIDED, HOWEVER, that
such Liens do not extend to or cover any property or assets of the Company
or any of its Restricted Subsidiaries not securing the Indebtedness so
Refinanced; or
(i) Liens on assets of the Company or any of its Restricted
Subsidiaries, securing Indebtedness in an aggregate principal amount not to
exceed $10.0 million.
SECTION 4.12. LIMITATION ON SALE/LEASEBACK TRANSACTIONS. The Company
shall not, and shall not permit any Restricted Subsidiary to, enter into any
Sale/Leaseback Transaction with respect to any property unless (i) the Company
or such Restricted Subsidiary would be (A) in compliance with Section 4.3
immediately after giving effect to such Sale/Leaseback Transaction and (B)
entitled to create a Lien on such property securing the Attributable Debt with
respect to such Sale/Leaseback Transaction without securing the Securities
pursuant to Section 4.11, (ii) the net proceeds received by the Company or any
Restricted Subsidiary in connection with such Sale/Leaseback Transaction are at
least equal to the fair market value (as determined by the Board of Directors of
the Company) of such property and (iii) the Company or such Restricted
Subsidiary applies the proceeds of such transaction in compliance with Section
4.6.
SECTION 4.13. LIMITATION ON SALE OR ISSUANCE OF CAPITAL STOCK OF
RESTRICTED SUBSIDIARIES. The Company shall not sell or otherwise dispose of any
shares of Capital Stock of a Restricted Subsidiary, and shall not permit any
Restricted Subsidiary, directly or indirectly, to issue or sell or otherwise
dispose of any shares of its Capital Stock to any Person (other than to the
Company or a Wholly Owned Subsidiary) or permit any Person (other than the
Company or a Wholly Owned Subsidiary) to own any Capital Stock of a Restricted
Subsidiary,
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if in either case as a result thereof such Restricted Subsidiary would no longer
be a Restricted Subsidiary; PROVIDED, HOWEVER, that this provision shall not
prohibit (x) the Company or any Restricted Subsidiary from selling, leasing or
otherwise disposing of all of the Capital Stock of any Restricted Subsidiary or
(y) the designation of a Restricted Subsidiary as an Unrestricted Subsidiary in
compliance with this Indenture. The foregoing shall not apply to any Lien
granted on the Capital Stock of a Restricted Subsidiary.
SECTION 4.14. PAYMENT OF TAXES AND OTHER CLAIMS. The Company shall,
and shall cause each of its Restricted Subsidiaries to, pay or discharge or
cause to be paid or discharged, before the same shall become delinquent, all
taxes, assessments and governmental charges levied or imposed upon its or its
Restricted Subsidiaries' income, profits or property; PROVIDED, HOWEVER, that
neither the Company nor any of its Subsidiaries shall be required to pay or
discharge or cause to be paid or discharged any such tax, assessment, charge or
claim whose amount, applicability or validity is being contested in good faith
by appropriate negotiations or proceedings and for which disputed amounts
adequate reserves have been made in accordance with GAAP.
SECTION 4.15. MAINTENANCE OF OFFICE OR AGENCY. The Company shall
maintain in the Borough of Manhattan, the City of New York, an office or agency
(which may be an office or agency of the Trustee, Registrar or co-Registrar),
where Securities may be surrendered for registration of transfer or exchange or
for presentation for payment and where notices and demands to or upon the
Company in respect of the Securities and this Indenture may be served. The
Company will give prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the address of the Trustee's office
in New York City as set forth in Section 11.2.
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The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for any
or all such purposes and may from time to time rescind such designations;
PROVIDED, HOWEVER, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, the City of New York, for such purposes. The Company will
give prompt written notice to the Trustee of any such designation or rescission
and of any change in the location of any such other office or agency.
The Company hereby initially designates the Trustee's office in New
York City as set forth in Section 11.2 as an agency of the Company in accordance
with Section 2.3.
SECTION 4.16. CORPORATE EXISTENCE. Subject to Article 5 and Section
4.6, the Company shall do or cause to be
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done, at its own cost and expense, all things necessary to, and will cause each
of its Restricted Subsidiaries to, preserve and keep in full force and effect
the corporate or partnership existence and rights (charter and statutory),
licenses and/or franchises of the Company and each of its Restricted
Subsidiaries; PROVIDED, HOWEVER, that the Company or any of its Restricted
Subsidiaries shall not be required to preserve any such rights, licenses or
franchises if the Board of Directors shall reasonably determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Company and the Restricted Subsidiaries, taken as a whole.
SECTION 4.17. FUTURE SUBSIDIARY GUARANTORS. The Company shall (a)
cause each Restricted Subsidiary that is organized and existing under the laws
of any State of the United States or the District of Columbia and that at any
time becomes an obligor or guarantor with respect to any obligations under one
or more Bank Credit Agreements to execute and deliver to the Trustee a
supplemental indenture reasonably satisfactory to the Trustee pursuant to which
such Restricted Subsidiary will Guarantee payment of the Notes on the terms set
forth in this Indenture and (b) deliver to the Trustee an Opinion of Counsel
stating that such supplemental indenture has been duly authorized, executed and
delivered by such Restricted Subsidiary and constitutes a legal, valid, binding
and enforceable obligation of such Restricted Subsidiary. Each Subsidiary
Guaranty will be limited in amount to an amount not to exceed the maximum amount
that can be Guaranteed by the applicable Subsidiary Guarantor without rendering
such Subsidiary Guaranty voidable under applicable law relating to fraudulent
conveyance or fraudulent transfer or similar laws affecting the rights of
creditors generally. After the execution and delivery of such supplemental
indenture, such Restricted Subsidiary shall be a Subsidiary Guarantor for all
purposes of this Indenture.
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ARTICLE 5
SUCCESSOR COMPANY
SECTION 5.1. MERGER, CONSOLIDATION AND SALE OF ASSETS. The Company
shall not, and shall not cause or permit any Subsidiary Guarantor to, and no
Subsidiary Guarantor (other than any Subsidiary Guarantor whose Subsidiary
Guaranty is to be released in accordance with the terms of the Subsidiary
Guaranty and the Indebtedness in connection with Section 4.6) shall consolidate
with or merge with or into, or convey, transfer or lease, in one transaction or
a series of transactions, its assets substantially as an entirety to, any Person
(other than, in the case of a Subsidiary Guarantor, to the Company or any other
Subsidiary Guarantor), unless:
(i) the resulting, surviving or transferee Person (the "Successor
Company") shall be a Person organized and existing under the laws of the
United States of America, any State thereof or the District of Columbia and
the Successor Company (if not the Company or, in the case of a Subsidiary
Guarantor, the Company or a Subsidiary Guarantor) shall expressly assume,
by an indenture supplemental hereto, executed and delivered to the Trustee,
in form satisfactory to the Trustee, all the obligations of the Company
under the Securities and this Indenture or of a Subsidiary Guarantor under
the applicable Subsidiary Guaranty, as applicable;
(ii) immediately after giving effect to such transaction (and
treating any Indebtedness which becomes an obligation of such Successor
Company or any Subsidiary as a result of such transaction as having been
Incurred by such Successor Company or such Subsidiary at the time of such
transaction), no Default shall have occurred and be continuing;
(iii) immediately after giving effect to such transaction, the
Successor Company will be able to Incur an additional $1.00 of Indebtedness
pursuant to Section 4.3(a)(i) in the case of the Company or Section
4.3(a)(ii) in the case of a Subsidiary Guarantor;
(iv) immediately after giving effect to such transaction, the
Successor Company shall have Consolidated Net Worth in an amount that is
not less than the Consolidated Net Worth of the Company or such Subsidiary
Guarantor, as applicable, prior to such transaction minus
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any costs incurred in connection with such transaction; and
(v) the Company or such Subsidiary Guarantor, as applicable, shall
have delivered to the Trustee an Officers' Certificate and an Opinion of
Counsel, each stating that such consolidation, merger or transfer and such
supplemental indenture (if any) comply with this Indenture.
Opinions of Counsel required to be delivered under this Section or
elsewhere in this Indenture may have qualifications customary for opinions of
the type required and counsel delivering such Opinions of Counsel may rely on
certificates of the Company or government or other officials customary for
opinions of the type required, including certificates certifying as to matters
of fact.
The Successor Company shall be the successor to the Company or the
Subsidiary Guarantor, as applicable, and shall succeed to, and be substituted
for, and may exercise every right and power of, the Company or the Subsidiary
Guarantor, as applicable, under this Indenture, but the predecessor company,
only in the case of a conveyance, transfer or lease, will not be released from
the obligation to pay the principal of and interest on the Securities.
Notwithstanding the foregoing, (i) any Subsidiary may consolidate
with, merge into or transfer all or part of its properties and assets to the
Company and (ii) the Company may merge with an Affiliate incorporated for the
purpose of reincorporating the Company in another jurisdiction to realize tax or
other benefits.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.1. EVENTS OF DEFAULT. An "Event of Default" occurs if:
(i) the Company defaults in the payment of interest on the
Securities when due, and such default continues for a period of 30 days;
(ii) the Company defaults in the payment of the principal of any
Security when due at its Stated Maturity, upon optional redemption, upon
required repurchase, upon
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acceleration or otherwise;
(iii) the Company fails to comply with Section 5.1;
(iv) the Company fails to comply for 30 days after the notice
specified below with Section 4.3, 4.4, 4.6, 4.8 or 4.13 (other than a
failure to purchase Securities when required under Section 4.8);
(v) the Company fails to comply for 60 days after the Company
receives the notice specified below with any of its other agreements in
this Indenture (other than those referred to in (i), (ii), (iii) or (iv)
above);
(vi) Indebtedness of the Company or any Significant Subsidiary is
not paid within any applicable grace period after final maturity or is
accelerated by the holders thereof because of a default and the total
amount of such Indebtedness unpaid or accelerated exceeds $10.0 million or
its foreign currency equivalent at the time;
(vii) the Company or any Significant Subsidiary of the Company
pursuant to or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief against it
in an involuntary case in which it is the debtor;
(C) consents to the appointment of a Custodian of it or for
any substantial part of its property; or
(D) makes a general assignment for the benefit of its
creditors;
or takes any comparable action under any foreign laws having a similar
effect or purpose as the Bankruptcy Laws;
(viii) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(A) is for relief against the Company or any Significant
Subsidiary of the Company in an involuntary case;
(B) appoints a Custodian of the Company or any
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Significant Subsidiary of the Company or for any substantial part of
the property of the Company or Significant Subsidiary; or
(C) orders the winding up or liquidation of the Company or
any Significant Subsidiary of the Company;
(or any similar relief is granted under any foreign laws having a similar
effect or purpose as the Bankruptcy Laws) and the order or decree remains
unstayed and in effect for 60 days; or
(ix) the rendering of any judgment or decree for the payment of
money in excess of $10.0 million, or its foreign equivalent at the time, is
entered against the Company or any Significant Subsidiary if such judgment
or decree remains outstanding for a period of 60 days following entry of
such judgment and is not discharged, bonded, waived or stayed within 30
days after notice thereof.
The foregoing will constitute Events of Default whatever the reason for any such
Event of Default and whether it is voluntary or involuntary or is effected by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body.
The term "Bankruptcy Law" means Title 11, United States Code, as
amended, or any similar federal or state law for the relief of debtors. The
term "Custodian" means any receiver, trustee, assignee, liquidator, custodian or
similar official under any Bankruptcy Law.
A Default under clause (iv) or (v) of this Section 6.1 will not
constitute an Event of Default until the Trustee or the Holders of at least 25%
in aggregate principal amount of the outstanding Securities notify the Company
of the Default and the Company does not cure such Default within the time
specified after receipt of such notice. Such notice must specify the Default,
demand that it be remedied and state that such notice is a "Notice of Default".
The Company shall deliver to the Trustee, within 30 days after the
occurrence thereof, written notice in the form of an Officers' Certificate of
any Event of Default under clause (vi) of this Section 6.1 and any event which
with the giving of notice or the lapse of time would become an Event of Default
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under clause (iv), (v) or (ix) of this Section 6.1, its status and what action
the Company is taking or proposes to take with respect thereto.
SECTION 6.2. ACCELERATION. If an Event of Default (other than an
Event of Default specified in Section 6.1(vii) or (viii) with respect to the
Company) occurs and is continuing, the Trustee by notice to the Company, or the
Holders of at least 25% in aggregate principal amount of the outstanding
Securities by notice to the Company and the Trustee, may declare the principal
of and accrued but unpaid interest on all the Securities to be due and payable.
Upon such a declaration, such principal and interest shall be due and payable
immediately. If an Event of Default specified in Section 6.1(vii) or (viii)
relating to the Company occurs and is continuing, the principal of and interest
on all the Securities will IPSO FACTO become and be immediately due and payable
without any declaration or other act on the part of the Trustee or any
Securityholders. The Holders of a majority in aggregate principal amount of the
outstanding Securities may by notice to the Trustee rescind an acceleration and
its consequences if the rescission would not conflict with any judgment or
decree and if all existing Events of Default have been cured or waived except
nonpayment of principal or interest that has become due solely because of
acceleration. No such rescission shall affect any subsequent Default or impair
any right consequent thereto.
SECTION 6.3. OTHER REMEDIES. If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy to collect the payment
of principal of or interest on the Securities or to enforce the performance of
any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Securityholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are, to the extent
permitted by law, cumulative.
SECTION 6.4. WAIVER OF PAST DEFAULTS. The Holders of a majority in
aggregate principal amount of the outstanding Securities by notice to the
Trustee may waive any past or existing Default and its consequences or
compliance with any provisions of this Indenture except (i) a Default in the
payment of the principal of or interest on a Security or (ii) a Default
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in respect of a provision that under Section 9.2 cannot be amended without the
consent of each Securityholder affected. When a Default is waived, it is deemed
cured, and any Event of Default arising therefrom shall be deemed to have been
cured, but no such waiver shall extend to any subsequent or other Default or
impair any consequent right.
SECTION 6.5. CONTROL BY MAJORITY. The Holders of a majority in
aggregate principal amount of the Securities then outstanding may direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee or of exercising any trust or power conferred on the Trustee.
However, the Trustee may refuse to follow any direction that conflicts with law
or this Indenture or, subject to Section 7.1, that the Trustee determines is
unduly prejudicial to the rights of other Securityholders or would involve the
Trustee in personal liability; PROVIDED, HOWEVER, that the Trustee may take any
other action deemed proper by the Trustee that is not inconsistent with such
direction. Prior to taking any action hereunder, the Trustee shall be entitled
to indemnification from the Securityholders satisfactory to it in its sole
discretion against all losses and expenses caused by taking or not taking such
action.
SECTION 6.6. LIMITATION ON SUITS. Except to enforce the right to
receive payment of principal, premium, if any, or interest when due, no Holder
may pursue any remedy with respect to this Indenture or the Securities unless:
(1) the Holder gives to the Trustee written notice stating that an
Event of Default is continuing;
(2) the Holders of at least 25% in aggregate principal amount of
the Securities then outstanding make a written request to the Trustee to
pursue the remedy;
(3) such Holder or Holders offer to the Trustee reasonable security
or indemnity against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer of security or indemnity; and
(5) the Holders of a majority in aggregate principal amount of the
Securities then outstanding do not give the Trustee a direction
inconsistent with the request during such 60-day period.
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A Securityholder may not use this Indenture to prejudice the rights of
another Securityholder or to obtain a preference or priority over another
Securityholder.
SECTION 6.7. RIGHTS OF HOLDERS TO RECEIVE PAYMENT. Notwithstanding
any other provision of this Indenture, the right of any Holder to receive
payment of principal of and interest on the Securities held by such Holder, on
or after the respective due dates expressed in the Securities, or to bring suit
for the enforcement of any such payment on or after such respective dates, shall
not be impaired or affected without the consent of such Holder.
SECTION 6.8. COLLECTION SUIT BY TRUSTEE. If an Event of Default
specified in Section 6.1(i) or (ii) occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company for the whole amount then due and owing (together with interest on any
unpaid interest to the extent lawful) and the amounts provided for in Section
7.7.
SECTION 6.9. TRUSTEE MAY FILE PROOFS OF CLAIM. The Trustee may file
such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee and the Securityholders
allowed in any judicial proceedings relative to the Company, its creditors or
its property and, unless prohibited by law or applicable regulations, may vote
on behalf of the Holders in any election of a trustee in bankruptcy or other
Person performing similar functions, and any Custodian in any such judicial
proceeding is hereby authorized by each Holder to make payments to the Trustee
and, in the event that the Trustee shall consent to the making of such payments
directly to the Holders, to pay to the Trustee any amount due it for the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and its counsel, and any other amounts due the Trustee under Section
7.7.
SECTION 6.10. PRIORITIES. If the Trustee collects any money or
property pursuant to this Article 6, it shall pay out the money or property in
the following order, subject to applicable law:
FIRST: to the Trustee for amounts due under Section 7.7;
SECOND: to Securityholders for amounts due and unpaid on the
Securities for principal and interest,
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ratably, without preference or priority of any kind, according to the
amounts due and payable on the Securities for principal and interest,
respectively; and
THIRD: to the Company.
The Trustee may, upon prior written notice to the Company, fix a
record date and payment date for any payment to Securityholders pursuant to this
Section. At least 15 days before such record date, the Company shall mail to
each Securityholder and the Trustee a notice that states the record date, the
payment date and amount to be paid.
SECTION 6.11. UNDERTAKING FOR COSTS. In any suit for the enforcement
of any right or remedy under this Indenture or in any suit against the Trustee
for any action taken or omitted by it as Trustee, a court in its discretion may
require the filing by any party litigant in the suit of an undertaking to pay
the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees and expenses, against any party
litigant in the suit, having due regard to the merits and good faith of the
claims or defenses made by the party litigant. This Section does not apply to a
suit by the Trustee, a suit by a Holder pursuant to Section 6.7 or a suit by
Holders of more than 10% in aggregate principal amount of the outstanding
Securities.
SECTION 6.12. WAIVER OF STAY OR EXTENSION LAWS. The Company (to the
extent it may lawfully do so) shall not at any time insist upon, or plead, or in
any manner whatsoever claim or take the benefit or advantage of, any stay or
extension law wherever enacted, now or at any time hereafter in force, which may
affect the covenants or the performance of this Indenture; and the Company (to
the extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law, and shall not hinder, delay or impede the execution
of any power herein granted to the Trustee, but shall suffer and permit the
execution of every such power as though no such law had been enacted.
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ARTICLE 7
TRUSTEE
SECTION 7.1. DUTIES OF TRUSTEE. (a) If an Event of Default has
occurred and is continuing, the Trustee shall, in the exercise of its the rights
and powers vested in it by this Indenture and use the same degree of care of a
prudent Person in the conduct of such Person's own affairs.
(b) Except during the continuance of an Event of Default:
(1) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
in the case of any such certificates or opinions which by any provision
hereof are specifically required to be furnished to the Trustee, the
Trustee shall examine the certificates and opinions to determine whether or
not they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(1) this paragraph does not limit the effect of paragraph (b) of
this Section;
(2) the Trustee shall not be liable for any error of judgment made
in good faith by a Trust Officer unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.5.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and
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(c) of this Section and to the provisions of the TIA.
(e) Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law.
(f) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(g) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section and to the provisions of the TIA.
SECTION 7.2. RIGHTS OF TRUSTEE. Subject to Section 7.1, (a) The
Trustee may rely on any document believed by it to be genuine and to have been
signed or presented by the proper person. The Trustee need not investigate any
fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on the
Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers; PROVIDED, HOWEVER, that the Trustee's conduct does not constitute
willful misconduct or negligence.
(e) The Trustee may consult with counsel of its selection, and the
advice or opinion of counsel with respect to legal matters relating to this
Indenture and the Securities shall be full and complete authorization and
protection from liability in respect to any action taken, omitted or suffered by
it hereunder in good faith and in accordance with the advice or opinion of such
counsel.
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(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders pursuant to this Indenture, unless such Holders shall have
offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by it in compliance with such
request or direction.
(g) Except with respect to Section 4.1, the Trustee shall have no
duty to inquire as to the performance of the Company's covenants in Article 4.
In addition, the Trustee shall not be deemed to have knowledge of any Default of
Event of Default except (i) any Default or Event of Default occurring pursuant
to Sections 6.1(i), 6.1(ii) and 4.1 or (ii) any Default or Event of Default of
which the Trustee shall have received written notification or obtained actual
knowledge.
SECTION 7.3. INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee in its
individual or any other capacity may become the owner or pledgee of Securities
and may otherwise deal with the Company or its respective Affiliates with the
same rights it would have if it were not Trustee. Any Paying Agent, Registrar,
co-registrar or co-paying agent may do the same with like rights. However, the
Trustee must comply with Sections 7.10 and 7.11.
SECTION 7.4. TRUSTEE'S DISCLAIMER. The Trustee shall not be
responsible for and makes no representation as to the validity or adequacy of
this Indenture or the Securities, it shall not be accountable for the Company's
use of the proceeds from the Securities, and it shall not be responsible for any
statement of the Company in this Indenture or in any document issued in
connection with the sale of the Securities or in the Securities other than the
Trustee's certificate of authentication.
SECTION 7.5. NOTICE OF DEFAULTS. If a Default occurs and is
continuing and is known to the Trustee, the Trustee shall mail to each
Securityholder notice of the Default within of 90 days after it occurs. Except
in the case of a Default in payment of principal of or interest on any Security,
the Trustee may withhold the notice if and so long as the board of directors,
the executive committee or a committee of its Trust Officers in good faith
determines that withholding notice is not opposed to the interests of
Securityholders.
SECTION 7.6. REPORTS BY TRUSTEE TO HOLDERS. As promptly as
practicable after each May 15 beginning with the May
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15 following the date of this Indenture, and in any event prior to July 15 in
each year, the Trustee shall mail to each Securityholder a brief report dated as
of May 15 that complies with TIA Section 313(a). The Trustee also shall comply
with TIA Section 313(b). Prior to delivery to the Holders, the Trustee shall
deliver to the Company a copy of any report it delivers to Holders pursuant to
this Section 7.6.
A copy of each report at the time of its mailing to Securityholders
shall be filed with the SEC and each stock exchange (if any) on which the
Securities are listed. The Company agrees to notify promptly the Trustee
whenever the Securities become listed on any stock exchange and of any delisting
thereof.
SECTION 7.7. COMPENSATION AND INDEMNITY. The Company shall pay to
the Trustee from time to time such reasonable compensation for its services as
the Company and the Trustee shall from time to time agree in writing. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee upon
request for all reasonable out-of-pocket expenses incurred or made by it,
including costs of collection, in addition to such compensation for its
services, except any such expense, disbursement or advance as may arise from its
negligence, willful misconduct or bad faith. Such expenses shall include the
reasonable compensation and expenses, disbursements and advances of the
Trustee's agents, counsel, accountants and experts. The Trustee shall provide
the Company reasonable notice of any expenditure not in the ordinary course of
business; PROVIDED that prior approval by the Company of any such expenditure
shall not be a requirement for the making of such expenditure nor for
reimbursement by the Company thereof. The Company shall indemnify each of the
Trustee and any predecessor Trustees against any and all loss, damage, claim,
liability or expense (including attorneys' fees and expenses) (other than taxes
applicable to the Trustee's compensation hereunder) incurred by it in connection
with the acceptance or administration of this trust and the performance of its
duties hereunder. The Trustee shall notify the Company promptly of any claim
for which it may seek indemnity. Failure by the Trustee to so notify the
Company shall not relieve the Company of its obligations hereunder. The Company
shall defend the claim and the Trustee shall cooperate in the defense of such
claim. The Trustee may have separate counsel at its own expense. The Company
need not reimburse any expense or indemnify against any loss, liability or
expense incurred by the Trustee through the Trustee's own willful misconduct,
negligence or bad faith. The
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Company need not pay for any settlement made without its written consent.
To secure the Company's payment obligations in this Section, the
Trustee shall have a lien prior to the Securities on all money or property held
or collected by the Trustee other than money or property held in trust to pay
principal of and interest on particular Securities.
The Company's payment obligations pursuant to this Section shall
survive the discharge of this Indenture. When the Trustee incurs expenses after
the occurrence of a Default specified in Section 6.1(vii) or (viii) with respect
to the Company, the expenses are intended to constitute expenses of
administration under the Bankruptcy Law.
SECTION 7.8. REPLACEMENT OF TRUSTEE. The Trustee may resign at any
time upon 30 days notice to the Company. The Holders of a majority in
principal amount of the Securities then outstanding-may remove the Trustee by so
notifying the Trustee and may appoint a successor Trustee. The Company shall
remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the Trustee
or its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns, is removed by the Company or by the Holders of
a majority in principal amount of the Securities and such Holders do not
reasonably promptly appoint a successor Trustee, or if a vacancy exists in the
office of Trustee for any reason (the Trustee in such event being referred to
herein as the retiring Trustee), the Company shall promptly appoint a successor
Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Securityholders. The retiring Trustee shall
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promptly transfer all property held by it as Trustee to the successor Trustee,
subject to the lien provided for in Section 7.7.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee or the Holders of
10% in principal amount of the Securities may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to this
Section, the Company's obligations under Section 7.7 shall continue for the
benefit of the retiring Trustee.
SECTION 7.9. SUCCESSOR TRUSTEE BY MERGER. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee, PROVIDED that such corporation shall
be eligible under this Article Seven and TIA Section 3.10(a).
In case at the time such successor or successors by merger, conversion
or consolidation to the Trustee shall succeed to the trusts created by this
Indenture any of the Securities shall have been authenticated but not delivered,
any such successor to the Trustee may adopt the certificate of authentication of
any predecessor trustee, and deliver such Securities so authenticated; and in
case at that time any of the Securities shall not have been authenticated, any
successor to the Trustee may authenticate such Securities either in the name of
any predecessor hereunder or in the name of the successor to the Trustee; and in
all such cases such certificates shall have the full force which it is anywhere
in the Securities or in this Indenture provided that the certificate of the
Trustee shall have.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION. The Trustee shall at
all times satisfy the requirements of TIA Section 310(a). The Trustee shall
have a combined capital and surplus of at least $25,000,000 as set forth in its
most recent published annual report of condition. The Trustee shall comply
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with TIA Section 310(b); PROVIDED, HOWEVER, that there shall be excluded from
the operation of TIA Section 310(b)(1) any indenture or indentures under which
other securities or certificates of interest or participation in other
securities of the Company are outstanding if the requirements for such exclusion
set forth in TIA Section 310(b)(1) are met.
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY. The
Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated.
ARTICLE 8
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.1. DISCHARGE OF LIABILITY ON SECURITIES; DEFEASANCE. This
Indenture will cease to be of further effect as to all outstanding Securities
when: (a) When (i) the Company delivers to the Trustee all outstanding
Securities (other than Securities replaced pursuant to Section 2.7) for
cancellation or (ii) all outstanding Securities have become due and payable,
whether at maturity or as a result of the mailing of a notice of redemption
pursuant to Article 3 hereof, and, in each case of this clause (ii), the
Company irrevocably deposits or causes to be deposited with the Trustee United
States dollars or U.S. Government Obligations sufficient to pay and discharge
the entire indebtedness on the Securities not heretofore delivered to the
Trustee for cancellation, for the principal of, premium, if any, and interest to
the date of deposit (other than Securities replaced pursuant to Section 2.7),
and if in either case the Company pays all other sums payable hereunder by the
Company, then this Indenture shall, subject to Section 8.1(c), cease to be of
further effect. The Trustee shall acknowledge satisfaction and discharge of
this Indenture on demand of the Company accompanied by an Officers' Certificate
and an Opinion of Counsel from the Company that all conditions precedent
provided herein for relating to satisfaction and discharge of this Indenture
have been complied with and at the cost and expense of the Company.
(b) Subject to Sections 8.1(c) and 8.2, the Company at its option at
any time may terminate (i) all of its
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obligations under the Securities and this Indenture ("legal defeasance option")
or (ii) its obligations under Article 4 (and any omission to comply with such
obligations shall not constitute a Default or Event of Default with respect to
the Securities) and the operation of Sections 6.1(vi), 6.1(vii) (but only with
respect to a Significant Subsidiary), 6.1(viii) (but only with respect to a
Significant Subsidiary), 6.1(ix) and 5.1(iii) and 5.1(iv) ("covenant defeasance
option"). The Company may exercise its legal defeasance option notwithstanding
its prior exercise of its covenant defeasance option.
If the Company exercises its legal defeasance option, payment of the
Securities may not be accelerated because of an Event of Default with respect
thereto. If the Company exercises its covenant defeasance option, payment of
the Securities may not be accelerated because of an Event of Default specified
in Sections 6.1(iv), 6.1(vi) and 6.1(vii) (but only with respect to a
Significant Subsidiary), or 6.1(viii) (but only with respect to a Significant
Subsidiary) or 6.1(ix) or because of the failure of the Company to comply with
5.1(iii) or 5.1(iv).
Upon satisfaction of the conditions set forth herein and upon request
of the Company, the Trustee shall acknowledge in writing the discharge of those
obligations that the Company terminates.
(c) Notwithstanding clauses (a) and (b) above, the Company's
obligations in Sections 2.3, 2.4, 2.5, 2.6, 2.7, 7.7, 7.8, 8.4, 8.5 and 8.6
shall survive until the Securities have been paid in full. Thereafter, the
Company's obligations in Sections 7.7, 8.4 and 8.5 shall survive.
SECTION 8.2. CONDITIONS TO DEFEASANCE. The Company may exercise its
legal defeasance option or its covenant defeasance option only if:
(1) the Company irrevocably deposits or causes to be deposited in
trust with the Trustee money or U.S. Government Obligations which, through
the scheduled payment of principal and interest in respect thereof in
accordance with their terms, will provide cash at such times and in such
amounts as will be sufficient to pay principal and interest when due on all
outstanding Securities (except Securities replaced pursuant to Section 2.6)
to maturity or redemption, as the case may be;
(2) the Company delivers to the Trustee a certificate from a
nationally recognized firm of
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independent accountants expressing their opinion that the payments of principal
and interest when due and without reinvestment on the deposited U.S. Government
Obligations plus any deposited money without investment will provide cash at
such times and in such amounts as will be sufficient to pay principal and
interest when due on all outstanding Securities (except Securities replaced
pursuant to Section 2.7) to maturity or redemption, as the case may be;
(3) 91 days pass after the deposit is made and during the 91-day
period no Default specified in Section 6.1(vii) or (viii) with respect to
the Company occurs which is continuing at the end of the period;
(4) the deposit does not constitute a default under any other
material agreement binding on the Company;
(5) the Company delivers to the Trustee an Opinion of Counsel to
the effect that the trust resulting from the deposit does not constitute,
or is qualified as, a regulated investment company under the Investment
Company Act of 1940;
(6) in the case of the legal defeasance option, the Company shall
have delivered to the Trustee an Opinion of Counsel stating that (i) the
Company have received from, or there has been published by, the Internal
Revenue Service a ruling, or (ii) since the date of this Indenture there
has been a change in the applicable federal income tax law, in either case
to the effect that, and based thereon such Opinion of Counsel shall confirm
that, the Securityholders will not recognize income, gain or loss for
federal income tax purposes as a result of such deposit and defeasance and
will be subject to federal income tax on the same amounts and in the same
manner and at the same times as would have been the case if such deposit
and defeasance had not occurred;
(7) in the case of the covenant defeasance option, the Company
shall have delivered to the Trustee an Opinion of Counsel to the effect
that the Securityholders will not recognize income, gain or loss for
federal income tax purposes as a result of such deposit and defeasance and
will be subject to federal income tax on the same amounts and in the same
manner and at the same times as would have been the case if such deposit
and defeasance had not occurred; and
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(8) the Company delivers to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent to
the defeasance and discharge of the Securities as contemplated by this
Article 8 have been complied with.
Opinions of Counsel required to be delivered under this Section may
have qualifications customary for opinions of the type required and counsel
delivering such Opinions of Counsel may rely on certificates of the Company or
government or other officials customary for opinions of the type required,
including certificates certifying as to matters of fact.
Before or after a deposit, the Company may make arrangements
satisfactory to the Trustee for the redemption of Securities at a future date in
accordance with Article 3.
SECTION 8.3. APPLICATION OF TRUST MONEY. The Trustee shall hold in
trust money or U.S. Government Obligations deposited with it pursuant to this
Article 8. It shall apply the deposited money and the money from U.S.
Government Obligations either directly or through the Paying Agent (including
the Company acting as its own Paying Agent as the Trustee may determine) and in
accordance with this Indenture to the payment of principal of and interest on
the Securities.
SECTION 8.4. REPAYMENT TO COMPANY. The Trustee and the Paying Agent
shall notify the Company of any excess money or Securities held by them at any
time and shall promptly turn over to the Company upon request any excess money
or securities held by them at any time.
Subject to any applicable abandoned property law, the Trustee and the
Paying Agent shall pay to the Company upon written request any money held by
them for the payment of principal or interest that remains unclaimed for two
years, and, thereafter, Securityholders entitled to the money must look to the
Company for payment as general creditors.
SECTION 8.5. INDEMNITY FOR GOVERNMENT OBLIGATIONS. The Company shall
pay and shall indemnify the Trustee against any tax, fee or other charge imposed
on or assessed against deposited U.S. Government Obligations or the principal
and interest received on such U.S. Government Obligations other than any such
tax, fee or other charge which by law is for the account of the Holders of the
defeased Securities; PROVIDED that the Trustee shall be entitled to charge any
such tax, fee or other charge to such Holder's account.
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SECTION 8.6. REINSTATEMENT. If the Trustee or Paying Agent is unable
to apply any money or U.S. Government Obligations in accordance with this
Article 8 by reason of any legal proceeding or by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Company's obligations under this
Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to this Article 8 until such time as the Trustee
or Paying Agent is permitted to apply all such money or U.S. Government
Obligations in accordance with this Article 8; PROVIDED, HOWEVER, that, (a) if
the Company has made any payment of interest on or principal of any Securities
following the reinstatement of their obligations, the Company shall be
subrogated to the rights of the Holders of such Securities to receive such
payment from the money or U.S. Government Obligations held by the Trustee or
Paying Agent and (b) unless otherwise required by any legal proceeding or any
order or judgment of any court or governmental authority, the Trustee or Paying
Agent shall return all such money and U.S. Government Obligations to the Company
promptly after receiving a written request therefor at any time, if such
reinstatement of the Company's obligations has occurred and continues to be in
effect.
ARTICLE 9
AMENDMENTS
SECTION 9.1. WITHOUT CONSENT OF HOLDERS. The Company and the Trustee
may amend this Indenture or the Securities without notice to or consent of any
Securityholder:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to comply with Article 5;
(3) to provide for uncertificated Securities in addition to or in
place of certificated Securities; PROVIDED, HOWEVER, that the
uncertificated Securities are issued in registered form for purposes of
Section 163(f) of the Code or in a manner such that the uncertificated
Securities are as described in Section 163(f)(2)(B) of the Code;
(4) to add guarantees with respect to the Securities, including the
Subsidiary Guaranties;
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(5) to secure the Securities;
(6) to add to the covenants of the Company or the Subsidiary
Guarantors for the benefit of the Holders or to surrender any right or
power herein conferred upon the Company or the Subsidiary Guarantors;
(7) to make any change that does not adversely affect the rights of
any Securityholder; or
(8) to comply with any requirements of the SEC in connection with
qualifying this Indenture under the TIA.
After an amendment under this Section becomes effective, the Company
shall mail to Securityholders a notice briefly describing such amendment. The
failure to give such notice to all Securityholders, or any defect therein, shall
not impair or affect the validity of an amendment under this section.
SECTION 9.2. WITH CONSENT OF HOLDERS. The Company and the Trustee
may amend this Indenture or the Securities without notice to any Securityholder
but with the written consent of the Holders of at least a majority in principal
amount of the Securities then outstanding. However, without the consent of each
Holder of an outstanding Security affected thereby, an amendment may not:
(1) reduce the amount of Securities whose Holders must consent to
an amendment;
(2) reduce the rate of or extend the time for payment of interest
on any Security;
(3) reduce the principal of or extend the Stated Maturity of any
Security;
(4) reduce the premium payable upon the redemption of any Security
or change the time at which any Security may be redeemed in accordance with
Article 3;
(5) make any Security payable in money other than that stated in
the Security;
(6) impair the right of any Holder to receive payment of principal
of and interest on such Holder's Securities on or after the due dates
therefor or to institute suit for the enforcement of any payment on or
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with respect to such Holder's Securities;
(7) make any change in Section 6.4 or 6.7 or the second sentence of
this Section; or
(8) affect the ranking of the Securities in any material respect.
The consent of the Holders under this Section is not necessary to
approve the particular form of any proposed amendment. It is sufficient if such
consent approves the substance of the proposed amendment.
After an amendment under this Section becomes effective, the Company
shall mail to Securityholders a notice briefly describing such amendment.
However, the failure to give such notice to all Securityholders, or any defect
therein, shall not impair or affect the validity of an amendment under this
Section.
SECTION 9.3. COMPLIANCE WITH TRUST INDENTURE ACT. Every amendment to
this Indenture or the Securities shall comply with the TIA as then in effect.
SECTION 9.4. REVOCATION AND EFFECT OF CONSENTS AND WAIVERS. A
consent to an amendment or a waiver by a Holder of a Security shall bind the
Holder and every subsequent Holder of that Security or portion of the Security
that evidences the same debt as the consenting Holder's Security, even if
notation of the consent or waiver is not made on the Security. An amendment or
waiver becomes effective once the requisite number of consents are received by
the Company or the Trustee. After an amendment or waiver becomes effective, it
shall bind every Securityholder.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Securityholders entitled to give their consent or
take any other action described above or required or permitted to be taken
pursuant to this Indenture. If a record date is fixed, then notwithstanding the
immediately preceding paragraph, those Persons who were Securityholders at such
record date (or their duly designated proxies), and only those Persons, shall be
entitled to give such consent or to revoke any consent previously given or to
take any such action, whether or not such Persons continue to be Holders after
such record date. No such consent shall be valid or effective for more than 120
days after such record date.
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SECTION 9.5. NOTATION ON OR EXCHANGE OF SECURITIES. If an amendment
changes the terms of a Security, the Trustee may require the Holder of the
Security to deliver it to the Trustee. The Trustee may place an appropriate
notation on the Security regarding the changed terms and return it to the
Holder. Alternatively, if the Company or the Trustee so determine, the Company
in exchange for the Security shall issue and the Trustee shall authenticate a
new Security that reflects the changed terms. Failure to make the appropriate
notation or to issue a new Security shall not affect the validity of such
amendment.
SECTION 9.6. TRUSTEE TO SIGN AMENDMENTS. The Trustee shall sign any
amendment authorized pursuant to this Article 9 if the amendment does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
If it does, the Trustee may but need not sign it. In signing such amendment the
Trustee shall be entitled to receive indemnity reasonably satisfactory to it and
to receive, and (subject to Section 7.1) shall be fully protected in relying
upon, an Officers' Certificate and an Opinion of Counsel stating that such
amendment complies with the provisions of Article 9 of this Indenture.
ARTICLE 10
SUBSIDIARY GUARANTIES
SECTION 10.1. GUARANTIES. Each Subsidiary Guarantor hereby
unconditionally and irrevocably guarantees, jointly and severally, to each
Holder and to the Trustee and its successors and assigns (a) the full and
punctual payment of principal of and interest on the Securities when due,
whether at maturity, by acceleration, by redemption or otherwise, and all other
monetary obligations of the Company under this Indenture and the Securities and
(b) the full and punctual performance within applicable grace periods of all
other obligations of the Company under this Indenture and the Securities (all
the foregoing being hereinafter collectively called the "Obligations"). Each
Subsidiary Guarantor further agrees that the Obligations may be extended or
renewed, in whole or in part, without notice or further assent from such
Subsidiary Guarantor and that such Subsidiary Guarantor will remain bound under
this Article 10 notwithstanding any extension or renewal of any Obligation.
Each Subsidiary Guarantor waives presentation to, demand of, payment
from and protest to the Company of any of the Obligations and also waives notice
of protest for nonpayment. Each Subsidiary Guarantor waives notice of any
default under the
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Securities or the Obligations. The obligations of each Subsidiary Guarantor
hereunder shall not be affected by (a) the failure of any Holder or the Trustee
to assert any claim or demand or to enforce any right or remedy against the
Company or any other Person under this Indenture, the Securities or any other
agreement or otherwise; (b) any extension or renewal of any thereof; (c) any
rescission, waiver, amendment or modification of any of the terms or provisions
of this Indenture, the Securities or any other agreement; (d) the release of any
security held by any Holder or the Trustee for the Obligations or any of them;
(e) the failure of any Holder or the Trustee to exercise any right or remedy
against any other guarantor of the Obligations; or (f) any change in the
ownership of such Subsidiary Guarantor.
Each Subsidiary Guarantor further agrees that its Subsidiary Guaranty
herein constitutes a guarantee of payment, performance and compliance when due
(and not a guarantee of collection) and waives any right to require that any
resort be had by any Holder or the Trustee to any security held for payment of
the Obligations.
Except as expressly set forth in Sections 8.1(b), 10.2 and 10.6, the
obligations of each Subsidiary Guarantor hereunder shall not be subject to any
reduction, limitation, impairment or termination for any reason, including any
claim of waiver, release, surrender, alteration or compromise, and shall not be
subject to any defense of setoff, counterclaim, recoupment or termination
whatsoever or by reason of the invalidity, illegality or unenforceability of the
Obligations or otherwise. Without limiting the generality of the foregoing, the
obligations of each Subsidiary Guarantor herein shall not be discharged or
impaired or otherwise affected by the failure of any Holder or the Trustee to
assert any claim or demand or to enforce any remedy under this Indenture, the
Securities or any other agreement, by any waiver of modification of any thereof,
by any default, failure or delay, willful or otherwise, in the performance of
the obligations, or by any other act or thing or omission or delay to do any
other act or thing which may or might in any manner or to any extent vary the
risk of such Subsidiary Guarantor or would otherwise operate as a discharge of
such Subsidiary Guarantor as a matter of law or equity.
Each Subsidiary Guarantor further agrees that its Guarantee herein
shall continue to be effective or be reinstated, as the case may be, if at any
time payment, or any part thereof, of principal of or interest on any Obligation
is rescinded or must otherwise be restored by any Holder or the
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Trustee upon the bankruptcy or reorganization of the Company or otherwise.
In furtherance of the foregoing and not in limitation of any other
right which any Holder or the Trustee has at law or in equity against any
Subsidiary Guarantor by virtue hereof, upon the failure of the Company to pay
the principal of or interest on any Obligation when and as the same shall become
due, whether at maturity, by acceleration, by redemption or otherwise, or to
perform or comply with any other Obligation, each Subsidiary Guarantor hereby
promises to and will, upon receipt of written demand by the Trustee, forthwith
pay, or cause to be paid, in cash to the Holders or the Trustee an amount equal
to the sum of (i) the unpaid amount of such Obligations, (ii) accrued and unpaid
interest on such Obligations (but only to the extent not prohibited by law) and
(iii) all other monetary Obligations of the Company to the Holders and the
Trustee.
Each Subsidiary Guarantor agrees that, as between it, on the one hand,
and the Holders and the Trustee, on the other hand, (x) the maturity of the
Obligations Guaranteed hereby may be accelerated as provided in Article 6 for
the purposes of such Subsidiary Guarantor's Subsidiary Guaranty herein,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of any Obligations Guaranteed hereby, and (y) in the
event of any declaration of acceleration of such obligations as provided in
Article 6, such Obligations (whether or not due and payable) shall forthwith
become due and payable by such Subsidiary Guarantor for the purposes of this
Section.
Each Subsidiary Guarantor also agrees to pay any and all costs and
expenses (including reasonable attorneys' fees) incurred by the Trustee or any
Holder in enforcing any rights under this Section.
SECTION 10.2. LIMITATION ON LIABILITY. Any term or provision of this
Indenture to the contrary notwithstanding, the maximum, aggregate amount of the
Obligations guaranteed hereunder by any Subsidiary Guarantor shall not exceed
the maximum amount that can be hereby guaranteed without rendering this
Indenture or the Guarantee, as they relate to such Subsidiary Guarantor,
voidable under applicable law relating to fraudulent conveyance or fraudulent
transfer or similar laws affecting the rights of creditors generally.
SECTION 10.3. SUCCESSORS AND ASSIGNS. This
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Article 10 shall be binding upon each Subsidiary Guarantor and its successors
and assigns and shall enure to the benefit of the successors and assigns of the
Trustee and the Holders and, in the event of any transfer or assignment of
rights by any Holder or the Trustee, the rights and privileges conferred upon
that party in this Indenture and in the Securities shall automatically extend to
and be vested in such transferee or assignee, all subject to the terms and
conditions of this Indenture.
SECTION 10.4. NO WAIVER Neither a failure nor a delay on the part of
either the Trustee or the Holders in exercising any right, power or privilege
under this Article 10 shall operate as a waiver thereof, nor shall a single or
partial exercise thereof preclude any other or further exercise of any right,
power or privilege. The rights, remedies and benefits of the Trustee and the
Holders herein expressly specified are cumulative and not exclusive of any other
rights, remedies or benefits which either may have under this Article 10 at law,
in equity, by statute or otherwise.
SECTION 10.5. MODIFICATION. No modification, amendment or waiver of
any provision of this Article 10, nor the consent to any departure by any
Subsidiary Guarantor therefrom, shall in any event be effective unless the same
shall be in writing and signed by the Trustee, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given. No notice to or demand on any Subsidiary Guarantor in any case shall
entitle such Subsidiary Guarantor to any other or further circumstances.
SECTION 10.6. RELEASE OF SUBSIDIARY GUARANTOR. Upon the sale or
other disposition (including by way of consolidation or merger) of all of the
Capital Stock of such a Subsidiary Guarantor, the sale or disposition of all or
substantially all the assets of such Subsidiary Guarantor (in each case other
than to the Company or an Affiliate of the Company) or the designation of a
Subsidiary Guarantor as an Unrestricted Subsidiary in compliance with this
Indenture, such Subsidiary Guarantor shall be deemed released from all
obligations under this Article 11 without any further action required on the
part of the Trustee or any Holder. At the request of the Company, the Trustee
shall execute and deliver an appropriate instrument evidencing such release.
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ARTICLE 11
MISCELLANEOUS
SECTION 11.1. TRUST INDENTURE ACT CONTROLS. If any provision of this
Indenture limits, qualifies or conflicts with another provision which is
required to be included in this Indenture by the TIA, the required provision
shall control. If this Indenture excludes any provision of the TIA that is
required to be included, such provision shall be deemed included herein.
SECTION 11.2. NOTICES. Any notice or communication shall be in
writing and delivered in person, by overnight courier or facsimile (if to the
Company, with receipt confirmed by an Officer) or mailed by first-class mail
addressed as follows:
IF TO THE COMPANY:
International Logistics Limited
330 S. Mannheim Road
Hillside, Illinois 60162
Attention: Chief Financial Officer
With copies to:
Millbank, Tweed, Hadley & McCloy
601 S. Figueroa Street
30th Floor
Los Angeles, California 90017
Attention: Eric H. Schunk, Esq.
IF TO THE TRUSTEE:
First Trust National Association
180 East Fifth Street
St. Paul, Minnesota 55101
Attention: Corporate Trust Trustee Administration
AND IF TO THE TRUSTEE'S OFFICE IN NEW YORK CITY:
First Trust New York
100 Wall Street
20th Floor
New York, New York 10005
Attention: Corporate Trust Trustee Administration
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The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication mailed or sent by overnight courier or
facsimile to a Securityholder shall be sent to the Securityholder at the
Securityholder's address as it appears on the registration books of the
Registrar and shall be sufficiently given if so sent within the time prescribed.
Failure to send a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is sent in the manner provided
above, it is duly given, whether or not the addressee receives it.
Where this Indenture provides for notice in any manner, such notice
may be waived in writing by the Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice.
SECTION 11.3 COMMUNICATION BY HOLDERS WITH OTHER HOLDERS.
Securityholders may communicate pursuant to TIA Section 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and anyone else shall have
the protection of TIA Section 312(c).
SECTION 11.4. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to take or refrain
from taking any action under this Indenture, the Company shall furnish to the
Trustee:
(1) an Officers' Certificate (which in connection with the original
issuance of the Securities need only be executed by one Officer for the
Company) in form and substance reasonably satisfactory to the Trustee
stating that, in the opinion of the signers, all conditions precedent, if
any, provided for in this Indenture relating to the proposed action have
been complied with; and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such counsel,
all such conditions precedent have been complied with.
SECTION 11.5. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. Each
certificate or opinion with respect to compliance
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with a covenant or condition provided for in this Indenture shall include:
(1) a statement that the individual making such certificate or opinion
has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such individual, he has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether or not, in the opinion of such
individual, such covenant or condition has been complied with; PROVIDED,
that an Opinion of Counsel can rely as to matters of fact on an Officers'
Certificate or a certificate of a public official.
SECTION 11.6. WHEN SECURITIES DISREGARDED. In determining whether
the Holders of the required principal amount of Securities have concurred in any
direction, waiver or consent, Securities owned by the Company or by any Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with the Company shall be disregarded and deemed not to be
outstanding, except that, for the purpose of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Securities which the Trustee actually knows are so owned shall be so
disregarded. Also, subject to the foregoing, only Securities outstanding at the
time shall be considered in any such determination.
SECTION 11.7. RULES BY TRUSTEE, PAYING AGENT AND REGISTRAR. The
Trustee may make reasonable rules for action by or a meeting of Securityholders.
The Trustee shall provide the Company reasonable notice of such rules. The
Registrar and the Paying Agent may make reasonable rules for their functions.
SECTION 11.8. LEGAL HOLIDAYS. A "Legal Holiday" is
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a Saturday, a Sunday or a day on which banking institutions in the State of New
York are authorized or required by law to close. If a payment date is a Legal
Holiday, payment shall be made on the next succeeding day that is not a Legal
Holiday, and no interest shall accrue for the intervening period. If a regular
record date is a Legal Holiday, the record date shall not be affected.
SECTION 11.9. GOVERNING LAW. This Indenture and the Securities shall
be governed by, and construed in accordance with, the laws of the State of New
York without giving effect to applicable principles of conflict of laws to the
extent that the application of the laws of another jurisdiction would be
required thereby.
SECTION 11.10. NO RECOURSE AGAINST OTHERS. No recourse for the
payment of the principal of, premium, if any, or interest on any of the
Securities or for any claim based thereon or otherwise in respect thereof, and
no recourse under or upon any obligation, covenant or agreement of the Company
in this Indenture, or in any of the Securities or because of the creation of any
Indebtedness represented hereby and thereby, shall be had against any
incorporator, stockholder, officer, director, employee or controlling person of
the Company or any Successor Person thereof. Each Holder, by accepting a
Security, waives and releases all such liability. The waiver and release shall
be part of the consideration for the issuance of the Securities.
SECTION 11.11. SUCCESSORS. All agreements of the Company in this
Indenture and the Securities shall bind the Company's successors. All
agreements of the Trustee in this Indenture shall bind its successors.
SECTION 11.12. MULTIPLE ORIGINALS. The parties may sign any number
of copies of this Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement. One signed copy is enough to prove
this Indenture.
SECTION 11.13. TABLE OF CONTENTS; HEADINGS. The table of contents,
cross-reference sheet and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not intended
to be considered a part hereof and shall not modify or restrict any of the terms
or provisions hereof.
SECTION 11.14. SEVERABILITY CLAUSE. In case any
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provision in this Indenture or in the Securities shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
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IN WITNESS WHEREOF, the parties have caused this Indenture to be duly
executed as of the date first written above.
INTERNATIONAL LOGISTICS LIMITED
By: /s/ ROGER E. PAYTON
---------------------------------
Name: Roger E. Payton
Title: President and Chief
Executive Officer
THE GUARANTORS:
THE BEKINS COMPANY
By: /s/ ROGER E. PAYTON
---------------------------------
Name: Roger E. Payton
Title: President and Chief
Executive Officer
LEP PROFIT INTERNATIONAL, INC.
By: /s/ ROGER E. PAYTON
---------------------------------
Name: Roger E. Payton
Title: Chairman of the Board
ILLCAN, INC.
By: /s/ ROGER E. PAYTON
---------------------------------
Name: Roger E. Payton
Title: Chairman of the Board
ILLSCOT, INC.
By: /s/ ROGER E. PAYTON
---------------------------------
Name: Roger E. Payton
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Title: Chairman of the Board
MATRIX INTERNATIONAL LOGISTICS, INC.
By: /s/ ROGER E. PAYTON
---------------------------------
Name: Roger E. Payton
Title: Chairman of the Board
LIW HOLDINGS CORP.
By: /s/ ROGER E. PAYTON
---------------------------------
Name: Roger E. Payton
Title: Chairman of the Board
BEKINS VAN LINES CO.
By: /s/ ROGER E. PAYTON
---------------------------------
Name: Roger E. Payton
Title: Vice President
LEP FAIRS, INC.
By: /s/ ROGER E. PAYTON
---------------------------------
Name: Roger E. Payton
Title: Vice President
AIR FREIGHT CONSOLIDATORS
INTERNATIONAL, INC.
By: /s/ ROGER E. PAYTON
---------------------------------
Name: Roger E. Payton
Title: Vice President
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BAY AREA MATRIX, INC.
By: /s/ ROGER E. PAYTON
---------------------------------
Name: Roger E. Payton
Title: Vice President
L.A. MATRIX, INC.
By: /s/ ROGER E. PAYTON
---------------------------------
Name: Roger E. Payton
Title: Vice President
SOUTHWEST MATRIX, INC.
By: /s/ ROGER E. PAYTON
---------------------------------
Name: Roger E. Payton
Title: Vice President
MATRIX CT., INC.
By: /s/ ROGER E. PAYTON
---------------------------------
Name: Roger E. Payton
Title: Vice President
THE TRUSTEE:
FIRST TRUST NATIONAL ASSOCIATION
By: /s/ RICK PROKOSCH
---------------------------------
Name: Rick Prokosch
Title:
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APPEXDIX 1
RULE 144A/REGULATION S APPENDIX
FOR OFFERINGS TO QUALIFIED INSTITUTIONAL BUYERS PURSUANT TO
RULE 144A AND TO CERTAIN PERSONS IN OFFSHORE TRANSACTIONS IN
RELIANCE ON REGULATION S.
PROVISIONS RELATING TO INITIAL SECURITIES,
PRIVATE EXCHANGE SECURITIES
AND EXCHANGE SECURITIES
1. DEFINITIONS.
1.1 DEFINITIONS.
For the purposes of this Appendix the following terms shall have the
meanings indicated below:
"Depository" means The Depository Trust Company, its nominees and
their respective successors.
"Exchange Securities" means the 9 3/4% Senior Notes Due 2007 to be
issued pursuant to this Indenture in connection with a Registered Exchange Offer
pursuant to the Registration Rights Agreement.
"Initial Purchasers" means Credit Suisse First Boston Corporation, BT
Alex. Brown Incorporated, Smith Barney Inc. and ING Barings (U.S.) Securities,
Inc.
"Initial Securities" means the 9 3/4% Senior Notes Due 2007, issued
under this Indenture on or about the date hereof.
"Private Exchange" means the offer by the Company, pursuant to the
Registration Rights Agreement, to the Initial Purchasers to issue and deliver to
each Initial Purchaser, in exchange for the Initial Securities held by the
Initial Purchaser as part of its initial distribution, a like aggregate
principal amount of Private Exchange Securities.
"Private Exchange Securities" means the 9 3/4% Senior Notes Due 2007
to be issued pursuant to this Indenture to the Initial Purchasers in a Private
Exchange,
"Purchase Agreement" means the Purchase Agreement
<PAGE>
dated October 24, 1997, among the Company, the Subsidiary Guarantors and the
Initial Purchasers.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Registered Exchange Offer" means the offer by the Company, pursuant
to the Registration Rights Agreement, to certain Holders of Initial Securities,
to issue and deliver to such Holders, in exchange for the Initial Securities, a
like aggregate principal amount of Exchange Securities registered under the
Securities Act.
"Registration Rights Agreement" means the Registration Rights
Agreement dated October 29, 1997 among the Company, the Subsidiary Guarantors
and the Initial Purchasers.
"Securities" means the Initial Securities, the Exchange Securities and
the Private Exchange Securities, treated as a single class.
"Securities Act" means the Securities Act of 1933.
"Securities Custodian" means the custodian with respect to a Global
Security (as appointed by the Depository), or any successor person thereto and
shall initially be the Trustee.
"Shelf Registration Statement" means the registration statement issued
by the Company, in connection with the offer and sale of Initial Securities or
Private Exchange Securities, pursuant to the Registration Rights Agreement.
"Transfer Restricted Securities" means Securities that bear or are
required to bear the legend set forth in Section 2.3(d) hereto.
1.2 OTHER DEFINITIONS.
Term Defined in Section:
---- ------------------
"Agent Members . . . . . . . . . . 2.1(b)
"Global Security". . . . . . . . . 2.1(a)
"Regulation S" . . . . . . . . . . 2.1(a)
"Rule 144A". . . . . . . . . . . . 2.1(a)
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<PAGE>
2. THE SECURITIES.
2.1 FORM AND DATING.
The Initial Securities are being offered and sold by the Company
pursuant to the Purchase Agreement.
(a) GLOBAL SECURITIES. Initial Securities offered and sold to a QIB
in reliance on Rule 144A under the Securities Act ("Rule 144A") or in reliance
on Regulation S under the Securities Act ("Regulation S"), in each case as
provided in the Purchase Agreement, shall be issued initially in the form of one
or more permanent global Securities in definitive, fully registered form without
interest coupons with the global securities legend and restricted securities
legend set forth in Exhibit 1 hereto (each, a "Global Security"), which shall be
deposited on behalf of the purchasers of the Initial Securities represented
thereby with the Trustee, at its New York office, as custodian for the
Depository (or with such other custodian as the Depository may direct), and
registered in the name of the Depository or a nominee of the Depository, duly
executed by the Company and authenticated by the Trustee as hereinafter
provided. The aggregate principal amount of the Global Securities may from time
to time be increased or decreased by adjustments made on the records of the
Trustee and the Depository or its nominee as hereinafter provided.
(b) BOOK-ENTRY PROVISIONS. This Section 2.1(b) shall apply only to a
Global Security deposited with or on behalf of the Depository.
The Company shall execute and the Trustee shall, in accordance with
this Section 2.1(b), authenticate and deliver initially one or more Global
Securities that (a) shall be registered in the name of the Depository for such
Global Security or Global Securities or the nominee of such Depository and (b)
shall be delivered by the Trustee to such Depository or pursuant to such
Depository's instructions or held by the Trustee as custodian for the
Depository.
Members of, or participants in, the Depository ("Agent Members") shall
have no rights under this Indenture with respect to any Global Security held on
their behalf by the Depository or by the Trustee as the custodian of the
Depository or under such Global Security, and the Depository may be treated by
the Company, the Trustee and any agent of the Company or the Trustee as the
absolute owner of such Global Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing
-3-
<PAGE>
herein shall prevent the Company, the Trustee or any agent of the Company or the
Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Depository or impair, as between the Depository
and its Agent Members, the operation of customary practices of such Depository
governing the exercise of the rights of a holder of a beneficial interest in any
Global Security.
(c) CERTIFICATED SECURITIES. Except as provided in this Section 2.1
or Section 2.3 or 2.4, owners of beneficial interests in Global Securities will
not be entitled to receive physical delivery of certificated Securities.
2.2 AUTHENTICATION.
The Trustee shall authenticate and deliver: (1) Initial Securities
for original issue in an aggregate principal amount of $110.0 million and (2)
Exchange Securities or Private Exchange Securities for issue only in a
Registered Exchange Offer or a Private Exchange, respectively, pursuant to the
Registration Rights Agreement, for a like principal amount of Initial
Securities, in each case upon a written order of the Company signed by two
Officers or by an Officer and either an Assistant Treasurer or an Assistant
Secretary of the Company. Such order shall specify the amount of the Securities
to be authenticated and the date on which the original issue of Securities is to
be authenticated and whether the Securities are to be Initial Securities,
Exchange Securities or Private Exchange Securities. The aggregate principal
amount of Securities outstanding at any time may not exceed $110.0 million
except as provided in Section 2.6 of this Indenture.
-4-
<PAGE>
2.3 TRANSFER AND EXCHANGE.
(a) TRANSFER AND EXCHANGE OF GLOBAL SECURITIES. (i) The transfer and
exchange of Global Securities or beneficial interests therein shall be effected
through the Depository, in accordance with this Indenture (including applicable
restrictions on transfer set forth herein, if any) and the procedures of the
Depository therefor. A transferor of a beneficial interest in a Global Security
shall deliver to the Registrar a written order given in accordance with the
Depositary's procedures containing information regarding the participant account
of the Depositary to credited with a beneficial interest in the Global Security.
The Registrar shall, in accordance with such instructions instruct the
Depositary to credit to the account of the Person specified in such instructions
a beneficial interest in the Global Security and to debit the account of the
Person making the transfer the beneficial interest in the Global Security being
transferred.
(ii) Notwithstanding any other provisions of this Appendix (other
than the provisions set forth in Section 2.4), a Global Security may not be
transferred as a whole except by the Depository to a nominee of the Depository
or by a nominee of the Depository to the Depository or another nominee of the
Depository or by the Depository or any such nominee to a successor Depository or
a nominee of such successor Depository.
(iii) In the event that a Global Security is exchanged for Securities
in definitive registered form pursuant to Section 2.4 of this Appendix or
Section 2.08 of the Indenture, prior to the consummation of a Registered
Exchange Offer or the effectiveness of a Shelf Registration Statement with
respect to such Securities, such Securities may be exchanged only in accordance
with such procedures as are substantially consistent with the provisions of this
Section 2.3 (including the certification requirements set forth on the reverse
of the Initial Securities intended to ensure that such transfers comply with
Rule 144A or Regulation S, as the case may be) and such other procedures as may
from time to time be adopted by the Company.
(b) LEGEND. (i) Except as permitted by the following paragraphs
(ii), (iii) and (iv), each Security certificate evidencing the Global Securities
(and all Securities issued in exchange therefor or in substitution thereof)
shall bear a legend in substantially the following form:
"THIS SECURITY (OR ITS PREDECESSOR) AND ANY GUARANTEE
-5-
<PAGE>
THEREOF WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION
UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND
THIS SECURITY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS
SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5
OF THE SECURITIES ACT PROVIDED BY RULE 144A.
THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE ISSUER THAT (A)
THIS SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY
(i) INSIDE THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY
BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (ii) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN
ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (iii) PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144
THEREUNDER (IF AVAILABLE), OR (iv) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (i) THROUGH (iv) IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO,
NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF THE RESALE RESTRICTIONS
REFERRED TO IN (A) ABOVE."
(ii) Upon any sale or transfer of a Transfer Restricted Security
(including any Transfer Restricted Security represented by a Global Security)
pursuant to Rule 144 under the Securities Act, in the case of any Transfer
Restricted Security that is represented by a Global Security, the Registrar
shall permit the Holder thereof to exchange such Transfer Restricted Security
for a certificated Security that does not bear the legend set forth above and
rescind any restriction on the transfer of such Transfer Restricted Security, if
the Holder certifies in writing to the Registrar that its request for such
exchange was made in reliance on Rule 144 (such certification to be in the form
set forth on the reverse of the Security).
(iii) After a transfer of any Initial Securities or Private Exchange
Securities during the period of the effectiveness of a Shelf Registration
Statement with respect to
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<PAGE>
such Initial Securities or Private Exchange Securities, as the case may be, all
requirements pertaining to legends on such Initial Security or such Private
Exchange Security will cease to apply, the requirements requiring any such
Initial Security or such Private Exchange Security issued to certain Holders be
issued in global form will cease to apply, and a certificated Initial Security
or Private Exchange Security without legends will be available to the transferee
of the Holder of such Initial Securities or Private Exchange Securities upon
exchange of such transferring Holder's certificated Initial Security or Private
Exchange Security or directions to transfer such Holder's interest in the Global
Security, as applicable.
(iv) Upon the consummation of a Registered Exchange Offer with
respect to the Initial Securities pursuant to which Holders of such Initial
Securities are offered Exchange Securities in exchange for their Initial
Securities, all requirements pertaining to such Initial Securities that Initial
Securities issued to certain Holders be issued in global form will cease to
apply and certificated Initial Securities with the restricted securities legend
set forth in Exhibit 1 hereto will be available to Holders of such Initial
Securities that do not exchange their Initial Securities, and Exchange
Securities in certificated or global form will be available to Holders that
exchange such Initial Securities in such Registered Exchange Offer.
(v) Upon the consummation of a Private Exchange with respect to the
Initial Securities pursuant to which Holders of such Initial Securities are
offered Private Exchange Securities in exchange for their Initial Securities,
all requirements pertaining to such Initial Securities that Initial Securities
issued to certain Holders be issued in global form will still apply, and Private
Exchange Securities in global form with the Restricted Securities Legend set
forth in Exhibit I hereto will be available to Holders that exchange such
Initial Securities in such Private Exchange.
(c) CANCELLATION OR ADJUSTMENT OF GLOBAL SECURITY. At such time as
all beneficial interests in a Global Security have either been exchanged for
certificated Securities, redeemed, repurchased or canceled, such Global Security
shall be returned to the Depository for cancellation or retained and canceled by
the Trustee. At any time prior to such cancellation, if any beneficial interest
in a Global Security is exchanged for certificated Securities, redeemed,
repurchased or canceled, the principal amount of Securities represented by such
Global Security shall be reduced and an adjustment shall be made
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<PAGE>
on the books and records of the Trustee (if it is then the Securities Custodian
for such Global Security) with respect to such Global Security, by the Trustee
or the Securities Custodian, to reflect such reduction.
(d) OBLIGATIONS WITH RESPECT TO TRANSFERS AND EXCHANGES OF
SECURITIES. (i) To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate certificated Securities
and Global Securities at the Registrar's or co-registrar's request.
(ii) No service charge shall be made for any registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any transfer tax, assessments, or similar governmental charge payable in
connection therewith (other than any such transfer taxes, assessments or similar
governmental charge payable upon exchange or transfer pursuant to Sections 3.6,
6.11 and Section 9.5 of the Indenture).
(iii) The Registrar or co-registrar shall not be required to register
the transfer of or exchange of (a) any certificated Security selected for
redemption in whole or in part pursuant to Article 3 of this Indenture, except
the unredeemed portion of any certificated Security being redeemed in part, or
(b) any Security for a period beginning 15 Business Days before the mailing of a
notice of an offer to repurchase or redeem Securities or 15 Business Days before
an interest payment date.
(iv) Prior to the due presentation for registration of transfer of
any Security, the Company, the Trustee, the Paying Agent, the Registrar or any
co-registrar may deem and treat the person in whose name a Security is
registered as the absolute owner of such Security for the purpose of receiving
payment of principal of and interest on such Security and for all other purposes
whatsoever, whether or not such Security is overdue, and none of the Company,
the Trustee, the Paying Agent, the Registrar or any co-registrar shall be
affected by notice to the contrary.
(v) All Securities issued upon any transfer or exchange pursuant to
the terms of this Indenture shall evidence the same debt and shall be entitled
to the same benefits under this Indenture as the Securities surrendered upon
such transfer or exchange.
(e) NO OBLIGATION OF THE TRUSTEE. (i) The Trustee
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<PAGE>
shall have no responsibility or obligation to any beneficial owner of a Global
Security, a member of, or a participant in the Depository or other Person with
respect to the accuracy of the records of the Depository or its nominee or of
any participant or member thereof, with respect to any ownership interest in the
Securities or with respect to the delivery to any participant, member,
beneficial owner or other Person (other than the Depository) of any notice
(including any notice of redemption) or the payment of any amount, under or with
respect to such Securities. All notices and communications to be given to the
Holders and all payments to be made to Holders under the Securities shall be
given or made only to or upon the order of the registered Holders (which shall
be the Depository or its nominee in the case of a Global Security). The rights
of beneficial owners in any Global Security shall be exercised only through the
Depository subject to the applicable rules and procedures of the Depository.
The Trustee may rely and shall be fully protected in relying upon information
furnished by the Depository with respect to its members, participants and any
beneficial owners.
(ii) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer imposed
under this Indenture or under applicable law with respect to any transfer of any
interest in any Security (including any transfers between or among Depository
participants, members or beneficial owners in any Global Security) other than to
require delivery of such certificates and other documentation or evidence as are
expressly required by, and to do so if and when expressly required by, the terms
of this Indenture, and to examine the same to determine substantial compliance
as to form with the express requirements hereof.
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<PAGE>
2.4 CERTIFICATED SECURITIES.
(a) A Global Security deposited with the Depository or with the
Trustee as custodian for the Depository pursuant to Section 2.1 shall be
transferred to the beneficial owners thereof in the form of certificated
Securities in an aggregate principal amount equal to the principal amount of
such Global Security, in exchange for such Global Security, only if such
transfer complies with Section 2.3 and (i) the Depository notifies the Company
that it is unwilling or unable to continue as Depository for such Global
Security or if at any time such Depository ceases to be a "clearing agency"
registered under the Exchange Act and a successor depositary is not appointed by
the Company within 90 days of such notice, or (ii) the Company, in its sole
discretion, notifies the Trustee in writing that it elects to cause the issuance
of certificated Securities under this Indenture.
(b) Any Global Security that is transferable to the beneficial owners
thereof pursuant to this Section shall be surrendered by the Depository to the
Trustee located in the Borough of Manhattan, The City of New York, to be so
transferred, in whole or from time to time in part, without charge, and the
Trustee shall authenticate and deliver, upon such transfer of each portion of
such Global Security, an equal aggregate principal amount of certificated
Initial Securities of authorized denominations. Any portion of a Global
Security transferred pursuant to this Section shall be executed, authenticated
and delivered only in denominations of $1,000 and any integral multiple thereof
and registered in such names as the Depository shall direct. Any certificated
Initial Security delivered in exchange for an interest in the Global Security
shall, except as otherwise provided by Section 2.3(d), bear the restricted
securities legend set forth in Exhibit 1 hereto.
(c) Subject to the provisions of Section 2.4(b), the registered
Holder of a Global Security may grant proxies and otherwise authorize any
Person, including Agent Members and Persons that may hold interests through
Agent Members, to take any action which a Holder is entitled to take under this
Indenture or the Securities.
(d) In the event of the occurrence of either of the events specified
in Section 2.4(a), the Company will promptly make available to the Trustee a
reasonable supply of certificated Securities in definitive, fully registered
form without interest coupons.
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<PAGE>
EXHIBIT 1
to
RULE 144A/REGULATION S APPENDIX
[Global Securities Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITARY TRUST COMPANY, A NEW YORK CORPORATION ("DTCI"), NEW YORK, NEW
YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE REFERRED TO ON THE REVERSE HEREOF.
[Restricted Securities Legend]
"THIS SECURITY (OR ITS PREDECESSOR) AND ANY GUARANTEE THEREOF WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED
STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THIS SECURITY MAY NOT
BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR
AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY
NOTIFIED THAT THE SELLER OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM
THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A.
THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE ISSUER THAT
(A) THIS SECURITY MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY
(i) INSIDE THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS
A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (ii) OUTSIDE THE
UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE
SECURITIES ACT, (iii) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE),
<PAGE>
OR (iv) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT, IN EACH OF CASES (i) THROUGH (iv) IN ACCORDANCE WITH ANY APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND
EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY
FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE."
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<PAGE>
EXHIBIT A
[FORM OF FACE OF INITIAL SECURITY]
[Global Securities Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW
YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL
SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF
DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND LIMITED TO
TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE
REFERRED TO ON THE REVERSE HEREOF.
[Restricted Securities Legend]
"THIS SECURITY (OR ITS PREDECESSOR) AND ANY GUARANTEE THEREOF WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED
STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THIS SECURITY MAY NOT
BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR
AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY
NOTIFIED THAT THE SELLER OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM
THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A.
THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE ISSUER THAT
(A) THIS SECURITY MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY
(i) INSIDE THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS
A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (ii) OUTSIDE THE
UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE
SECURITIES ACT, (iii) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), OR (iv) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
A-1
<PAGE>
THE SECURITIES ACT, IN EACH OF CASES (i) THROUGH (iv) IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER
WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS
SECURITY FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE."
A-2
<PAGE>
INTERNATIONAL LOGISTICS LIMITED
$110,000,000
9 3/4% Senior Notes Due 2007
No. CUSIP No.
INTERNATIONAL LOGISTICS LIMITED, a Delaware corporation, promises to
pay to , or registered assigns, the principal sum of
on October 15, 2007.
Interest Payment Dates: April 15 and October 15.
Record Dates: April 1 and October 1.
Additional provisions of this Security are set forth on the reverse
side of this Security.
A-3
<PAGE>
INTERNATIONAL LOGISTICS LIMITED
By:
-----------------------------------
Name:
Title:
By:
-----------------------------------
Name:
Title:
Dated: , 1997
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
FIRST TRUST NATIONAL ASSOCIATION, as Trustee, certifies that this is one of the
Securities referred to in the within-mentioned Indenture.
By:
- -------------------------------
Authorized Signatory
A-4
<PAGE>
[FORM OF REVERSE SIDE OF INITIAL SECURITY]
9 3/4% SENIOR NOTE DUE 2007
1. INTEREST
INTERNATIONAL LOGISTICS LIMITED, a Delaware corporation (such entity,
and its successors and assigns under the Indenture hereinafter referred to, and
each other entity which is required to become the Company pursuant to the
Indenture, and its successors and assigns under the Indenture, being herein
called the "Company"), promises to pay interest on the principal amount of this
Security at the rate per annum shown above. The Company will pay interest
semiannually on April 15 and October 15 of each year, commencing April 15, 1998.
Interest on the Securities will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from, October 29, 1997.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months. The Company shall pay interest on overdue principal at the rate borne
by the Securities, and it shall pay interest on overdue installments of interest
at the same rate to the extent lawful.
A-5
<PAGE>
2. METHOD OF PAYMENT
The Company will pay interest on the Securities (except defaulted
interest) to the Persons who are registered holders of Securities at the close
of business on the record date immediately preceding the interest payment date
even if Securities are canceled after the record date and on or before the
interest payment date. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Company will pay principal and interest in
money of the United States that at the time of payment is legal tender for
payment of public and private debts. Payments in respect of the Securities
represented by a Global Security (including principal, premium and interest)
will be made by wire transfer of immediately available funds to the accounts
specified by The Depository Trust Company. The Company will make all payments
in respect of a certificated Security (including principal, premium and
interest) by mailing a check to the registered address of each Holder thereof;
PROVIDED, HOWEVER, that payments on a certificated Security will be made by wire
transfer to a U.S. dollar account maintained by the payee with a bank in the
United States if such Holder elects payment by wire transfer by giving written
notice to the Trustee or the Paying Agent to such effect designating such
account no later than 30 days immediately preceding the relevant due date for
payment (or such other date as the Trustee may accept in its discretion).
3. PAYING AGENT AND REGISTRAR
Initially, FIRST TRUST NATIONAL ASSOCIATION, a National banking
corporation ("Trustee"), will act as Paying Agent and Registrar. The Company
may appoint and change any Paying Agent, Registrar or co-registrar without
notice. The Company may act as Paying Agent, Registrar, co-Registrar or
transfer agent.
A-6
<PAGE>
4. INDENTURE
The Company issued the Securities under an Indenture dated as of
October 29, 1997 (the "Indenture"), among the Company the Subsidiary Guarantors
named therein and the Trustee. The terms of the Securities include those stated
in the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as in effect on the date
of the Indenture (the "TIA"). Terms defined in the Indenture and not defined
herein have the meanings ascribed thereto in the Indenture. The Securities are
subject to all such terms, and Securityholders are referred to the Indenture and
the TIA for a statement of those terms. Any conflict between this Security and
the Indenture will be governed by the Indenture.
The Securities are general unsecured senior obligations of the Company
limited to $110,000,000 aggregate principal amount (subject to Section 2.7 of
the Indenture). The Indenture imposes certain limitations on the Incurrence of
Indebtedness by the Company and its Restricted Subsidiaries, the existence of
liens, the payment of dividends on, and redemption of, the Capital Stock of the
Company and its Subsidiaries, restricted payments, the sale or transfer of
assets and Subsidiary stock, the issuance or sale of Capital Stock of Restricted
Subsidiaries, sale and leaseback transactions, the investments of the Company
and its Restricted Subsidiaries, consolidations, mergers and transfers of all or
substantially all the assets of the Company, and transactions with Affiliates.
In addition, the Indenture limits the ability of the Company and certain of its
Subsidiaries to restrict distributions and dividends from Restricted
Subsidiaries.
5. OPTIONAL REDEMPTION
Except as set forth in the next paragraph, the Securities may not be
redeemed prior to October 15, 2002. Thereafter, the Company may redeem as
provided in, and subject to the terms of, the Indenture the Securities in whole
or in part, at any time or from time to time, at the following redemption prices
(expressed in percentages of principal amount), plus accrued interest to the
redemption date (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date) if
redeemed during the 12-month period commencing on October 15 of the years set
forth below:
Period Percentage
------ ----------
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<PAGE>
2002 . . . . . . . . . . . . . . . . . 104.875%
2003 . . . . . . . . . . . . . . . . . 103.250%
2004 . . . . . . . . . . . . . . . . . 101.625%
2005 and thereafter . . . . . . . . . . 100.000%
In addition, at any time and from time to time prior to October 15,
2000, the Company may redeem in the aggregate up to 35% of the principal amount
of the Securities with the proceeds of one or more Public Equity Offerings, at a
redemption price (expressed as a percentage of principal amount) of 109.75% plus
accrued interest to the redemption date (subject to the right of Holders of
record on the relevant record date to receive interest due on the relevant
interest payment date) as provided in, and subject to the terms of, the
Indenture; PROVIDED, HOWEVER, that at least $71.5 million aggregate principal
amount of the Securities must remain outstanding after each such redemption.
6. NOTICE OF REDEMPTION
Notice of redemption will be mailed by first-class mail at least 30
days but not more than 60 days before the redemption date to each Holder of
Securities to be redeemed at his registered address. Securities in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000. If money sufficient to pay the redemption price of and
accrued interest on all Securities (or portions thereof) to be redeemed on the
redemption date is deposited with the Paying Agent on or before the redemption
date and certain other conditions are satisfied, on and after such date interest
ceases to accrue on such Securities (or such portions thereof) called for
redemption. If a notice or communication is sent in the manner provided in the
Indenture, it is duly given, whether or not the addressee receives it. Failure
to send a notice or communication to a Securityholder or any defect in it shall
not affect its sufficiency with respect to other Securityholders.
In addition, in the event of certain Asset Dispositions, the Company
will be required to make an offer to purchase Securities at a purchase price of
100% of their principal amount plus accrued interest to the date of purchase
(subject to the rights of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date) as provided in, and
subject to the terms of, the Indenture.
A-8
<PAGE>
7. CHANGE OF CONTROL
Upon a Change of Control, each Holder of Securities will have the
right to require the Company to repurchase all or any part of the Securities of
such Holder at a repurchase price in cash equal to 101% of the principal amount
of the Securities to be repurchased plus accrued and unpaid interest to the date
of repurchase (subject to the right of Holders of record on the relevant record
date to receive interest due on the related interest payment date) as provided
in, and subject to the terms of, the Indenture.
8. DENOMINATIONS; TRANSFER; EXCHANGE
The Securities are in registered form without coupons in denominations
of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange
Securities in accordance with the Indenture. The Registrar may require a
Holder, among other things, to furnish appropriate endorsements or transfer
documents and to pay any taxes and fees required by law or permitted by the
Indenture, including any transfer tax or other similar governmental charge
payable in connection therewith. The Registrar need not register the transfer
of or exchange any Securities selected for redemption (except, in the case of a
Security to be redeemed in part, the portion of the Security not to be redeemed)
or any Securities for a period of 15 days before a selection of Securities to be
redeemed or 15 days before an interest payment date.
9. PERSONS DEEMED OWNERS
The registered Holder of this Security may be treated as the owner of
it for all purposes.
10. UNCLAIMED MONEY
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to the
Company at its written request unless an abandoned property law designates
another Person. After any such payment, Holders entitled to the money must look
only to the Company and not to the Trustee for payment.
A-9
<PAGE>
11. DISCHARGE AND DEFEASANCE
Subject to certain conditions, the Company at any time may terminate
some or all of its obligations under the Securities and the Indenture if the
Company deposits with the Trustee money or U.S. Government Obligations for the
payment of principal and interest on the Securities to redemption or maturity,
as the case may be.
12. AMENDMENT, WAIVER
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended with the consent of the Holders of at
least a majority in principal amount outstanding of the Securities and (ii) any
past default or compliance with any provision may be waived with the consent of
the Holders of a majority in principal amount outstanding of the Securities.
Subject to certain exceptions set forth in the Indenture, without the consent of
any Securityholder, the Company and the Trustee may amend the Indenture or the
Securities to cure any ambiguity, omission, defect or inconsistency, to comply
with Article 5 of the Indenture, to provide for uncertificated Securities in
addition to or in place of certificated Securities, to add guarantees with
respect to the Securities, to secure the Securities, to add additional covenants
or surrender rights and powers conferred on the Company, to make any change that
does not adversely affect the rights of any Securityholder or to comply with any
request of the SEC in connection with qualifying the Indenture under the TIA.
A-10
<PAGE>
13. DEFAULTS AND REMEDIES
Under the Indenture, Events of Default include (i) default for 30 days
in payment of interest on the Securities; (ii) default in payment of principal
on any Security when due at its Stated Maturity, upon redemption pursuant to
paragraphs 5 or 6 above, upon required repurchase, upon acceleration or
otherwise, (iii) failure by the Company to comply with Article 5 of the
Indenture; (iv) failure by the Company to comply for 30 days after the notice
specified in the paragraph below with Section 4.3, 4.4, 4.6, 4.8 or 4.13 (other
than a failure to purchase Securities when required under Section 4.8) of the
Indenture; (v) failure by the Company to comply for 60 days after the Company
receives the notice specified in the paragraph below with any of its other
agreements in the Indenture (other than those referred to in (i), (ii), (iii) or
(iv) above); (vi) failure by the Company or any Significant Subsidiary to pay
any Indebtedness within any applicable grace period after final maturity or
acceleration by the Holders thereof because of a default and the total amount of
such Indebtedness unpaid or accelerated exceeds $10.0 million; (vii) certain
events of bankruptcy, insolvency or reorganization of the Company or any
Significant Subsidiary; and (viii) the rendering of any judgments or decrees for
the payment of money in excess of $10.0 million, or its foreign equivalent at
the time, is entered against the Company or any Significant Subsidiary if such
judgment or decree remains outstanding for a period of 60 days following entry
of such judgment and is not discharged, bonded, waived or stayed within 30 days
after notice thereof.
A Default under clause (iv) or (v) of Section 6.1 of the Indenture
will not constitute an Event of Default until the Trustee or the Holders of at
least 25% in aggregate principal amount of the outstanding Securities notify the
Company of the Default and the Company does not cure such Default within the
time specified after receipt of such notice. Such notice must specify the
Default, demand that it be remedied and state that such notice is a "Notice of
Default".
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the Securities then outstanding
may declare all the Securities to be due and payable. Certain events of
bankruptcy or insolvency are Events of Default which will result in the
Securities being due and payable immediately upon the occurrence of such Events
of Default.
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<PAGE>
Securityholders may not enforce the Indenture or the Securities except
as provided in the Indenture. The Trustee may refuse to enforce the Indenture
or the Securities unless it receives reasonable indemnity or security. Subject
to certain limitations, Holders of a majority in principal amount of the
Securities may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Securityholders notice of any continuing Default
(except a Default in payment of principal or interest) if it determines that
withholding notice is in the interest of the Holders.
14. GUARANTEE
The obligations of the Company pursuant to the Securities, including
the repurchase obligations resulting from a Change of Control, will be
unconditionally guaranteed, on a senior unsecured basis, by each Subsidiary
Guarantor.
15. TRUSTEE DEALINGS WITH THE COMPANY
Subject to certain limitations imposed by the TIA, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with and collect obligations owed
to it by the Company or any of its Affiliates and may otherwise deal with the
Company or any of its Affiliates with the same rights it would have if it were
not Trustee.
16. NO RECOURSE AGAINST OTHERS
No recourse for the payment of the principal of, premium, if any, or
interest on any of the Securities or for any claim based thereon or otherwise in
respect thereof, and no recourse under or upon any obligation, covenant or
agreement of the Company in the Indenture, or in any of the Securities or
because of the creation of any Indebtedness represented hereby and thereby,
shall be had against any incorporator, stockholder, officer, director, employee
or controlling person of the Company or any Successor Person thereof. Each
Holder, by accepting a Security, waives and releases all such liability.
17. GOVERNING LAW
THE INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO
APPLICABLE PRINCIPLES OF CONFLICT OF LAWS TO THE EXTENT THAT THE APPLICATION OF
THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
A-12
<PAGE>
18. AUTHENTICATION
This Security shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
19. ABBREVIATIONS
Customary abbreviations may be used in the name of a Securityholder or
an assignee, such as TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with rights of survivorship and not as
tenants in common), CUST (= custodian), and U/G/M/A (= Uniform Gift to Minors
Act).
20. HOLDERS' COMPLIANCE WITH REGISTRATION RIGHTS AGREEMENT.
Each Holder of a Security, by acceptance hereof, acknowledges and
agrees to the provisions of the Registration Rights Agreement, including,
without limitation, the obligations of the Holders with respect to a
registration and the indemnification of the Company to the extent provided
therein.
21. CUSIP NUMBERS
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures the Company has caused CUSIP numbers to be
printed on the Securities and have directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Securityholders. No representation is
made as to the accuracy of such numbers either as printed on the Securities or
as contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
A-13
<PAGE>
The Company will furnish to any Securityholder upon written request
and without charge to the Securityholder a copy of the Indenture which has in it
the text of this Security in larger type. Requests may be made as follows:
If to the Company:
International Logistics Limited
330 S. Mannheim Road
Hillside, Illinois 60162
Attention: Chief Financial Officer
If to the Trustee:
First Trust National Association
180 East Fifth Street
St. Paul, Minnesota 55101
Attention: Corporate Trust Trustee Administration
A-14
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint ________________________ agent to transfer this Security
on the books of the Company. The agent may substitute another to act for him.
Date: Your Signature:
---------------------- -----------------------------
Sign exactly as your name appears on
the other side of this Security.
Signature Guarantee:
-----------------------------
(Signature must be guaranteed)
In connection with any transfer of any of the Securities evidenced by
this certificate occurring prior to the expiration of the period referred to in
Rule 144(k) under the Securities Act after the later of the date of original
issuance of such Securities and the last date, if any, on which such Securities
are owned by the Company or any Affiliate of the Company, the undersigned
confirms that such Securities are being transferred in accordance with its
terms:
A-15
<PAGE>
[CHECK ONE]
-----------
(1) __ to the Company or a Subsidiary thereof; or
(2) __ to a "qualified institutional buyer" (as defined in Rule 144A under
the Securities Act of 1933, as amended) that purchases for its own
account or for the account of a qualified institutional buyer to whom
notice is given that such transfer is being made in reliance on
Rule 144A, in each case pursuant to and in compliance with Rule 144A
under the Securities Act of 1933; or
(3) __ outside the United states to a "foreign person" in compliance with
Rule 904 of Regulation S under the Securities Act of 1933, as amended;
or
(4) __ pursuant to an effective registration statement under the Securities
Act of 1933, as amended; or
(5) __ pursuant to another available exemption from the registration
requirements of the Securities Act of 1933, as amended.
and unless the box below is checked, the undersigned confirms that such Note is
not being transferred to an "affiliate" of the Company as defined in Rule 144
under the Securities Act of 1933, as amended (an "Affiliate"):
/ / The transferee is an Affiliate of the Company.
Unless one of the items above is checked, the Trustee will refuse to register
any of the Notes evidenced by this certificate in the name of any person other
than the registered Holder thereof; PROVIDED, HOWEVER, that if item (3), or (5)
is checked, the Company or the Trustee may require, prior to registering any
such transfer of the Notes, in their sole discretion, such written legal
opinions, certifications (including an investment letter in the case of box (3)
or (4)) and other information as the Trustee or the Company have reasonably
requested to confirm that such transfer is being made pursuant to an exemption
from, or in a transaction not subject to, the registration requirements of the
Securities Act of 1933, as amended.
If none of the foregoing items are checked, the Trustee or Registrar
shall not be obligated to register this
A-16
<PAGE>
Note in the name of any person other than the Holder hereof unless and until the
conditions to any such transfer of registration set forth herein and in Section
2.17 of the Indenture shall have been satisfied.
Dated: Signed:
------------------------- --------------------------------------
(Sign exactly as your name appears
on the other side of this Note)
Signature Guarantee:
------------------------------------------------------------
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this
Note for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Dated:
------------------------- ----------------------------------------
NOTICE: To be executed by
an executive officer
A-17
<PAGE>
[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The following increases or decreases in this Global Security have been
made:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Date of Amount of Amount of increase Principal amount of Signature
of au-
Exchange decrease in in Principal Amount this Global Security thorized
officer
Principal of this Global following such of Trust or
Amount of this Security decrease or increase Securities
Global Security Custodian
</TABLE>
A-18
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.6 or 4.8 of the Indenture, check the box:
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.6 or 4.8 of the Indenture, state the
amount: $
Date: Your Signature:
----------------------- ------------------------------
Sign exactly as your name appears on
the other side of this Security.
Signature Guarantee:
------------------------------
(Signature must be guaranteed)
A-19
<PAGE>
[FORM OF GUARANTEE]
For value received, the undersigned hereby unconditionally guarantees,
as principal obligor and not only as a surety, to the Holder of this Note the
cash payments in United States dollars of principal of, premium, if any, and
interest on this Note (and including Additional Interest payable thereon) in the
amounts and at the times when due and interest on the overdue principal,
premium, if any, and interest, if any, of this Note, if lawful, and the payment
or performance of all other obligations of the Company under the Indenture or
the Notes, to the Holder of this Note and the Trustee, all in accordance with
and subject to the terms and limitations of this Note, Article Ten of the
Indenture and this Guarantee. This Guarantee will become effective in
accordance with Article Ten of the Indenture and its terms shall be evidenced
therein. The validity and enforceability of any Guarantee shall not be affected
by the fact that it is not affixed to any particular Note.
Capitalized terms used but not defined herein shall have the meanings
ascribed to them in the Indenture dated as of October 29, 1997, among
International Logistics Limited, a Delaware corporation, the Subsidiary
Guarantors named therein and First Trust National Association, as trustee (the
"Trustee"), as amended or supplemented (the "Indenture").
The obligations of the undersigned to the Holders of Notes and to the
Trustee pursuant to this Guarantee and the Indenture are expressly set forth in
Article Ten of the Indenture and reference is hereby made to the Indenture for
the precise terms of the Guarantee and all of the other provisions of the
Indenture to which this Guarantee relates.
THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF
CONFLICTS OF LAW. Each Subsidiary Guarantor hereby agrees to submit to the
jurisdiction of the courts of the State of New York in any action or proceeding
arising out of or relating to this Guarantee.
This Guarantee is subject to release upon the terms set forth in the
Indenture.
A-1
<PAGE>
IN WITNESS WHEREOF, each Subsidiary Guarantor has caused its Guarantee
to be duly executed.
Date:
THE BEKINS COMPANY
By
-----------------------------------
Name:
Title:
LEP PROFIT INTERNATIONAL, INC.
By
-----------------------------------
Name:
Title:
ILLCAN, INC.
By
-----------------------------------
Name:
Title:
ILLSCOT, INC.
By
-----------------------------------
Name:
Title:
MATRIX INTERNATIONAL LOGISTICS, INC.
By
-----------------------------------
Name:
Title:
A-2
<PAGE>
LIW HOLDINGS CORP.
By
-----------------------------------
Name:
Title:
BEKINS VAN LINES CO.
By
-----------------------------------
Name:
Title:
LEP FAIRS, INC.
By
-----------------------------------
Name:
Title:
AIR FREIGHT CONSOLIDATORS INTERNATIONAL,
INC.
By
-----------------------------------
Name:
Title:
BAY AREA MATRIX, INC.
By
-----------------------------------
Name:
Title:
L.A. MATRIX, INC.
By
-----------------------------------
Name:
Title:
A-3
<PAGE>
SOUTHWEST MATRIX, INC.
By
-----------------------------------
Name:
Title:
MATRIX CT., INC.
By
-----------------------------------
Name:
Title:
A-4
<PAGE>
EXHIBIT B
[FORM OF FACE OF EXCHANGE SECURITY]
[Global Securities Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW
YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL
SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF
DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND LIMITED TO
TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE
REFERRED TO ON THE REVERSE HEREOF.
B-1
<PAGE>
INTERNATIONAL LOGISTICS LIMITED
$110,000,000
9 3/4% Senior Notes Due 2007
No. CUSIP No.
INTERNATIONAL LOGISTICS LIMITED, a Delaware corporation, promises to
pay to , or registered assigns, the principal sum of
Dollars on October 15, 2007.
Interest Payment Dates: April 15 and October 15.
Record Dates: April 1 and October 1.
Additional provisions of this Security are set forth on the reverse
side of this Security.
INTERNATIONAL LOGISTICS LIMITED
By:
------------------------------
Name:
Title:
By:
------------------------------
Name:
Title:
Dated: , 1997
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
FIRST TRUST NATIONAL ASSOCIATION, as Trustee, certifies that this is one of the
Securities referred to in the within-mentioned Indenture.
B-2
<PAGE>
By:
- ---------------------------
Authorized Signatory
B-3
<PAGE>
FORM OF REVERSE SIDE OF EXCHANGE SECURITY
9 3/4% SENIOR NOTE DUE 2007
1. INTEREST
INTERNATIONAL LOGISTICS LIMITED, a Delaware corporation (such entity,
and its successors and assigns under the Indenture hereinafter referred to, and
each other entity which is required to become the Company pursuant to the
Indenture, and its successors and assigns under the Indenture, being herein
called the "Company"), promises to pay interest on the principal amount of this
Security at the rate per annum shown above. The Company will pay interest
semiannually on April 15 and October 15 of each year, commencing April 15, 1998.
Interest on the Securities will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from, October 29, 1997.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months. The Company shall pay interest on overdue principal at the rate borne
by the Securities, and it shall pay interest on overdue installments of interest
at the same rate to the extent lawful.
B-4
<PAGE>
2. METHOD OF PAYMENT
The Company will pay interest on the Securities (except defaulted
interest) to the Persons who are registered holders of Securities at the close
of business on the record date immediately preceding the interest payment date
even if Securities are canceled after the record date and on or before the
interest payment date. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Company will pay principal and interest in
money of the United States that at the time of payment is legal tender for
payment of public and private debts. Payments in respect of the Securities
represented by a Global Security (including principal, premium and interest)
will be made by wire transfer of immediately available funds to the accounts
specified by The Depository Trust Company. The Company will make all payments
in respect of a certificated Security (including principal, premium and
interest) by mailing a check to the registered address of each Holder thereof;
PROVIDED, HOWEVER, that payments on a certificated Security will be made by wire
transfer to a U.S. dollar account maintained by the payee with a bank in the
United States if such Holder elects payment by wire transfer by giving written
notice to the Trustee or the Paying Agent to such effect designating such
account no later than 30 days immediately preceding the relevant due date for
payment (or such other date as the Trustee may accept in its discretion).
3. PAYING AGENT AND REGISTRAR
Initially, FIRST TRUST NATIONAL ASSOCIATION, a National banking
corporation ("Trustee"), will act as Paying Agent and Registrar. The Company
may appoint and change any Paying Agent, Registrar or co-registrar without
notice. The Company may act as Paying Agent, Registrar, co-Registrar or
transfer agent.
B-5
<PAGE>
4. INDENTURE
The Company issued the Securities under an Indenture dated as of
October 29, 1997 (the "Indenture"), among the Company, the Subsidiary Guarantors
named therein and the Trustee. The terms of the Securities include those stated
in the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as in effect on the date
of the Indenture (the "TIA"). Terms defined in the Indenture and not defined
herein have the meanings ascribed thereto in the Indenture. The Securities are
subject to all such terms, and Securityholders are referred to the Indenture and
the TIA for a statement of those terms. Any conflict between this Security and
the Indenture will be governed by the Indenture.
The Securities are general unsecured senior obligations of the Company
limited to $110,000,000 aggregate principal amount (subject to Section 2.7 of
the Indenture). The Indenture imposes certain limitations on the Incurrence of
Indebtedness by the Company and its Restricted Subsidiaries, the existence of
liens, the payment of dividends on, and redemption of, the Capital Stock of the
Company and its Subsidiaries, restricted payments, the sale or transfer of
assets and Subsidiary stock, the issuance or sale of Capital Stock of Restricted
Subsidiaries, sale and leaseback transactions, the investments of the Company
and its Restricted Subsidiaries, consolidations, mergers and transfers of all or
substantially all the assets of the Company, and transactions with Affiliates.
In addition, the Indenture limits the ability of the Company and certain of its
Subsidiaries to restrict distributions and dividends from Restricted
Subsidiaries.
5. OPTIONAL REDEMPTION
Except as set forth in the next paragraph, the Securities may not be
redeemed prior to October 15, 2002. On and after that date, the Company may
redeem as provided in, and subject to the terms of, the Indenture the Securities
in whole or in part, at any time or from time to time, at the following
redemption prices (expressed in percentages of principal amount), plus accrued
interest to the redemption date (subject to the right of Holders of record on
the relevant record date to receive interest due on the related interest payment
date) if redeemed during the 12-month period commencing on October 15 of the
years set forth below:
Period Percentage
------ ----------
B-6
<PAGE>
2002 . . . . . . . . . . . . . . . . . 104.875%
2003 . . . . . . . . . . . . . . . . . 103.250%
2004 . . . . . . . . . . . . . . . . . 101.625%
2005 and thereafter . . . . . . . . . . 100.000%
In addition, at any time and from time to time prior to October 15,
2000 the Company may redeem in the aggregate up to 35% of the principal amount
of the Securities with the proceeds of one or more Public Equity Offerings, at a
redemption price (expressed as a percentage of principal amount) of 109.75% plus
accrued and unpaid interest to the redemption date (subject to the right of
Holders of record on the relevant record date to receive interest due on the
relevant interest payment date) as provided in, and subject to the terms of, the
Indenture; PROVIDED, HOWEVER, that at least $71.5 million aggregate principal
amount of the Securities must remain outstanding after each such redemption.
6. NOTICE OF REDEMPTION
Notice of redemption will be mailed by first-class mail at least 30
days but not more than 60 days before the redemption date to each Holder of
Securities to be redeemed at his registered address. Securities in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000. If money sufficient to pay the redemption price of and
accrued interest on all Securities (or portions thereof) to be redeemed on the
redemption date is deposited with the Paying Agent on or before the redemption
date and certain other conditions are satisfied, on and after such date interest
ceases to accrue on such Securities (or such portions thereof) called for
redemption. If a notice or communication is sent in the manner provided in the
Indenture, it is duly given, whether or not the addressee receives it. Failure
to send a notice or communication to a Securityholder or any defect in it shall
not affect its sufficiency with respect to other Securityholders.
In addition, in the event of certain Asset Dispositions, the Company
will be required to make an offer to purchase Securities at a purchase price of
100% of their principal amount plus accrued interest to the date of purchase
(subject to the rights of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date) as provided in, and
subject to the terms of, the Indenture.
B-7
<PAGE>
7. CHANGE OF CONTROL
Upon a Change of Control, each Holder of Securities will have the
right to require the Company to repurchase all or any part of the Securities of
such Holder at a repurchase price in cash equal to 101% of the principal amount
of the Securities to be repurchased plus accrued and unpaid interest to the date
of repurchase (subject to the right of Holders of record on the relevant record
date to receive interest due on the related interest payment date) as provided
in, and subject to the terms of, the Indenture.
8. DENOMINATIONS; TRANSFER; EXCHANGE
The Securities are in registered form without coupons in denominations
of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange
Securities in accordance with the Indenture. The Registrar may require a
Holder, among other things, to furnish appropriate endorsements or transfer
documents and to pay any taxes and fees required by law or permitted by the
Indenture, including any transfer tax or other similar governmental charge
payable in connection therewith. The Registrar need not register the transfer
of or exchange any Securities selected for redemption (except, in the case of a
Security to be redeemed in part, the portion of the Security not to be redeemed)
or any Securities for a period of 15 days before a selection of Securities to be
redeemed or 15 days before an interest payment date.
9. PERSONS DEEMED OWNERS
The registered Holder of this Security may be treated as the owner of
it for all purposes.
10. UNCLAIMED MONEY
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to the
Company at its written request unless an abandoned property law designates
another Person. After any such payment, Holders entitled to the money must look
only to the Company and not to the Trustee for payment.
B-8
<PAGE>
11. DISCHARGE AND DEFEASANCE
Subject to certain conditions, the Company at any time may terminate
some or all of its obligations under the Securities and the Indenture if the
Company deposits with the Trustee money or U.S. Government Obligations for the
payment of principal and interest on the Securities to redemption or maturity,
as the case may be.
12. AMENDMENT, WAIVER
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended with the consent of the Holders of at
least a majority in principal amount outstanding of the Securities and (ii) any
past default or compliance with any provision may be waived with the consent of
the Holders of a majority in principal amount outstanding of the Securities.
Subject to certain exceptions set forth in the Indenture, without the consent of
any Securityholder, the Company and the Trustee may amend the Indenture or the
Securities to cure any ambiguity, omission, defect or inconsistency, to comply
with Article 5 of the Indenture, to provide for uncertificated Securities in
addition to or in place of certificated Securities, to add guarantees with
respect to the Securities, to secure the Securities, to add additional covenants
or surrender rights and powers conferred on the Company, to make any change that
does not adversely affect the rights of any Securityholder or to comply with any
request of the SEC in connection with qualifying the Indenture under the TIA.
B-9
<PAGE>
13. DEFAULTS AND REMEDIES
Under the Indenture, Events of Default include (i) default for 30 days
in payment of interest on the Securities; (ii) default in payment of principal
on any Security when due at its Stated Maturity, upon redemption pursuant to
paragraphs 5 or 6 above, upon required repurchase, upon acceleration or
otherwise, (iii) failure by the Company to comply with Article 5 of the
Indenture; (iv) failure by the Company to comply for 30 days after the notice
specified in the paragraph below with Section 4.3, 4.4, 4.6, 4.8 or 4.13 (other
than a failure to purchase Securities when required under Section 4.8) of the
Indenture; (v) failure of the Company to comply for 60 days after the Company
receives the notice specified in the paragraph below with any of its other
agreements in the Indenture (other than those referred to in (i), (ii), (iii) or
(iv) above); (vi) failure by the Company or any Significant Subsidiary to pay
any Indebtedness within any applicable grace period after final maturity or
acceleration by the Holders thereof because of a default and the total amount of
such Indebtedness unpaid or accelerated exceeds $10.0 million; (vii) certain
events of bankruptcy, insolvency or reorganization of the Company or any
Significant Subsidiary; and (viii) the rendering of any judgments or decrees for
the payment of money in excess of $10.0 million or its foreign equivalent at the
time is entered against the Company or any Significant Subsidiary if such
judgment or decree remains outstanding for a period of 60 days following entry
of such judgment and is not discharged, bonded, waived or stayed within 30 days
after notice thereof.
A Default under clause (iv) or (v) of Section 6.1 of the Indenture
will not constitute an Event of Default until the Trustee or the Holders of at
least 25% in aggregate principal amount of the outstanding Securities notify the
Company of the Default and the Company does not cure such Default within the
time specified after receipt of such notice. Such notice must specify the
Default, demand that it be remedied and state that such notice is a "Notice of
Default".
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the Securities then outstanding
may declare all the Securities to be due and payable. Certain events of
bankruptcy or insolvency are Events of Default which will result in the
Securities being due and payable immediately upon the occurrence of such Events
of Default.
Securityholders may not enforce the Indenture or the
B-10
<PAGE>
Securities except as provided in the Indenture. The Trustee may refuse to
enforce the Indenture or the Securities unless it receives reasonable indemnity
or security. Subject to certain limitations, Holders of a majority in principal
amount of the Securities may direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Securityholders notice of any continuing
Default (except a Default in payment of principal or interest) if it determines
that withholding notice is in the interest of the Holders.
14. TRUSTEE DEALINGS WITH THE COMPANY
Subject to certain limitations imposed by the TIA, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with and collect obligations owed
to it by the Company or any of its Affiliates and may otherwise deal with the
Company or any of its Affiliates with the same rights it would have if it were
not Trustee.
15. GUARANTEE
The obligations of the Company pursuant to the Securities, including
the repurchase obligations resulting from a Change of Control, will be
unconditionally guaranteed, on a senior unsecured basis, by each Subsidiary
Guarantor.
16. NO RECOURSE AGAINST OTHERS
No recourse for the payment of the principal of, premium, if any, or
interest on any of the Securities or for any claim based thereon or otherwise in
respect thereof, and no recourse under or upon any obligation, covenant or
agreement of the Company in the Indenture, or in any of the Securities or
because of the creation of any Indebtedness represented hereby and thereby,
shall be had against any incorporator, stockholder, officer, director, employee
or controlling person of the Company or any Successor Person thereof. Each
Holder, by accepting a Security, waives and releases all such liability.
17. HOLDER'S COMPLIANCE WITH REGISTRATION RIGHTS AGREEMENT.
Each Holder of a Security, by acceptance hereof, acknowledges and
agrees to the provisions of the Registration Rights Agreement, including,
without limitation, the obligations of the Holders with respect to a
registration and the indemnification of the Company to the extent provided
therein.
B-11
<PAGE>
18. GOVERNING LAW
THE INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO
APPLICABLE PRINCIPLES OF CONFLICT OF LAWS TO THE EXTENT THAT THE APPLICATION OF
THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
19. AUTHENTICATION
This Security shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
20. ABBREVIATIONS
Customary abbreviations may be used in the name of a Securityholder or
an assignee, such as TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with rights of survivorship and not as
tenants in common), CUST (= custodian), and U/G/M/A (= Uniform Gift to Minors
Act).
21. CUSIP NUMBERS
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures the Company has caused CUSIP numbers to be
printed on the Securities and have directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Securityholders. No representation is
made as to the accuracy of such numbers either as printed on the Securities or
as contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
B-12
<PAGE>
The Company will furnish to any Securityholder upon written request
and without charge to the Securityholder a copy of the Indenture which has in it
the text of this Security in larger type. Requests may be made as follows:
If to the Company:
International Logistics Limited
330 S. Mannheim Road
Hillside, Illinois 60162
Attention: Chief Financial Officer
If to the Trustee:
First Trust National Association
180 East Fifth Street
St. Paul, Minnesota 55101
Attention: Corporate Trust Trustee Administration
B-13
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint ________________________ agent to transfer this Security
on the books of the Company. The agent may substitute another to act for him.
Date: Your Signature:
------------------------ -----------------------------
Sign exactly as your name appears on
the other side of this Security.
Signature Guarantee:
----
(Signature must be guaranteed)
B-14
<PAGE>
[FORM OF GUARANTEE]
For value received, the undersigned hereby unconditionally guarantees,
as principal obligor and not only as a surety, to the Holder of this Note the
cash payments in United States dollars of principal of, premium, if any, and
interest on this Note (and including Additional Interest payable thereon) in the
amounts and at the times when due and interest on the overdue principal,
premium, if any, and interest, if any, of this Note, if lawful, and the payment
or performance of all other obligations of the Company under the Indenture or
the Notes, to the Holder of this Note and the Trustee, all in accordance with
and subject to the terms and limitations of this Note, Article Ten of the
Indenture and this Guarantee. This Guarantee will become effective in
accordance with Article Ten of the Indenture and its terms shall be evidenced
therein. The validity and enforceability of any Guarantee shall not be affected
by the fact that it is not affixed to any particular Note.
Capitalized terms used but not defined herein shall have the meanings
ascribed to them in the Indenture dated as of October 29, 1997, among
International Logistics Limited, a Delaware corporation, the Subsidiary
Guarantors named therein and First Trust National Association, as trustee (the
"Trustee"), as amended or supplemented (the "Indenture").
The obligations of the undersigned to the Holders of Notes and to the
Trustee pursuant to this Guarantee and the Indenture are expressly set forth in
Article Ten of the Indenture and reference is hereby made to the Indenture for
the precise terms of the Guarantee and all of the other provisions of the
Indenture to which this Guarantee relates.
THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF
CONFLICTS OF LAW. Each Subsidiary Guarantor hereby agrees to submit to the
jurisdiction of the courts of the State of New York in any action or proceeding
arising out of or relating to this Guarantee.
This Guarantee is subject to release upon the terms set forth in the
Indenture.
B-1
<PAGE>
IN WITNESS WHEREOF, each Subsidiary Guarantor has caused its Guarantee
to be duly executed.
Date:
THE BEKINS COMPANY
By
-----------------------------------
Name:
Title:
LEP PROFIT INTERNATIONAL, INC.
By
-----------------------------------
Name:
Title:
ILLCAN, INC.
By
-----------------------------------
Name:
Title:
ILLSCOT, INC.
By
-----------------------------------
Name:
Title:
MATRIX INTERNATIONAL LOGISTICS, INC.
By
-----------------------------------
Name:
Title:
B-2
<PAGE>
LIW HOLDINGS CORP.
By
-----------------------------------
Name:
Title:
BEKINS VAN LINES CO.
By
-----------------------------------
Name:
Title:
LEP FAIRS, INC.
By
-----------------------------------
Name:
Title:
AIR FREIGHT CONSOLIDATORS INTERNATIONAL,
INC.
By
-----------------------------------
Name:
Title:
BAY AREA MATRIX, INC.
By
-----------------------------------
Name:
Title:
L.A. MATRIX, INC.
By
-----------------------------------
Name:
Title:
B-3
<PAGE>
SOUTHWEST MATRIX, INC.
By
-----------------------------------
Name:
Title:
MATRIX CT., INC.
By
-----------------------------------
Name:
Title:
B-4
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.6 or 4.8 of the Indenture, check the box:
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.6 or 4.8 of the Indenture,
state the amount: $
Date: Your Signature:
------------------------- ----------------------------
Sign exactly as your name appears on
the other side of this Security.
Signature Guarantee:
-------
(Signature must be guaranteed)
B-1
<PAGE>
$110,000,000
INTERNATIONAL LOGISTICS LIMITED
9 3/4% SENIOR NOTES DUE 2007
REGISTRATION RIGHTS AGREEMENT
<PAGE>
TABLE OF CONTENTS
1. Registered Exchange Offer. . . . . . . . . . . . . . . . . . . . . . . 3
2. Shelf Registration . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3. Registration Procedures. . . . . . . . . . . . . . . . . . . . . . . . 9
4. Registration Expenses. . . . . . . . . . . . . . . . . . . . . . . . . 17
5. Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6. Additional Interest Under Certain Circumstances. . . . . . . . . . . . 21
7. Rules 144 and 144A . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8. Underwritten Registrations . . . . . . . . . . . . . . . . . . . . . . 23
9. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(a) Amendments and Waivers. . . . . . . . . . . . . . . . . . . . . . 24
(b) Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(c) No Inconsistent Agreements. . . . . . . . . . . . . . . . . . . . 25
(d) Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . 25
(e) Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(f) Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(g) GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(h) Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(i) Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . 26
(j) Securities Held by the Company. . . . . . . . . . . . . . . . . . 26
<PAGE>
October 29, 1997
CREDIT SUISSE FIRST BOSTON CORPORATION
BT ALEX. BROWN INCORPORATED
SMITH BARNEY INC.
ING BARING (U.S.) SECURITIES, INC.
c/o Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, New York 10010-3629
Ladies and Gentlemen:
This Registration Rights Agreement is dated as of October 29, 1997
among International Logistics Limited, a Delaware corporation (the "Company"),
as issuer, the Subsidiary Guarantors listed on the signature pages hereto, as
guarantors (the "Guarantors," and together with the Company, the "Issuers"), and
Credit Suisse First Boston Corporation, BT Alex. Brown Incorporated, Smith
Barney Inc. and ING Baring (U.S.) Securities, Inc. (collectively, the "Initial
Purchasers"). The Company proposes to issue and sell to the Initial Purchasers,
upon the terms set forth in a purchase agreement dated October 24, 1997 (the
"Purchase Agreement"), $110,000,000 aggregate principal amount of its 9 3/4%
Senior Notes Due 2007 (the "Initial Securities"). The Initial Securities will
be issued pursuant to an Indenture, dated as of October 29, 1997, (the
"Indenture") among the Company, the Guarantors and First Trust National
Association (the "Trustee"). As an inducement to the Initial Purchasers, the
Issuers agree with the Initial Purchasers, for the benefit of the holders of the
Initial Securities (including, without limitation, the Initial Purchasers), the
Exchange Securities (as defined below) and the Private Exchange Securities (as
defined below) (collectively, the "Holders"), as follows:
1. REGISTERED EXCHANGE OFFER. The Issuers shall, at their own cost,
prepare and, not later than 60 days after (or if the 60th day is not a business
day, the first business day thereafter) the date of original issue of the
Initial Securities (the "Issue Date"), file with the Securities and Exchange
Commission (the "Commission") a registration statement (the "Exchange Offer
Registration Statement") on an appropriate form under the Securities Act of
1933, as amended (the "Securities Act"), with respect to a proposed offer (the
"Registered Exchange Offer") to the Holders of Transfer Restricted Securities
(as defined in Section 6 hereof), who are not prohibited by any law or policy of
the Commission from participating in the Registered Exchange Offer, to issue and
deliver to such Holders, in exchange for the Initial Securities, a like
aggregate principal amount of debt securities (the "Exchange Securities") of the
Company,
<PAGE>
guaranteed by the Guarantors, and issued under the Indenture and identical in
all material respects to the Initial Securities (except for the transfer
restrictions relating to the Initial Securities and the provisions relating to
the matters described in Section 6 hereof) that would be registered under the
Securities Act. The Issuers shall use all reasonable efforts to cause such
Exchange Offer Registration Statement to become effective under the Securities
Act within 195 days (or if the 195th day is not a business day, the first
business day thereafter) after the Issue Date of the Initial Securities and
shall keep the Exchange Offer Registration Statement effective for not less than
30 days (or longer, if required by applicable law) after the date notice of the
Registered Exchange Offer is mailed to the Holders (such period being called the
"Exchange Offer Registration Period").
If the Issuers effect the Registered Exchange Offer, the Issuers will
be entitled to close the Registered Exchange Offer 30 days after the
commencement thereof provided that the Issuers have accepted all the Initial
Securities theretofore validly tendered in accordance with the terms of the
Registered Exchange Offer.
Following the declaration of the effectiveness of the Exchange Offer
Registration Statement, the Issuers shall promptly commence the Registered
Exchange Offer, it being the objective of such Registered Exchange Offer to
enable each Holder of Transfer Restricted Securities (as defined in Section 6
hereof) electing to exchange the Initial Securities for Exchange Securities
(assuming that such Holder is not an affiliate of the Issuers within the meaning
of the Securities Act, acquires the Exchange Securities in the ordinary course
of such Holder's business and has no arrangements with any person to participate
in the distribution of the Exchange Securities and is not prohibited by any law
or policy of the Commission from participating in the Registered Exchange Offer)
to trade such Exchange Securities from and after their receipt without any
limitations or restrictions under the Securities Act and without material
restrictions under the securities laws of the several states of the United
States.
The Issuers acknowledge that, pursuant to current interpretations by
the Commission's staff of Section 5 of the Securities Act, in the absence of an
applicable exemption therefrom, (i) each Holder which is a broker-dealer
electing to exchange Initial Securities, acquired for its own account as a
result of market making activities or other trading activities, for Exchange
Securities (an "Exchanging Dealer"), is required to deliver a prospectus
containing the information set forth in (a) Annex A hereto on the cover of such
prospectus, (b) Annex B hereto in the "Exchange Offer Procedures" section and
the
-2-
<PAGE>
"Purpose of the Exchange Offer" section of such prospectus, and (c) Annex C
hereto in the "Plan of Distribution" section of such prospectus in connection
with a sale of any such Exchange Securities received by such Exchanging Dealer
pursuant to the Registered Exchange Offer and (ii) an Initial Purchaser that
elects to sell Exchange Securities acquired in exchange for Initial Securities
constituting any portion of an unsold allotment is required to deliver a
prospectus containing the information required by Items 507 or 508 of
Regulation S-K under the Securities Act, as applicable, in connection with such
sale.
The Issuers shall use their best efforts to keep the Exchange Offer
Registration Statement effective and to amend and supplement the prospectus
contained therein, in order to permit such prospectus to be lawfully delivered
by all persons subject to the prospectus delivery requirements of the Securities
Act for such period of time as such persons must comply with such requirements
in order to resell the Exchange Securities (which period shall not exceed one
year from the date on which the Exchange Offer Registration Statement is
declared effective); provided, however, that (i) in the case where such
prospectus and any amendment or supplement thereto must be delivered by an
Exchanging Dealer or an Initial Purchaser, such period shall be the lesser of
180 days and the period ending on the date on which all Exchanging Dealers and
the Initial Purchasers have sold all Exchange Securities held by them (unless
such period is extended pursuant to Section 3(j) below) and (ii) the Issuers
shall make such prospectus and any amendment or supplement thereto, available to
any broker-dealer for use in connection with any resale of any Exchange
Securities for a period of not less than 90 days after the consummation of the
Registered Exchange Offer.
If, upon consummation of the Registered Exchange Offer, any Initial
Purchaser holds Initial Securities acquired by it as part of its initial
distribution, the Issuers, simultaneously with the delivery of the Exchange
Securities pursuant to the Registered Exchange Offer, shall issue and deliver to
such Initial Purchaser upon the written request of such Initial Purchaser, in
exchange (the "Private Exchange") for the Initial Securities held by such
Initial Purchaser, a like principal amount of debt securities of the Company,
guaranteed by the Guarantors, and issued under the Indenture and identical in
all material respects (including the existence of restrictions on transfer under
the Securities Act and the securities laws of the several states of the United
States, but excluding provisions relating to the matters described in Section 6
hereof) to the Initial Securities (the "Private Exchange Securities"). The
Initial Securities, the Exchange Securities and the Private Exchange Securities
are herein collectively called the "Securities."
-3-
<PAGE>
In connection with the Registered Exchange Offer, the Issuers shall:
(a) mail to each Holder a copy of the prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter
of transmittal and related documents;
(b) keep the Registered Exchange Offer open for not less than 30 days
(or longer, if required by applicable law) after the date notice thereof is
mailed to the Holders;
(c) utilize the services of a depositary for the Registered Exchange
Offer with an address in the Borough of Manhattan, The City of New York,
which may be the Trustee or an affiliate of the Trustee;
(d) permit Holders to withdraw tendered Securities at any time prior
to the close of business, New York time, on the last business day on which
the Registered Exchange Offer shall remain open; and
(e) otherwise comply with all applicable laws.
As soon as practicable after the close of the Registered Exchange
Offer or the Private Exchange, as the case may be, the Issuers shall:
(x) accept for exchange all the Securities validly tendered and not
withdrawn pursuant to the Registered Exchange Offer and the Private
Exchange;
(y) deliver to the Trustee for cancellation all the Initial
Securities so accepted for exchange; and
(z) cause the Trustee to authenticate and deliver promptly to each
Holder of the Initial Securities, Exchange Securities or Private Exchange
Securities, as the case may be, equal in principal amount to the Initial
Securities of such Holder so accepted for exchange.
The Indenture will provide that the Exchange Securities will not be
subject to the transfer restrictions set forth in the Indenture and that all the
Securities will vote and consent together on all matters as one class and that
none of the Securities will have the right to vote or consent as a class
separate from one another on any matter.
Interest on each Exchange Security and Private Exchange Security
issued pursuant to the Registered Exchange Offer and in
-4-
<PAGE>
the Private Exchange will accrue from the last interest payment date on which
interest was paid on the Initial Securities surrendered in exchange therefor or,
if no interest has been paid on the Initial Securities, from the date of
original issue of the Initial Securities.
Each Holder participating in the Registered Exchange Offer shall be
required to represent to the Issuers that at the time of the consummation of the
Registered Exchange Offer (i) any Exchange Securities received by such Holder
will be acquired in the ordinary course of business, (ii) such Holder will have
no arrangements or understanding with any person to participate in the
distribution of the Securities within the meaning of the Securities Act,
(iii) such Holder is not an "affiliate," as defined in Rule 405 of the
Securities Act, of the Company or any Guarantor or if it is an affiliate, such
Holder will comply with the registration and prospectus delivery requirements of
the Securities Act to the extent applicable, (iv) if such Holder is not a
broker-dealer, that it is not engaged in, and does not intend to engage in, the
distribution of the Exchange Securities and (v) if such Holder is a
broker-dealer, that it will receive Exchange Securities for its own account in
exchange for Initial Securities that were acquired as a result of market-making
activities or other trading activities and that it will be required to
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Securities.
Notwithstanding any other provisions hereof, the Issuers will ensure
that (i) any Exchange Offer Registration Statement and any amendment thereto and
any prospectus forming part thereof and any supplement thereto complies in all
material respects with the Securities Act and the rules and regulations
thereunder, (ii) any Exchange Offer Registration Statement and any amendment
thereto does not, when it becomes effective, contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and (iii) any prospectus
forming part of any Exchange Offer Registration Statement, and any supplement to
such prospectus, does not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
2. SHELF REGISTRATION. If, (i) because of any change in law or in
applicable interpretations thereof by the staff of the Commission, the Issuers
are not permitted to effect a Registered Exchange Offer, as contemplated by
Section 1 hereof, (ii) the Registered Exchange Offer is not consummated within
230 days of the Issue Date or (iii) any Holder notifies the
-5-
<PAGE>
Issuers within 30 days after commencement of the Registered Exchange Offer that
such holder (x) is prohibited by applicable law or SEC policy from participating
in the Registered Exchange Offer, (y) may not resell Exchange Notes acquired by
it to the public without delivery of a prospectus and that the prospectus
contained in the Exchange Offer Registration Statement is not appropriate or
available for such resales by such Holder or (z) is a broker-dealer and holds
Notes acquired directly from the Issuers or an affiliate of the Issuers, then in
lieu of conducting the Registered Exchange Offer, the Issuers shall take the
following actions:
(a) The Issuers shall, at their cost, as promptly as practicable (but
in no event more than 60 days after so required or requested pursuant to
this Section 2) file with the Commission and thereafter shall use all
reasonable efforts to cause to be declared effective a registration
statement (the "Shelf Registration Statement" and, together with the
Exchange Offer Registration Statement, a "Registration Statement") on an
appropriate form under the Securities Act relating to the offer and sale of
the Transfer Restricted Securities (as defined in Section 6 hereof) by the
Holders thereof from time to time in accordance with the methods of
distribution set forth in the Shelf Registration Statement and Rule 415
under the Securities Act (hereinafter, the "Shelf Registration"); provided,
however, that no Holder (other than an Initial Purchaser) shall be entitled
to have the Securities held by it covered by such Shelf Registration
Statement unless such Holder agrees in writing to be bound by all the
provisions of this Agreement applicable to such Holder.
(b) The Issuers shall use all reasonable efforts to keep the Shelf
Registration Statement continuously effective in order to permit the
prospectus included therein to be lawfully delivered by the Holders of the
relevant Securities, for a period of two years (or for such longer period
if extended pursuant to Section 3(j) below) from the Issue Date or such
shorter period that will terminate when all the Securities covered by the
Shelf Registration Statement (i) have been sold pursuant thereto or
(ii) are no longer restricted securities (as defined in Rule 144 under the
Securities Act, or any successor rule thereof). The Issuers shall be
deemed not to have used their best efforts to keep the Shelf Registration
Statement effective during the requisite period if they voluntarily take
any action that would result in Holders of Securities covered thereby not
being able to offer and sell such Securities during that period, unless
such action is required by applicable law.
-6-
<PAGE>
(c) Notwithstanding any other provisions of this Agreement to the
contrary, the Issuers shall cause the Shelf Registration Statement and the
related prospectus and any amendment or supplement thereto, as of the
effective date of the Shelf Registration Statement, amendment or
supplement, (i) to comply in all material respects with the applicable
requirements of the Securities Act and the rules and regulations of the
Commission and (ii) not to contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
3. REGISTRATION PROCEDURES. In connection with any Shelf
Registration contemplated by Section 2 hereof and, to the extent applicable, any
Registered Exchange Offer contemplated by Section 1 hereof, the following
provisions shall apply:
(a) The Issuers shall (i) furnish to each Initial Purchaser, prior to
the filing thereof with the Commission, a copy of the Registration
Statement and each amendment thereof and each supplement, if any, to the
prospectus included therein and, in the event that an Initial Purchaser
(with respect to any portion of an unsold allotment from the original
offering) is participating in the Registered Exchange Offer or the Shelf
Registration Statement, the Issuers shall use their best efforts to reflect
in each such document, when so filed with the Commission, such comments as
such Initial Purchaser may reasonably propose; (ii) include the information
set forth in Annex A hereto on the cover of such Registration Statement, in
Annex B hereto in the "Exchange Offer Procedures" section and the "Purpose
of the Exchange Offer" section of such Registration Statement and in Annex
C hereto in the "Plan of Distribution" section of the prospectus forming a
part of the Exchange Offer Registration Statement and include the
information set forth in Annex D hereto in the Letter of Transmittal
delivered pursuant to the Registered Exchange Offer; (iii) if requested by
an Initial Purchaser, include the information required by Items 507 or 508
of Regulation S-K under the Securities Act, as applicable, in the
prospectus forming a part of the Exchange Offer Registration Statement;
(iv) include within the prospectus contained in the Exchange Offer
Registration Statement a section entitled "Plan of Distribution,"
reasonably acceptable to the Initial Purchasers, which shall contain a
summary statement of the positions taken or policies made by the staff of
the Commission with respect to the potential "underwriter" status of any
broker-dealer that is the beneficial owner (as defined in Rule 13d-3 under
the Securities Exchange Act of
-7-
<PAGE>
1934, as amended (the "Exchange Act")) of Exchange Securities received by
such broker-dealer in the Registered Exchange Offer (a "Participating
Broker-Dealer"), whether such positions or policies have been publicly
disseminated by the staff of the Commission or such positions or policies,
in the reasonable judgment of the Initial Purchasers based upon advice of
counsel (which may be in-house counsel), represent the prevailing views of
the staff of the Commission; and (v) in the case of a Shelf Registration
Statement, include the names of the Holders, who propose to sell Securities
pursuant to the Shelf Registration Statement, as selling securityholders.
(b) If a Shelf Registration Statement is filed pursuant to Section 2
hereof or a prospectus contained in an Exchange Registration Statement is
required to be delivered by a Participating Broker-Dealer, the Issuers
shall give written notice to the Initial Purchasers, the Holders of the
Securities and any Participating Broker-Dealer from whom the Issuers have
received prior written notice that it will be a Participating Broker-Dealer
in the Registered Exchange Offer (which notice pursuant to clauses (ii) -
(v) hereof shall be accompanied by an instruction to suspend the use of the
prospectus until the requisite changes have been made):
(i) when the Registration Statement or any amendment thereto has
been filed with the Commission and when the Registration Statement or any
post-effective amendment thereto has become effective;
(ii) of any request by the Commission for amendments or
supplements to the Registration Statement or the prospectus included
therein or for additional information;
(iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose;
(iv) of the receipt by the Company or any Guarantor or its
respective legal counsel of any notification with respect to the suspension
of the qualification of the Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose; and
(v) of the happening of any event that requires the Issuers to
make changes in the Registration Statement or the prospectus in order that
the Registration Statement or
-8-
<PAGE>
the prospectus do not contain an untrue statement of a material fact nor
omit to state a material fact required to be stated therein or necessary to
make the statements therein (in the case of the prospectus, in light of the
circumstances under which they were made) not misleading.
(c) The Issuers shall make every reasonable effort to obtain the
withdrawal at the earliest practicable time, of any order suspending the
effectiveness of the Registration Statement.
(d) The Issuers shall furnish to each Holder of Securities included
within the coverage of the Shelf Registration, without charge, at least one
copy of the Shelf Registration Statement and any post-effective amendment
thereto, including financial statements and schedules, and, if the Holder
so requests in writing, all exhibits thereto (including those, if any,
incorporated by reference).
(e) The Issuers shall deliver to each Exchanging Dealer and each
Initial Purchaser, and to any other Holder who so requests, without charge,
at least one copy of the Exchange Offer Registration Statement and any
post-effective amendment thereto, including financial statements and
schedules, and, if any Initial Purchaser or any such Holder requests, all
exhibits thereto (including those incorporated by reference).
(f) The Issuers shall, during the Shelf Registration Period, deliver
to each Holder of Securities included within the coverage of the Shelf
Registration, without charge, as many copies of the prospectus (including
each preliminary prospectus) included in the Shelf Registration Statement
and any amendment or supplement thereto as such person may reasonably
request. Subject to the second sentence of Subsection (j) of this
Section 3, the Issuers consent, subject to the provisions of this
Agreement, to the use of the prospectus or any amendment or supplement
thereto by each of the selling Holders of the Securities in connection with
the offering and sale of the Securities covered by the prospectus, or any
amendment or supplement thereto, included in the Shelf Registration
Statement.
(g) The Issuers shall deliver to each Initial Purchaser, any
Exchanging Dealer, any Participating Broker-Dealer and such other persons
required to deliver a prospectus following the Registered Exchange Offer,
without charge, as many copies of the final prospectus included in the
Exchange Offer Registration Statement and any amendment or supplement
thereto as such persons may reasonably
-9-
<PAGE>
request. The Issuers consent, subject to the provisions of this Agreement,
to the use of the prospectus or any amendment or supplement thereto by any
Initial Purchaser, if necessary, any Participating Broker-Dealer and such
other persons required to deliver a prospectus following the Registered
Exchange Offer in connection with the offering and sale of the Exchange
Securities covered by the prospectus, or any amendment or supplement
thereto, included in such Exchange Offer Registration Statement.
(h) Prior to any public offering of the Securities, pursuant to any
Registration Statement, the Issuers shall register or qualify or cooperate
with the Holders of the Securities included therein and their respective
counsel in connection with the registration or qualification of the
Securities for offer and sale under the securities or "blue sky" laws of
such states of the United States as any Holder of the Securities reasonably
requests in writing and do any and all other acts or things reasonably
necessary or advisable to enable the offer and sale in such jurisdictions
of the Securities covered by such Registration Statement; provided,
however, that the Issuers shall not be required to (i) qualify generally to
do business in any jurisdiction where it is not then so qualified or
(ii) take any action which would subject it to general service of process
or to taxation in any jurisdiction where it is not then so subject.
(i) The Issuers shall cooperate with the Holders of the Securities to
facilitate the timely preparation and delivery of certificates representing
the Securities to be sold pursuant to any Registration Statement free of
any restrictive legends and in such denominations and registered in such
names as the Holders may request a reasonable period of time prior to sales
of the Securities pursuant to such Registration Statement.
(j) Upon the occurrence of any event contemplated by paragraphs (ii)
through (v) of Section 3(b) above during the period for which the Issuers
are required to maintain an effective Registration Statement, the Issuers
shall promptly prepare and file a post-effective amendment to the
Registration Statement or a supplement to the related prospectus and any
other required document so that, as thereafter delivered to Holders of the
Securities or purchasers of Securities, the prospectus will not contain an
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,
in light of the circumstances under which they were made, not misleading.
If the Issuers
-10-
<PAGE>
notify the Initial Purchasers, the Holders of the Securities and any known
Participating Broker-Dealer in accordance with paragraphs (ii) through (v)
of Section 3(b) above to suspend the use of the prospectus until the
requisite changes to the prospectus have been made, then the Initial
Purchasers, the Holders of the Securities and any such Participating
Broker-Dealers shall agree, by accepting such Securities, to suspend use of
such prospectus, and the period of effectiveness of the Shelf Registration
Statement provided for in Section 2(b) above and the Exchange Offer
Registration Statement provided for in Section 1 above shall each be
extended by the number of days from and including the date of the giving of
such notice to and including the date when the Initial Purchasers, the
Holders of the Securities and any known Participating Broker-Dealer shall
have received such amended or supplemented prospectus pursuant to this
Section 3(j).
(k) Not later than the effective date of the applicable Registration
Statement, the Issuers will provide a CUSIP number for the Initial
Securities, the Exchange Securities or the Private Exchange Securities, as
the case may be, and provide the applicable trustee with printed
certificates for the Initial Securities, the Exchange Securities or the
Private Exchange Securities, as the case may be, in a form eligible for
deposit with The Depository Trust Issuers.
(l) The Issuers use its best efforts to comply with all rules and
regulations of the Commission to the extent and so long as they are
applicable to the Registered Exchange Offer or the Shelf Registration and
will make generally available to its security holders (or otherwise provide
in accordance with Section 11(a) of the Securities Act) an earnings
statement satisfying the provisions of Section 11(a) of the Securities Act,
no later than 45 days after the end of a 12-month period (or 90 days, if
such period is a fiscal year) beginning with the first month of the
Company's first fiscal quarter commencing after the effective date of the
Registration Statement, which statement shall cover such 12-month period.
(m) The Issuers shall cause the Indenture to be qualified under the
Trust Indenture Act of 1939, as amended, in a timely manner and containing
such changes, if any, as shall be necessary for such qualification. In the
event that such qualification would require the appointment of a new
trustee under the Indenture, the Issuers shall appoint a new trustee
thereunder pursuant to the applicable provisions of the Indenture.
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(n) The Issuers may require each Holder of Securities to be sold
pursuant to the Shelf Registration Statement to furnish to the Issuers such
information regarding the Holder and the distribution of the Securities as
the Issuers may from time to time reasonably require for inclusion in the
Shelf Registration Statement, and the Issuers may exclude from such
registration the Securities of any Holder that unreasonably fails to
furnish such information within a reasonable time after receiving such
request.
(o) The Issuers shall enter into such customary agreements
(including, if requested, an underwriting agreement in customary form) and
take all such other action, if any, as any Holder of the Securities shall
reasonably request in order to facilitate the disposition of the Securities
pursuant to any Shelf Registration.
(p) In the case of any Shelf Registration, the Issuers shall (i) make
reasonably available for inspection by the Holders of the Securities, any
underwriter participating in any disposition pursuant to the Shelf
Registration Statement and any attorney, accountant or other agent retained
by the Holders of the Securities or any such underwriter all relevant
financial and other records, pertinent corporate documents and properties
of the Issuers and (ii) cause the Issuers' officers, directors, employees,
accountants and auditors to supply all relevant information reasonably
requested by the Holders of the Securities or any such underwriter,
attorney, accountant or agent in connection with the Shelf Registration
Statement, in each case, as shall be reasonably necessary to enable such
persons, to conduct a reasonable investigation within the meaning of
Section 11 of the Securities Act; provided, however, that the foregoing
inspection and information gathering shall be coordinated on behalf of the
Initial Purchasers by Credit Suisse First Boston Corporation and on behalf
of the other parties, by one counsel designated by and on behalf of such
other parties as described in Section 4 hereof. Each selling Holder of
such Transfer Restricted Securities or any underwriter participating in any
disposition pursuant to such Registration Statement agrees that such
information pertaining to the Issuers obtained by it shall be deemed
confidential and shall not be used by it as the basis for any market
transactions in the securities of the Company unless and until such
information is made generally available to the public.
(q) In the case of any Shelf Registration, the Issuers, if requested
by any Holder of Securities covered thereby, shall cause (i) its counsel to
deliver an opinion
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and updates thereof relating to the Securities in customary form addressed
to such Holders and the managing underwriters, if any, thereof and dated,
in the case of the initial opinion, the effective date of such Shelf
Registration Statement (it being agreed that the matters to be covered by
such opinion shall include, without limitation, the due incorporation and
good standing of the Issuers and their respective subsidiaries; the
qualification of the Company and each Guarantor and their respective
subsidiaries to transact business as foreign corporations; the due
authorization, execution and delivery of the relevant agreement of the type
referred to in Section 3(o) hereof; the due authorization, execution,
authentication and issuance, and the validity and enforceability, of the
applicable Securities; the absence of material legal or governmental
proceedings involving the Company and its subsidiaries and each Guarantor;
the absence of governmental approvals required to be obtained in connection
with the Shelf Registration Statement, the offering and sale of the
applicable Securities, or any agreement of the type referred to in
Section 3(o) hereof; the compliance as to form of such Shelf Registration
Statement and any documents incorporated by reference therein and of the
Indenture with the requirements of the Securities Act and the Trust
Indenture Act, respectively; and, relying as to materiality to a large
extent on certificates and other representations of the Company and without
independent check or verification thereof, no facts came to such counsel's
attention that caused such counsel to believe that, as of the effective
date of the Shelf Registration Statement or most recent post-effective
amendment thereto, as the case may be, the absence from such Shelf
Registration Statement and the prospectus included therein, as then amended
or supplemented, and from any documents incorporated by reference therein
contained an untrue statement of a material fact or omitted to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading (in the case of any such documents,
in the light of the circumstances existing at the time that such documents
were filed with the Commission under the Exchange Act) (without limiting
the foregoing, such counsel may further state that such counsel assumes no
responsibility for, and has not independently verified, the accuracy,
completeness or fairness of the financial statements, notes, schedules and
other financial data included in the Shelf Registration Statement as
contemplated by this Agreement or the prospects included therein; (ii) its
officers to execute and deliver all customary documents and certificates
and updates thereof requested by any underwriters of the applicable
Securities and (iii) its
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independent public accountants and the independent public accountants with
respect to any other entity for which financial information is provided in
the Shelf Registration Statement to provide to the selling Holders of the
applicable Securities and any underwriter therefor a comfort letter in
customary form and covering matters of the type customarily covered in
comfort letters in connection with primary underwritten offerings, subject
to receipt of appropriate documentation as contemplated, and only if
permitted, by Statement of Auditing Standards No. 72.
(r) In the case of the Registered Exchange Offer, if requested by any
Initial Purchaser or any known Participating Broker-Dealer, the Issuers
shall cause (i) their counsel to deliver to such Initial Purchaser or such
Participating Broker-Dealer a signed opinion in the form set forth in
Section 6(c)-(d) of the Purchase Agreement with such changes as are
customary in connection with the preparation of a Registration Statement
and (ii) their independent public accountants and the independent public
accountants with respect to any other entity for which financial
information is provided in the Registration Statement to deliver to such
Initial Purchaser or such Participating Broker-Dealer a comfort letter, in
customary form, meeting the requirements as to the substance thereof as set
forth in Section 6(a) and (g) of the Purchase Agreement, with appropriate
date changes.
(s) If a Registered Exchange Offer or a Private Exchange is to be
consummated, upon delivery of the Initial Securities by Holders to the
Company (or to such other Person as directed by the Company) in exchange
for the Exchange Securities or the Private Exchange Securities, as the case
may be, the Issuers shall mark, or caused to be marked, on the Initial
Securities so exchanged that such Initial Securities are being canceled in
exchange for the Exchange Securities or the Private Exchange Securities, as
the case may be; in no event shall the Initial Securities be marked as paid
or otherwise satisfied.
(t) The Issuers will use their best efforts to (a) if the Initial
Securities have been rated prior to the initial sale of such Initial
Securities, confirm such ratings will apply to the Securities covered by a
Registration Statement, or (b) if the Initial Securities were not
previously rated, cause the Securities covered by a Registration Statement
to be rated with the appropriate rating agencies, if so requested by
Holders of a majority in aggregate principal amount of Securities covered
by such Registration Statement, or by the managing underwriters, if any.
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(u) In the event that any broker-dealer registered under the Exchange
Act shall underwrite any Securities or participate as a member of an
underwriting syndicate or selling group or "assist in the distribution"
(within the meaning of the Conduct Rules (the "Rules") of the National
Association of Securities Dealers, Inc. ("NASD")) thereof, whether as a
Holder of such Securities or as an underwriter, a placement or sales agent
or a broker or dealer in respect thereof, or otherwise, the Issuers will
use its best efforts assist such broker-dealer in complying with the
requirements of such Rules, including, without limitation, by (i) if such
Rules, including Rule 2720, shall so require, engaging a "qualified
independent underwriter" (as defined in Rule 2720) to participate in the
preparation of the Registration Statement relating to such Securities, to
exercise usual standards of due diligence in respect thereto and, if any
portion of the offering contemplated by such Registration Statement is an
underwritten offering or is made through a placement or sales agent, to
recommend the yield of such Securities, (ii) indemnifying any such
qualified independent underwriter to the extent of the indemnification of
underwriters provided in Section 5 hereof and (iii) providing such
information to such broker-dealer as may be required in order for such
broker-dealer to comply with the requirements of the Rules.
(v) The Issuers shall use their best efforts to take all other steps
necessary to effect the registration of the Securities covered by a
Registration Statement contemplated hereby.
4. REGISTRATION EXPENSES. The Issuers shall bear all fees and
expenses incurred in connection with the performance of its obligations under
Sections 1 through 3 hereof (including the reasonable fees and expenses, if any,
of Cahill Gordon & Reindel, counsel for the Initial Purchasers, incurred in
connection with the Registered Exchange Offer), whether or not the Registered
Exchange Offer or a Shelf Registration is filed or becomes effective, and, in
the event of a Shelf Registration, shall bear or reimburse the Holders of the
Securities covered thereby for the reasonable fees and disbursements of one firm
of counsel designated by the Holders of a majority in principal amount of the
Initial Securities covered thereby to act as counsel for the Holders of the
Initial Securities in connection therewith.
5. INDEMNIFICATION. (a) The Issuers agree to indemnify and hold
harmless each Holder of the Securities, any Participating Broker-Dealer and each
person, if any, who controls such Holder or such Participating Broker-Dealer
within the meaning of the Securities Act or the Exchange Act (each Holder,
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any Participating Broker-Dealer and such controlling persons are referred to
collectively as the "Indemnified Parties") from and against any losses, claims,
damages or liabilities, joint or several, or any actions in respect thereof
(including, but not limited to, any losses, claims, damages, liabilities or
actions relating to purchases and sales of the Securities) to which each
Indemnified Party may become subject under the Securities Act, the Exchange Act
or otherwise, insofar as such losses, claims, damages, liabilities or actions
arise out of or are based upon any untrue statement or alleged untrue statement
of a material fact contained in a Registration Statement or prospectus or in any
amendment or supplement thereto or in any preliminary prospectus relating to a
Shelf Registration, or arise out of, or are based upon, the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and shall reimburse, as
incurred, the Indemnified Parties for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action in respect thereof, provided, however, that
(i) the Issuers shall not be liable in any such case to the extent that such
loss, claim, damage or liability arises out of or is based upon any untrue
statement or alleged untrue statement or omission or alleged omission made in a
Registration Statement or prospectus or in any amendment or supplement thereto
or in any preliminary prospectus relating to a Shelf Registration in reliance
upon and in conformity with written information pertaining to such Holder and
furnished to the Issuers by or on behalf of such Holder specifically for
inclusion therein and (ii) with respect to any untrue statement or omission or
alleged untrue statement or omission made in any preliminary prospectus relating
to a Shelf Registration Statement, the indemnity agreement contained in this
subsection (a) shall not inure to the benefit of any Holder or Participating
Broker-Dealer from whom the person asserting any such losses, claims, damages or
liabilities purchased the Securities concerned, to the extent that a prospectus
relating to such Securities was required to be delivered by such Holder or
Participating Broker-Dealer under the Securities Act in connection with such
purchase and any such loss, claim, damage or liability of such Holder or
Participating Broker-Dealer results from the fact that there was not sent or
given to such person, at or prior to the written confirmation of the sale of
such Securities to such person, a copy of the final prospectus if the Issuers
had previously furnished copies thereof to such Holder or Participating
Broker-Dealer; provided further, however, that this indemnity agreement will be
in addition to any liability which the Issuers may otherwise have to such
Indemnified Party. The Issuers shall also indemnify underwriters, their
officers and directors and each person who controls such underwriters within the
meaning of the Securities
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Act or the Exchange Act to the same extent as provided above with respect to the
indemnification of the Holders of the Securities if requested by such Holders.
(b) Each Holder of the Securities, severally and not jointly, will
indemnify and hold harmless the Issuers and their respective directors and
officers and each person, if any, who controls the Issuers (within the meaning
of the Securities Act or the Exchange Act) from and against any losses, claims,
damages or liabilities or any actions in respect thereof, to which the Issuers
or any such controlling person may become subject under the Securities Act, the
Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities
or actions arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in a Registration Statement or prospectus
or in any amendment or supplement thereto or in any preliminary prospectus
relating to a Shelf Registration, or arise out of or are based upon the omission
or alleged omission to state therein a material fact necessary to make the
statements therein not misleading, but in each case only to the extent that the
untrue statement or omission or alleged untrue statement or omission was made in
reliance upon and in conformity with written information pertaining to such
Holder and furnished to the Issuers by or on behalf of such Holder specifically
for inclusion therein; and, subject to the limitation set forth immediately
preceding this clause, shall reimburse, as incurred, the Issuers for any legal
or other expenses reasonably incurred by them or any such controlling person in
connection with investigating or defending any loss, claim, damage, liability or
action in respect thereof. This indemnity agreement will be in addition to any
liability which such Holder may otherwise have to the Issuers or any of their
controlling persons.
(c) Promptly after receipt by an indemnified party under this
Section 5 of notice of the commencement of any action or proceeding (including a
governmental investigation), such indemnified party will, if a claim in respect
thereof is to be made against the indemnifying party under this Section 5,
notify the indemnifying party of the commencement thereof; but the omission to
so notify the indemnifying party will not, in any event, relieve the
indemnifying party from any obligations to any indemnified party other than the
indemnification obligation provided in paragraph (a) or (b) above. In case any
such action is brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party (who
shall not,
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except with the consent of the indemnified party, be counsel to the indemnifying
party), and after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof the indemnifying party will not
be liable to such indemnified party under this Section 5 for any legal or other
expenses, other than reasonable costs of investigation, subsequently incurred by
such indemnified party in connection with the defense thereof. No indemnifying
party shall, without the prior written consent of the indemnified party, effect
any settlement of any pending or threatened action in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party unless such settlement includes an
unconditional release of such indemnified party from all liability on any claims
that are the subject matter of such action.
(d) If the indemnification provided for in this Section 5 is
unavailable or insufficient to hold harmless an indemnified party under
subsections (a) or (b) above, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to in
subsection (a) or (b) above (i) in such proportion as is appropriate to reflect
the relative benefits received by the indemnifying party or parties on the one
hand and the indemnified party on the other from the exchange of the Securities,
pursuant to the Registered Exchange Offer, or (ii) if the allocation provided by
the foregoing clause (i) is not permitted by applicable law, in such proportion
as is appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the indemnifying party or
parties on the one hand and the indemnified party on the other in connection
with the statements or omissions that resulted in such losses, claims, damages
or liabilities (or actions in respect thereof) as well as any other relevant
equitable considerations. The relative fault of the parties shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Issuers on the one hand or
such Holder or such other indemnified party, as the case may be, on the other,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The amount paid
by an indemnified party as a result of the losses, claims, damages or
liabilities referred to in the first sentence of this subsection (d) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any action or
claim which is the subject of this subsection (d). Notwithstanding any other
provision of this Section 5(d), the Holders of the
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Securities shall not be required to contribute any amount in excess of the
amount by which the net proceeds received by such Holders from the sale of the
Securities pursuant to a Registration Statement exceeds the amount of damages
which such Holders have otherwise been required to pay by reason of such untrue
or alleged untrue statement or omission or alleged omission. No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this
paragraph (d), each person, if any, who controls such indemnified party within
the meaning of the Securities Act or the Exchange Act shall have the same rights
to contribution as such indemnified party and each person, if any, who controls
the Issuers within the meaning of the Securities Act or the Exchange Act shall
have the same rights to contribution as the Issuers.
(e) The agreements contained in this Section 5 shall survive the sale
of the Securities pursuant to a Registration Statement and shall remain in full
force and effect, regardless of any termination or cancellation of this
Agreement or any investigation made by or on behalf of any indemnified party.
6. ADDITIONAL INTEREST UNDER CERTAIN CIRCUMSTANCES. (a) Additional
interest (the "Additional Interest") with respect to the Initial Securities
shall be assessed as follows if any of the following events occur (each such
event in clauses (i) through (iii) below a "Registration Default"):
(i) If by December 28, 1997, the Exchange Offer Registration
Statement has not been filed with the Commission;
(ii) If by June 16, 1998, the Registered Exchange Offer has not been
consummated or, if required in lieu thereof by August 5, 1998, the Shelf
Registration Statement has not been declared effective by the Commission;
or
(iii) If after either the Exchange Offer Registration Statement or the
Shelf Registration Statement is declared effective (A) such Registration
Statement thereafter ceases to be effective; or (B) such Registration
Statement or the related prospectus ceases to be usable (except as
permitted in paragraph (b)) in connection with resales of Transfer
Restricted Securities during the periods specified herein because either
(1) any event occurs as a result of which the related prospectus forming
part of such Registration Statement would include any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein in the light of the circumstances under
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which they were made not misleading, or (2) it shall be necessary to amend
such Registration Statement or supplement the related prospectus, to comply
with the Securities Act or the Exchange Act or the respective rules
thereunder.
Additional Interest shall accrue on the Initial Securities over and
above the interest set forth in the title of the Securities from and including
the date on which any such Registration Default shall occur to but excluding the
date on which all such Registration Defaults have been cured at a rate of 0.25%
per annum during the 90-day period following the date on which such Registration
Default has occurred, which rate shall increase by 0.25% per annum for each
subsequent 90-day period; PROVIDED, HOWEVER, that the rate at which Additional
Interest accrues shall not exceed 1.0% per annum.
(b) A Registration Default referred to in Section 6(a)(iii)(B) hereof
shall be deemed not to have occurred and be continuing in relation to a Shelf
Registration Statement or the related prospectus if (i) such Registration
Default has occurred solely as a result of (x) the filing of a post-effective
amendment to such Shelf Registration Statement to incorporate annual audited
financial information with respect to the Issuers where such post-effective
amendment is not yet effective and needs to be declared effective to permit
Holders to use the related prospectus or (y) other material events, with respect
to the Issuers that would need to be described in such Shelf Registration
Statement or the related prospectus and (ii) in the case of clause (y), the
Issuers are proceeding promptly and in good faith to amend or supplement such
Shelf Registration Statement and related prospectus to describe such events;
provided, however, that in any case if such Registration Default occurs for a
continuous period in excess of 30 days, Additional Interest shall be payable in
accordance with the above paragraph from the day such Registration Default
occurs until such Registration Default is cured.
(c) Any amounts of Additional Interest Due pursuant to clause (i),
(ii) or (iii) of Section 6(a) above will be payable in cash on the regular
interest payment dates with respect to the Initial Securities. The amount of
Additional Interest will be determined by multiplying the applicable Additional
Interest rate by the principal amount of the Initial Securities, multiplied by a
fraction, the numerator of which is the number of days such Additional Interest
rate was applicable during such period (determined on the basis of a 360-day
year comprised of twelve 30-day months), and the denominator of which is 360.
(d) "Transfer Restricted Securities" means each Security until
(i) the date on which such Transfer Restricted
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Security has been exchanged by a person other than a broker-dealer for a freely
transferable Exchange Security in the Registered Exchange Offer, (ii) following
the exchange by a broker-dealer in the Registered Exchange Offer of a Initial
Security for an Exchange Note, the date on which such Exchange Note is sold to a
purchaser who receives from such broker-dealer on or prior to the date of such
sale a copy of the prospectus contained in the Exchange Offer Registration
Statement, (iii) the date on which such Initial Security has been effectively
registered under the Securities Act and disposed of in accordance with the Shelf
Registration Statement or (iv) the date on which such Initial Securities are
distributed to the public pursuant to Rule 144 under the Securities Act or is
saleable pursuant to Rule 144(k) under the Securities Act or another applicable
resale exemption under the Securities Act.
7. RULES 144 AND 144A. The Company shall use its best efforts to
file the reports required to be filed by it under the Securities Act and the
Exchange Act in a timely manner and, if at any time the Company is not required
to file such reports, it will, upon the request of any Holder of Initial
Securities, make publicly available other information so long as necessary to
permit sales of their securities pursuant to Rules 144 and 144A. The Company
covenants that it will take such further action as any Holder of Initial
Securities may reasonably request, all to the extent required from time to time
to enable such Holder to sell Initial Securities without registration under the
Securities Act within the limitation of the exemptions provided by Rules 144 and
144A (including the requirements of Rule 144A(d)(4)). The Company will provide
a copy of this Agreement to prospective purchasers of Initial Securities
identified to the Company by the Initial Purchasers upon request. Upon the
request of any Holder of Initial Securities, the Company shall deliver to such
Holder a written statement as to whether it has complied with such requirements.
Notwithstanding the foregoing, nothing in this Section 7 shall be deemed to
require the Company to register any of its securities pursuant to the Exchange
Act.
8. UNDERWRITTEN REGISTRATIONS. If any of the Transfer Restricted
Securities covered by any Shelf Registration are to be sold in an underwritten
offering, the investment banker or investment bankers and manager or managers
that will administer the offering ("Managing Underwriters") will be selected by
the Holders of a majority in aggregate principal amount of such Transfer
Restricted Securities to be included in such offering and shall be reasonably
satisfactory to the Company. The Company shall pay all fees and expenses of
such investment bankers' and managers' only to the extent specifically provided
in Section 4. In no event shall the Company be
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responsible for paying any underwriting discounts or commissions in connection
with such underwritten offering.
No person may participate in any underwritten registration hereunder
unless such person (i) agrees to sell such person's Transfer Restricted
Securities on the basis reasonably provided in any underwriting arrangements
approved by the persons entitled hereunder to approve such arrangements and
(ii) completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements.
9. MISCELLANEOUS.
(a) AMENDMENTS AND WAIVERS. The provisions of this Agreement may not
be amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, except by the Company and the written
consent of the Holders of a majority in principal amount of the Securities
affected by such amendment, modification, supplement, waiver or consents.
Notwithstanding the foregoing, a waiver or consent to departure from the
provisions hereof that relates exclusively to the rights of Holders whose
securities are being tendered pursuant to the Exchange Offer and that does not
affect directly or indirectly the rights of other Holders whose securities are
not being tendered pursuant to such Exchange Offer may be given by the Holders
of a majority of the outstanding principal amount of Transfer Restricted
Securities being tendered or registered.
(b) NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, first-class mail,
facsimile transmission, or air courier which guarantees overnight delivery:
(1) if to a Holder of the Securities, at the most current address
given by such Holder to the Company.
(2) if to any Initial Purchaser;
c/o Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, NY 10010-3629
Fax No.: (212) 325-8278
Attention: Transactions Advisory Group
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with a copy to:
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Fax No.: (212) 269-5420
Attention: James J. Clark, Esq.
(3) if to the Issuers, at the following address:
330 South Mannheim Road, Suite 220
Hillside, Illinois 60162
Fax No.: (708) 547-4524
Attention: Chief Executive Officer
with a copy to:
Milbank, Tweed, Hadley & McCloy
601 South Figueroa Street
Los Angeles, California 90017
Fax No.: (213) 629-5063
Attention: Eric Schunk, Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; three business
days after being deposited in the mail, postage prepaid, if mailed; when receipt
is acknowledged by recipient's facsimile machine operator, if sent by facsimile
transmission; and on the day delivered, if sent by overnight air courier
guaranteeing next day delivery.
(c) NO INCONSISTENT AGREEMENTS. None of the Issuers have, as of the
date hereof, entered into, nor shall it, on or after the date hereof, enter
into, any agreement with respect to their securities that is inconsistent with
the rights granted to the Holders herein or otherwise conflicts with the
provisions hereof.
(d) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
(i) the successors and assigns of each of the parties to this Agreement, without
the need for an express assignment and (ii) subsequent Holders of Securities.
(e) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
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(f) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAWS.
(h) SEVERABILITY. If any one or more of the provisions contained
herein, or the application thereof in any circumstance, is held invalid, illegal
or unenforceable, the validity, legality and enforceability of any such
provision in every other respect and of the remaining provisions contained
herein shall not be affected or impaired thereby.
(i) ENTIRE AGREEMENT. This Agreement, together with the Indenture
and the Purchase Agreement, is intended by the parties to be a final expression
of their agreement and is intended to be a complete and exclusive statement of
the agreement and understanding of the parties hereto with respect to the
subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted by the Company with respect to
the Transfer Restricted Securities. This agreement supersedes all prior
agreements and undertakings between the parties with respect to the subject
matter contained herein.
(j) SECURITIES HELD BY THE COMPANY. Whenever the consent or approval
of Holders of a specified percentage of principal amount of Securities is
required hereunder, Securities held by the Company or its affiliates (other than
subsequent Holders of Securities if such subsequent Holders are deemed to be
affiliates solely by reason of their holdings of such Securities) shall not be
counted in determining whether such consent or approval was given by the Holders
of such required percentage.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
among the several Initial Purchasers and the Company in accordance with its
terms.
Very truly yours,
THE COMPANY:
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<PAGE>
INTERNATIONAL LOGISTICS LIMITED
By /s/ ROGER E. PAYTON
--------------------------------
Name: Roger E. Payton
Title: President and Chief
Executive Officer
THE GUARANTORS:
THE BEKINS COMPANY
By /s/ ROGER E. PAYTON
--------------------------------
Name: Roger E. Payton
Title: President and Chief
Executive Officer
LEP PROFIT INTERNATIONAL, INC.
By /s/ ROGER E. PAYTON
--------------------------------
Name: Roger E. Payton
Title: Chairman of the Board
ILLCAN, INC.
By /s/ ROGER E. PAYTON
--------------------------------
Name: Roger E. Payton
Title: Chairman of the Board
ILLSCOT, INC.
By /s/ ROGER E. PAYTON
--------------------------------
Name: Roger E. Payton
Title: Chairman of the Board
MATRIX INTERNATIONAL LOGISTICS, INC.
By /s/ ROGER E. PAYTON
--------------------------------
Name: Roger E. Payton
Title: Chairman of the Board
LIW HOLDINGS CORP.
By /s/ ROGER E. PAYTON
--------------------------------
Name: Roger E. Payton
Title: Chairman of the Board
-25-
<PAGE>
BEKINS VAN LINES CO.
By /s/ ROGER E. PAYTON
--------------------------------
Name: Roger E. Payton
Title: Vice President
LEP FAIRS, INC.
By /s/ ROGER E. PAYTON
--------------------------------
Name: Roger E. Payton
Title: Vice President
AIR FREIGHT CONSOLIDATORS INTERNATIONAL, INC.
By /s/ ROGER E. PAYTON
--------------------------------
Name: Roger E. Payton
Title: Vice President
BAY AREA MATRIX, INC.
By /s/ ROGER E. PAYTON
--------------------------------
Name: Roger E. Payton
Title: Vice President
L.A. MATRIX, INC.
By /s/ ROGER E. PAYTON
--------------------------------
Name: Roger E. Payton
Title: Vice President
SOUTHWEST MATRIX, INC.
By /s/ ROGER E. PAYTON
--------------------------------
Name: Roger E. Payton
Title: Vice President
MATRIX CT., INC.
By /s/ ROGER E. PAYTON
--------------------------------
Name: Roger E. Payton
Title: Vice President
-26-
<PAGE>
The foregoing Registration
Rights Agreement is hereby confirmed
and accepted as of the date first
above written.
CREDIT SUISSE FIRST BOSTON CORPORATION
BT ALEX. BROWN INCORPORATED
SMITH BARNEY INC.
ING BARING (U.S.) SECURITIES, INC.
By: CREDIT SUISSE FIRST BOSTON CORPORATION,
Acting on behalf of themselves and as the Representative of the several
Initial Purchasers
By: /s/ MARK W. KENNELLEY
--------------------------------
Name: Mark W. Kennelley
Title: Director
-27-
<PAGE>
ANNEX A
Each broker-dealer that receives Exchange Securities for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Securities. The
Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of Exchange Securities received in exchange for
Initial Securities where such Initial Securities were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that, for a period of 180 days after the
Expiration Date (as defined herein), it will make this Prospectus available to
any broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
ANNEX B
Each broker-dealer that receives Exchange Securities for its own
account in exchange for Securities, where such Initial Securities were acquired
by such broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Securities. See "Plan of Distribution."
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Securities for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Securities. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Securities received in
exchange for Initial Securities where such Initial Securities were acquired as a
result of market-making activities or other trading activities. The Issuers has
agreed that, for a period of 180 days after the Expiration Date, it will make
this prospectus, as amended or supplemented, available to any broker-dealer for
use in connection with any such resale. In addition, until ,
199 , all dealers effecting transactions in the Exchange Securities may be
required to deliver a prospectus.(1)
The Issuers will not receive any proceeds from any sale of Exchange
Securities by broker-dealers. Exchange Securities received by broker-dealers
for their own account pursuant to the
__________________
(1) In addition, the legend required by Item 502(e) of Regulation S-K will
appear on the back cover page of the Exchange Offer prospectus.
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<PAGE>
Exchange Offer may be sold from time to time in one or more transactions in the
over-the-counter market, in negotiated transactions, through the writing of
options on the Exchange Securities or a combination of such methods of resale,
at market prices prevailing at the time of resale, at prices related to such
prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such Exchange Securities. Any
broker-dealer that resells Exchange Securities that were received by it for its
own account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Securities may be deemed to be
an "underwriter" within the meaning of the Securities Act and any profit on any
such resale of Exchange Securities and any commission or concessions received by
any such persons may be deemed to be underwriting compensation under the
Securities Act. The Letter of Transmittal states that, by acknowledging that it
will deliver and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date the Issuers will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Issuers has agreed to pay all expenses
incident to the Exchange Offer (including the expenses of one counsel for the
Holders of the Securities) other than commissions or concessions of any brokers
or dealers and will indemnify the Holders of the Securities (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
ANNEX D
CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR
SUPPLEMENTS THERETO.
Name: _________________________________
Address: _________________________________
_________________________________
If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of Exchange
Securities. If the undersigned is a broker-dealer that will receive Exchange
Securities for its own account in exchange for Initial Securities that were
acquired as a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such Exchange Securities; however, by so acknowledging and by delivering a
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<PAGE>
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
-30-
<PAGE>
Exhibit 5.1
December 18, 1997
International Logistics Limited
330 South Mannheim Road
Hillside, IL 60162
Re: REGISTRATION STATEMENT ON FORM S-4
Gentlemen:
We have examined the Registration Statement on Form S-4 filed by you
with the Securities and Exchange Commission on December 18, 1997 (the
"Registration Statement"), in connection with the registration of Senior
Notes due 2007 (the "Notes") of International Logistics Limited (the
"Company"). We have examined the Indenture, dated October 29, 1997 (the
"Indenture"), between the Company, the Guarantors named therein and First
Trust National Association, as Trustee (the "Trustee"), under which the Notes
are to be issued in exchange for Senior Notes due 2007 of the Company which
were issued under the Indenture on October 29, 1997 (the "Old Notes"). We
are familiar with the proceedings heretofore taken by the Company in
connection with the authorization, registration and issuance of the Notes in
exchange for the Old Notes.
Subject to the proposed additional proceedings being taken as now
contemplated by us as your counsel and as contemplated by the Indenture prior
to the issuance of the Notes in exchange for the Old Notes, it is our opinion
that the Notes will, upon the issuance of the Notes in exchange for the Old
Notes in the manner referred to in the Registration Statement, constitute the
legal, valid and binding obligations of the Company, enforceable against the
Company in accordance with their terms, except as limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or transfer or
similar laws affecting creditors' rights generally and except as
<PAGE>
International Logistics Limited
December 18, 1997
Page 2
the enforceability of the Notes is subject to the effect of general
principles of equity including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing and the possible unavailability
of specific performance or injunctive relief, regardless of whether
considered in a proceeding in equity or at law.
We consent to the use of this opinion as an exhibit to the
Registration Statement and to the reference to our name in the Registration
Statement under "Legal Matters."
Respectfully submitted,
/s/ Milbank, Tweed, Hadley & McCloy
[EHS/TO]
<PAGE>
THIRD AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
This THIRD AMENDED AND RESTATED STOCKHOLDERS AGREEMENT (this
"AGREEMENT") is made and entered into as of September 30, 1997, by and between
International Logistics Limited, a Delaware corporation (the "COMPANY"), and
each of the Holders listed on EXHIBIT A hereto (singularly a "HOLDER" and
collectively, the "HOLDERS").
W I T N E S S E T H
WHEREAS, each of the Holders have either purchased shares of the
Common Stock (as defined herein) of the Company or were granted Warrants (as
defined herein) to purchase shares of the Common Stock of the Company; and
WHEREAS, the Company and the Holders deem it to be in their best
interests to provide for continuity in the control and operation of the Company
to regulate certain of their rights in connection with their interests in the
Company and to restrict the sale, assignment, transfer, encumbrance or other
disposition of the Securities (as defined herein) to be issued to the Holders as
contemplated hereby, and desire to enter into this Agreement in order to
effectuate those purposes;
NOW, THEREFORE, in consideration of the agreements and mutual
covenants set forth herein, the parties agree as follows:
SECTION 1. DEFINITIONS. As used in this Agreement, the following
terms have the following meanings:
"ACCREDITED INVESTOR" shall have the meaning set forth for such term
in Regulation D under the Securities Act.
"ACCREDITED OFFEREE" shall have the meaning set forth in SECTION 5(a).
"ACQUIROR" has the meaning assigned to such term in SECTIONS 6(b) AND
7.
"AFFILIATE" of a Holder means any Person which directly or indirectly
controls, is controlled by, or is under common control with such Holder.
"Control," "controlled by" and "under common control with" means direct or
indirect possession of the power to direct or cause the direction of management
or policies (whether through ownership of voting securities, by contract or
otherwise); PROVIDED that control shall be conclusively presumed
<PAGE>
when any Person or entity or affiliated group directly or indirectly owns ten
percent (10%) or more of the securities having ordinary voting power for the
election of a majority of the directors of a corporation.
"AGREEMENT" means this Agreement, as the same shall be amended from
time to time.
"BANKS" mean, collectively, ING and Paribas.
"BOARD OF DIRECTORS" means the Board of Directors of the Company.
"BUSINESS DAY" means a day other than Saturday, Sunday or any other
day on which banks located in the State of Illinois are authorized or obligated
to close.
"CHARTER" OR "CERTIFICATE OF INCORPORATION" means the Amended and
Restated Certificate of Incorporation of the Company as in effect immediately
upon the Closing Date.
"CLOSING DATE" means November 7, 1996.
"COMMON STOCK" means the Company's Common Stock, $0.001 par value per
share.
"COMPANY" has the meaning assigned to such term in the preamble.
"COMPANY ACCEPTANCE NOTICE" has the meaning assigned to such term in
SECTION 4(d)(i).
"COMPANY TRANSFEREE" has the meaning assigned to such term in SECTION
5(a).
"COMPANY TRANSFER NOTICE" has the meaning assigned to such term in
SECTION 5(a).
"COMPANY TRANSFER SECURITIES" has the meaning assigned to such term in
SECTION 5(a).
"EMPLOYEE STOCK PURCHASE PLAN" means the employee stock purchase plans
adopted by the Board of Directors on May 1, 1996 and March 3, 1997.
"EXECUTIVE COMMITTEE" shall have the meaning ascribed to such term in
SECTION 9(b).
"FAIR MARKET VALUE" shall mean the fair market value of the Company's
Common Stock as determined by the Executive
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<PAGE>
Committee on a fully-distributed basis without regard to liquidity or size
relative to the number of shares outstanding; PROVIDED that such valuation shall
ascribe value to Warrants as the amount, if any, by which the value of the
Common Stock underlying the warrant shall exceed the aggregate exercise price
related thereto.
"FAMILY MEMBER" means any Holder's spouse, siblings, children,
children's spouses, grandchildren or their spouses or any trusts for the benefit
of any of the foregoing.
"FINANCIAL DEFAULT" shall mean with respect to the Company or any
Subsidiary, any of the following: (i) the occurrence of a default under any
indebtedness with a principal amount in excess of $20 million (either
individually or in the aggregate) to the extent that such default is not cured
or waived within thirty (30) days; (ii) the acceleration of any indebtedness
with a principal amount in excess of $10 million (either individually or in the
aggregate) to the extent not paid or rescinded within five (5) days; (iii) the
imposition of any final and non-appealable judgments in excess of $10 million
(either individually or in the aggregate) to the extent not paid or rescinded
within five (5) days; or (iv) the filing of any voluntary or involuntary
bankruptcy petition with respect to the Company or any Subsidiary to the extent
not withdrawn within five (5) days.
"FINANCIAL DEFAULT DISAGREEMENT" shall mean that, upon the occurrence
of a Financial Default, the Board of Directors is unable to agree on the
Company's course of action in response to a Financial Default.
"HOLDERS" has the meaning assigned to such term in the preamble.
"ING" means ING Capital (U.S.) Corporation.
"INITIAL PUBLIC OFFERING" means the first underwritten public offering
of Common Stock by the Company pursuant to a registration of shares under the
Securities Act on a Form S-1 Registration Statement (or equivalent or successor
form).
"INTER VIVOS TRANSFEREE" has the meaning assigned to such term in
SECTION 3(d).
"MANAGEMENT" means each Person set forth on EXHIBIT B attached hereto,
as the same may be amended from time to time.
"MATRIX ACCEPTANCE NOTICE" has the meaning assigned to such term in
SECTION 4(d)(ii).
-3-
<PAGE>
"MATRIX HOLDERS" has the meaning assigned to such term in SECTION
4(d)(ii).
"MATRIX OFFER" has the meaning assigned to such term in SECTION
4(d)(ii).
"MYERS" means William E. Myers, Jr. and any Myers Affiliate.
"MYERS AFFILIATE" shall mean any (i) bona fide officer, director,
shareholder or employee of W.E. Myers & Company reasonably acceptable to the
Company, (ii) Family Member of any of the foregoing individuals and (iii)
partnership, corporation, trust or other entity controlled by William E. Myers,
Jr.
"OCM" means OCM Principal Opportunities Fund, L.P., a Delaware limited
partnership.
"OCM AFFILIATES" means any investor in or any employee of OCM or
Oaktree Capital Management, LLC ("OAKTREE"), a California limited liability
company, or in any company, joint venture, limited liability company,
association or partnership of which OCM or Oaktree, is a shareholder, manager or
general partner, as the case may be.
"OCM ENTITY" means either or both of TCW and OCM, as the context
indicates.
"OCM ENTITY ACCEPTANCE NOTICE" has the meaning assigned to such term
in SECTION 4(c).
"OCM ENTITY FUNDING DEFAULT" means a circumstance whereby (i) an OCM
Entity and WES&S have entered into a commitment to purchase Securities of the
Company pursuant to a purchase agreement; (ii) such OCM Entity is in breach of
its commitment to purchase such Securities; and (iii) WES&S ultimately completes
its purchase under such purchase agreement.
"OCM ENTITY OFFER" has the meaning assigned to such term in
SECTION 4(b).
"OCM ENTITY PURCHASE DEFAULT" means an OCM Entity is in breach of its
purchase obligation under an OCM Entity Acceptance Notice in connection with
certain transfers of the WES&S Shares as set forth in SECTION 4.
"OCM ENTITY SHARES" means all the Securities now and hereafter held by
OCM, any OCM Affiliate, TCW or any TCW Affiliate.
-4-
<PAGE>
"OCM ENTITY TRANSFER TERMINATION EVENT" means the first to occur of
(i) a Qualified Public Offering, (ii) a Sell-Down Event, (iii) a WES&S Purchase
Default, (iv) a WES&S Funding Default or (v) May 2, 2002.
"OFFER TO SELL" has the meaning assigned to such term in SECTION 5(b).
"OFFEREE" means, for the purposes of SECTION 4 hereof: (i) with
respect to any proposed Transfer by an OCM Entity: WES&S; (ii) with respect to
any proposed Transfer by WES&S: each OCM Entity; (iii) with respect to any
proposed Transfer by each of Management, Myers or the Banks: the Company, each
OCM Entity and WES&S, as applicable, and (iv) for the purposes of
SECTION 4(d)(ii), with respect to any proposed Transfer by a Matrix Holder; the
other nontransferring Matrix Holders.
"PARIBAS" means Banque Paribas and Paribas North America, Inc.
"PERMITTED TRANSFER" has the meaning assigned to such term in SECTION
3.
"PERSON" shall mean any individual, corporation, partnership, limited
liability company, joint venture, association, joint stock company, trust,
unincorporated organization or government or agency or political subdivision
thereof.
"PRO RATA" shall mean, with respect to any offer of shares of Common
Stock or securities exercisable or convertible into shares of Common Stock, an
offer based on the relative percentages of Securities then held by or issuable
to all of the Holders to whom such offer is made.
"PUBLIC OFFERING" means any offering of Common Stock to the public,
including the Initial Public Offering, either on behalf of the Company or any of
its stockholders, pursuant to an effective registration statement under the
Securities Act.
"PUBLIC TRANSFEREES" has the meaning assigned to such term in SECTION
2(c).
"QUALIFIED PUBLIC OFFERING" means a Public Offering wherein the
aggregate offering proceeds are not less than $30,000,000 (determined based on
gross offering price paid to the Company at the closing of each such transaction
for the offered securities).
"QUALIFIED SALE" shall mean (i) any sale of all or substantially all
of the assets of the Company or (ii) any sale,
-5-
<PAGE>
merger or liquidation of the Company with or into any entity other than to or
with OCM, TCW, WES&S, an OCM Affiliate, a TCW Affiliate or a WES&S Affiliate
whereby such entity or the holders of a majority of the voting stock thereof
shall obtain (A) at least a majority of the voting stock of the surviving entity
and (B) the right to elect a majority of the surviving entity's board of
directors.
"RE-OFFER ACCEPTANCE NOTICE" has the meaning assigned to such term in
SECTION 4(d)(i).
"RE-OFFER NOTICE" has the meaning assigned to such term in SECTION
4(d)(i).
"REFUSAL NOTICE" has the meaning assigned to such term in SECTION
4(a).
"REFUSAL SECURITIES" has the meaning assigned to such term in SECTION
4(a).
"REFUSAL TRANSFEREE" has the meaning assigned to such term in SECTION
4(a).
"SECURITIES" shall mean the shares of Common Stock and any securities
convertible or exercisable into shares of Common Stock, and whenever an amount
of Securities is calculated or used in any provision of this Agreement,
convertible or exercisable securities shall be counted as the number of shares
of Common Stock issuable upon such conversion or exercise.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"SELL-DOWN EVENT" means an event, subject to SECTIONS 2, 3 AND 4,
whereby WES&S sells or Transfers Securities (or an economic "capital interest"
therein, whether directly or indirectly) to any Person; PROVIDED, HOWEVER, that
the following Transfers shall not constitute a Sell-Down Event: (i) any Transfer
made to a WES&S Affiliate or (ii) any Transfer made to any Person if (A) WES&S
retains voting control of the Securities transferred to such Person and (B) the
cumulative number of Securities so transferred (or the economic capital interest
therein) by WES&S shall not exceed the Threshold Amount.
"SELLING HOLDERS" has the meaning assigned to it in SECTIONS 6(b) & 7.
"SIMON ENTITY" means Logistical Simon, L.L.C., a Delaware limited
liability company, WESINVEST, Inc., a Delaware
-6-
<PAGE>
corporation or William E. Simon & Sons, L.L.C., a Delaware limited liability
company.
"SUBSIDIARY" means any entity at least fifty percent (50%) owned or
controlled either directly or indirectly by the Company or any of its
Subsidiaries.
"TCW" means TCW Special Credits Fund V - The Principal Fund, a
California limited partnership,
"TCW AFFILIATE" means any investor in or any employee of TCW, TCW
Asset Management Company, a California corporation ("TAMCO"), Trust Company of
the West, a California trust company ("TRUSTCO") or Oaktree Capital Management,
LLC ("OAKTREE"), a California limited liability company, or in any company,
joint venture, limited liability company, association or partnership of which
TCW, TAMCO, Trustco or Oaktree, is a shareholder, manager or general partner, as
the case may be.
"THRESHOLD AMOUNT" means thirty percent (30%) of the shares held by
WES&S as of the Closing Date (excluding for the purpose of this calculation any
shares owned by WES&S to the extent received upon the exercise of its Warrants
or otherwise acquired from parties other than the Company).
"TRADING PRICE" means the trading price for each trading day: (a) if
the Common Stock is traded on a national securities exchange, its last reported
sale price on the preceding Business Day on such national securities exchange
or, if there was no sale on that day, the last reported sale price on such
national securities exchange on the next preceding Business Day on which there
was a sale, all as made available over the Consolidated Last Sale Reporting
System of the CTA Plan (the "CLSRS") or, if the Common Stock is not then
eligible for reporting over the CLSRS, its last reported sale price on the
preceding Business Day on such national securities exchange or, if there was no
sale on that day, on the next preceding Business Day on which there was a sale
on such exchange or (b) if the principal market for the Common Stock is the
over-the-counter market, but the Common Stock is not then eligible for reporting
over the CLSRS, but the Common Stock is quoted on the National Association of
Securities Dealers Automated Quotations System ("NASDAQ"), the last sale price
reported on NASDAQ on the preceding Business Day or, if the Common Stock is an
issue for which last sale prices are not reported on NASDAQ, the closing bid
quotation on such day, but in each of the next preceding two cases, if the
relevant NASDAQ price or quotation did not exist on such day, then the price or
quotation on the next preceding Business Day in which there was such a price or
quotation.
-7-
<PAGE>
"TRANSFER" has the meaning assigned to such term in SECTION 2(a).
"TRANSFER NOTICE" has the meaning assigned to such term in
SECTIONS 6(b) & 7.
"TRANSFEROR" has the meaning assigned to such term in SECTION 4(a).
"VOTING TERMINATION EVENT" has the meaning assigned to such term in
SECTION 8(a).
"WARRANT(S)" means the Warrants exercisable into the Common Stock of
the Company at either a fixed or variable priced exercise rate.
"WES&S" means Logistical Simon, L.L.C., a Delaware limited liability
company, and for purposes of Sections 4(b) and 4(d)(i) only and only in the
event that WES&S offers to acquire an amount of Refusal Securities, includes
Myers; PROVIDED, HOWEVER, that should WES&S and Myers each offer to acquire an
amount of Refusal Securities (as defined in Section 4(a) hereof) that is
oversubscribed pursuant to such Sections 4(b) and 4(d)(i), the shares to be so
purchased shall be allocated to each of WES&S and Myers Pro-Rata based upon the
relative number of Securities owned by each entity as of such date.
"WES&S AFFILIATE" means any Simon Entity or any partnership, limited
liability company or corporation that directly or indirectly, through one or
more intermediaries, has control of, is controlled by or is under common control
with (i) any Simon Entity or (ii) any shareholders, partner or member of a Simon
Entity or any such shareholder's, partner's or member's spouse, siblings,
children, children's spouses, grandchildren or their spouses or any trusts for
the benefit of any of the foregoing.
"WES&S ACCEPTANCE NOTICE" has the meaning assigned to such term in
SECTION 4(b).
"WES&S FUNDING DEFAULT" means a circumstance whereby (i) an OCM
Entity and WES&S have entered into a commitment to purchase the Securities of
the Company pursuant to a purchase agreement; (ii) WES&S is in breach of its
commitment to purchase such Securities; and (iii) an OCM Entity ultimately
completes its purchase under such purchase agreement.
"WES&S OFFER" has the meaning assigned to such term in SECTION 4(c).
-8-
<PAGE>
"WES&S PURCHASE DEFAULT" means WES&S is in breach of its purchase
obligation under a WES&S Acceptance Notice in connection with certain transfers
of the OCM Entity Shares as set forth in SECTION 4.
"WES&S SHARES" means all the Securities now and hereafter held by
WES&S and any WES&S Affiliate.
"WES&S TRANSFER TERMINATION EVENT" means the first to occur of (i) a
Qualified Public Offering, (ii) an OCM Entity Purchase Default, (iii) an OCM
Entity Funding Default, (iv) the date on which the OCM Entities, in the
aggregate, own less than fifty percent (50%) of the total number of shares held
by the OCM Entities as of the Closing Date or (v) May 2, 2002.
SECTION 2. PROVISIONS REGARDING TRANSFER.
(a) GENERAL RESTRICTIONS. So long as this Agreement shall remain in
force, none of the Securities may be issued, sold, assigned, transferred, given
away or in any way disposed of (any of the foregoing being hereinafter referred
to as a "TRANSFER") unless:
(i) the Person in whose favor such Transfer is made shall deliver
to the Company a written acknowledgment that the Securities to be transferred
are subject to this Agreement and that such Person and such Person's successors
in interest are bound hereby on the same terms as the Transferor of such
Securities, but prior to any such Transfer, the Transferor shall give the
Company (1) notice describing the manner and circumstances of the proposed
Transfer and (2) if reasonably requested by the Company, a written opinion in
form and substance reasonably satisfactory to legal counsel of the Company to
the effect that the proposed Transfer may be effected without registration under
the Securities Act or any applicable state law;
(ii) such Transfer shall be made in compliance with the
provisions of this Agreement, the Employee Stock Purchase Plan and the
Management subscription agreements; or
(iii) such Transfer shall be made pursuant to a public offering
registered under the Securities Act and in accordance with applicable state law
or pursuant to Rule 144 under the Securities Act.
Any attempted Transfer other than in accordance with this Agreement shall be
void, and the Company shall refuse to recognize any such Transfer and shall not
reflect on its records
-9-
<PAGE>
any change in record ownership of the Securities pursuant to any such attempted
Transfer.
(b) MECHANICS OF TRANSFER. The closing of any Transfer of
Securities (other than pursuant to SECTION 2(a)(iii) above) shall take place
at the principal executive offices of the Company. Any Holder who Transfers
the Securities shall (i) take all such actions and execute and deliver all
such documents as may be necessary or reasonably requested by the Company in
order to consummate the Transfer of such Securities and (ii) pay to the
Company such amounts as may be required for any applicable stock transfer
taxes.
(c) PLEDGE AND HYPOTHECATION PROHIBITED. Prior to a Qualified Public
Offering, no Holder (other than any Persons not a party to this agreement who
acquire shares pursuant to a registration statement ("PUBLIC TRANSFEREES"))
shall in any manner pledge, hypothecate or encumber, or grant options with
respect to, any Securities held by such Holder, unless such Holder obtains the
prior (i) written approval of the Executive Committee and (ii) written agreement
of the designated assignee or secured party to acknowledge, accept and agree to
be bound by the terms of this Agreement.
SECTION 3. TRANSFERS NOT SUBJECT TO RIGHT OF FIRST REFUSAL. The
following Transfers (each a PERMITTED TRANSFER") shall not be subject to the
rights of first refusal set forth in SECTION 4 hereof:
(a) CERTAIN TRANSFERS BY OCM ENTITY. Subject to the restrictions on
Transfer set forth in SECTION 2, an OCM Entity or any subsequent holder of the
OCM Entity Shares, may Transfer or grant participation in any or all of the OCM
Entity Shares to (i) any OCM Affiliate or a TCW Affiliate in connection with an
in-kind distribution, (ii) any Person pursuant to a demand or piggyback
registration or (iii) any other Person to the extent the aggregate number of OCM
Entity Shares so transferred shall not exceed thirty percent (30%) of the
aggregate number of OCM Entity Shares purchased by the OCM Entities, in the
aggregate, from the Company on the Closing Date and subsequent thereto. Any OCM
Entity Shares, or interest therein, so transferred may subsequently be
transferred back to an OCM Entity and upon such reacquisition such OCM Entity
Shares shall be subject to this Agreement; PROVIDED, HOWEVER, that any OCM
Entity Shares so reacquired by an OCM Entity shall not be subject to this
Agreement to the extent that an OCM Entity purchased such OCM Entity Shares
pursuant to a registration statement or from a Public Transferee.
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(b) CERTAIN TRANSFERS BY WES&S. Subject to the restrictions on
Transfer set forth in SECTION 2, WES&S or any subsequent holder of the WES&S
Shares, may Transfer or grant participation in any or all of the WES&S Shares to
(i) any Person to the extent that such Transfer would not constitute a Sell-Down
Event or (ii) any other Person pursuant to a demand or piggyback registration.
Any WES&S Shares, or interest therein, so transferred may subsequently be
transferred back to WES&S and upon such reacquisition such WES&S Shares shall be
subject to this Agreement; PROVIDED, HOWEVER, that any WES&S Shares so
reacquired by WES&S shall not be subject to this Agreement to the extent that
WES&S purchased such WES&S Shares pursuant to a registration statement or from a
Public Transferee.
(c) CERTAIN TRANSFERS BY MANAGEMENT, MYERS OR THE BANKS. Each of
Management, Myers, or the Banks, may Transfer any or all of their respective
shares of Common Stock to any Person in connection with a piggyback
registration. Subject to the restrictions on Transfer set forth in SECTION 2,
Myers may transfer any or all of his Securities to a Myers Affiliate. Any
shares of Common Stock, or interest therein, so transferred by a Holder pursuant
to this SECTION 3(c) may subsequently be transferred back to such Holder and
upon such reacquisition such shares of Common Stock shall be subject to this
Agreement; PROVIDED, HOWEVER, that any shares of Common Stock so reacquired by
such Holder shall not be subject to this Agreement to the extent that such
Holder purchased such shares of Common Stock pursuant to a registration
statement or from a Public Transferee.
(d) INTER VIVOS TRANSFERS. Any Holder who is a natural person may
transfer, by INTER VIVOS Transfer, any or all of his or her Securities to any
other natural person who is a Family Member or to a trust primarily for the
benefit of such natural person who is a Family Member or such Holder (an "INTER
VIVOS TRANSFEREE"); PROVIDED that such Holder retains all voting rights with
respect to such Securities, and; PROVIDED, FURTHER, that no Holder who is a
natural person may make an INTER VIVOS transfer to any person unless such Holder
shall comply with the provisions of SECTION 2. Subject to the restrictions of
SECTION 2, any Securities transferred pursuant to this SECTION 3(d) may
subsequently be transferred back to such Holder.
SECTION 4. RIGHT OF FIRST REFUSAL. Each Holder agrees that, except
as provided in SECTIONS 3 AND 5 hereof, such Holder will not transfer any
Securities, or any right, title or interest therein, unless such Holder shall
have first made the offers to sell set forth in this SECTION 4.
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(a) REFUSAL NOTICE. A Holder that desires in good faith to Transfer
any Securities (the "TRANSFEROR") shall deliver a written notice of such intent
(the "REFUSAL NOTICE") to each Offeree. The Refusal Notice shall contain (i) a
description of the proposed Transfer transaction and the terms thereof including
the number and type of Securities (E.G., Common Stock or Warrants) proposed to
be transferred (collectively, the "REFUSAL SECURITIES"), (ii) the name of each
person to whom or in favor of whom the proposed Transfer is to be made (the
"REFUSAL TRANSFEREE") and (iii) a description of the consideration to be
received by the Transferor upon Transfer of the Refusal Securities; PROVIDED,
HOWEVER, that if any Holder desires to Transfer any Securities pursuant to Rule
144 of the Securities Act, such Holder shall not be required to satisfy
subsection (a)(ii) herein. The Refusal Notice shall be accompanied by a copy of
the third party written offer (for purposes of this SECTION 4, an executed
letter of intent stating the terms of such offer, or incorporating by reference
therein a separate summary of terms which shall be deemed a written offer). No
offer (covered by this SECTION 4) to Transfer to a Transferee shall be
permissible, unless the consideration for the Transfer involved consists solely
of cash.
(b) TRANSFERS BY OCM ENTITY. Prior to an OCM Entity Transfer
Termination Event, if an OCM Entity intends in good faith to sell or otherwise
Transfer any OCM Entity Shares to any Person, such OCM Entity shall deliver to
WES&S, concurrently with the delivery of the Refusal Notice, a written offer to
sell (the "OCM ENTITY OFFER") all, but not less than all, of such Refusal
Securities which are the subject of the Refusal Notice. Each OCM Entity Offer
shall contain the same terms and conditions, and shall be for the same
consideration, as described in the Refusal Notice. Within five (5) Business
Days after the Refusal Notice is delivered to WES&S, WES&S may, by written
notice delivered to such OCM Entity (a "WES&S ACCEPTANCE NOTICE"), accept the
offer to acquire all, but not less than all, of the Refusal Securities as
described in the Refusal Notice. Transfers of Securities to WES&S pursuant to
offers made and accepted in accordance with this SECTION 4 shall occur
simultaneously on a Business Day not more than thirty (30) days after the date
on which the WES&S Acceptance Notice is delivered to such OCM Entity. If WES&S
breaches its obligation to purchase the Refusal Securities which are the subject
of the Refusal Notice within thirty (30) days of the date on which the WES&S
Acceptance Notice is delivered to such OCM Entity, (i) WES&S shall forfeit (a)
any and all future rights of first refusal with respect to the OCM Entity Shares
and (b) any and all future rights of first refusal with respect to any proposed
Transfer of Securities pursuant to SECTION 4(d) hereof, and (ii) except as
provided in SECTION 4(f) hereof such failure shall constitute a WES&S Purchase
Default.
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(c) TRANSFERS BY WES&S. Prior to a WES&S Transfer Termination Event,
if WES&S intends in good faith to sell or otherwise Transfer any WES&S Shares to
any Person, WES&S shall deliver to each OCM Entity, concurrently with the
delivery of the Refusal Notice, a written offer to sell (the "WES&S OFFER") all,
but not less than all, of such Refusal Securities which are the subject of the
Refusal Notice. Each WES&S Offer shall contain the same terms and conditions,
and shall be for the same consideration, as described in the Refusal Notice.
Within five (5) Business Days after the Refusal Notice is delivered to each OCM
Entity, each OCM Entity may, by written notice delivered to WES&S (an "OCM
ENTITY ACCEPTANCE NOTICE"), accept the offer to acquire all, but not less than
all, of the Refusal Securities as described in the Refusal Notice; PROVIDED
HOWEVER, that if each OCM Entity elects to submit an OCM Entity Acceptance
Notice, the Securities to be so purchased shall be allocated to each OCM Entity
Pro-Rata based upon the relative number of Securities owned by each entity as of
such date or on such other basis as may be agreed upon by the OCM Entities.
Transfers of Securities to an OCM Entity pursuant to offers made and accepted in
accordance with this SECTION 4 shall occur simultaneously on a Business Day not
more than thirty (30) days after the date on which the OCM Entity Acceptance
Notice is delivered to WES&S. If either OCM Entity breaches its obligation to
purchase the Refusal Securities which are the subject of the Refusal Notice
within thirty (30) days of the date on which the OCM Entity Acceptance Notice is
delivered to WES&S, (i) both OCM Entities shall forfeit (a) any and all future
rights of first refusal with respect to the WES&S Shares and (b) any and all
future rights of first refusal with respect to any proposed Transfer of
Securities pursuant to SECTION 4(d) hereof, and (ii) except as provided in
SECTION 4(f) hereof such failure shall constitute an OCM Entity Purchase
Default.
(d) TRANSFERS BY HOLDERS. (i) Prior to a Qualified Public Offering
(and in the case of Myers, if earlier, May 2, 2002), if any Holder (other than
an OCM Entity and WES&S), subject to the transfer restrictions, if any, as set
forth in the terms of such Holder's Warrant, intends in good faith to sell or
otherwise Transfer any Securities to any Person, such Holder shall deliver to
the Company, concurrently with the delivery of the Refusal Notice, a written
offer to sell (the "COMPANY OFFER") all, but not less than all, of such Refusal
Securities which are the subject of the Refusal Notice; PROVIDED, HOWEVER that
if any such Holder intends to Transfer any Securities to the Company pursuant to
the terms of such Holder's employment or subscription agreement, such Holder
shall not be required to deliver a Refusal Notice pursuant to this subsection
(d). Each Company Offer shall contain the same terms and conditions, and shall
be for the same cash consideration, as described in the Refusal Notice. Within
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five (5) Business Days after the Refusal Notice is delivered to the Company, the
Company may, by written notice delivered to such proposed Transferor (a "COMPANY
ACCEPTANCE NOTICE"), accept the offer to acquire all, but not less than all, of
the Refusal Securities as described in the Refusal Notice. If the Company does
not return the Company Acceptance Notice within the required five (5) Business
Day period, the proposed Transferor shall deliver to each OCM Entity and WES&S,
concurrently with the delivery of a Refusal Notice ("RE-OFFER NOTICE") a written
offer to sell (the "RE-OFFER") all but not less than all of such Refusal
Securities which are the subject of the Refusal Notice; PROVIDED, HOWEVER, that
the proposed Transferor shall not be obligated to deliver a Re-Offer Notice to
an OCM Entity or WES&S to the extent that their respective rights of first
refusal have expired as set forth in SECTIONS 4(b) AND (c) hereof. Within five
(5) Business Days after the Re-Offer Notice is delivered to each OCM Entity and
WES&S, each OCM Entity and WES&S may, by written notice delivered to such
proposed Transferor (a "RE-OFFER ACCEPTANCE NOTICE"), accept the offer to
acquire all, but not less than all, of the Refusal Securities as described in
the Re-Offer Notice. Each of the Company, each OCM Entity and WES&S, as
applicable, shall be required to complete the purchase of the Refusal Securities
which are the subject of the applicable acceptance notice referred to in this
SECTION 4(d)(i) within thirty (30) days of receipt of the applicable acceptance
notice by the proposed Transferor. If more than one of WES&S and the OCM
Entities elect to submit a Re-Offer Acceptance Notice, the Securities to be so
purchased shall be allocated to each entity which has submitted a Re-Offer
Acceptance Notice Pro-Rata based upon the relative number of Securities owned by
each such entity as of such date.
(ii) Prior to complying with SECTION 4(d)(i) above, if any of Douglas
Cruikshank, Ronald S. Cruse, Steve Hitchcock, Paul D. Smith or Abe Ranish
(collectively, the "MATRIX HOLDERS"), intends in good faith to sell or otherwise
Transfer any Securities to any Person (other than any Transfers made pursuant to
a put or call as set forth in any subscription agreement or employment agreement
between each of the Matrix Holders and the Company or any of its Subsidiaries),
such Transferor shall deliver to the nontransferring Matrix Holders,
concurrently with the delivery of the Refusal Notice, a written offer to sell
(the "MATRIX OFFER") all, but not less than all, of such Refusal Securities
which are the subject of the Refusal Notice; PROVIDED, HOWEVER, that a
nontransferring Matrix Holder shall only be entitled to receive notice hereunder
as long as such nontransferring Matrix Holder is an employee of Matrix
International Logistics, Inc., a Delaware corporation. Each Matrix Offer shall
contain the same terms and conditions, and shall be for the same cash
consideration, as described in the Refusal Notice. Within
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five (5) Business Days after the Refusal Notice is delivered to the
nontransferring Matrix Holders, any or all of the nontransferring Matrix Holders
may, by written notice delivered to such proposed Transferor (a "MATRIX
ACCEPTANCE NOTICE"), accept the offer to acquire all, but not less than all, of
the Refusal Securities as described in the Refusal Notice offered to such
nontransferring Matrix Holder. If more than one nontransferring Matrix Holder
elects to submit a Matrix Acceptance Notice, the Securities to be so purchased
shall be allocated to each Person which has submitted a Matrix Acceptance Notice
Pro-Rata based upon the relative number of Securities owned by each such Matrix
Holder as of such date. Each of the Matrix Holders, as applicable, shall be
required to complete the purchase of the Refusal Securities which are the
subject of the applicable acceptance notice referred to in this SECTION 4(d)(ii)
within thirty (30) days of receipt of the applicable acceptance notice by the
proposed Transferor. If none of the nontransferring Matrix Holders return the
Matrix Acceptance Notice within the required five (5) Business Day period, the
proposed Transferor shall nevertheless be obligated to comply with the notice
and offer provisions of SECTION 4(d)(i) prior to a proposed Transfer to any
Person.
(e) ELECTION OF TRANSFEROR. In the event that an Offeree does not
agree to purchase all of the Refusal Securities offered for sale to such Offeree
by a Transferor, such Transferor has the right at such Transferor's election to
(i) transfer the Refusal Securities to a third party in accordance with the
terms of SECTION 4(F) below.
(f) TRANSFERS TO THIRD PARTIES. If the Transfer of Refusal
Securities to an Offeree is not completed within the period set forth in
SECTIONS 4(b), (c) OR (d), as applicable, then such Transferor has the right to
complete a sale transaction with a third party; PROVIDED, that the consideration
received by such Transferor in respect of any such Transfer is not less than the
consideration proposed by the Refusal Notice. Notwithstanding any forfeiture of
future refusal rights as set forth in SECTIONS 4(b) AND (c), if such Transfer
transaction with a third party is not completed within ninety (90) days of the
date the Refusal Notice is received by each OCM Entity, WES&S or the Company, as
the case may be, then each OCM Entity, WES&S or the Company, as the case may be,
shall have the rights of first refusal with respect to any subsequent proposed
sale of Securities covered by this SECTION 4.
(g) TRANSFER OF SHARES. Transfers of Securities pursuant to offers
made and accepted in accordance with this SECTION 4 shall be made subject to and
in accordance with SECTION 2. Any Transfer made in violation of this SECTION 4
shall be void and of no force and effect.
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SECTION 5. PREEMPTIVE RIGHTS. If the Company issues any Common Stock
or securities convertible into Common Stock, or any right, title or interest
therein to any Person, then the Company shall make the offer to sell pursuant
to, and otherwise comply with the requirements set forth in this SECTION 5.
Notwithstanding the foregoing, the Company may Transfer Common Stock or
securities convertible into Common Stock, and any right, title or interest
therein without making the offer to sell as set forth in this SECTION 5 in
connection with (i) a Public Offering, (ii) the issuance of shares of Common
Stock in connection with the exercise of any Warrants, (iii) the issuance of
Securities to certain employees, executive officers and directors of the Company
pursuant to any stock option plan or stock purchase plan approved by the Board
of Directors and (iv) the issuance of Securities to any employee, director or
officer of the Company or any of its Subsidiaries. Notwithstanding the
foregoing, any rights or obligations pursuant to this SECTION 5 shall terminate
no later than the date of an Initial Public Offering. The rights in this
SECTION 5 shall not inure to the benefit of Myers with respect to any Warrants
owned by Myers or any transferee therefrom.
(a) COMPANY TRANSFER NOTICE. If the Company desires in good faith to
Transfer Common Stock or securities convertible into Common Stock, the Company
shall deliver a written notice of the proposed Transfer (the "COMPANY TRANSFER
NOTICE") to each Holder that in the reasonable judgment of the Company is an
Accredited Investor, or who can provide the Company with an opinion of counsel,
reasonably satisfactory in form and substance to the Company, that the Company
Transfer Securities (as defined below) may be sold to such Holder without
registration under the Securities Act (each an "ACCREDITED OFFEREE"). The
Company Transfer Notice shall contain a description of the proposed transaction
and the terms thereof including the number of Securities and type of Securities
proposed to be transferred (collectively, the "COMPANY TRANSFER SECURITIES"),
the name of each person to whom or in favor of whom the proposed Transfer is to
be made (the "COMPANY TRANSFEREE"), and a description of the consideration to be
received by the Company upon Transfer of the Company Transfer Securities. On a
day which is not earlier than the ten (10) days following delivery of the
Company Transfer Notice and after having received the requisite approval from
the Board of Directors, the Company may issue the Company Transfer Securities to
the Company Transferee on the terms set forth in the Company Transfer Notice.
(b) TERMS OF OFFER. Upon completion of the issuance of the Company
Transfer Securities referred to in SUBSECTION (a) above, the Company shall
deliver to each Holder a written offer
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to sell (the "OFFER TO SELL") a Pro-Rata portion of an equivalent number of the
Company Transfer Securities based upon such Holder's holdings of Securities.
The Offer to Sell shall be on the same terms and conditions, and shall be for
cash. If the consideration described in the Company Transfer Notice is for
something other than cash, the purchase price paid by each Holder for shares
purchased pursuant to this SUBSECTION (b) shall be in cash at the Trading Price
(or if no trading price is available, then the Fair Market Value) of such
Securities determined as of the issue date of the Company Transfer Securities.
(c) ACCEPTANCE OF OFFER. Within thirty (30) days after receipt of an
Offer to Sell, any Accredited Offeree may, by written notice delivered to the
Company, accept the Offer to Sell in whole or in part.
(d) ADDITIONAL OFFER. If, within the thirty (30) day period
specified in SECTION 5(c), the Accredited Offerees do not agree to purchase all
of the Company Transfer Securities offered pursuant to the initial Offers to
Sell, the Company shall make an additional offer to sell the remainder of the
Company Transfer Securities (the "ADDITIONAL OFFER") proportionately to the
Holders who accepted in whole their respective initial Offers to Sell. The
Additional Offer shall be made within five (5) days after expiration of the
initial thirty (30) day period, and may be accepted, in whole or in part, by
written notice delivered to the Company within ten (10) days after receipt.
Notwithstanding any other provision of this SECTION 5, the Accredited Offerees
may permit, by written agreement signed by each Accredited Offeree, any
Accredited Offeree to purchase more or less than such Accredited Offeree's Pro
Rata portion of the Company Transfer Securities.
(e) TRANSFER OF SHARES. Transfers of Securities pursuant to offers
made and accepted in accordance with this SECTION 5 or to a Company Transferee
shall occur simultaneously on a Business Day not more than thirty (30) days
after the last date on which any offer made in accordance with this SECTION 5
could have been accepted. Each such Transfer shall be made in accordance with
SECTIONS 2(a) AND (b) hereof.
SECTION 6. DRAG-ALONG. Prior to a Qualified Public Offering, the
following drag-along rights shall be available:
(a) QUALIFIED SALE. If (i) the Company agrees to be sold, merged or
liquidated pursuant to a Qualified Sale and (ii) such Qualified Sale is approved
by more than eighty percent (80%) of the outstanding shares of Common Stock
entitled to vote on such transaction, then all Holders (other than Public
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Transferees), shall be deemed to have consented to such Qualified Sale and shall
execute such documents to confirm such consent.
(b) STOCK SALE. If the Holders holding shares in excess of eighty
percent (80%) of the issued and outstanding Common Stock (the "SELLING HOLDERS")
elect to sell such shares of Common Stock to a third party (other than an OCM
Entity, WES&S, an OCM Affiliate, a TCW Affiliate or a WES&S Affiliate) (the
"ACQUIROR"), then the Acquiror shall have the right, at its option, to purchase
from the Holders other than the Selling Holders and any Public Transferees (the
"NON-SELLING HOLDERS"), the same Pro-Rata portion of Securities as is being
acquired from the Selling Holders at the same price per Security, with the same
form of consideration and upon the same terms and conditions as set forth in the
Transfer Notice (as defined below); PROVIDED, HOWEVER, that the price paid to
any warrantholder shall be the price paid by the Acquiror for each share of
Common Stock less any exercise price payable by such warrantholder. To exercise
this drag-along right, the Selling Holders shall provide written notice to each
Non-Selling Holder twenty (20) days prior to any such Transfer of Common Stock
(a "TRANSFER NOTICE") explaining the terms of such offer and identifying the
name and address of the Acquiror. If the Acquiror has exercised its right to
purchase a portion, but not all, of the Securities owned by the Non-Selling
Holders, then such Acquiror shall purchase a Pro Rata portion of the Securities
from each such Non-Selling Holder.
SECTION 7. TAG-ALONG. Prior to a Qualified Public Offering, if
Holders (other than Public Transferees) holding shares in excess of seventy-five
percent (75%) of the issued and outstanding Common Stock (the "SELLING HOLDERS")
elect to sell, dispose of or otherwise Transfer such shares of Common Stock to a
third party (other than an OCM Entity, WES&S, an OCM Affiliate, a TCW Affiliate
or a WES&S Affiliate)(the "ACQUIROR"), then, at least twenty (20) days prior to
any such Transfer by the Selling Holders of any Common Stock, the Selling
Holders shall provide to each Holder other than a Selling Holder and Public
Transferee (a "NON-SELLING HOLDER") a written notice (a "TRANSFER NOTICE")
explaining the terms of such transfer and identifying the name and address of
the potential Acquiror. Upon receipt of such Transfer Notice, each such
Non-Selling Holder shall have the right, upon delivery of a written request to
the Selling Holders within twenty (20) days of the date the Transfer Notice is
received by such Non-Selling Holder, to cause the potential Acquiror to purchase
from such Non-Selling Holder a Pro-Rata portion of the Securities which are
proposed to be sold by the Selling Holders (on a fully-diluted basis) in the
Transfer Notice at the same price and on the same terms and conditions contained
in the Transfer Notice delivered in connection with such proposed
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transaction; PROVIDED, HOWEVER, that the price paid to any warrantholder shall
be the price paid by the Acquiror for each share of Common Stock less any
exercise price payable by such warrantholder.
SECTION 8. BOARD OF DIRECTORS. (a) PRE-VOTING TERMINATION EVENT
BOARD. Prior to the first to occur of (i) an Initial Public Offering, (ii) a
Sell-Down Event, (iii) a WES&S Purchase Default, (iv) a WES&S Funding Default,
(v) a Financial Default Disagreement, (vi) an OCM Entity Purchase Default,
(vii) an OCM Entity Funding Default or (viii) May 2, 2002 (in each case a
"VOTING TERMINATION EVENT"), the Board of Directors shall at all times consist
of eight (8) members. Each Holder of Securities hereby agrees to cause all such
Securities that are entitled to vote and are registered in the name of such
Holder to be voted, and will otherwise take or cause to be taken all such other
action as may be necessary, so that the Board of Directors of the Company shall
at all times, until a Voting Termination Event, consist of eight (8) members, of
which two (2) members shall be designated by OCM (an "OCM DIRECTOR"), one (1)
member shall be designated by TCW (a "TCW DIRECTOR"), three (3) members shall
designated by WES&S (a "WES&S DIRECTOR"), one (1) member shall be the Chief
Executive Officer of the Company and one (1) member shall be William E. Myers,
Jr.
(b) POST-VOTING TERMINATION EVENT BOARD. Upon a Voting Termination
Event that is not caused by an Initial Public Offering, the Board of Directors
of the Company shall at all times consist of at least five (5) members or such
greater number that shall be needed to satisfy the terms of this SECTION 8(b).
Each Holder of Securities hereby agrees to cause all such Securities that are
entitled to vote and are registered in the name of such Holder to be voted, and
will otherwise take or cause to be taken all such other action as may be
necessary, so that the Board of Directors shall at all times, after a Voting
Termination Event that is not caused by an Initial Public Offering, consist of:
(a) (i) a majority of Board of Directors seats designated by an OCM Entity,
PROVIDED, that the combined holdings of the OCM Entities are fifty percent (50%)
or more of the voting stock and the Voting Termination Event is due to an event
other than an OCM Entity Funding Default or an OCM Entity Purchase Default,
(ii) one (1) Board of Directors seat less than a majority designated by an OCM
Entity, PROVIDED, that either (x) the combined holdings of the OCM Entities are
at least twenty-five percent (25%) but less than fifty percent (50%) of the
voting stock or (y) the combined holdings of the OCM Entities are fifty percent
(50%) or more of the voting stock and the Voting Termination Event is due solely
to an OCM Entity Funding Default or an OCM Entity Purchase Default, or (iii) one
(1) Board of Directors
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seat designated by an OCM Entity, PROVIDED, that the combined holdings of the
OCM Entities are at least ten percent (10%) but less than twenty-five (25%) of
the voting stock (in each case, an "OCM ENTITY TERMINATION DIRECTOR"); (b) one
(1) Board of Directors seat to be the Chief Executive Officer; (c) one (1) Board
of Directors seat to be William E. Myers Jr. and (d) the remainder of the board
seats to be designated by WES&S (a "WES&S TERMINATION DIRECTOR"); PROVIDED, that
in no event shall WES&S designate less than one (1) Board of Directors seat.
(c) INITIAL BOARD OF DIRECTORS. The Board of Directors, as of the
Closing Date, shall consist of the following members:
Stephen A. Kaplan (TCW Director)
Vincent J. Cebula (OCM Director)
(OCM Executive Director)
Richard J. Goldstein (OCM Director)
William E. Simon, Jr. (WES&S Director)
Michael B. Lenard (WES&S Director)
(WES&S Executive Director)
Conor T. Mullett (WES&S Director)
Roger E. Payton (Chief Executive Officer)
William E. Myers, Jr. (an individual)
each of whom shall hold office for a term of one (1) year until the next annual
or special meeting of Holders called for the purpose of electing directors as
provided in SECTION 8(a) AND (b) of this Agreement or in the Bylaws.
Notwithstanding the foregoing designation, upon a Voting Termination Event that
is not caused by an Initial Public Offering, the directors designated in this
SECTION 8(c) shall be subject to removal and redesignation as set forth in
SECTION 8(b) hereof.
(d) FILLING VACANCIES, ETC. At any time a vacancy is created on the
Board by the death, removal (with or without cause) or resignation of any one of
the Directors, no action shall be taken by the Board until the Board is
reconstituted with the appropriate number of directors. Only OCM or an OCM
Affiliate shall have the right to remove an OCM Director or an OCM Entity
Termination Director appointed by OCM, or to fill a vacancy caused by the
resignation, removal (with or without
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cause) or death of such OCM Director or OCM Entity Termination Director. Only
TCW or a TCW Affiliate shall have the right to remove a TCW Director or an OCM
Entity Termination Director appointed by TCW, or to fill a vacancy caused by the
resignation, removal (with or without cause) or death of such TCW Director or
OCM Entity Termination Director. Only WES&S shall have the right to remove a
WES&S Director or to fill a vacancy caused by the resignation, removal (with or
without cause) or death of such WES&S Director or WES&S Termination Director.
For all other vacancies, the remaining directors shall meet in person or by
telephone for the purpose of approving and appointing a director in accordance
with the provisions set forth in SECTIONS 8(a) AND (b) hereof or in the By-Laws.
(e) COMPENSATION; LIABILITY COVERAGE. William E. Myers, Jr. and any
directors who are employees of OCM, TCW or WES&S shall not be entitled to
compensation (other than reimbursement of reasonable out-of-pocket expenses
incurred in connection with board meetings or director-related activities);
PROVIDED HOWEVER, that if directors who are either employees of the Company or
are newly admitted directors after the Closing Date receive additional
compensation in their capacity as directors, then such OCM Directors, TCW
Director, WES&S Directors, William E. Myers, Jr., OCM Entity Termination
Directors or WES&S Termination Directors shall be entitled to receive an
equivalent consideration. Within sixty (60) days of the Closing Date, the
Company shall secure for the benefit of all Directors and Officers liability
coverage from a reputable insurer selected by the Company with coverages which
are not less than Five Million Dollars ($5,000,000) and deductibles which are
customary for companies of comparable size. If the Company shall ever fail to
pay when due any premium or other charge with respect to such insurance
coverage, or otherwise fail to renew such coverage, any Holder may pay such
premium or charge, or renew such coverage, and the Company shall promptly
reimburse such Holder.
(f) ADDITIONAL OCM ENTITY RIGHTS. So long as an OCM Entity owns any
Common Stock:
(i) OCM, TCW, any such OCM Affiliate or TCW Affiliate, or any
designated representative on behalf of such OCM Affiliate or TCW Affiliate
(1) shall be entitled to discuss the business operations, properties and
financial and other conditions of the Company with any authorized officer,
employee, agent, representative, director or independent accountant of the
Company and, upon reasonable notice to the Company, any such authorized
officer, agent, representative, director or independent accountant of any
Subsidiary of the Company, (2) shall be entitled to submit
-21-
<PAGE>
proposals or suggestions to the Company's management from time to time with
the requirement that the management of the Company and, upon reasonable
notice to the Company, management of any Subsidiary of the Company shall
discuss such proposals or suggestions with OCM, TCW, any such OCM Affiliate
or TCW Affiliate, or any designated representative on behalf of each OCM,
TCW, any such OCM Affiliate or TCW Affiliate within a reasonable period
after such submission, and (3) shall be entitled to call a meeting with the
management of the Company and, upon reasonable notice to the Company,
management of any Subsidiary of the Company at reasonable times and on
reasonable notice in order to discuss such proposals or suggestions or for
other purposes.
(ii) OCM, TCW, any such OCM Affiliate or TCW Affiliate, or any
designated representative on behalf of OCM, TCW, or such OCM Affiliate or
TCW Affiliate, shall be entitled to examine and make abstracts from the
books and records, operating reports, budgets and other financial reports
of the Company as are available to the management of the Company, to visit
and inspect the facilities of the Company and, upon reasonable notice to
the Company, the facilities of any Subsidiary of the Company and to
reasonably request information all at reasonable times and intervals (and
on reasonable notice to the Company) concerning the general status of
financial condition and operations of the Company.
(iii) Upon request, OCM, TCW, any such OCM Affiliate or TCW
Affiliate, or any designated representative on behalf of OCM, TCW or such
OCM Affiliate or TCW Affiliate, shall be entitled to receive, when
available, copies of (1) financial statements, forecasts and projections
provided to or approved by the Board of Directors of the Company and/or (2)
such other business or financial data as OCM, TCW, any such OCM Affiliate
or TCW Affiliate, or any designated representative on behalf of OCM, TCW or
such OCM Affiliate or TCW Affiliate, may reasonably request.
(iv) each of OCM and TCW will hold, and will use its best efforts
to cause the OCM Affiliates and the TCW Affiliates, as applicable, to hold,
in strict confidence from any Person (other than any such Affiliate or
Person who has provided, or who is considering providing, financing to the
Company or purchasing securities of the Company from OCM or an OCM
Affiliate), unless (i) compelled to disclose by judicial or administrative
process or by other requirements of law or (ii) disclosed in an action or
proceeding brought by a party hereto in pursuit of its rights or in the
exercise of its remedies hereunder, all documents and
-22-
<PAGE>
information concerning the Company furnished to it by the Company in
connection with this SECTION 8(f), except to the extent that such documents
or information can be shown to have been (a) previously known by the party
receiving such documents or information, (b) in the public domain (either
prior to or after the furnishing of such documents or information
hereunder) through no fault of such receiving party or (c) later acquired
by the receiving party from another source if the receiving party is not
aware that such source is under an obligation to another party hereto to
keep such documents and information confidential.
(g) NONTRANSFERABILITY. Notwithstanding any other provision of this
Agreement to the contrary, the rights of OCM, TCW, WES&S and William E. Myers,
Jr. pursuant to this SECTION 8 shall not be transferable to any transferee;
PROVIDED, HOWEVER, that each of OCM, TCW and WES&S may transfer their rights
pursuant to this SECTION 8 to an OCM Affiliate, a TCW Affiliate or a WES&S
Affiliate, respectively.
(h) VOTING AGREEMENT. All parties to this Agreement agree that this
SECTION 8 shall constitute a voting agreement within the meaning of Section 218
of the Delaware General Corporation Law and, subject to the other express terms
of this Agreement, shall be of the maximum duration permitted under the Delaware
General Corporation Law.
SECTION 9. CORPORATE GOVERNANCE. (a) BOARD VOTING; MANAGEMENT. Prior
to a Voting Termination Event and except with respect to the daily affairs and
operations of the Company arising in the ordinary course of business, which
affairs shall be attended to by the officers of the Company under the ultimate
direction of the Board of Directors, no action shall be taken, securities
issued, monies borrowed, sum expended, decision made or obligation incurred by
or on behalf of the Company or any of its Subsidiaries with respect to any
matter, unless approved by at least six (6) Directors or as set forth in SECTION
9(b) below.
(b)EXECUTIVE COMMITTEE. Prior to a Voting Termination Event, an
Executive Committee (the "EXECUTIVE COMMITTEE") consisting of three (3) members
of the Board of Directors shall be authorized to take any action on behalf of
the Board of Directors (in between meetings of the Board of Directors) upon the
unanimous approval of such Executive Committee, including, without limitation,
the declaration of dividends, the issuance of shares of capital stock or any
other equity or debt security, or option or security convertible into equity or
debt securities, of the Company, and the adoption of a certificate of ownership
and merger pursuant to Section 253 of the Delaware General
-23-
<PAGE>
Corporation Law. Each of OCM and WES&S shall designate one (1) OCM Director (an
"OCM EXECUTIVE DIRECTOR") and one (1) WES&S Director (a "WES&S EXECUTIVE
DIRECTOR"), respectively, to sit on the Executive Committee; and the third
member of the Executive Committee shall be the Chief Executive Officer of the
Company. Only OCM shall have the right to remove (with or without cause) an OCM
Executive Director or to fill a vacancy caused by the resignation, removal or
death of such OCM Executive Director. Only WES&S shall have the right to remove
(with or without cause) a WES&S Executive Director or to fill a vacancy caused
by the resignation, removal or death of such WES&S Executive Director.
(c) AUDIT AND COMPENSATION COMMITTEES. The Board of Directors may, by
resolution passed by a majority of the total number of directors which the
Company would at the time have if there were no vacancies, designate an audit
committee of the Board of Directors (the "AUDIT COMMITTEE"), which shall be
responsible for reviewing the scope of the Company's independent auditors'
examination of the Company's financial statements and receiving and reviewing
their reports, and a compensation committee of the Board of Directors (the
"COMPENSATION COMMITTEE"), which shall be responsible and have authority for
determining the Company's policies with respect to the nature and amount of all
compensation to be paid to the Company's executive officers and administering
the Company's benefit plans and shall also have the authority to issue shares of
capital stock or any other equity or debt security, or option or security
convertible into equity or debt securities, of the Company. Prior to a Voting
Termination Event each of the Audit Committee and the Compensation Committee
shall consist of two members, one of whom shall be an OCM Director that is
designated for membership on such committee by OCM and one of whom shall be a
WES&S Director that is designated for membership on such committee by WES&S.
Only OCM shall have the right to remove an OCM Director who is a member of the
Audit Committee or Compensation Committee or to fill a vacancy on the Audit
Committee or Compensation Committee caused by the resignation, removal or death
of such OCM Director. Only WES&S shall have the right to remove a WES&S
Director who is a member of the Audit Committee or Compensation Committee or to
fill a vacancy on the Audit Committee or Compensation Committee caused by the
resignation, removal or death of such WES&S Director.
(d) SHAREHOLDER VOTING. Prior to a Voting Termination Event, all such
actions taken by, in the name of or on behalf of the holders of Common Stock
shall require an affirmative vote of the holders representing at least eighty
percent (80%) of the issued and outstanding shares entitled to vote. Upon a
Voting Termination Event, all such actions taken by, in the name of or on behalf
of the holders of Common Stock shall require an
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<PAGE>
affirmative vote of a majority of the issued and outstanding shares entitled to
vote.
SECTION 10. CERTIFICATES.
(a) RESTRICTIVE ENDORSEMENTS. Each certificate evidencing any
Securities shall bear a legend in substantially the following form:
"The [shares][warrant] evidenced by this certificate [and the shares
of Common Stock into which any Warrant represented hereby is
convertible] are subject to that certain [a Warrant, dated as of
_________,] [Subscription Agreement, dated as of _________,] [Employee
Stock Purchase Plan, dated as of ________,] a Stockholders Agreement,
dated as of ________, and Registration Rights Agreement, dated as of
___________ copies of which are on file at the principal office of the
Company and will be furnished to the holder on request to the
Secretary of the Company. Such [Warrant,] [Subscription Agreement]
[Employee Stock Purchase Plan] Stockholders Agreement and Registration
Rights Agreement provide, among other things, for certain restrictions
on voting, sale, transfer, pledge, hypothecation or other disposition
of the (securities) [warrant] evidenced by this certificate [and the
shares of Common Stock purchasable upon exercise of the warrant] and
that such securities may be subject to purchase by the Company as well
as certain other persons upon the occurrence of certain events. Any
issuance, sale, assignment, transfer or other disposition of the
securities evidenced by this certificate to persons who are not party
to such Stockholders Agreement shall be null and void."
In addition, unless counsel to the Company has advised the Company that
such legend is no longer needed, each certificate evidencing the Securities
shall bear a legend in substantially the following form:
"The securities [warrant] evidenced by this certificate [and the
shares of common stock purchasable upon exercise of the warrant] have
not been registered pursuant to the Securities Act of 1933, as amended
(the "Act"), or any state securities law, and such securities
[warrant] may not be sold, transferred or otherwise disposed of unless
the same are registered and qualified in accordance with the Act and
any applicable state securities laws, or in the opinion of counsel
-25-
<PAGE>
reasonably satisfactory to the Company such registration and qualification
are not required."
(b) REPLACEMENT CERTIFICATES. Upon receipt by the Company of
evidence reasonably satisfactory to it of the loss, theft, destruction or
mutilation of any certificate evidencing any Securities, and (in the case of
loss, theft or destruction) of indemnity reasonably satisfactory to the Company,
upon surrender and cancellation of such certificate or receipt of such
indemnity, the Company will execute, register and deliver a new certificate of
like tenor in lieu of such lost, stolen, destroyed or mutilated certificate.
SECTION 11. REPRESENTATIONS. Each Holder represents that such Holder
is the record and beneficial owner of the number of issued and outstanding
Securities appearing opposite such Holder's name in Exhibit A attached hereto,
free and clear of any option, lien, encumbrance or charge of any kind
whatsoever.
SECTION 12. EQUITABLE RELIEF. The parties hereto agree and declare
that legal remedies may be inadequate to enforce the provisions of this
Agreement and that equitable relief, including specific performance and
injunctive relief, may be used to enforce such provisions.
SECTION 13. MISCELLANEOUS.
(a) NOTICES. All notices, requests and other communications hereunder
must be in writing and will be deemed to have been duly given only if delivered
personally or by facsimile transmission or mailed (first class postage prepaid)
to the parties at the following addresses or facsimile numbers:
(i) (A) if to the Company, at
330 S. Mannheim Road, Ste. 200
Hillside, IL 60612
Facsimile No.: (708) 547-4524
Attention: Chief Executive Officer
(B) with copies to OCM, TCW and WES&S, at the respective
addresses set forth below
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<PAGE>
(ii) if to TCW or OCM, at
TCW Special Credits Fund V - The Principal Fund
C/O Oaktree Capital Management, LLC
555 South Hope St., 22nd Floor
Los Angeles, CA 90071
Facsimile No.: (213) 694-1593
Attention: Vincent J. Cebula
OCM Principal Opportunities Fund, L.P.
C/O Oaktree Capital Management, LLC
555 South Hope St., 22nd Floor
Los Angeles, CA 90071
Facsimile No.: (213) 694-1593
Attention: Vincent J. Cebula
with copies to:
Oaktree Capital Management, LLC
550 South Hope Street
22nd Floor
Los Angeles, California 90071
Facsimile No.: (213) 694-1599
Attention: Kenneth Liang, Esq.
Milbank, Tweed, Hadley & McCloy
601 South Figueroa Street
30th Floor
Los Angeles, California 90017
Facsimile No.: (213) 629-5063
Attention: Eric H. Schunk, Esq.
(iii) if to WES&S, at
William Simon & Sons, LLC
10990 Wilshire Blvd., Suite 1750
Los Angeles, CA 90024
Facsimile No.: (310) 575-3258
Attention: Michael Lenard
with copies to:
Latham & Watkins
633 West Fifth Street
Suite 4000
Los Angeles, California 90071-2007
Facsimile No.: (213) 891-6763
Attention: Paul D. Tosetti, Esq.
-27-
<PAGE>
(iv) if to any other Person who is the registered holder of any
Securities to the address for the purpose of such holder as it appears in
the stock ledger of the Company.
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided in this Section, be deemed given upon receipt, and (iii) if delivered
by mail in the manner described above to the address as provided in this
Section, be deemed given upon receipt (in each case regardless of whether such
notice, request or other communication is received by any other Person to whom a
copy of such notice, request or other communication is to be delivered pursuant
to this Section). Any party from time to time may change its address, facsimile
number or other information for the purpose of notices to that party by giving
notice specifying such change to the other party hereto.
(b) WAIVER. No failure or delay on the part of the parties or any of
them in exercising any right, power or privilege hereunder, nor any course of
dealing between the parties or any of them shall operate as a waiver of any such
right, power or privilege nor shall any single or partial exercise of any such
right, power or privilege preclude the simultaneous or later exercise of any
other right, power or privilege. The rights and remedies herein expressly
provided are cumulative and are not exclusive of any rights or remedies which
the parties or any of them would otherwise have. No notice to or demand on the
Company in any case shall entitle the Company to any other or further notice or
demand in similar or other circumstances or constitute a waiver of the rights of
the other parties or any of them to take any other or further action in any
circumstances without notice or demand.
(c) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
(d) GOVERNING LAW. This Agreement shall be construed in accordance
with and governed by the laws of the State of Delaware without regard to
principles of conflict of laws.
(e) FILING. A copy of this Agreement and of all amendments hereto
shall be filed at the principal office of the Company.
-28-
<PAGE>
(f) AMENDMENT OR TERMINATION. Prior to a Voting Termination Event,
this Agreement may be amended or terminated at any time only by an instrument in
writing signed by the Company and the Holders beneficially owning at least
eighty percent (80%) of the issued and outstanding Common Stock. Upon a Voting
Termination Event, this Agreement may be amended or terminated at any time by an
instrument in writing signed by the Company and the Holders beneficially owning
a majority of the issued and outstanding shares entitled to vote.
Notwithstanding the foregoing, (i) no amendment or modification to SECTION 8 OR
9 hereof may be made without the consent of the Holders beneficially owning
ninety percent (90%) of the issued and outstanding Common Stock and (ii) upon
receiving the unanimous written consent of each of the OCM Entities and WES&S,
the Company may (a) add new Holders to this Agreement by attaching a
supplemental signature page dated as of the date of execution and (b) amend
Exhibits A and B.
(g) BENEFIT AND BINDING EFFECT. Except as otherwise provided in this
Agreement, no right under this Agreement shall be assignable and any attempted
assignment in violation of this provision shall be void. Subject to compliance
with the terms of this Agreement regarding Transfer of Securities, this
Agreement shall be binding upon and inure to the benefit of the parties and
their executors, administrators, personal representatives, heirs, successors and
permitted assigns. Except as set forth in this SUBSECTION (g), this Agreement
does not create and shall not be construed as creating any rights enforceable by
any Person not a party hereto.
(h) SEVERABILITY. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provisions in every other respect and of the
remaining provisions contained herein shall not be affected or impaired thereby.
-29-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Third
Amended and Restated Stockholders Agreement as of the day and year first above
written.
The Company: INTERNATIONAL LOGISTICS LIMITED
By: /s/ ROGER E. PAYTON
-------------------
Roger E. Payton
President and
Chief Executive Officer
Holders: TCW SPECIAL CREDITS FUND V - THE
PRINCIPAL FUND
By: TCW ASSET MANAGEMENT COMPANY,
its General Partner
By: /s/ STEPHEN A. KAPLAN
---------------------
Stephen A. Kaplan
Authorized Signatory
By: /s/ VINCENT J. CEBULA
---------------------
Vincent J. Cebula
Authorized Signatory
OCM PRINCIPAL OPPORTUNITIES FUND, L.P.
By: OAKTREE CAPITAL MANAGEMENT, LLC,
its General Partner
By: /s/ STEPHEN A. KAPLAN
---------------------
Stephen A. Kaplan
Principal
By: /s/ VINCENT J. CEBULA
---------------------
Vincent J. Cebula
Managing Director
LOGISTICAL SIMON, L.L.C.
By: WESINVEST, Inc.
its Manager
By: /s/ MICHAEL B. LENARD
---------------------
Michael B. Lenard
President
[signature page continues]
<PAGE>
ING CAPITAL (U.S.) CORPORATION
By: /s/
-------------------
Name:
Title:
BANQUE PARIBAS
By: /s/ STEVEN M HEINEN
-------------------
Name: Steven M. Heinen
Title: Director
PARIBAS NORTH AMERICA, INC.
By: /s/ JOHN G. MARTINEZ
--------------------
Name: John G. Martinez
Title: Financial Controller
/s/ ROGER E. PAYTON
-------------------
Roger E. Payton, as an individual
/s/ GARY S. HOLTER
---------------
Gary Holter, as an individual
/s/ LARRY MARZULLO
------------------
Larry Marzullo, as an individual
/s/ WILLIAM E. MYERS, JR.
-------------------------
William E. Myers, Jr., as an individual
/s/ KURT KAMM
-------------
Kurt Kamm, as an individual
/s/ William Kidd
----------------------------------
William Kidd, as an individual
/s/ David W.M. Harvey
----------------------------------
David W.M. Harvey, as an individual
[signature page continues]
<PAGE>
/s/ Brian E. Sanderson
---------------------------------------
Brian E. Sanderson, as an individual
/s/ Edward R. Mandell
---------------------------------------
Edward R. Mandell, as an individual
/s/ Kenneth S. Ogden
---------------------------------------
Kenneth S. Ogden, as an individual
/s/ James L. Mazzuca
---------------------------------------
James L. Mazzuca, as an individual
/s/ Mark Lundgren
---------------------------------------
Mark Lundgren, as an individual
/s/ Paul Stone
---------------------------------------
Paul Stone, as an individual
/s/ Christine Stone
---------------------------------------
Christine Stone, as an individual
/s/ Douglas Cruikshank
---------------------------------------
Douglas Cruikshank, as an individual
/S/ Ronald S. Cruse
---------------------------------------
Ronald S. Cruse, as an individual
/s/ Steve Hitchcock
---------------------------------------
Steve Hitchcock, as an individual
/s/ Paul D. Smith
---------------------------------------
Paul D. Smith, as an individual
/s/ Abe Ranish
---------------------------------------
Abe Ranish, as an individual
/s/ Luis Solis
---------------------------------------
Luis Solis, an individual
[signature page continues]
<PAGE>
/s/ Larry Tieman
---------------------------------------
Larry Tieman, an individual
/s/ Joe Monaghan
---------------------------------------
Joe Monaghan, an individual
/s/ Ben Cassell
---------------------------------------
Ben Cassell, an individual
/s/ Randy Valentino
---------------------------------------
Randy Valentino, an individual
/s/ Diego Hidalgo
---------------------------------------
Diego Hidalgo, an individual
/s/ Louis Mitchell
---------------------------------------
Louis Mitchell, an individual
/s/ Sam Schotsky
---------------------------------------
Sam Schotsky, an individual
/s/ Dave Martin
---------------------------------------
Dave Martin, an individual
/s/ Russ Krueger
---------------------------------------
Russ Krueger, an individual
/s/ Ove Anderson
---------------------------------------
Ove Anderson, an individual
/s/ Jim Bruder
---------------------------------------
Jim Bruder, an individual
/s/ Peter Schwerdt
---------------------------------------
Peter Schwerdt, an individual
/s/ Ron Evinou
---------------------------------------
Ron Evinou, an individual
<PAGE>
/s/ Bruno Setz
---------------------------------------
Bruno Setz, an individual
/S/ Manoutchehr Ardalan
---------------------------------------
Manoutchehr Ardalan, an individual
/s/ J.G. Birrell
---------------------------------------
J.G. Birrell, an individual
/s/ Donald D. Branson
---------------------------------------
Donald D. Branson, an individual
/s/ John Connolly
---------------------------------------
John Connolly, an individual
/s/ Robert J. Fruchterman
---------------------------------------
Robert J. Fruchterman, an individual
/s/ Deborah A. MacDougall
---------------------------------------
Deborah A. MacDougall, an individual
/s/ Mitchell J. Martin
---------------------------------------
Mitchell J. Martin, an individual
/s/ Christian E. Meyer
---------------------------------------
Christian E. Meyer, an individual
/s/ Stephen J. Zimmer
---------------------------------------
Stephen J. Zimmer, an individual
/s/ Jack Wasp
---------------------------------------
Jack Wasp, an individual
/s/ Wolfgang Hollermann
---------------------------------------
Wolfgang Hollermann, an individual
/s/ Andrew Bernard
---------------------------------------
Andrew Bernard, an individual
[signature page continues]
<PAGE>
ELGAR TRADING LIMITED
By: /s/ Ronald Jackson
----------------------------------
Ronald Jackson, as attorney
in fact for Elgar Trading Limited
COTECH COMPANY INC.
By: /s/ Ronald Jackson
----------------------------------
Ronald Jackson, as attorney
in fact for Elgar Trading Limited
HERA VENTURES LIMITED
By: /s/ Ronald Jackson
----------------------------------
Ronald Jackson, as attorney
in fact for Elgar Trading Limited
/s/ Anthony J. Quinn
---------------------------------------
Anthony J. Quinn, an individual
/s/ Sergey Kuzminykh
---------------------------------------
Sergey Kuzminykh, an individual
/s/ Audrey Jackel
---------------------------------------
Audrey Jackel, an individual
/s/ Sherry Aaholm
--------------------------------------
Sherry Aaholm, an individual
/s/ Grant Wattman
--------------------------------------
Grant Wattman, an individual
/s/ Charlie Hitt
--------------------------------------
Charlie Hitt, an individual
/s/ Mark Jerome
---------------------------------------
Mark Jerome, an individual
[signature page continues]
<PAGE>
/s/ Ron Jackson
---------------------------------------
Ron Jackson, an individual
/s/ George Milton
--------------------------------------
George Milton, an individual
[signature page continues]
<PAGE>
EXHIBIT "A"
HOLDERS COMMON STOCK WARRANTS
- ---------------------------------------------------------------------
TCW SPECIAL CREDITS FUND V -
THE PRINCIPAL FUND 695,575 0
OCM PRINCIPAL OPPORTUNITIES
FUND, L.P. 600,000 0
LOGISTICAL SIMON, L.L.C. 469,532 125,000
ROGER E. PAYTON 20,012* 175,000
GARY HOLTER 10,000 37,500
LARRY MARZULLO 19,200 10,000
ING 18,718 5,025**
BANQUE PARIBAS 17,500 5,025***
PARIBAS NORTH AMERICA, INC. 70,175 0
WILLIAM E. MYERS, JR. 0 59,938
BRIAN E. SANDERSON 0 14,983
KURT KAMM 0 6,516
WILLIAM KIDD 0 6,516
EDWARD R. MANDELL 196 266
DAVID W.M. HARVEY 0 5,620
KENNETH S. OGDEN 1,000* 0
JAMES L. MAZZUCA 2,500* 0
PAUL STONE AND
CHRISTINE STONE 500 5,000
DOUGLAS CRUIKSHANK 24,000 0
RONALD S. CRUSE 24,000 0
STEVE HITCHCOCK 24,000 0
PAUL D. SMITH 24,000 0
ABE RANISH 9,000 0
LUIS SOLIS 7,000 37,500
LARRY TIEMAN 1,000 37,500
JOE MONAGHAN 0 30,000
BEN CASSELL 1,000 0
RANDY VALENTINO 500 0
DIEGO HIDALGO 3,500 0
[table continued on next page]
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<PAGE>
SAM SCHOTSKY 600 0
DAVE MARTIN 500 0
RUSS KRUEGER 500 0
OVE ANDERSON 500 0
JIM BRUDER 500 0
PETER SCHWERDT 500 0
RON EVINOU 500 0
BRUNO SETZ 2,500 0
MANOUTCHEHR ARDALAN 500 0
J.G. BIRRELL 500 0
DONALD D. BRANSON 3,333 0
JOHN CONNOLLY 1,700 0
ROBERT J. FRUCHTERMAN 1,000 0
DEBORAH A. MacDOUGALL 1,667 0
MITCHELL J. MARTIN 1,000 0
CHRISTIAN E. MEYER 500 0
STEPHEN J. ZIMMER 500 0
ILL DEFERRED COMPENSATION
PLAN 3,168 0
HERA VENTURES LIMITED 0 7,323
COTECH COMPANY INC. 0 42,361
ELGAR TRADING LIMITED 0 42,361
ANTHONY J. QUINN 3,333 37,500
SERGEY KUZMINYKH 3,333 0
AUDREY JACKEL 2,500 0
SHERRY AAHOLM 500 0
GRANT WATTMAN 2,000 0
CHARLIE HITT 1,334 0
MARK JEROME 850 0
RON JACKSON 0 8,000
GEORGE MILTON 0 12,500
TOTAL 2,076,726 711,434
Common Stock Warrants
* Excludes shares which are held by the ILL Deferred Compensation Plan for
the benefit of Roger E. Payton (2,488), Jim Mazzuca (247) and Scott Ogden
(433).
** Excludes up to 1,624 Warrants exercisable if WES&S, Payton and ING Capital
(U.S.) Corporation exercise 100% of the Warrants issued to each of them on
May 2, 1996.
*** Excludes up to 1,624 Warrants exercisable if WES&S, Payton and Banque
Paribas exercise 100% of the Warrants issued to each of them on May 2,
1996.
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<PAGE>
EXHIBIT "B"
ROGER E. PAYTON RON JACKSON
GARY HOLTER GEORGE MILTON
LARRY MARZULLO RUSS KRUEGER
KENNETH S. OGDEN OVE ANDERSON
JAMES L. MAZZUCA JIM BRUDER
MARK LUNDGREN PETER SCHWERDT
PAUL STONE AND RON EVINOU
CHRISTINE STONE
DOUGLAS CRUIKSHANK BRUNO SETZ
RONALD S. CRUSE MANOUTCHEHR ARDALAN
STEVE HITCHCOCK J.G. BIRRELL
PAUL D. SMITH DONALD D. BRANSON
ABE RANISH JOHN CONNOLLY
LUIS SOLIS ROBERT J. FRUCHTERMAN
LARRY TIEMAN DEBORAH A. MACDOUGALL
JOE MONAGHAN MITCHELL J. MARTIN
BEN CASSELL CHRISTIAN E. MEYER
RANDY VALENTINO STEPHEN J. ZIMMER
DIEGO HIDALGO JACK WASP
LOUIS MITCHELL HERA VENTURES LIMITED
SAM SCHOTSKY WOLFGANG HOLLERMANN
DAVE MARTIN COTECH COMPANY INC.
SHERRY AAHOLM ANDREW BERNARD
GRANT WATTMAN ELGAR TRADING LIMITED
CHARLIE HITT ANTHONY J. QUINN
MARK JEROME SERGEY KUZMINYKH
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<PAGE>
Exhibit 10.2
AMENDED AND RESTATED LOAN AGREEMENT
DATED AS OF OCTOBER 28, 1997
BY AND AMONG
INTERNATIONAL LOGISTICS LIMITED,
(the "Company," as additional obligor under the covenants)
THE BEKINS COMPANY
MATRIX INTERNATIONAL LOGISTICS, INC.
ILLCAN, INC.
ILLSCOT, INC.
LEP PROFIT INTERNATIONAL, INC.
AND
LEP INTERNATIONAL LIMITED
AS BORROWERS
ING (U.S.) CAPITAL CORPORATION,
AS ADMINISTRATIVE AGENT
AND
THE LENDERS PARTY HERETO
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TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS..............................2
1.1 Defined Terms..................................................2
1.2 Use of Defined Terms..........................................37
1.3 Accounting Terms..............................................37
1.4 Exhibits and Schedules........................................37
1.5 Miscellaneous Terms...........................................37
ARTICLE II LOANS AND LETTERS OF CREDIT.................................38
2.1 Loans-General.................................................38
2.2 Loans.........................................................40
2.3 Reduction of Commitments......................................41
2.4 Administrative Agent's Right to Assume Funds Available for
Advances......................................................41
2.5 Standby Letters of Credit.....................................41
2.6 Collateral....................................................46
2.7 Release of Collateral.........................................46
ARTICLE III PAYMENTS AND FEES..........................................47
3.1 Principal and Interest........................................47
3.2 Closing and Agency Fees.......................................49
3.3 Commitment Fees...............................................49
3.4 Letter of Credit Fees.........................................50
3.5 Increased Costs...............................................50
3.6 Default Rate..................................................54
3.7 Computation of Interest and Fees..............................54
3.8 Manner and Treatment of Payments..............................54
3.9 Failure to Charge Not Subsequent Waiver.......................56
3.10 Administrative Agent's Right to Assume Payments Will Be Made by
Borrowers.....................................................57
3.11 Fee and Cost Determination Detail.............................57
3.12 Survivability.................................................57
ARTICLE IV COLLECTIONS OF COLLATERAL AND CASH MANAGEMENT..............58
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4.1 Collection of Receivables..........................................58
4.2 Concentration Accounts.............................................59
4.3 Application of Funds...............................................59
4.4 Additional Lender Accounts.........................................60
ARTICLE V REPRESENTATIONS AND WARRANTIES....................................62
5.1 Solvency..........................................................62
5.2 Existence and Qualification, Power, Compliance with Laws..........62
5.3 Authority; Compliance with Other Agreements and Instruments and
Government Regulations............................................63
5.4 No Governmental Approvals Required................................64
5.5 Subsidiaries......................................................64
5.6 Financial Statements..............................................65
5.7 No Other Liabilities; No Material Adverse Effect..................65
5.8 Title to Property.................................................65
5.9 Intangible Assets.................................................66
5.10 Governmental Regulation...........................................66
5.11 Litigation........................................................66
5.12 Binding Obligations...............................................66
5.13 No Default........................................................67
5.14 ERISA.............................................................67
5.15 CAN Plans.........................................................68
5.16 Regulations G, T, U and X.........................................70
5.17 Disclosure........................................................70
5.18 Tax Liability.....................................................70
5.19 Projections.......................................................71
5.20 Employee Matters..................................................71
5.21 Security Interests................................................71
5.22 Hazardous Materials...............................................72
5.23 Labor Disputes....................................................73
5.24 Workers' Compensation.............................................73
5.25 Intercompany Debt Arrangements....................................73
5.26 Canadian Subsidiaries.............................................73
ARTICLE VI AFFIRMATIVE COVENANTS (OTHER THAN INFORMATION AND REPORTING
REQUIREMENTS)................................................................74
6.1 Payment of Taxes and Other Potential Liens.........................74
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6.2 Preservation of Existence..........................................74
6.3 Maintenance of Properties..........................................75
6.4 Maintenance of Insurance...........................................75
6.5 Compliance With Laws...............................................75
6.6 Inspection Rights..................................................75
6.7 Keeping of Records and Books of Account............................76
6.8 Compliance with Agreements.........................................76
6.9 Use of Proceeds....................................................76
6.10 Hazardous Materials Laws...........................................76
6.11 Additional Collateral..............................................77
6.12 Collateral.........................................................77
ARTICLE VII NEGATIVE COVENANTS...............................................79
7.1 Creation or Dissolution of Subsidiaries............................79
7.2 Prepayment of Indebtedness.........................................79
7.3 Payment of Subordinated Obligations................................79
7.4 Disposition of Property............................................80
7.5 Mergers............................................................80
7.6 Investments and Acquisitions.......................................80
7.7 Hostile Tender Offers..............................................81
7.8 Distributions......................................................81
7.9 ERISA..............................................................81
7.10 Change in Nature of Business.......................................82
7.11 Liens, Negative Pledges, Sales and Leaseback.......................82
7.12 Indebtedness and Contingent Obligations............................83
7.13 CAN Plans..........................................................83
7.14 Transactions with Affiliates.......................................84
7.15 EBITDA.............................................................84
7.16 Interest Charge Coverage Ratio.....................................85
7.17 Holding Company Restrictions.......................................85
7.18 New Subsidiaries...................................................86
7.19 Amendments to Subordinated Obligations.............................86
ARTICLE VIII INFORMATION AND REPORTING REQUIREMENTS..........................87
8.1 Financial and Business Information.................................87
8.2 Compliance Certificates............................................90
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ARTICLE IX CONDITIONS........................................................92
9.1 Initial Advances...................................................92
9.2 Conditions to Availability of the UK Commitment....................95
9.3 Any Advance........................................................96
ARTICLE X EVENTS OF DEFAULT AND REMEDIES UPON EVENT OF DEFAULT...............97
10.1 Events of Default.................................................97
10.2 Remedies upon Event of Default...................................100
ARTICLE XI THE ADMINISTRATIVE AGENT.........................................104
11.1 Appointment and Authorization....................................104
11.2 Agent and Affiliates.............................................104
11.3 Proportionate Interest of the Lenders in Any Collateral..........104
11.4 Lenders' Credit Decisions........................................105
11.5 Action by Administrative Agent...................................105
11.6 Liability of Administrative Agent................................106
11.7 Indemnification..................................................107
11.8 Successor Administrative Agent...................................108
11.11 No Obligations of the Company or Borrowers.......................109
ARTICLE XII MISCELLANEOUS...................................................111
12.1 Cumulative Remedies: No Waiver...................................111
12.2 Amendment: Consents..............................................111
12.3 Costs, Expenses and Taxes........................................112
12.4 Nature of Lenders' Obligations...................................113
12.5 Survival of Representations and Warranties.......................113
12.6 Notices..........................................................114
12.7 Execution of Loan Documents......................................114
12.8 Binding Effect; Assignment.......................................114
12.9 Lien on Deposits and Property in Possession of Any Lender........118
12.10 Sharing of Setoffs...............................................119
12.11 Indemnity........................................................120
12.12 Nonliability of the Lenders......................................121
12.13 No Third Parties Benefited.......................................122
12.14 Confidentiality..................................................122
12.15 Hazardous Materials Indemnity....................................124
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12.16 Further Assurances...............................................125
12.17 Integration......................................................125
12.18 Governing Law....................................................125
12.19 Severability of Provisions.......................................125
12.20 Independent Representations, Warranties, and Covenants...........126
12.21 Headings.........................................................126
12.22 Time of the Essence..............................................126
12.23 Submission to Jurisdiction.......................................126
12.24 Purported Oral Amendments........................................126
12.25 Replacement of a Lender..........................................127
12.26 Waiver of Right to Trial by Jury.................................127
12.27 Judgement Currency...............................................127
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EXHIBITS
- --------
Exhibit A Borrowing Base Certificate
Exhibit B Commitment Assignment and Acceptance
Exhibit C Compliance Certificate
Exhibit D Form of Domestic Notes
Exhibit E UK Note
Exhibit F Request for Letter of Credit
Exhibit G Request for Loan
Exhibit H Joint Borrower Provisions
Exhibit I UK Security Documents
SCHEDULES
- ---------
4.4 Demand and Time Deposit Accounts
5.2 Warrants
5.3 Authority and Compliance
5.4 Governmental Approvals
5.5 Subsidiaries and Other Investments
5.7 Other Liabilities
5.9 Intangible Assets
5.11 Litigation
5.14 Pension Plans
5.15 CAN Plans
5.18 Tax Liability
5.19 Projections
5.22 Hazardous Materials
5.23 Labor Matters
5.25 Intercompany Debt Arrangements
6.4 Real Property Insurance
7.6 Existing Investments
7.11 Existing Liens and Rights of Others
7.12A Existing Indebtedness and Contingent Obligations
7.12B Existing Indebtedness of LEP UK to NatWest Group
7.15 Pro Forma EBITDA (pre-9-30-97)
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AMENDED AND RESTATED LOAN AGREEMENT
-----------------------------------
Dated as of October 28, 1997
This AMENDED AND RESTATED LOAN AGREEMENT ("Agreement") is entered
into by and among International Logistics Limited, a Delaware corporation
(the "Company"), Matrix International Logistics, Inc., a Delaware
corporation, LEP Profit International, Inc. a Delaware corporation, The
Bekins Company, a Delaware corporation, ILLCAN, Inc., a Delaware corporation,
and ILLSCOT, Inc., a Delaware corporation (collectively, the Domestic
Borrowers"), LEP International Limited, a company organized under the Laws of
England ("LEP UK" and collectively with the Domestic Borrowers, "Borrowers"),
ING (U.S.) Capital Corporation ("ING Capital") and each other lender whose
name is set forth on the signature pages hereof or which may hereafter
execute and deliver an instrument of assignment with respect to this
Agreement pursuant to Section 12.8 (collectively, the "Lenders" and,
individually, a "Lender"), ING Capital, as Administrative Agent, and ING
Bank, n.v. (London, England Branch), as facilitator of the UK Commitment (and
not as a "Lender"). The parties agree with reference to the following facts:
A. The Company, the lenders named therein, Banque Paribas, as
Administrative Agent (the "Prior Agent") and a Co-Agent, and ING Capital,
as Co-Agent have previously entered into a Loan Agreement (as heretofore
amended, the "Existing Loan Agreement") dated as of October 31, 1996.
B. Substantially concurrently herewith, the Company is issuing
$110,000,000 of its Senior Notes (the "Senior Notes" described below).
C. The Company intends to use the proceeds of the Senior Notes, together
with the proceeds of Loans under this Agreement, to repay certain
Indebtedness, to refinance the Indebtedness under the Existing Loan
Agreement, and for the other permitted purposes described herein.
D. In order to provide for access by its direct Subsidiaries to credit,
the Company has requested that the parties amend and restate the Existing
Loan Agreement and the other "Loan Documents" referred to therein to
provide for the $100,000,000 credit facility for the Domestic Borrowers
and the $30,000,000 credit facility for LEP UK described herein, PROVIDED
that the aggregate amount of
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the Loans and Letters of Credit outstanding hereunder shall not exceed
$100,000,000 at any time and are subject to the borrowing base
limitations described herein.
E. The parties have agreed to concurrently nominate and appoint ING
Capital as successor Administrative Agent.
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.1 DEFINED TERMS. As used in this Agreement, the following terms
shall have the meanings set forth below:
"ACQUISITION" means any transaction, or any series of related
transactions, by which the Company or any of its Restricted Subsidiaries
directly or indirectly (a) acquires any going business or all or substantially
all of the assets of any firm, partnership, joint venture, corporation or
division thereof, whether through purchase of assets, merger or otherwise, (b)
acquires (in one transaction or as the most recent transaction in a series of
transactions) control of at least a majority in ordinary voting power of the
securities of a corporation which have ordinary voting power for the election of
directors, or (c) acquires control of a 50% or more ownership interest in any
partnership, limited liability company or joint venture.
"ACTIVE SUBSIDIARY" means, as of any date of determination, any
Restricted Subsidiary of the Company other THAN any Inactive Subsidiary.
"ADMINISTRATIVE AGENT" means ING Capital, when acting in its capacity
as the Administrative Agent under any of the Loan Documents and any successor
Administrative Agent.
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"ADMINISTRATIVE AGENT'S OFFICE" means the Administrative Agent's
address as set forth on the signature pages of this Agreement, or such other
address as the Administrative Agent may designate by written notice to the
Company and the Lenders.
"ADVANCE" means any Advance made or to be made by any Lender to any of
the Borrowers as provided in Article II.
"AFFILIATE" means, as to any Person, any other Person which directly
or indirectly controls, or is under common control with, or is controlled by,
such Person. As used in this definition, "control" (and the correlative terms
"controlled by" and "under common control with") shall mean possession, directly
or indirectly, of power to direct or cause the direction of management or
policies (whether through ownership of securities or partnership or other
ownership interests, by contract or otherwise); PROVIDED that, in any event, any
Person that owns, directly or indirectly, 10% or more of the securities having
ordinary voting power for the election of directors or other governing body of a
corporation that has more than 100 record owners, or 10% or more of the
partnership or other ownership interests of any other Person that has more than
100 record owners, will be deemed to control such corporation or other Person.
"AGENT AND CONTRACTOR RECEIVABLES" means all accounts receivable of
BVL for goods sold or services rendered to a customer which are to be or have
been collected from the customer on behalf of BVL by a Representative Agent or
Contractor and have not yet been remitted to BVL, and all advances made to
Representative Agents or Contractors for the purpose of financing expenses
incurred by such Representative Agents or Contractors in connection with the
provision of services to customers of BVL.
"AGREEMENT" means this Amended and Restated Loan Agreement, either as
originally executed or as it may from time to time be supplemented, modified,
amended, restated or extended.
"APPROVED FOREIGN CUSTOMER" means customers of the Borrowers and their
Restricted Subsidiaries, the Receivables of which are approved by the
Administrative Agent for inclusion in the Eligible Domestic Receivables and the
Eligible UK Receivables, subject to such restrictions, including dollar
limitations, as the Administrative Agent may impose in its sole discretion. The
Administrative Agent may, on not less than 10 days notice to the Company
eliminate any Person as an Approved Foreign Customer, or change the restrictions
applicable to that Person.
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"AVERAGE AVAILABILITY" means, for each period, the average daily
difference between (a) the aggregate outstanding principal amount of the Loans
PLUS the aggregate effective face amount of all Letters of Credit, and (b) the
LESSER of (i) the sum of the Domestic Borrowing Bases and the UK Borrowing Base,
and (ii) $100,000,000 or such lesser amount to which the Domestic Commitment has
been reduced in accordance with Section 2.3.
"AVERAGE UNUSED COMMITMENT" means, for each period, the average daily
difference between (a) the aggregate outstanding principal amount of the Loans
PLUS the aggregate effective face amount of all Letters of Credit, and (b)
$100,000,000 or such lesser amount to which the Domestic Commitment has been
reduced in accordance with Section 2.3.
"BASE RATE" means the arithmetic average of the rates of interest
publicly announced by The Chase Manhattan Bank, Citibank, N.A. and Morgan
Guaranty Trust Company of New York (or their respective successors) as their
respective prime commercial lending rates (or, as to any such bank that does not
announce such a rate, such bank's "base" or other rate determined by the
Administrative Agent to be the equivalent rate announced by such bank), except
that, if any such bank shall, for any period, cease to announce publicly its
prime commercial lending (or equivalent) rate, the Administrative Agent shall,
during such period, determine the "Prime Rate" based upon the prime commercial
lending (or equivalent) rates announced publicly by the other such banks.
"BASE RATE LOAN" means a Loan made at a rate of interest based upon
the Base Rate.
"BASE RATE MARGIN" means: (a) during the period from the Closing Date
through March 31, 1998, 0.50% per annum, (b) during each Pricing Period or
portion thereof occurring during the prior from April 1, 1998 through the day
prior to the first anniversary of the Closing Date, the LESSER OF (i) 0.50% per
annum and (ii) the percentage set forth opposite the Funded Debt Ratio for the
Fiscal Quarter ending 45 days prior to the commencement of such Pricing Period,
and (c) during each Pricing Period or portion thereof occurring after the first
anniversary of the Closing Date, the percentage set forth below opposite the
Funded Debt Ratio for the Fiscal Quarter ending 45 days prior to the
commencement of such Pricing Period:
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FUNDED DEBT RATIO APPLICABLE BASE RATE MARGIN
----------------- ---------------------------
Equal to or greater than 6.00 to 1.00 1.00%
Less than 6.00:1.00 but not less than 5.50:1.00 0.75%
Less than 5.50:1.00 but not less than 4.50:1.00 0.50%
Less than 4.50:1.00 but not less than 4.00:1.00 0.25%
Less than 4.00:1.00 0.00%
"BEKINS" means The Bekins Company, a Delaware corporation, its
successors and permitted assigns.
"BEST KNOWLEDGE" means, where it modifies a statement that, after
reasonable inquiry, nothing has come to the attention of any Senior Officer of
the Company, any Borrower or any relevant Restricted Subsidiary which would
render the statement incorrect or misleading in any respect.
"BLOCKED ACCOUNT AGREEMENT" means a letter agreement in substantially
the form of Exhibits N-3, N-4 or N-5 to the Existing Loan Agreement.
"BLOCKED ACCOUNTS" means any demand or time deposit account maintained
at a financial institution that is subject to a Blocked Account Agreement.
"BORROWING BASE CERTIFICATE" means a report in the form of Exhibit A,
properly completed and executed by a Responsible Official of the Company,
calculating in sufficient detail the Domestic Borrowing Bases and the UK
Borrowing Base, based on a new accounts receivable aging as of the last Business
Day of the relevant period.
"BPS" or L means lawful currency of the United Kingdom.
"BREAKAGE FEE" means the fee set forth in Section 3.5(g) hereof.
"BUSINESS DAY" means any Monday, Tuesday, Wednesday, Thursday or
Friday, OTHER THAN a day on which banks are authorized or required to be closed
in
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New York, Los Angeles or Chicago or a day on which any of the Lenders' relevant
U.S. offices are closed or (in connection with any Loan or Advance made to, or
Letter of Credit issued to, LEP UK) London.
"BVL" means Bekins Van Lines Co., a Nebraska corporation, its
Subsidiaries, and each of their respective successors and permitted assigns.
"CAN PLAN" means any pension or other similar employee benefit plan
which is subject to Canadian law and which is: (a) a plan maintained by the
Company or any of its Subsidiaries; (b) a plan to which the Company or any of
its Subsidiaries contributes or is required to contribute; (c) a plan to which
the Company or any of its Subsidiaries was required to make contributions at any
time during the five calendar years preceding the date of this Agreement; or
(d) any other plan with respect to which the Company or any of its Subsidiaries
has incurred or may incur liability, including contingent liability, either to
such plan or to any Person, including any administrator or Governmental Agency.
"CAN PLAN TERMINATION EVENT" means, with respect to any CAN Plan, the
occurrence of any of the following: (a) the cessation (in whole or in part) by
the Company or any of its Subsidiaries of its participation in a CAN Plan during
a plan year, (b) the filing of a notice of intent to terminate or wind up (in
whole or in part) a CAN Plan or the treatment of a CAN Plan amendment,
reorganization or other event or circumstance as such a termination or wind up;
(c) the doing of or failure to do any act or thing in furtherance of any
termination or wind up (in whole or in part) of any CAN Plan or which may result
in such termination or wind up; (d) the institution or threatened institution of
any proceedings or action by the Pension Commission of Ontario, any other
Governmental Agency or any other Person to terminate, wind up (in whole or in
part) or have a trustee or provisional administrator appointed to administer a
CAN Plan; (e) any determination that a termination or wind up (in whole or in
part) of any CAN Plan has occurred or will occur; (f) the Company or any of its
Subsidiaries is required to make any payment in respect of any unfunded
liability or solvency deficiency in respect of any CAN Plan in addition to its
minimum regular monthly contribution amounts required from time to time
(Inclusive of current service, unfunded liability and solvency deficiency
payments) in respect thereof; or (g) any other event or condition which may, as
determined by the Administrative Agent in the exercise of its discretion,
constitute grounds for the termination or wind up (in whole or in part) of, or
the appointment of a trustee or provisional administrator to administer, any CAN
Plan or which may (as
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determined by the Administrative Agent in its discretion) give rise to any Lien
in favor of any Person.
"CANADIAN DOLLARS" or "CAN$" means lawful currency of Canada.
"CANADIAN SECURITY DOCUMENTS" means, collectively, an Acknowledgment
Agreement (in regard to certain existing guarantees, debentures, debenture
pledge agreements and hypothecs), a General Assignment of Book Debts, Book
Accounts and a Hypothec to be executed by LEP Canada in favor of the
Administrative Agent together with any instrument or document of security now or
hereafter executed by LEP Canada in favor of the Agent or any of the Lenders.
"CANADIAN SUBSIDIARY" means any Subsidiary of the Company which is
incorporated or continued under the laws of Canada or any province of Canada.
"CAPITAL LEASE" means, as to any Person, a lease of any Property by
that Person as lessee that is, or should be, in accordance with Financial
Accounting Standards Board Statement No. 13, as amended from time to time, or,
if such Statement is not then in effect, such other statement of Generally
Accepted Accounting Principles as may be applicable, recorded as a "capital
lease" on the balance sheet of that Person prepared in accordance with Generally
Accepted Accounting Principles.
"CASH" means, when used in connection with any Person, all monetary
and nonmonetary items owned by that Person that are treated as cash in
accordance with Generally Accepted Accounting Principles.
"CASH EQUIVALENTS" means, when used in connection with any Person,
that Person's Investments in: (a) Government Securities due within one year
after the date of the making of the Investment; (b) readily marketable direct
obligations of any State of the United States of America or any political
subdivision of any such State given on the date of such investment a credit
rating of at least Aa by Moody's Investors Service, Inc. or AA by Standard &
Poor's Corporation, in each case due within one year after the date of the
making of the Investment (or, in the case of LEP UK, and readily marketable
direct obligations of the United Kingdom of similar maturities deemed by LEP UK
to have a similar creditworthiness); (c) certificates of deposit issued by, bank
deposits in, eurodollar deposits through, bankers acceptances of, and reverse
repurchase agreements covering Government Securities executed by any Lender or
any bank, savings and loan or savings
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bank doing business in and incorporated under the Laws of the United States of
America or any State thereof or of any of the "G-12" nations and having on the
date of such Investment combined capital, surplus and undivided profits of at
least $250,000,000, in each case due within one year after the date of the
making of the Investment; (d) certificates of deposit issued by, bank deposits
in, eurodollar deposits through, bankers acceptances of, and reverse repurchase
agreements covering Government Securities executed by any branch or office
located in the United States of America or any such G-12 nation of a bank
incorporated under the Laws of any jurisdiction outside the United States of
America or any such G-12 nation having on the date of such Investment combined
capital, surplus and undivided profits of at least $500,000,000, in each case
due within one year after the date of the making of the Investment; and (e)
readily marketable commercial paper of corporations doing business in and
incorporated under the Laws of the United States of America or any State thereof
given on the date of such Investment the highest credit rating by Moody's
Investors Service, Inc. and Standard & Poor's Corporation, in each case due
within 270 days after the date of the making of the Investment (or, in the case
of LEP UK, any readily marketable obligations of United Kingdom corporations
deemed by LEP UK to have a similar creditworthiness).
"CERTIFICATE OF A RESPONSIBLE OFFICIAL" means a certificate signed by
a Responsible Official of the Person providing the certificate.
"CHANGE OF CONTROL EVENT" means the occurrence of any of the following
events with respect to the Company:
(i) any "person" (as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934 (the "Exchange Act"), other than one
or more Permitted Holders, is or becomes the beneficial owner (as defined
in Rules 13d-3 and 13d-5 under the Exchange Act, except that for purposes
of this clause (i) such person shall be deemed to have "beneficial
ownership" of all shares that such person has the right to acquire,
whether such right is exercisable immediately or only after the passage
of time), directly or indirectly, of more than 50% of the total voting
power of the then outstanding common stock of the Company; PROVIDED,
HOWEVER, that for purposes of this clause (i), the Permitted Holders
shall be deemed to beneficially own any common stock of a corporation
(the "specified corporation") held by any other corporation (the "parent
corporation") so long as the Permitted Holders beneficially own (as so
defined), directly or indirectly, in the
<PAGE>
aggregate a majority of the voting power of the common stock of the
parent corporation;
(ii) during any period of two consecutive years commencing after the
Company's initial Public Equity Offering, individuals who at the
beginning of such period constituted the board of directors of the
Company (together with any new directors whose election of such board of
directors or whose nomination for election by the shareholders of the
Company was approved by a vote of 66 2/3% of the directors of the Company
then still in office who were either directors at the beginning of such
period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the board of
directors of the Company then in office; or
(iii) the merger or consolidation of the Company with or into
another Person or the merger of another Person with or into the Company,
or the sale of all or substantially all the assets of the Company to
another Person (in each case other than a Person that is controlled by
the Permitted Holders), and, in the case of any such merger or
consolidation, the securities of the Company that are outstanding
immediately prior to such transaction and which represent 100% of the
aggregate voting power of the common stock of the Company are changed
into or exchanged for cash, securities or property, unless pursuant to
such transaction such securities are changed into or exchanged for, in
addition to any other consideration, securities of the surviving
corporation or a parent corporation that owns all of the capital stock of
such corporation that represent immediately after such transaction, at
least a majority of the aggregate voting power of the common stock of the
surviving corporation or such parent corporation, as the case may be;
(iv) If no Public Equity Offering has then occurred, the sale
transfer or other disposition by each Sponsor of common stock (other than
to another Sponsor) which results in failure of each Sponsor to
collectively own, beneficially and of record, and control the power to
vote, at least 75% of the common stock of the Company owned by it as of
the Closing Date if, as of the date of such sale, transfer or other
disposition, the Interest Charge Coverage Ratio is less than 2.25:1.00;
and
(v) If a Public Equity Offering has then occurred, the sale
transfer or other disposition by each Sponsor of common stock which
results in the failure of
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the each Sponsor to own, beneficially and of record, and control the
power to vote, at least 50% of the common stock of the Company owned by
them as of the Closing Date if, as of the date of such sale, transfer or
other disposition, the Interest Charge Coverage Ratio is less than
2.25:1.00.
"CLOSING DATE" means the date upon which the conditions set forth in
Section 9.1 are satisfied, and the initial Loans hereunder are made.
"CODE" means the Internal Revenue Code of 1986, as amended or replaced
and as in effect from time to time.
"COLLATERAL" means, collectively, all of the collateral subject to the
Liens, or intended to be subject to the Liens, created by the Collateral
Documents.
"COLLATERAL DOCUMENTS" means collectively the Pledge and Security
Agreements, the Drop-Down Note Pledge and Security Agreements, the UK Security
Documents, the Canadian Security Documents, and any other pledge agreement,
hypothecation agreement, security agreement, assignment, deed of trust, mortgage
or similar instrument executed by the Company or any of its Restricted
Subsidiaries in favor of the Administrative Agent or any Creditor to secure any
of the Obligations.
"COMMISSION" means the Securities and Exchange Commission.
"COMMITMENT ASSIGNMENT AND ACCEPTANCE" means a Commitment Assignment
and Acceptance substantially in the form of Exhibit B.
"COMMITMENTS" means, collectively, the Domestic Commitment and the
U.K. Commitment. As of the Closing Date, ING Capital is the holder of the
entire Commitment.
"COMPLIANCE CERTIFICATE" means a certificate in the form of Exhibit C,
properly completed and signed by a Senior Officer of each Borrower.
"CONCENTRATION ACCOUNT" means (a) in the case of the Domestic
Borrowers, account 187-437-9 established at Harris Trust and Savings Bank, and
(b) in the case of LEP UK, a demand deposit account established at ING Bank,
n.v. (London Branch), or in either case or any other account bank acceptable to
the Administrative Agent. The
<PAGE>
Concentration Accounts have been established for the purpose of accepting direct
deposits as well as deposits or transfers of funds from Depositary Accounts and
Lockbox Accounts. The Concentration Accounts are the sole property of the
Administrative Agent, for the collective benefit of the Lenders, and are the
subject of a Concentration Account Agreement.
"CONCENTRATION ACCOUNT AGREEMENT" means a letter agreement
substantially in the form of Exhibit W to the Existing Loan Agreement.
"CONTINGENT OBLIGATION" means, as to any Person, any (a) direct or
indirect guaranty of Indebtedness of, or other obligation performable by, any
other Person, INCLUDING any endorsement (other than for collection or deposit in
the ordinary course of business), co-making or sale with recourse of the
obligations of any other Person or (b) contractual assurance (not arising solely
by operation of Law) given to an obligee with respect to the performance of an
obligation by, or the financial condition of, any other Person, whether direct,
indirect or contingent, INCLUDING any purchase or repurchase agreement covering
such obligation or any Collateral security therefor, any agreement to provide
funds (by means of loans, capital contributions or otherwise) to such other
Person, any agreement to support the solvency or level of any balance sheet item
to such other Person, or any other arrangement of whatever nature having the
effect of assuring or holding harmless any obligee against loss with respect to
any obligation of such other Person including without limitation any
"keep-well", "take-or-pay" or "through-put" agreement or arrangement. The
amount of any Contingent Obligation issued in support of Indebtedness shall be
deemed to be an amount equal to the stated or determinable amount of the related
primary obligation (unless the Contingent Obligation is limited by its terms to
a lesser amount, in which case to the extent of such amount) or, if not stated
or determinable, the maximum reasonably anticipated liability in respect thereof
as determined by the Person in good faith. The amount of any other Contingent
Obligation shall be zero until and unless, pursuant to GAAP, an amount in
respect of such Contingent Obligation is required to be included on the face of
the balance sheet of such Person (and not merely as a note thereto), at which
time the amount of such Contingent Obligation shall be the amount so required to
be included.
"CONTRACTOR" means any owner/operator engaged in the transportation of
household goods or other general commodities as an independent contractor who
has entered into a contract (OTHER THAN a Representative Agency Agreement) with
BVL for the purpose of providing moving and related services to customers of
BVL.
<PAGE>
"CONTRACTUAL OBLIGATION" means, as to any Person, any provision of any
outstanding Securities issued by that Person or of any material agreement,
instrument or undertaking to which that Person is a party or by which it or any
of its Property is bound.
"CREDITORS" means, collectively, the Administrative Agent, each
Lender, the Issuing Lender, and ING UK.
"CREDIT LIMIT" means, as of each date of determination (a)
$100,000,000 or such lower amount to which the Commitments have been reduced in
accordance with Section 2.3, MINUS (b) the Foreign Currency Reserve.
"DEBTOR RELIEF LAWS" means the Bankruptcy Code of the United States of
America, the Bankruptcy and Insolvency Act of Canada, the Companies' Creditors
Arrangement Act of Canada and the Winding-Up Act of Canada, The Insolvency Act
1986 and the Companies Act of 1985 (as amended by the Companies Act of 1989) of
England and Wales), as amended from time to time, and all other applicable
liquidation, conservatorship, bankruptcy, moratorium, rearrangement,
receivership, insolvency, reorganization, or similar debtor relief Laws,
including corporation Laws, from time to time in effect affecting the rights of
creditors generally.
"DEFAULT" means any event that, with the giving of any applicable
notice or passage of time specified in Section 10.1, or both, would be an Event
of Default.
"DEFAULT RATE" means the interest rate set forth in Section 3.6.
"DEPOSITARY ACCOUNT" means a demand or time deposit account maintained
with a financial institution used for the collection of Receivables and Cash
held by the Company or its Restricted Subsidiaries.
"DISPOSITION" means the sale, transfer or other disposition in any
single transaction or series of related transactions of (a) any of the capital
stock, or all or substantially all of the assets of (i) of any Borrower, or (ii)
any Active Subsidiary having assets with a value in excess of $1,000,000, (b)
all or substantially all of the assets of a division or comparable business
segment of the Company or any Active Subsidiary, or (c) any other individual
asset, or group of related assets, of the Company or any of its Restricted
Subsidiaries having a value in excess of $5,000,000, BUT EXCLUDING the sale or
other disposition of equipment or other personal property that is replaced by
equipment or
<PAGE>
personal property, as the case may be, performing substantially the same
function not later than 90 days after such sale or disposition.
"DISTRIBUTION" means, with respect to any shares of capital stock or
any warrant or right to acquire shares of capital stock or any other equity
security issued by a Person, (a) the retirement, redemption, purchase, or other
acquisition for value by such Person of any such security, (b) the declaration
or (without duplication) payment by such Person of any dividend in Cash or in
Property (other than in common stock of such Person) on or with respect to any
such security, and (c) any Investment by such Person in any holder of 10% or
more of the capital stock (or other equity securities) of such Person, if a
purpose of such Investment is to avoid the characterization of the transaction
between such Person and such holder as a Distribution under clause (a) or (b)
above.
"DOLLARS" or "'$" means United States dollars.
"DOMESTIC BORROWERS" has the meaning set forth in the preamble hereto.
"DOMESTIC BORROWING BASE" means, as to each Domestic Borrower and as
of any date of determination, an amount determined by the Administrative Agent
with reference to the most recent Borrowing Base Certificate equal to the sum of
85% of Domestic Eligible Receivables of that Domestic Borrower and its
Restricted Subsidiaries, PROVIDED THAT upon ten (10) Business Days' prior
written notice to the Company, the Administrative Agent may from time to time,
in its good-faith discretion in accordance with prudent asset-based lending
practices, and the Administrative Agent shall, upon the direction of the
Majority Lenders (each acting in its good-faith discretion in accordance with
prudent asset-based lending practices), establish such reasonable reserves
against the Domestic Borrowing Base as it deems necessary and proper, INCLUDING,
reasonable reserves for existing Liens and Rights of Others.
"DOMESTIC COMMITMENT" means, subject to Section 2.3, $100,000,000.
"DOMESTIC ELIGIBLE RECEIVABLES" means, as of any date of
determination, the unpaid principal amount of accounts receivable of the
Domestic Borrowers and their Restricted Subsidiaries for goods sold or services
rendered to a customer OTHER THAN Agent and Contractor Receivables (the
"Domestic Receivables"), PROVIDED that such accounts receivable:
<PAGE>
(a) arose in the ordinary course of business of the Domestic
Borrowers or such Subsidiaries;
(b) represent amounts owed for goods sold or services rendered to a
customer;
(c) in the case of accounts receivable which are the subject of an
invoice to the customer, are due within 30 days of the invoice date and are not
more than 90 days past due;
(d) do not have as the account debtor a Person that is the subject of
any proceeding under any Debtor Relief Law;
(e) do not include accounts receivable of any account debtor if 50%
or more of the aggregate amount of such account debtor's balance is more than 90
days past the due date or 120 days past the original invoice date;
(f) do not have as the account debtor a Person which is located
outside the United States of America other than an Approved Foreign Customer,
unless (i) with respect to Canadian and Puerto Rican account debtors such
account is payable in U.S. Dollars or, with respect to Canadian account debtors,
such account is payable in Canadian Dollars and (ii) with respect to all foreign
account debtors other than Canadian or Puerto Rican account debtors included in
the immediately preceding clause (i), the obligations of such account debtor are
backed by an irrevocable letter of credit issued or confirmed to the
Administrative Agent by a Lender or by another bank reasonably acceptable to the
Administrative Agent and is in form and substance acceptable to the
Administrative Agent, payable in the full amount of the account in freely
convertible U.S. Dollars at a place of payment within the United States;
(g) do not have as the account debtor a director, officer or employee
of the Company or a Subsidiary of the Company;
(h) do not include accounts receivable (i) of Matrix which have the
account debtor as the United States of America, or any department, agency or
instrumentality thereof ("U.S. Government Accounts") to the extent such accounts
receivable exceed 60% of the total accounts receivable of Matrix or (ii) which
are
<PAGE>
U.S. Government Accounts or which have as account debtors Canada or any Province
(collectively with U.S. Government Accounts, "Government Accounts") to the
extent such Government Accounts exceed 10% of Eligible Receivables unless the
Company and its Subsidiaries, assign its right to payment of each such account
receivable in excess thereof to the Administrative Agent, in a manner
satisfactory to the Administrative Agent, so as to comply with, in the case of
U.S. Government Accounts, the Assignment of Claims Act of 1940 (31 U.S.C.
Section 203 ET SEQ., as amended) and, in the case of Canadian Government
Accounts, the Financial Administration Act of Canada or any other similar
legislation of any Province, as applicable (collectively "Governmental
Assignment Regulations"). In any event, the inclusion of any Government
Accounts in the Borrowing Base shall be at the sole discretion of the
Administrative Agent and Lenders;
(i) do not have an agreement between the account debtor and the
Company or any Subsidiary of the Company to extend the time of payment thereof;
(j) do not have as the account debtor an Affiliate of the Company or
any Subsidiary of the Company (including intercompany receivables) or of any
Contractor or Representative Agent;
(k) are valid and legally enforceable obligations of the account
debtor with respect thereto, and do not have as the account debtor a Person
which has asserted any substantial defense, counterclaim or offset with respect
to such account receivable; and
(l) are subject to a first priority perfected and registered security
interest in favor of the Administrative Agent pursuant to the Collateral
Documents, except for compliance with provisions of any applicable Governmental
Assignment Regulations with respect to accounts receivables which are Government
Accounts which are included in Domestic Eligible Receivables pursuant to clause
(h) (the foregoing being the "Gross Domestic Eligible Receivables");
AND MINUS (y) reserves for goods and services taxes, customs
duties and/or excise taxes as determined by the Administrative Agent from
time to time and MINUS
<PAGE>
(z) the product of (1) the ratio of the total amount of Gross
Domestic Eligible Receivables divided by the total amount of Domestic
Receivables, TIMES (2) all unapplied cash which has not been applied to
account debtor's balances as of such date.
"DOMESTIC LETTER OF CREDIT" means each Letter of Credit issued by the
Issuing Lender under the Domestic Commitment.
"DOMESTIC LOAN" means each loan made by the Lenders under the Domestic
Commitment.
"DOMESTIC NOTES" means, collectively, the promissory notes made by the
Domestic Borrowers to evidence the Domestic Loans.
"DROP-DOWN NOTES" means the promissory notes executed by each Active
Subsidiary of the Company (other than LEP UK and LIWDE) evidencing inter-company
advances made to that Active Subsidiary, in each case, as the same may from time
to time be supplemented, modified, amended, restated, renewed, extended or
supplanted. The Drop-Down Notes executed by the Borrowers shall be made payable
to the Company. The Drop-Down Notes executed by each Active Subsidiary (other
than the Borrowers and LIWDE) shall be made payable to the Borrower which is the
direct or indirect corporate parent of that Active Subsidiary.
"DROP-DOWN NOTE PLEDGE AND SECURITY AGREEMENT" means the Pledge and
Security Agreements executed by each of the Active Subsidiaries other than the
Borrowers, LEP UK and LEP Canada in favor of the payee of the Drop-Down Note
executed by that Active Subsidiary, as the same may from time to time be
supplemented, modified, amended, restated, renewed, extended or supplanted.
"DROP-DOWN NOTE SUBORDINATION AGREEMENT" means the Drop Down Note
Subordination Agreement executed by the Company, the Domestic Borrowers and the
Administrative Agent and acknowledged by the Active Subsidiaries of each
Domestic Borrower, as the same may from time to time be supplemented, modified,
amended, restated, renewed, extended or supplanted.
"EBITDA" means, for any period, the sum, for the Company and its
consolidated Subsidiaries (determined on a consolidated basis without
duplication in
<PAGE>
accordance with Generally Accepted Accounting Principles), of the following: (a)
net income (excluding extraordinary and unusual items and income or loss
attributable to equity in Affiliates) for such period PLUS (b) Interest Charges
PLUS (c) income taxes payable or accrued PLUS (d) depreciation and amortization
for such period PLUS (e) all other non-Cash charges; MINUS (f) that portion of
net income arising out of the sale of assets outside of the ordinary course of
business (to the extent not previously excluded under clause (a) of this
definition), in each case to the extent included in determining net income for
such period.
"ERISA" means the Employee Retirement Income Security Act of 1974, and
any regulations issued pursuant thereto, as amended or replaced and as in effect
from time to time.
"ERISA AFFILIATE" means, with respect to any Person, any Person or any
trade or business, whether or not incorporated) that is under common control
with that Person within the meaning of Section 414(b) or (c) of the Code.
"EURODOLLAR LOAN" means a Loan made at a rate of interest based upon
the Eurodollar Rate.
"EURODOLLAR RATE" means, for any Interest Period for any Eurodollar
Rate Loan, a rate per annum (rounded upwards, if necessary, to the nearest 1/100
of 1%) equal to the offered rate for deposits in Dollars (in the same
approximate amount and having approximately the same maturity as the Eurodollar
Rate Loan to be made) in the London interbank eurodollar market at approximately
11:00 a.m. (London time), which appears on the Telerate Screen 3750 or, if such
rate does not appear on the Telerate Screen, such rate as determined in good
faith by the Administrative Agent, two Business Days prior to the first day of
the Interest Period for such Eurodollar Rate Loan.
"EURODOLLAR RATE MARGIN" means: (a) during the period from the Closing
Date through March 31, 1998, 2.00% per annum, (b) during each Pricing Period or
portion thereof occurring during the prior from April 1, 1998 through the day
prior to the first anniversary of the Closing Date, the LESSER OF (i) 2.00% per
annum and (ii) the percentage set forth opposite the Funded Debt Ratio for the
Fiscal Quarter ending 45 days prior to the commencement of such Pricing Period,
and (c) during each Pricing Period or portion thereof occurring after the first
anniversary of the Closing Date, the percentage set
<PAGE>
forth below opposite the Funded Debt Ratio for the Fiscal Quarter ending 45 days
prior to the commencement of such Pricing Period:
FUNDED DEBT RATIO EURODOLLAR RATE MARGIN
----------------- ----------------------
Equal to or greater than 6.00 to 1.00 2.50%
Less than 6.00:1.00 but not less than 5.50:1.00 2.25%
Less than 5.50:1.00 but not less than 4.50:1.00 2.00%
Less than 4.50:1.00 but not less than 4.00:1.00 1.75%
Less than 4.00:1.00 1.50%
"EVENT OF DEFAULT" shall have the meaning provided in Section 10.1
"EXISTING LOAN AGREEMENT" means the Loan Agreement dated as of
October 31, 1996 referred to in the recitals to this Agreement, as heretofore
amended.
"FEDERAL FUNDS RATE" means, for any period, a fluctuating interest
rate per annum equal for each day during such period to (a) the weighted average
of the rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the preceding Business Day) by the
Federal Reserve Bank of New York, or (b) if such rate is not so published for
any day which is a Business Day, the average of the quotations at approximately
11 a.m. (New York time) for such day on such transactions received by the
Administrative Agent from three federal funds brokers of recognized standing
selected by it.
"FEE LETTER" means the letter agreement dated as of the Closing Date
between the Company and the Administrative Agent.
"FISCAL QUARTER" means the fiscal quarter of the Company consisting of
a three-month fiscal period ending on each March 31, June 30, September 30 and
December 31.
<PAGE>
"FISCAL YEAR" means the fiscal year of the Company consisting of a
12-month fiscal period ending on each December 31.
"FOREIGN CURRENCY OBLIGATION" means all Obligations with respect to or
arising out of Loans and Letters of Credit which are denominated in a currency
other than Dollars.
"FOREIGN CURRENCY RESERVE" means an amount equal to 5% the U.S. Dollar
Equivalent of all outstanding Foreign Currency Obligations.
"FOREIGN EXCHANGE RATE" means, with respect to each Foreign Currency
Obligation, the currency exchange rate at which the Administrative Agent values
the relevant foreign currency or currencies for the purpose of establishing the
Foreign Currency Reserve. The Administrative Agent shall establish the Foreign
Exchange Rate for each relevant foreign currency on the first Business Day of
each calendar month on the basis of the Administrative Agent's then effective
spot rate of exchange for buying the relevant foreign currency with Dollars and
shall inform the Company thereof, and the Foreign Exchange Rate so established
shall remain effective for the balance of that calendar month.
"FOREIGN SUBSIDIARY" means any Subsidiary incorporated in a
jurisdiction other than one of the first fifty states in the United States.
"FUNDED DEBT RATIO" means, with respect to any Fiscal Quarter, the
ratio of (a) the Indebtedness of the Company and its Subsidiaries for borrowed
money and Capital Leases (exclusive of any letters of credit and other similar
instruments except (but without duplication) to the extent issued in support of
such Indebtedness or Capital Leases) to (b) EBITDA of the Company and its
Subsidiaries for the twelve month fiscal period ending on the last day of such
Fiscal Quarter.
"GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" means, as of any date of
determination, accounting principles set forth as generally accepted in then
currently effective Statements of the Auditing Standards Board of the American
Institute of Certified Public Accountants or, if such statements are not then in
effect, accounting principles that are then approved by a significant segment of
the accounting profession in the United States of America, or in the case of the
financial statements of the Canadian Subsidiaries and LEP UK only, generally
accepted accounting principles as recognized by
<PAGE>
the Canadian Institute of Chartered Accountants or as used in Great Britain,
respectively. The term "CONSISTENTLY APPLIED," as used in connection therewith,
means that the accounting principles applied are consistent in all material
respects with those applied at prior dates or for prior periods.
"GOVERNMENT SECURITIES" means readily marketable, direct full faith
and credit obligations of the United States of America or obligations
unconditionally guaranteed by the full faith and credit of the United States of
America.
"GOVERNMENTAL AGENCY" means any international, foreign, federal,
state, provincial, county or municipal government, or political subdivision
thereof, any governmental or quasi-governmental agency, authority, board,
bureau, commission, department, instrumentality or public body, any court,
administrative tribunal or public utility or any arbitration tribunal or other
nongovernmental authority to whose jurisdiction a Person has consented.
"GUARANTIES" means, collectively, (a) the Guaranty issued by the
Company of the obligations of each of the Borrowers under the Commitments, (b)
the Guaranty issued by the Domestic Borrowers of the Obligations of LEP UK under
the UK Commitment, and (c) the Guaranty issued by each other Active Subsidiary
(other than LEP UK) of the obligations of the Domestic Borrowers under the
Domestic Commitment and of LEP UK under the UK Commitment, in each case executed
on the Closing Date in favor of the Administrative Agent, for the benefit of the
Creditors, as the same may from time to time be modified by the execution of an
Instrument of Joinder in the form of Exhibit A thereto in accordance with
Section 7.18, and as the same may from time to time be supplemented, modified,
amended, renewed, extended or supplanted.
"HAZARDOUS MATERIALS" means any pollutants, contaminants, hazardous,
toxic or special wastes, substances or materials, defined or regulated as such
in (or for purposes of) any environmental Law, including, without limitation,
any asbestos, any petroleum (including crude oil or any fraction), any
radioactive substance and any polychlorinated byphenyls; PROVIDED, in the event
that any environmental Law is amended so as to broaden the meaning of any term
defined thereby, such broader meaning shall apply subsequent to the effective
date of such amendment; and PROVIDED further, to the extent that the applicable
Laws of the United States or Canada or any province or state establish a meaning
for "hazardous material," 'hazardous substance," "hazardous waste," "solid
waste," "contaminant," "pollutant," or "toxic substance" which
<PAGE>
is broader than that specified in any environmental Law, such broader meaning
shall apply.
"HAZARDOUS MATERIALS CLAIMS" means the matters described in CLAUSES
(A) and (B) of Section 6.10.
"HAZARDOUS MATERIALS LAWS" means applicable provisions of the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended ("CERCLA"), the Resource Conservation and Recovery Act of 1976, as
amended ("RCRA"), any "Superfund" law, the Hazardous Materials Transportation
Act, as amended, the Occupational Safety and Health Act, as amended ("OSHA"),
the Hazardous Waste Control Law, California Health Safety Code, as amended,
Environment Quality Act (Quebec) and regulations adopted thereunder,
Transportation of Dangerous Goods Act (Canada), the Environmental Protection Act
(Ontario), Transportation of Dangerous Goods Regulation (Canada), Transportation
of Dangerous Substances Regulation (Quebec), Canadian Environmental Protection
Act (Canada), the Environmental Act 1995, the Environmental Protection Act of
1990 and the Planning (Hazardous Substances) Act of 1990 or England and Wales,
and any other applicable United States, English, Welsh or Canadian federal,
state, provincial, municipal or local law, statute, rule, regulation, ordinance,
order, judgement, decree, permit, license or other binding determination of any
Governmental Agency, as now or at any time hereafter amended or in effect and
applicable to any Party, regulating, relating to or imposing liability or
standards of conduct concerning the manufacture, processing, distribution, use,
treatment, handling, storage, disposal, or transportation of Hazardous
Materials, or air emissions, water discharges or otherwise concerning the
protection of the outdoor or indoor environment.
"INACTIVE SUBSIDIARY" means, as of any date of determination, any
Subsidiary of the Company that is on that date not actively engaged in a trade
or business and on that date does not have total assets in excess of $100,000,
determined in accordance with Generally Accepted Accounting Principles.
"INDEBTEDNESS" means, as to any Person, (a) all indebtedness of such
Person for borrowed money, (b) that portion of the obligations of such Person
under Capital Leases that is properly recorded as a liability on a balance sheet
of that Person prepared in accordance with Generally Accepted Accounting
Principles, (c) any obligation of such Person that is evidenced by a promissory
note or other instrument representing an
<PAGE>
extension of credit to such Person, whether or not for borrowed money, (d) any
obligation of such Person for the deferred purchase price of Property or
services (OTHER THAN trade or other accounts payable in the ordinary course of
business in accordance with customary terms), (e) any obligation of such Person
that is secured by a Lien on the assets of such Person, whether or not that
Person has assumed such obligation and whether or not such obligation is
nonrecourse to the credit of such Person, but only to the extent of the fair
market value of the assets so subject to the Lien, (f) obligations of such
Person arising under acceptance facilities or under facilities for the discount
of accounts receivable of such Person, (g) obligations of such Person for
unreimbursed draws under letters of credit issued for the account of such Person
and (h) the net obligations of such Person under any swap agreement. The term
"Indebtedness" excludes all obligations under operating leases, determined in
accordance with Generally Accepted Accounting Principles.
"ING UK" means ING Bank, n.v. (London England Branch Office), the
lender under the UK Commitment.
"INTANGIBLE ASSETS" means general intangibles as such term is defined
in the Uniform Commercial Code.
"INTEREST CHARGE COVERAGE RATIO" means, as of each date of
determination, the ratio of (a) EBITDA for the twelve month fiscal period
ending on that date, MINUS that portion of such EBITDA associated with Property
which has been the subject of any Disposition or other sale permitted hereunder,
to (b) Interest Charges for the same period, MINUS that portion of such Interest
Charges which is with respect to Indebtedness which either (i) has been
permanently reduced and retired in connection with any such permitted
Disposition or sale or otherwise during such twelve month fiscal period, or (ii)
has been assumed in connection with such Disposition or other sale by an
unrelated third party (with no remaining recourse on such Indebtedness to the
Company and its Subsidiaries) during such twelve month fiscal period, PROVIDED
THAT to the extent that such twelve month period contains any period prior to
September 30, 1997, EBITDA and Interest Charges shall be calculated as described
on Schedule 7.15 to the extent set forth thereon on a pro forma basis for that
period.
"INTEREST CHARGES" means, for any period the sum of (a) all interest,
charges and related expenses payable with respect to that fiscal period to a
lender in connection with borrowed money or the deferred purchase price of
assets that are treated as interest in accordance with Generally Accepted
Accounting Principles, PLUS (b) the portion of rent
<PAGE>
payable with respect to that fiscal period under Capital Leases that should be
treated as interest in accordance with General Accepted Accounting Principles,
PLUS (c) the net amount of the charges paid or payable (without duplication)
during that period with respect to swap agreements.
"INTEREST PERIOD" means, as to each Eurodollar Rate Loan, the period
commencing on the date specified by the Company and the Borrowers pursuant to
Section 2.1(c) and ending on the date specified by the Company and the
Borrowers, pursuant to Section 2.1(c) hereof, which shall be seven days,
fourteen days, one, two, three or six months after the date such period
commenced; PROVIDED that: (a) the first day of any Interest Period shall be a
Business Day; (b) any Interest Period that would otherwise end on a day that is
not a Business Day shall be extended to the next-succeeding Business Day; and
(c) no Interest Period shall extend beyond the Maturity Date.
"INVESTMENT" means, when used in connection with any Person, any
investment by or of that Person, whether by means of purchase or other
acquisition of capital stock or other Securities of any other Person or by means
of loan, advance, capital contribution, guaranty or other debt or equity
participation or interest, or otherwise, in any other Person, INCLUDING any
partnership and joint venture interests of such Person in any other Person. The
amount of any Investment shall be the amount actually invested, without
adjustment for increases or decreases in the value of such Investment.
"ISSUING LENDER" means (a) in the case of Domestic Letters of Credit,
ING Capital or a Lender or other financial institution designated by ING
Capital, and (b) in the case of UK Letters of Credit, ING UK..
"LAWS" means, collectively, all international, foreign, federal,
state, provincial and local statutes, treaties, rules, regulations, ordinances,
codes and administrative or judicial precedents.
"LENDERS" means each Lender which is an original signatory hereto or
which hereafter becomes a party hereto in accordance with Section 12.8, but
excludes ING Bank, n.v. (London Branch) in its capacity as facilitator of the UK
Commitment).
"LEP CANADA" means LEP International, Co., a Nova Scotia unlimited
liability company, and its successors and permitted assigns. For purposes of
this
<PAGE>
Agreement, LEP Canada shall be deemed to be a Subsidiary of both ILLCAN, Inc.
and ILLSCOT, Inc.
"LETTERS OF CREDIT" means any standby letter of credit issued by the
Issuing Lender pursuant to Section 2.5, either as originally issued or as the
same may be supplemented, modified, amended, renewed, extended or supplanted.
Any reference to the "face amount" of a Letter of Credit that is denominated in
a currency other than Dollars refers to the face amount of such Letter of Credit
after conversion into Dollars based upon the exchange rate in effect, as
determined by the Administrative Agent, on the first Business Day of the
calendar month in which such conversion occurs.
"LIEN" means (whether choate or inchoate, crystallized or fixed, for
amounts due or accruing) any mortgage, deed of trust, pledge, hypothecation,
assignment for security, security interest, encumbrance, lien, deemed trust,
reservation, exception, easement, encroachment, title exception, garnishment or
distraint right, deposit arrangement, or charge of any kind, whether voluntarily
incurred or arising by operation of Law or otherwise, affecting any Property,
INCLUDING any agreement to grant any of the foregoing, any conditional sale or
other title retention agreement, any lease in the nature of a security interest
and/or the filing of or agreement to give any financing statement, notice or
registration (other than a precautionary financing statement with respect to a
lease that is not in the nature of a security interest) under the Uniform
Commercial Code, the Personal Property Security Act of Ontario or any other
province of Canada, the Civil Code of Quebec, the Companies Act 1985 of England
and Wales, or comparable Law of any jurisdiction with respect to any Property.
"LIW" means LEP International Worldwide Limited, a company limited by
shares and incorporated in England, its successors and permitted assigns.
"LIW ACQUISITION" means the Acquisition by the Company of the
remaining equity interests in LIW pursuant to the terms of the LIW Acquisition
Documents.
"LIW ACQUISITION DOCUMENTS" means the Agreement dated 30 September,
1997 between Wayrol plc, the Company and the receivers of Wayrol plc, and the
Agreement dated 29 September 1997 between Mr. Digby Davies, Mr. Ronald Series,
Abacus (C.I.) Limited and the Company, and each of the instruments, documents
and agreements executed in connection therewith, as in effect on the Closing
Date.
<PAGE>
"LIWDE" means LIW Holdings Corp., a Delaware corporation which is a
direct Subsidiary of the Company, and which is the direct owner of 100% of the
equity interests in LIW acquired by the Company to date (other than the LIW
Acquisition Documents themselves), representing more than a majority of the
equity ownership interests in LIW, its successors and permitted assigns.
"LOAN" means any group of Advances made by the Lenders pursuant to
Article II.
"LOAN DOCUMENTS" means, collectively, this Agreement, the Notes, the
Letters of Credit, the Collateral Documents, the Guaranties, the Drop-Down
Notes, the Drop Down Note Subordination Agreement, any Request for Loan, any
Request for Letter of Credit, the Lockbox Agreements, the Blocked Account
Agreements, the Depositary Account Agreements, the Concentration Account
Agreements and any other certificates, documents or agreements of any type or
nature executed and delivered by the Company or any of its Subsidiaries to any
of the Creditors concurrently herewith or at any time in the future in
furtherance of this Agreement, either as originally executed or as the same may
from time to time be supplemented, modified, amended, restated, extended or
supplanted.
"LOCKBOX ACCOUNTS" means any of the lockbox accounts established with
collecting banks pursuant to the Lockbox Agreements.
"LOCKBOX AGREEMENT" means any of the lockbox agreements with banks
acting as depositories for remittances with respect to accounts receivable of
the Company and its Subsidiaries, either as originally executed or as the same
may from time to time be supplemented, modified, amended, restated, extended or
supplanted.
"MAJORITY LENDERS" means, as of any date of determination, Lenders
whose aggregate Pro Rata Shares, in the aggregate, are at least 51%.
"MANAGEMENT AGREEMENTS" means (i) that certain Management Agreement of
even date herewith between William E. Simon & Sons, LLC and the Company and (ii)
a Management Agreement on substantially similar terms with the OCM Entities.
"MATERIAL ADVERSE EFFECT" means any set of circumstances or events
which (a) has or could reasonably be expected to have any material adverse
effect whatsoever
<PAGE>
upon the validity or enforceability of any Loan Document, (b) is or could
reasonably be expected to be material and adverse to the condition (financial or
otherwise) or business operations of the Company and its Restricted
Subsidiaries, taken as a whole, or the properties and assets of the Company and
its Restricted Subsidiaries taken as a whole, (c) materially impairs or could
reasonably be expected to materially impair the ability of the Company and its
Restricted Subsidiaries, taken as a whole, to perform the Obligations, or (d)
impairs or could reasonably be expected to impair the ability of the Lenders to
enforce their legal remedies pursuant to the Loan Documents.
"MATRIX" means Matrix International Logistics, Inc., a Delaware
corporation, and each of its Subsidiaries.
"MATURITY DATE" means October 28, 2002.
"MINIMUM AVAILABILITY" when modifying a stated amount means, as of
each date of determination, that both (a) Average Availability for the one
calendar month period immediately preceding that date was in excess of a stated
amount, and (b) on that date, Average Availability (treating that date as a
period and giving effect to the then current Borrowing Base Certificate) was
also in excess of the stated amount.
"MULTIEMPLOYER PLAN" means any employee benefit plan of the type
described in Section 4001(a)(3) of ERISA.
"NEGATIVE PLEDGE" means any covenant binding on the Company or its
Restricted Subsidiaries that prohibits the creation of Liens on any Property
thereof, EXCEPT a covenant contained in an instrument creating a Permitted
Encumbrance or Permitted Right of Others on Property that prohibits the creation
of other Liens on that Property and proceeds thereof and no other Property or
proceeds thereof of the Company or its Restricted Subsidiaries.
"NOTES" means, collectively, (a) any of the promissory notes made by
the Company to a Lender evidencing Advances under that Lender's Pro Rata Share
of the Domestic Commitment, substantially in the form of Exhibit D, and (b) the
promissory note made by LEP UK to ING UK evidencing Advances under the UK
Commitment, substantially in the form of Exhibit E, in each case either as
originally executed or as the same may from time to time be supplemented,
modified, amended, renewed, extended or supplanted.
<PAGE>
"OBLIGATIONS" means all present and future obligations of every kind
or nature of the Company, Borrowers or any other Party at any time and from time
to time owed to the Creditors or any one or more of them under any one or more
of the Loan Documents, whether due or to become due, matured or unmatured,
liquidated or unliquidated or contingent or noncontingent, INCLUDING obligations
of performance as well as obligations of payments and INCLUDING interest that
accrues after the commencement of any proceeding under any Debtor Relief Law by
or against the Company or any Party.
"OCM ENTITIES" means TCW Special Credits Fund V - The Principal Fund,
OCM Principal Opportunities Fund, L.P. and any other entity managed by Oaktree
Capital Management, LLC, as general partner, agent or investment manager.
"OPINIONS OF COUNSEL" means the favorable written legal opinion dated
as of the Closing Date of (a) Milbank, Tweed, Hadley & McCloy, special counsel
to the Company, (b) Freshfields, special English counsel to ING Capital,
(c) internal counsel to Bekins, (d) Stikeman Elliott, special Ontario counsel to
LEP Canada and its Subsidiaries, (e) Stikeman Elliott, special Quebec counsel to
LEP Canada and its Subsidiaries, (f) Stewart, McKelvey, Stirling, Scales,
special Nova Scotia counsel to LEP Canada, and (g) local counsel to LEP Canada
in each of British Columbia, Alberta and Manitoba, Canada, together with copies
of all factual certificates and legal opinions upon which such counsel have
relied.
"PARTICIPATION AGREEMENT" means a Participation Agreement dated as of
the Closing Date among each of the Lenders, the Administrative Agent, and ING UK
pursuant to which each of the Lenders has purchased a risk participation in the
Loans and Letters of Credit made by ING UK under the UK Commitment, either as
originally executed or as the same may from time to time be supplemented,
modified, amended, renewed, extended or supplanted.
"PARTY" means any Person other than the Creditors that now or
hereafter is a party to any of the Loan Documents, but excluding any bank party
to a Blocked Account Agreement, Lockbox Agreement, Depositary Agreement, or
Concentration Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
thereof established under ERISA.
<PAGE>
"PENSION PLAN" means any "employee pension benefit plan" that is
subject to Title IV of ERISA and that is maintained for employees of the Company
or any of its ERISA Affiliates, other than a Multiemployer Plan and includes any
CAN Plan.
"PERMITTED ACQUISITION" means an Acquisition that meets each of the
following criteria: (a) such Acquisition has been approved by the Board of
Directors of the entity to be acquired; (b) both prior to and after giving
effect to the Acquisition, no Default or Event of Default will exist; (c) the
consummation of the Acquisition will not violate any covenant contained in
Article VII hereof; (d) the principal business of which is in a business related
to the then-current business activities of the Company and its Subsidiaries, and
(e) giving effect to the making of the Acquisition, Minimum Availability shall
not be less than $10,000,000.
"PERMITTED ENCUMBRANCES" means: (a) statutory Liens incident to
construction or maintenance of real property, or Liens incident to constriction
or maintenance of real property, now or hereafter filed of record for which
adequate accounting reserves have been set aside and which are being contested
in good faith by appropriate proceedings and have not proceeded to judgment,
PROVIDED that, by reason of nonpayment of the obligations secured by such Liens,
no material such real property is subject to an imminent risk of loss or
forfeiture prior to judgment; (b) Liens for taxes and assessments on real
property that are not yet past due, or Liens for taxes and assessments on real
property for which adequate accounting reserves have been set aside and are
being contested in good faith by appropriate proceedings and have not proceeded
to judgment, PROVIDED that, by reason of nonpayment of the obligations secured
by such Liens, no such material real property is subject to an imminent risk of
loss or forfeiture prior to judgment; (c) minor defects and irregularities in
title to any real property that in the aggregate do not materially impair the
fair market value or use of the real property for the purposes for which it is
or may reasonably be expected to be held; (d) easements, exceptions,
reservations or other agreements granted or entered into for the purpose of
pipelines, conduits, cables, wire communication lines, power lines and
substations, streets, trails, walkways, drainage, irrigation, water and sewerage
purposes, dikes, canals, ditches, the removal of oil, gas, coal or other
minerals and other like purposes affecting real property that in the aggregate
do not materially burden or impair the fair market value or use of such real
property for the purposes for which it is or may reasonably be expected to be
held; (e) rights reserved to or vested in any
<PAGE>
Governmental Agency by Law to control or regulate, or obligations or duties
under Law to any Governmental Agency with respect to, the use of any property;
(f) rights reserved to or vested in any Governmental Agency by Law to control or
regulate, or obligations or duties under Law to any Governmental Agency with
respect to, any right, power, franchise, grant, license or permit; (g) present
or future zoning laws and ordinances or other laws and ordinances restricting
the occupancy, use or enjoyment of real property; (h) statutory Liens, other
than those described in clauses (a) and (b) above, arising in the ordinary
course of business with respect to obligations that are not delinquent or are
being contested in good faith by appropriate proceedings, PROVIDED that, if
delinquent, adequate reserves have been set aside with respect thereto and, by
reason of nonpayment, no material Property is subject to an imminent risk of
loss or forfeiture prior to judgment; (i) Liens consisting of pledges or
deposits made in connection with obligations under workers' compensation laws or
similar legislation, including Liens of judgments thereunder which are not
currently dischargeable; (j) Liens consisting of pledges or deposits of Property
to secure performance in connection with operating leases made in the ordinary
course of business to which the Company or a Subsidiary of the Company is a
party as lessee, PROVIDED the aggregate value of all such pledges and deposits
in connection with any such lease entered into on or after the Closing Date does
not at any time exceed 10% of the annual fixed rentals payable under such lease;
(k) Liens consisting of deposits of Property to secure statutory obligations of
the Company or a Subsidiary of the Company in the ordinary course of its
business; (l) Liens consisting of deposits of Property to secure (or in lieu of)
surety, appeal or customs bonds in proceedings to which the Company or a
Subsidiary of the Company is a party in the ordinary course of its business; (m)
Liens created by or resulting from any litigation or legal proceeding involving
the Company or a Subsidiary of the Company in the ordinary course of its
business which is currently being contested in good faith by appropriate
proceedings, PROVIDED that adequate reserves have been set aside with respect
thereto, and such Liens are discharged or stayed within 30 days of creation and
no material Property is subject to an imminent risk of loss or forfeiture prior
to judgment; (n) leases or subleases of any real property that in the aggregate
do not materially impair the fair market value or use of such real property for
the purposes for which it is or may reasonably be expected to be held; and (o)
Liens consisting of deposits of Property to secure performance bonds in
connection with contracts entered into in the ordinary course of business.
"PERMITTED HOLDERS" means, collectively, the Sponsors and Roger E.
Payton.
"PERMITTED RIGHT OF OTHERS" means a Right of Others consisting of (a)
an interest (other than a legal or equitable co-ownership interest, an option or
right to acquire a legal or equitable co-ownership interest and any interest of
a ground lessor under a
<PAGE>
ground lease) that does not materially impair the value or use of property for
the purposes for which it is or may reasonably be expected to be held, (b) an
option or right to acquire a Lien that would be a Permitted Encumbrance and (c)
the reversionary interest of a landlord under a lease of Property.
"PERSON" means any entity, whether an individual, trustee,
corporation, general partnership, limited partnership, limited liability
company, joint stock company, trust, estate, unincorporated organization,
business association, tribe, firm, joint venture, Governmental Agency or
otherwise.
"PLEDGE AND SECURITY AGREEMENTS" means the Pledge and Security
Agreements executed on the Closing Date by the Company and its Active
Subsidiaries (other than LEP UK, LEP Canada and LIWDE) to secure the
Obligations, including without limitation those under this Agreement, the Notes
and the Guaranties, either as originally executed or as they may from time to
time be supplemented, modified, amended, restated or extended.
"PLEDGED COLLATERAL" means:
(a) with respect to the Pledge and Security Agreement executed by the
Company, all of the issued and outstanding capital stock of the Domestic
Borrowers and LIWDE, together with such rights ancillary thereto as are
described in that Pledge and Security Agreement, and the Drop-Down Notes
held by the Company from time to time;
(b) with respect to the Pledge and Security Agreement executed by the
Domestic Borrowers, (i) all of the issued and outstanding capital stock
of each direct Active Subsidiary thereof, (ii) all Drop-Down Notes held
from time to time by the Domestic Borrowers, in each case together with
such rights ancillary thereto as are described in that Pledge and
Security Agreement;
(c) with respect to each other Pledge and Security Agreement, (i) all
of the issued and outstanding capital stock of each Active Subsidiary of
the Grantors thereunder;
(d) with respect to the UK Security Documents, any collateral
described therein which is to be pledged to the Administrative Agent;
<PAGE>
(e) with respect to the Canadian Security Documents, any collateral
described therein which is to be pledged to the Administrative Agent; and
(f) with respect to the Pledge and Security Agreement to be executed
by LIWDE, 66% of the capital stock of LIW;
PROVIDED that the Company and its Restricted Subsidiaries shall not be
obligated to pledge (x) any of the capital stock or other similar equity
securities of any Unrestricted Subsidiary or any Inactive Subsidiary or
(y) more than 66% of the capital stock or other similar equity interests
held by them in any of their Active Subsidiaries not organized under the
Laws of the United States or Canada.
"PRICING PERIOD" means successive periods of approximately three month
each, each beginning on the 45th day following the last day of each Fiscal
Quarter, and each ending approximately three months later on the day prior to
the first day of the succeeding such period.
"PRIOR AGENT" means Banque Paribas, when acting as the Administrative
Agent under the Existing Loan Agreement.
"PRO RATA SHARE" means, as to each Lender, the percentage interest of
that Lender in the Commitments, which, in the case of the Obligations under the
UK Commitment, shall be a risk participation in the UK Loans made by and UK
Letters of Credit issued by ING UK. As of the Closing Date, ING Capital is the
holder of a Pro Rata Share of 100%. From time to time following the Closing
Date, the Pro Rata Shares of each Lender shall be subject to adjustment in
connection with any assignment to which that Lender is a party in accordance
with Section 12.8.
"PROJECTIONS" means the financial projections attached hereto as
Schedule 5.19.
"PROPERTY" means any interest in any kind of property or asset,
whether real, personal or mixed, movable or immovable, or tangible or
intangible.
"PUBLIC EQUITY OFFERING" means an underwritten primary public
offering of common stock of the Company pursuant to an effective registration
under the Securities
<PAGE>
Act of 1933 that for purposes of clauses (iv) and (v) of the definition of
"Change of Control Event" yields cash proceeds to the Company of not less than
$20,000,000.
"QUARTERLY PAYMENT DATE" means each March 31, June 30, September 30
and December 31, commencing with the first such date to occur subsequent to the
Closing Date.
"RECEIVABLES" means all accounts receivable of the Company and its
Restricted Subsidiaries for goods sold or services rendered to a customer.
"RECEIVABLES AGING REPORT" means a monthly report consisting of a
Certificate of a Responsible Official of each Borrower setting forth, as of the
last day of the most recently ended fiscal month, the Receivables, the account
debtors thereon, the related invoice numbers or other identifying information
and the aging status thereof, in such format and in such detail as is reasonably
acceptable to the Administrative Agent, together with such supporting
documentation as the Administrative Agent may require.
"REGULATIONS D, G, T, U AND X" means, respectively, Regulations D, G,
T, U and X, as at any time amended, of the Board of Governors of the Federal
Reserve System, or any other regulations in substance substituted therefor.
"REPRESENTATIVE AGENCY AGREEMENT" means any of the agreements,
substantially in the form provided to the Administrative Agent by the Company,
pursuant to which a Person agrees to act as an agent of BVL for the purpose of
providing interstate or intrastate moving and related services to customers of
BVL.
"REPRESENTATIVE AGENT" means any freight forwarder, moving and storage
company, warehouseman or other Person who has entered into a Representative
Agency Agreement with BVL.
"REQUEST FOR LETTER OF CREDIT" means a written request for letter of
credit substantially in the form of Exhibit F, together with the standard form
of application for letter of credit used by the Issuing Lender, signed by a
Responsible Official of the relevant Borrower and properly completed to provide
all information required to be included therein.
<PAGE>
"REQUEST FOR LOAN" means a written request for a Loan substantially in
the form of Exhibit G, signed by a Responsible Official of the relevant Borrower
and properly completed to provide all information required to be included
therein.
"REQUIREMENT OF LAW" means, as to any Person, the articles or
certificate of incorporation and bylaws or other organizational or governing
documents of such Person, and any Law, or judgment, award, decree, writ or
determination of a Governmental Agency, in each case applicable to or binding
upon such Person or any of its Property or to which such Person or any of its
Property is subject.
"RESPONSIBLE OFFICIAL" means, (a) when used with reference to a Person
other than an individual, any corporate officer of such Person, general partner
of such Person, corporate officer of a corporate general partner of such Person,
or corporate officer of a corporate general partner of a partnership that is a
general partner of such Person, or (for purposes of Articles II and III only)
any other responsible official thereof duly acting on behalf thereof, and, (b)
when used with reference to a Person who is an individual, such Person. Any
document or certificate hereunder that is signed or executed by a Responsible
Official of a Person shall be conclusively presumed to have been authorized by
all necessary corporate, partnership and/or other action on the part of that
Person.
"RESTRICTED SUBSIDIARY" means (a) each Borrower and (b) each
Subsidiary of the Domestic Borrowers which is incorporated under the Laws of the
United States or Canada.
"RIGHT OF OTHERS" means, as to any Property in which a Person has an
interest, (a) any legal or equitable right, title or other interest (OTHER THAN
a Lien) held by any other Person in or with respect to that Property and (b) any
option or right held by any other Person to acquire any right, title or other
interest in or with respect to that Property, INCLUDING any option or right to
acquire a Lien.
"SECURITIES" means any capital stock, share, voting trust certificate,
bonds, debentures, notes or other evidences of indebtedness, limited partnership
interests or any warrant, option or other right to purchase or acquire any of
the foregoing.
<PAGE>
"SENIOR NOTES" means the 9 3/4% Senior Notes of the Company due 2007
issued pursuant to the Indenture dated October 29, 1997 among the Company, First
Trust National Association, as trustee, as in effect on the date of this
Agreement.
"SENIOR OFFICER" means the (a) chief executive officer, (b) chief
operating officer, (c) chief financial officer or (d) president, vice-president
or treasurer of the Person designated.
"SOLVENT" as to any Person shall mean that (a) the sum of the assets
of such Person, both at a fair valuation and at present fair salable value, will
exceed its liabilities, including contingent liabilities, (b) such Person will
have sufficient capital with which to conduct its business as presently
conducted and as proposed to be conducted and (c) such Person has not incurred
debts, and does not intend to incur debts, beyond its ability to pay such debts
as they mature. For purposes of this definition, "debt" means any liability on
a claim, and "claim" means (x) a right to payment, whether or not such right is
reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured, or unsecured, or (y)
a fight to an equitable remedy for breach of performance if such breach gives
rise to a payment, whether or not such right to an equitable remedy is reduced
to judgment, fixed, contingent, matured, unmatured, disputed, undisputed,
secured or unsecured. With respect to any such contingent liabilities, such
liabilities shall be computed at the amount which, in light of all the facts and
circumstances existing at the time, represents the amount which can reasonably
be expected to become an actual or matured liability.
"SPONSORS" means William E. Simon & Sons, LLC, TCW Special Credits
Fund V - The Principal Fund, OCM Principal Opportunities Fund, L.P. and any of
their respective affiliates.
"SUBORDINATED OBLIGATIONS" means (a) any Obligations and Indebtedness
of the Company and its Subsidiaries under the Management Agreements, and (b) any
other Indebtedness of the Company that is subordinated to the Obligations, all
of the provisions of which (including amount, maturity, amortization, interest
rate, covenants, defaults and subordination) have been approved in writing as to
form and substance by the Administrative Agent with the consent of the Majority
Lenders.
"SUBSIDIARY" means, as of any date of determination and with respect
to any Person, any other entity, (a) in the case of a corporation, of which a
majority of the
<PAGE>
securities having ordinary voting power for the election of directors or other
governing body (other than securities having such power only by reason of the
happening of a contingency) are at the time beneficially owned by such Person
and/or one or more Subsidiaries of such Person or, (b) in the case of a
partnership or joint venture, of which such Person or a Subsidiary of such
Person is a general partner or joint venturer or of which a majority of the
partnership or other ownership interests are at the time beneficially owned by
such Person and/or one or more of its Subsidiaries, or (c) in the case of any
other type of entity, of which such Person or a Subsidiary of such Person is the
beneficial owner of the majority in interest of the equity securities.
"TERMINATION EVENT" means (a) a "reportable event" as defined in
Section 4043 of ERISA (other than a reportable event that is not subject to the
provision for 30-day notice to the PBGC), (b) the withdrawal of the Company or
any of its ERISA Affiliates from a Multiemployer Plan during the plan year, or
from a Pension Plan during any plan year in which it was a "substantial
employer" as defined in Section 4001(a)(2) of ERISA, (c) the filing of a notice
of intent to terminate a Pension Plan or the treatment of an amendment to a
Pension Plan as a termination thereof pursuant to Section 4041 of ERISA, (d) the
institution of proceedings to terminate a Pension Plan by the PBGC or (e) any
other event or condition which might reasonably be expected to constitute
grounds under ERISA for the termination of, or the appointment of a trustee to
administer, any Pension Plan or Multiemployer Plan, and includes any CAN Plan
Termination Event.
"TEST QUARTER" means (a) any Fiscal Quarter for which Minimum
Availability is less than $20,000,000, and (b) any Fiscal Quarter as of the last
day of which no Public Equity Offering has been consummated and each Sponsor
does not own, beneficially and of record, and control the power to vote, at
least 75% of the common stock of the Company owned by such Sponsor as of the
Closing Date.
"UK AVAILABILITY REPORT" has the meaning set forth in the second
paragraph of Section 2.2.
"UK BORROWING BASE" means, as of any date of determination, an amount
determined by the Administrative Agent with reference to the most recent
Borrowing Base Certificate equal to the sum of 80% of UK Eligible Receivables,
PROVIDED THAT upon ten (10) Business Days' prior written notice to the Company,
the Administrative Agent may from time to time, in its good-faith discretion in
accordance with prudent asset-based lending practices, and the Administrative
Agent shall, upon the direction of the Majority
<PAGE>
Lenders (each acting in its good-faith discretion in accordance with prudent
asset-based lending practices), establish such reasonable reserves against the
UK Borrowing Base as it deems necessary and proper, INCLUDING, reasonable
reserves for existing Liens and Rights of Others.
"UK COMMITMENT" means, subject to Section 2.3, $30,000,000.
"UK ELIGIBLE RECEIVABLES" means, as of any date of determination, the
unpaid principal amount of accounts receivable of LEP UK for goods sold or
services rendered to a customer (the "UK Receivables"), PROVIDED that such
accounts receivable:
(a) arose in the ordinary course of business of LEP UK;
(b) represent amounts owed for goods sold or services rendered
to a customer;
(c) in the case of accounts receivable which are the subject of
an invoice to the customer, are due within 30 days of the invoice date
and are not more than 90 days past due;
(d) do not have as the account debtor a Person that is the
subject of any proceeding under any Debtor Relief Law;
(e) do not include accounts receivable of any account debtor if
50% or more of the aggregate amount of such account debtor's balance is
more than 90 days past the due date or 120 days past the original invoice
date;
(f) do not have as the account debtor a Person which is located
outside of the United States or Great Britain other than an Approved
Foreign Customer, unless the obligations of such account debtor are
backed by an irrevocable letter of credit issued or confirmed to the
Administrative Agent by a Lender or by another bank reasonably acceptable
to the Administrative Agent and is in form and substance acceptable to
the Administrative Agent, payable in the full amount of the account in
freely convertible BPS or U.S. Dollars at a place of payment within
England, Wales or the United States;
<PAGE>
(g) do not have as the account debtor a director, officer or
employee of the Company or a Subsidiary of the Company;
(h) do not include accounts receivable which are U.S. Government
Accounts or which have as account debtors Canada or any Province
(collectively with U.S. Government Accounts, "Government Accounts") to
the extent such Government Accounts exceed 10% of Eligible Receivables
unless the Company and its Subsidiaries, assign its right to payment of
each such account receivable in excess thereof to the Administrative
Agent, in a manner satisfactory to the Administrative Agent, so as to
comply with, in the case of U.S. Government Accounts, the Assignment of
Claims Act of 1940 (31 U.S.C. Section 203 ET SEQ., as amended) and, in
the case of Canadian Government Accounts, the Financial Administration
Act of Canada or any other similar legislation of any Province, as
applicable (collectively "Governmental Assignment Regulations"). In any
event, the inclusion of any Government Accounts in the Borrowing Base
shall be at the sole discretion of the Administrative Agent and Lenders;
(i) do not have an agreement between the account debtor and the
Company or any Subsidiary of the Company to extend the time of payment
thereof;
(j) do not have as the account debtor an Affiliate of the
Company or any Subsidiary of the Company (including intercompany
receivables) or of any Contractor or Representative Agent;
(k) are valid and legally enforceable obligations of the account
debtor with respect thereto, and do not have as the account debtor a
Person which has asserted any substantial defense, counterclaim or offset
with respect to such account receivable; and
(l) are subject to a first priority perfected and registered
security interest in favor of the Administrative Agent pursuant to the
Collateral Documents, except for compliance with provisions of any
applicable Governmental Assignment Regulations with respect to accounts
receivables which are Government Accounts which are included in UK
Eligible Receivables pursuant to clause (h) (the foregoing being the
"Gross UK Eligible Receivables");
<PAGE>
AND MINUS (y) reserves for goods and services taxes, customs
duties and/or excise taxes as determined by the Administrative Agent from
time to time and MINUS
(z) the product of (1) the ratio of the total amount of Gross UK
Eligible Receivables divided by the total amount of UK Receivables, TIMES
(2) all unapplied cash which has not been applied to account debtor's
balances as of such date.
"UK LETTER OF CREDIT" means each letter of credit issued by the
Issuing Lender under the UK Commitment.
"UK LOAN" means each Loan made by ING UK under the UK Commitments.
"UK NOTE" means the promissory note made by LEP UK in favor of ING UK
to evidence the UK Loans, in which each Lender has acquired a risk participation
pursuant to the Participation Agreement.
"UK SECURITY DOCUMENTS" means the Security Assignment and the Security
Deposit Agreement to be executed and delivered by LEP UK prior to the date of
the making of the initial UK Loans and the issuance of the initial UK Letters of
Credit to secure the Obligations of LEP UK with respect to the UK Commitment,
substantially in the form of Exhibits I-1 and I-2 hereto, in each case as the
same may from time to time be supplemented, modified, amended, restated or
extended.
"UNAVAILABLE COMMITMENT" means, for each period, the average daily
amount by which the Domestic Commitment exceeds the aggregate of the Domestic
Borrowing Bases and the UK Borrowing Base.
"UN GUARANTY" means the guaranty, if any, provided by the Company in
connection with the contract between Matrix and the United Nations for
international household goods relocation services.
"U.S. DOLLAR EQUIVALENT" means, as of each date of determination, and
with respect to any Foreign Currency Obligation, the Dollar Equivalent amount of
such Foreign Currency Obligations, calculated at the then effective Foreign
Exchange Rate.
<PAGE>
1.2 USE OF DEFINED TERMS. Any defined term used in the plural shall
refer to all members of the relevant class, and any defined term used in the
singular shall refer to any one or more of the members of the relevant class.
1.3 ACCOUNTING TERMS. All accounting terms not specifically defined
in this Agreement shall be construed in conformity with, and all financial data
required to be submitted by this Agreement shall be prepared in conformity with,
Generally Accepted Accounting Principles applied on a consistent basis, EXCEPT
as otherwise specifically prescribed herein. In the event that Generally
Accepted Accounting Principles change during the term of this Agreement such
that any of the financial covenants contained in Article VII would then be
calculated in a different manner or with different components, (a) the Company
and the Lenders agree to amend this Agreement in such respects as are necessary
to conform that covenant as a criterion for evaluating the Company's financial
condition to substantially the same criterion as was effective prior to such
change in Generally Accepted Accounting Principles and (b) the Company and
Borrowers shall be deemed to be in compliance with the covenant contained in
such Section during the 60-day period following any such change in Generally
Accepted Accounting Principles if and to the extent that the Company would have
been in compliance therewith under Generally Accepted Accounting Principles as
in effect immediately prior to such change.
1.4 EXHIBITS AND SCHEDULES. All Exhibits and Schedules to this
Agreement, either as originally existing or as the same may from time to time be
supplemented, modified or amended, are incorporated herein by this reference. A
matter disclosed on any Schedule shall be deemed disclosed on all Schedules.
1.5 MISCELLANEOUS TERMS. The term "or" is disjunctive; the term
"and" is conjunctive. The term "shall" is mandatory; the term "may" is
permissive. Masculine terms also apply to females; feminine terms also apply to
males. The term "including" is by way of example and not limitation.
<PAGE>
ARTICLE II
LOANS AND LETTERS OF CREDIT
2.1 LOANS-GENERAL. (a) Subject to the terms and conditions set forth
in this Agreement, at any time and from time to time from Business Day next
following the Closing Date through the Maturity Date, each Lender shall, pro
rata according to its Pro Rata Share of the then-applicable Domestic Commitment,
make Advances to each Domestic Borrower under the Domestic Commitment in Dollars
in such amounts as the Domestic Borrowers may request that do not exceed in the
aggregate at any one time outstanding the amount of that Lender's Pro Rata Share
of the then-applicable Domestic Commitment; PROVIDED that, giving effect to the
Domestic Loan of which such Advance is a part:
(i) the sum of the Domestic Loans to that Domestic Borrower PLUS the
aggregate effective face amount of all Domestic Letters of Credit issued
for the account of that Domestic Borrower shall not exceed the Domestic
Borrowing Base for that Domestic Borrower; and
(ii) the sum of the then-outstanding principal Indebtedness evidenced by
all of the Notes PLUS the aggregate effective face amounts of all of the
Letters of Credit then outstanding shall not exceed the Credit Limit.
Subject to the limitations set forth herein, the Domestic Borrowers may borrow,
repay and reborrow under the Domestic Commitment without premium or penalty.
(b) Subject to the terms and conditions set forth in this Agreement,
at any time and from time to time from the business day next following the
closing date through the Maturity Date, ING UK shall make UK Loans to LEP UK
under the UK Commitment in BPS in such amounts as LEP UK may request that do not
exceed in the aggregate at any one time outstanding the then-applicable UK
Commitment; PROVIDED that giving effect to that UK Loan:
(i) the sum of the then-outstanding principal Indebtedness evidenced by
the UK Note PLUS the aggregate effective base amounts of all UK Letters
of Credit then outstanding shall not exceed the LESSER of (A) the
then-applicable UK Commitment and (B) the UK Borrowing Base; and
<PAGE>
(ii) the sum of the then-outstanding principal Indebtedness evidenced by
all of the Notes PLUS the aggregate effective face amounts of all of the
Letters of Credit then outstanding shall not exceed the Credit Limit.
Each Lender shall participate in each UK Loan in accordance with its Pro Rata
Share in accordance with the Participation Agreement. Subject to the
limitations set forth herein, LEP UK may borrow, repay and reborrow under the UK
Commitment without premium or penalty.
(c) Each Loan shall be made pursuant to a Request for Loan which
shall (i) specify the requested (A) date of such Loan, (B) amount of such Loan
and (C) whether such Loan shall be a Base Rate Loan or a Eurodollar Loan, and if
a Eurodollar Loan, the last day of the Interest Period with respect thereto
(which shall be a date one, two, three or six months after the date of such
Loan) and (ii) certify in case of Domestic Loan, (A) which Domestic Borrower
will receive the proceeds of the requested Domestic Loan, and (B) that on the
date of such Request and after giving effect to the borrowing of such Loan, that
the Company and each Borrower shall be Solvent. Each Request for a Loan must be
sent by telecopier or telex to the Administrative Agent, signed by a Responsible
Official of the relevant Borrower.
(d) Promptly following receipt of a Request for Loan, the
Administrative Agent shall notify each Lender by telephone, telecopier or telex
of the date of the Loan and that Lender's Pro Rata Share of the Loan. Not later
than 2:30 p.m., New York time, on the date specified for any Domestic Loan, each
Lender shall make its Pro Rata Share of the Domestic Loan in immediately
available funds available to the Administrative Agent at the Administrative
Agent's account number 9301035763 at The Chase Manhattan Bank, N.A. (ABA No.
021-000-021) ref: International Logistics Limited. Upon fulfillment of the
applicable conditions set forth in Article IX, all Advances shall be transferred
in immediately available funds to the designated Blocked Account.
(e) Unless the Majority Lenders otherwise consent, each Loan shall be
in an integral multiple of $100,000, which, in the case of a Eurodollar Loan is
in an amount not less than $500,000, and no more than twelve Eurodollar Loans
having different Interest Periods may be outstanding at any time.
(f) The Advances made by each Lender under the Domestic Commitment
shall be evidenced by that Lender's Domestic Note. The UK Loans made
<PAGE>
by ING UK under the UK Commitment shall be evidenced by the UK Note, and each
Lender shall have a participation interest therein in accordance with the terms
of the Participation Agreement.
(g) Subject to the Sections 3.5(c) and (g) hereof, a Request for Loan
shall be irrevocable upon receipt of such Request for Loan by the Administrative
Agent.
(h) If an outstanding Loan is then due and payable and is not repaid
when due in accordance with this Agreement, and no Request for Loan has been
made under the same Commitment within the requisite notice period set forth in
Section 2.2 in connection therewith, and the making of a new Loan would not
increase the outstanding principal Indebtedness evidenced by the relevant Notes,
then the Borrowers shall be deemed to have requested a Base Rate Loan in an
amount equal to the amount necessary to cause the outstanding principal
Indebtedness evidenced by the Notes to remain the same and the Lenders (or in
the case of a UK Loan, ING UK) shall make the Advances necessary to make such
Loan notwithstanding Sections 2.1(D) and 2.2.
LOANS. Each Request for Loan for a Domestic Loan shall be submitted to the
Administrative Agent, at the Administrative Agent's Office, not later than 1:00
p.m, New York time, (a) with respect to a request for a Base Rate Loan, on the
Business Day of the requested Loan, and (b) with respect to a request for a
Eurodollar Loan, on the Business Day that is three Business Days prior to the
first day of the applicable Interest Period.
If the conditions precedent specified herein to UK Loans have been
satisfied (other than the submission of a Request for Loan with respect thereto)
then, on each Business Day, the Administrative Agent shall provide ING UK with a
report (the "UK Availability Report") indicating the aggregate amount of Loans
and Letters of Credit which are available under the UK Commitment during the
next Business Day (after giving effect to Loan and Letter of Credit activity
under the Domestic Commitment during that Business Day). Each Request for Loan
for any UK Loan shall be submitted directly to ING UK not later than 1:00 p.m,
London local time (with a copy to the Administrative Agent at the Administrative
Agent's Office). Each such Request for Loan shall be submitted (a) with respect
to a request for a Base Rate Loan, on the Business Day of the requested Loan,
and (b) with respect to a request for a Eurodollar Loan, on the Business Day
that is three Business Days prior to the first day of the applicable Interest
Period. ING UK shall make Loans and Letters of Credit available to the UK
Borrower in
<PAGE>
accordance with such Request for Loan and to the extent consistent with the UK
Availability Report, and shall, on the same Business Day, provide notice to the
Administrative Agent of the amount and terms thereof, including the related Base
Rate, Erodollar Rate, tenor, and interest rate spreads.
2.3 REDUCTION OF COMMITMENTS. Borrowers shall have the right, at any
time and from time to time, without penalty or charge, upon at least four
Business Days' prior written notice to the Administrative Agent, voluntarily to
reduce, permanently and irrevocably, in aggregate principal amounts in an
integral multiple of $1,000,000, or to terminate, the then undisbursed portion
of the aggregate Commitments; PROVIDED that in each case any such reduction or
termination shall be accompanied by all accrued and unpaid commitment fees with
respect to the portion of the Commitments being reduced or terminated.
2.4 ADMINISTRATIVE AGENT'S RIGHT TO ASSUME FUNDS AVAILABLE FOR
ADVANCES. For each Domestic Loan, unless the Administrative Agent shall have
been notified by any Lender no later than the Business Day prior to the funding
in the case of a Eurodollar Loan, and no later than two hours prior to the
funding of a Base Rate Loan, that such Lender does not intend to make available
to the Administrative Agent such Lender's Pro Rata Share of the total amount of
such Loan, the Administrative Agent may assume that such Lender has made such
amount available to the Administrative Agent on the date of the Loan and the
Administrative Agent may, in reliance upon such assumption, make available to a
corresponding amount to the Borrowers. If the Administrative Agent has made
funds available to any of the Borrowers based on such assumption and such
corresponding amount is not in fact made available to the Administrative Agent
by such Lender, the Administrative Agent shall be entitled to recover such
corresponding amount on demand from such Lender, which demand shall be made in a
reasonably prompt manner. If such Lender does not pay such corresponding amount
forthwith upon the Administrative Agent's demand therefor, the Administrative
Agent promptly shall notify the Company and that Borrower and that Borrower
shall pay such corresponding amount to the Administrative Agent. The
Administrative Agent also shall be entitled to recover from such Lender interest
on such corresponding amount with respect to each day from the date such
corresponding amount was made available by the Administrative Agent to any of
the Borrowers to the date such corresponding amount is recovered by the
Administrative Agent, at a rate per annum equal to the Federal Funds Rate for
such period. Nothing herein shall be deemed to relieve any Lender from its
obligation to fulfill its Pro Rata Share of any Commitment or to prejudice any
rights
<PAGE>
which the Administrative Agent or Borrowers may have against any Lender as a
result of any default by such Lender hereunder.
2.5 STANDBY LETTERS OF CREDIT. (a) Subject to the terms and
conditions hereof, at any time and from time to time from the Closing Date
through the day prior to the Maturity Date, the Issuing Lender shall issue such
Domestic Letters of Credit as the Domestic Borrowers may request by a Request
for Letter of Credit; PROVIDED that, giving effect to such Domestic Letter of
Credit:
(i) the sum of the Domestic Loans to that Domestic Borrower PLUS the
aggregate effective face amount of all Domestic Letters of Credit issued
for the account of that Domestic Borrower shall not exceed the Domestic
Borrowing Base for that Domestic Borrower;
(ii) the sum of the then-outstanding principal Indebtedness evidenced by
all of the Notes PLUS the aggregate effective face amounts of all of the
Letters of Credit then outstanding shall not exceed the Credit Limit; and
(iii) the aggregate effective face amount of all Letters of Credit then
outstanding (including Letters of Credit issued in Canadian Dollars, BPS
or other currencies as provided below) shall not exceed $60,000,000.
Subject to the terms and conditions herein, at the request of the Domestic
Borrowers the Issuing Lender shall issue Domestic Letters of Credit denominated
in BPS, PROVIDED that the currency risk associated with such Letters of Credit
shall be subject to currency hedging agreements acceptable to the Administrative
Agent providing protection against fluctuations in the exchange rates for BPS
and Dollars for the term of each such Letter of Credit.
(b) Subject to the terms and conditions hereof, at any time and from
time to time from the Closing Date through the day prior to the Maturity Date,
the Issuing Lender shall issue such UK Letters of Credit denominated in BPS as
LEP UK may request by a Request for Letter of Credit; PROVIDED that, giving
effect to such UK Letter of Credit:
(i) the sum of the then-outstanding principal Indebtedness evidenced by
the UK Note PLUS the aggregate effective base amounts of all UK Letters
of Credit then
<PAGE>
outstanding shall not exceed the LESSER of (i) the then-applicable UK
Commitment and (ii) the UK Borrowing Base;
(ii) the sum of the then-outstanding principal Indebtedness evidenced by
all of the Notes PLUS the aggregate effective face amounts of all of the
Letters of Credit then outstanding shall not exceed the Credit Limit; and
(ii) the aggregate effective face amount of all Letters of Credit then
outstanding (including Letters of Credit issued in Canadian Dollars, BPS
and other currencies as provided below) shall not exceed $60,000,000.
Each Request for a UK Letter of Credit shall be submitted directly to ING UK not
later than 1:00 p.m, London local time (with a copy to the Administrative Agent
at the Administrative Agent's Office). In the event that the UK Availability
Report demonstrates that Letters of Credit are available, ING UK shall make UK
Letters of Credit available to the UK Borrower in accordance therewith any such
Request for Letter of Credit, and shall, on the same Business Day, provide
notice to the Administrative Agent of the amount and terms thereof.
(c) Subject to the terms and conditions specified herein, the Issuing
Lender shall issue Domestic Letters of Credit denominated in Canadian Dollars,
provided that the aggregate effective face amount of all outstanding Letters of
Credit denominated in Canadian Dollars shall not exceed CAN$5,000,000. Upon
request by any Borrower, the Administrative Agent may in its sole discretion
also issue Letters of Credit in foreign currencies other than Dollars, Canadian
Dollars and BPS, subject to the limitations set forth herein, provided that it
shall concurrently establish a Foreign Exchange Rate for such currencies.
(c) Unless all the Lenders otherwise consent in writing, no Letter of
Credit shall have a term which exceeds 12 months. No Letter of Credit shall
have a maturity or expiration date later than the Maturity Date unless such
Letters of Credit are 100% Cash-collateralized in a form and manner satisfactory
to the Issuing Lender. No Letter of Credit shall be issued except in the
ordinary course of business of the Company or any of its Subsidiaries. Each
Request for Letter of Credit shall specify the Borrower under whose Borrowing
Base the related Letter of Credit is requested, however the Company may, at the
discretion of such Borrower, be identified as the nominal account party with
respect to the Letter of Credit on the face thereof.
<PAGE>
(d) Each Request for Letter of Credit shall be submitted to the
Issuing Lender at least two Business Days prior to the date when required. Upon
receipt of such request, the Issuing Lender shall promptly notify the Lenders of
the amount and terms thereof.
(e) Upon the issuance of a Letter of Credit, each Lender shall be
deemed to have purchased a pro rata participation from the Issuing Lender of the
Letter of Credit in an amount equal to that Lender's Pro Rata Share. Without
limiting the scope and nature of each Lender's participation in any Letter of
Credit, to the extent that the Issuing Lender has not been reimbursed by the
relevant Borrowers for any payment required to be made by the Issuing Lender
under any Letter of Credit, each Lender shall, according to its Pro Rata Share
of the Commitment, reimburse the Issuing Lender promptly upon demand for the
amount of such payment. The obligation of each Lender to so reimburse the
Issuing Lender shall be absolute and unconditional and shall not be affected by
the occurrence of an Event of Default or any other occurrence or event. Any
such reimbursement shall not relieve or otherwise impair the obligation of
Borrowers to reimburse the Issuing Lender for the amount of any payment made by
the Issuing Lender under any Letter of Credit together with interest as
hereinafter provided.
(f) Upon the making of any payment with respect to any Letter of
Credit by the Issuing Lender, the relevant Borrower(s) shall be deemed to have
submitted a Request for Loan in the amount of such payment, and the
Administrative Agent shall without notice to or the consent of that Borrower or
Borrowers cause Advances to be made by the Lenders under the Domestic
Commitment, or by ING UK under the UK Commitment (as the case may be), in an
aggregate amount equal to the amount paid by the Issuing Lender on that Letter
of Credit and, for this purpose, the conditions precedent set forth in
Article IX shall not apply. The proceeds of such Advances shall be paid to the
Issuing Lender to reimburse it for the payment made by it under the Letter of
Credit. Promptly following the making of any Advances made under this Section
the Administrative Agent shall notify the Company and the Borrowers thereof.
(g) To the extent that the Advances made pursuant to Section 2.5(f)
are insufficient to reimburse the Issuing Lender in full then, subject to
Section 12.28(b), each Borrower agrees to pay to the Issuing Lender with respect
to each Letter of Credit, within one Business Day after demand therefor, a
principal amount equal to any payment made by the Issuing Lender under that
Letter of Credit, together with interest on such amount
<PAGE>
from the date of any payment made by the Issuing Lender through the date of
payment by the Borrowers at the Default Rate. The principal amount of any such
payment made by the Borrowers to the Issuing Lender shall be used to reimburse
the Issuing Lender for the payment made by it under the Letter of Credit. Each
Lender that has reimbursed the Issuing Lender pursuant to Section 2.5(e) for its
Pro Rata Share of any payment made by the Issuing Lender under a Letter of
Credit shall thereupon acquire a pro rata participation, to the extent of such
reimbursement, in the claim of the Issuing Lender against the respective
Borrowers under this Section.
(h) The issuance of any supplement, modification, amendment, renewal
or extension to or of any Letter of Credit shall be treated in all respects the
same as the issuance of a new Letter of Credit.
(i) The obligation of Borrowers to pay to the Issuing Lender the
amount of any payment made by the Issuing Lender under any Letter of Credit
issued under the Commitment for which they are obligated shall be absolute,
unconditional and irrevocable. Without limiting the foregoing, these
obligations shall not be affected by any of the following circumstances:
(i) any lack of validity or enforceability of the Letter of
Credit, this Agreement or any other agreement or instrument relating
thereto;
(ii) any amendment or waiver of or any consent to departure from
the Letter of Credit, this Agreement or any other agreement or instrument
relating thereto;
(iii) the existence of any claim, setoff, defense or other
rights which the Company may have at any time against any Creditor, any
beneficiary of the Letter of Credit (or any persons or entities for whom
any such beneficiary may be acting) or any other Person, whether in
connection with the Letter of Credit, this Agreement or any other
agreement or instrument relating thereto, or any unrelated transactions;
(iv) any demand, statement or any other document presented under
the Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect
<PAGE>
whatsoever so long as any such document appeared to comply with the terms
of the Letter of Credit;
(v) payment by the Issuing Lender in good faith under the Letter
of Credit against presentation of a draft or any accompanying document
that does not strictly comply with the terms of the Letter of Credit;
(vi) the existence, character, quality, quantity, condition,
packing, value or delivery of any property purported to be represented by
documents presented in connection with any Letter of Credit or for any
difference between any such property and the character, quality,
quantity, condition or value of such property as described in such
documents;
(vii) the solvency or financial responsibility of any party
issuing any documents in connection with a Letter of Credit,
(viii) any error in the transmission of any message relating
to a Letter of Credit not caused by the Issuing Lender, or any delay or
interruption in any such message:
(ix) any error, neglect or default of any correspondent of the
Issuing Lender in connection with a Letter of Credit;
(x) any consequence arising from acts of God, war, insurrection,
disturbances, labor disputes, emergency conditions or other causes beyond
the control of the Issuing Lender;
(xi) so long as the Issuing Lender in good faith determines that
the contract or document appears to comply with the terms of the Letter
of Credit, the form, accuracy, genuineness or legal effect of any
contract or document referred to in any document submitted to the Issuing
Lender in connection with a Letter of Credit; and
(xii) where the Issuing Lender has acted in good faith and
observed general banking usage, any other circumstances whatsoever,
PROVIDED that nothing in this Section 2.5(g) shall prevent the bringing
of a separate claim (including by
<PAGE>
way of compulsory counterclaim) against the Issuing Lender for its gross
negligence or willful misconduct in connection with any Letter of
Credit).
(h) The Issuing Lender shall be entitled to the protection
accorded to the Administrative Agent pursuant to Section 11.6, MUTATIS MUTANDIS.
2.6 COLLATERAL. The Loans, together with all other Obligations,
shall be secured by the Liens created by the Collateral Documents.
2.7 RELEASE OF COLLATERAL. Provided that no Default exists, the
Administrative Agent and the Lenders shall release Liens upon any Receivables or
Pledged Collateral which are the subject of a Disposition permitted hereunder,
promptly upon request by the Company.
<PAGE>
ARTICLE III
PAYMENTS AND FEES
3.1 PRINCIPAL AND INTEREST.
(a) Interest shall be payable on the outstanding daily unpaid
principal amount of each Loan from the date thereof until payment in full is
made and shall accrue and be payable at the rates set forth herein before and
after default, before and after maturity, before and after judgment, and before
and after the commencement of any proceeding under any Debtor Relief Law, with
interest on overdue interest to bear interest at the Default Rate to the fullest
extent permitted by applicable Laws.
(b) Interest accrued on each Eurodollar Loan as of the last day
of the Interest Period with respect thereto shall be due and payable on that day
and, if such Interest Period is longer than three months, on the last day of
each three month period, the first of which commences on the first day of such
Interest Period, during such Interest Period. Interest accrued on each Base
Rate Loan as of each Quarterly Payment Date shall be due and payable on that
day. Except as otherwise provided in Sections 3.5 and 3.6, (i) the unpaid
principal amount of each Base Rate Loan shall bear interest at a fluctuating
rate per annum equal to the Base Rate PLUS the Base Rate Margin and (ii) the
unpaid principal amount of each Eurodollar Loan shall bear interest at a rate
per annum equal to the relevant Eurodollar Rate PLUS the Eurodollar Rate Margin.
Each change in the interest rate applicable to a Base Rate Loan hereunder shall
take effect simultaneously with the corresponding change in the Base Rate. Each
change in the Base Rate shall be effective as of 12:01 a.m. on the Business Day
on which the change in the Base Rate is announced, unless otherwise specified in
such announcement, in which case the change shall be effective as so specified.
(c) If not sooner paid, the principal Indebtedness evidenced by the
Notes shall be payable by the respective Borrowers as follows (with application
first to Base Rate Loans and then to Eurodollar Rate Loans):
(i) subject to Section 2.1(h), the principal amount of each
Eurodollar Rate Loan shall be payable on the last day of the Interest
Period for such Loan;
<PAGE>
(ii) the amount, if any, by which the sum of the principal
Indebtedness evidenced by the Domestic Notes PLUS the aggregate effective
face amount of all Domestic Letters of Credit then outstanding at any
time exceeds the Domestic Commitment shall be payable immediately;
(iii) the amount, if any, by which the sum of the principal
Indebtedness evidenced by the UK Note PLUS the aggregate effective face
amount of all UK Letters of Credit then outstanding at any time exceeds
the UK Commitment shall be payable immediately;
(iv) the amount, if any, by which the sum of (A) the
principal Indebtedness evidenced by the Domestic Notes then outstanding
PLUS (B) the sum of the aggregate face amounts of all Domestic Letters of
Credit then outstanding, exceeds the aggregate Domestic Borrowing Bases
at such time shall be payable within one Business Day thereafter;
(v) the amount, if any, by which the sum of
(A) principal Indebtedness evidenced by the UK Note then outstanding PLUS
(B) the sum of the aggregate face amount of all UK Letters of Credit then
outstanding exceeds the UK Borrowing Base at such time shall be payable
within one business day thereafter, and the Loans evidenced by the UK
Notes shall in any event be repaid on each Business Day by the amount
actually received in the UK Collection Account on that Business Day;
(vi) the amount, if any, by which the aggregate
principal Indebtedness evidenced by the Notes plus the aggregate
effective face amount of all Letters of Credit at any time exceeds the
Credit Limit, shall be payable immediately;
(vii) If within 30 days following their receipt of notice of
a Change of Control Event, the Majority Lenders so elect by notice to the
Company, the Indebtedness evidenced by the Notes shall be payable in full
on the later of (a) thirty days following the receipt by the Company of
such notice and (b) the date upon which such Change of Control Event
occurs (and, in the event of any such election by the Majority Lenders,
the Commitments shall be terminated and, subject to Section 12.28, the
Borrowers shall provide cash collateral for each Letter of Credit which
then remains outstanding); and
<PAGE>
(viii) the principal Indebtedness evidenced by the Notes shall
in any event be payable on the Maturity Date.
(d) MANDATORY PREPAYMENTS. Concurrently with the making of any
Disposition permitted hereby which involves the sale, transfer or other
disposition of any Receivables, or of the equity securities of any Restricted
Subsidiary which owns Receivables (to the extent that direct or indirect
ownership of Receivables are transferred in connection therewith), the Company
and the Borrowers shall prepare and deliver to the Administrative Agent a
revised Borrowing Base Certificate giving PRO FORMA effect to such sale,
transfer or other disposition, and shall repay the Obligations to the extent
required in Section 3.1(c)(iv) or 3.1(c)(v).
(e) VOLUNTARY PREPAYMENT. The Borrowers each may, at any time and
from time to time, voluntarily pay or prepay the Notes in whole or in part,
EXCEPT that with respect to any voluntary prepayment of the Notes under this
Section:
(i) Except for any repayments out of the collected funds in the
Collection Accounts, the Administrative Agent (and in the case of a UK
Loan, ING UK) shall have received written notice of any prepayment before
10:00 a.m., New York time, on the Business Day on which such payment is
to be made, which notice shall identify the date and amount of the
prepayment;
(ii) The relevant Borrower shall pay any Breakage Fees due
pursuant to Section 3.5(g) with respect to any Eurodollar Loan in
connection with such prepayment; and
(iii) any partial prepayment shall be in a minimum
amount of $1,000,000 or an integral multiple of $1,000,000 in excess
thereof.
3.2 CLOSING AND AGENCY FEES. The Borrowers shall pay to the
Administrative Agent the closing and agency fees described in the Fee Letter on
the dates set forth therein, which fees are for the sole account of the
Administrative Agent, provided that from the closing fees described in this
Section, the Administrative Agent shall pay to each Lender a closing fee in an
amount set forth in a letter agreement between the Administrative Agent and that
Lender.
<PAGE>
3.3 COMMITMENT FEES. From the Closing Date, the Borrowers shall pay
commitment fees to the Administrative Agent for the account of the Lenders
according to their Pro Rata Shares, PROVIDED that the liability of LEP UK shall
be limited as set forth in Section 12.28. The commitment fees shall be payable
quarterly in arrears on each Quarterly Payment Date and on the earlier of the
Maturity Date or the date upon which the Commitments are terminated or reduced
in accordance with Section 2.3. Commitment fees shall accrue at the rate of
(a) 0.125% per annum with respect to that portion of the Average Unused
Commitment which is the Unavailable Commitment, (b) 0.250% per annum TIMES that
portion of the Average Availability which is not greater than $50,000,000, and
(c) 0.375% of that portion of Average Availability which is in excess of
$50,000,000.
3.4 LETTER OF CREDIT FEES. Each Borrower each shall pay a letter of
credit fee to the Administrative Agent with respect to each Letter of Credit
issued for its account equal to the product of (a) the then applicable
Eurodollar Rate Margin for the term of such Letter of Credit, and (b) the face
value of such Letter of Credit (a "Letter of Credit Fee"). This fee shall be
payable of each Letter of Credit quarterly in arrears on each Quarterly Payment
Date. A portion of the Letter of Credit Fee equal to the greater of .125% or
$500 shall be a fronting fee for the sole account of the Issuing Lender, and the
remainder shall be payable to the Lenders in accordance with their Pro Rata
Shares. The Administrative Agent shall promptly make available to the Lenders,
in immediately available funds, their portion of all Letter of Credit Fees. In
addition to the Letter of Credit Fees, upon the amendment or negotiation of each
Letter of Credit issued for their account, each Borrower shall pay to the
Administrative Agent the amendment fees and other fees as the Issuing Lender
normally charges in connection with a Letter of Credit and activity pursuant
thereto, which amendment and other fees shall be solely for the account of the
Issuing Lender.
3.5 INCREASED COSTS.
(a) If any Lender determines that either (i) the introduction
of or any change in any law or regulation or in the interpretation or
administration of any Law or regulation by any Governmental Agency charged
with the interpretation or administration thereof from the Closing Date or
(ii) compliance with any guideline or request from any such Governmental
Agency (whether or not having the force of law) has or would have the effect
of reducing the rate of return on the capital of the Lender or any
corporation controlling the Lender as a consequence of or with reference to
the Lender's
<PAGE>
making or maintaining its Pro Rata Share of the Commitments, any Advance, or its
participation in any Letter of Credit or other transaction hereunder below the
rate which the Lender or such other corporation could have achieved but for such
introduction, change or compliance (taking into account the policies of the
Lender or corporation with regard to capital), then each Borrower shall from
time to time, upon demand by the Lender, pay to the Lender additional amounts
sufficient to compensate the Lender or other corporation for such reduction. A
certificate as to such amounts in reasonable detail, submitted to the Borrowers
by the Lender (with a copy to the Administrative Agent), shall be conclusive and
binding for all purposes, absent manifest error. Each Lender agrees promptly to
notify the Borrowers of any circumstances that would cause Borrowers to pay
additional amounts pursuant to this Section, PROVIDED that the failure to give
notice shall not affect the Borrowers' obligations to pay such additional
amounts hereunder.
(b) In the event that any Lender shall have determined (which
determination shall, absent manifest error, be final and conclusive and binding
upon all parties hereto): (i) on any date for determining the Eurodollar Rate
for any Interest Period, (A) that by reason of any changes arising after the
date of this Agreement affecting the London interbank Eurodollar market,
adequate and fair means do not exist for ascertaining the applicable interest
rate on the basis provided for in the definition of the Eurodollar Rate; or (B)
that the relevant Eurodollar Rate shall not represent the effective pricing to
such Lender for funding or maintaining its portion of a Eurodollar Loan, or (ii)
such Lender shall at any time incur increased costs or reductions in the amounts
received or receivable hereunder with respect to any Eurodollar Loan in any such
case because of (A) any change since the date of this Agreement in any
applicable law or governmental rule, regulation, guideline or order or any
interpretation thereof and including the introduction of any new law or
governmental rule, regulation, guideline or order (such as, for example, a
change in official reserve requirements, but, in all events, excluding reserves
required under Regulation D of the Federal Reserve Board to the extent included
in the computation of the Eurodollar Rate), whether or not having the force of
law and whether or not failure to comply therewith would be unlawful, or (B)
other circumstances materially and adversely affecting the London interbank
eurodollar market or the position of such Lender in such market, or (iii) at any
time, that the making or continuance by it of any Eurodollar Loan has become
unlawful by compliance by such Lender in good faith with any law or governmental
rule, regulation, guideline or order (whether or not having the force of law and
whether or not failure to comply therewith would be unlawful) or has become
impracticable as a result of a contingency occurring
<PAGE>
after the date of this Agreement that materially and adversely affects the
London interbank eurodollar market, then, and in any such event, such Lender
shall, promptly after making such determination, give notice (by telephone
promptly confirmed in writing) to the Borrowers and the Administrative Agent of
such determination (which notice the Administrative Agent shall promptly
transmit to each of the other Lenders). Thereafter, (x) in the case of clause
(i) above, the Borrowers' right to request Eurodollar Loans shall be suspended,
and any Request for Loan given by the Borrowers with respect to any borrowing of
Eurodollar Loans that has not yet been made shall be deemed canceled and
rescinded, (y) in the case of clause (ii) above, the relevant Borrowers shall
pay to such Lender, upon such Lender's delivery of written demand therefor to
the Borrowers with a copy to the Administrative Agent, such additional amounts
(in the form of an increased rate of interest, or a different method of
calculating interest, or otherwise, as such Lender in its sole discretion shall
determine) as shall be required to compensate such Lender for such increased
costs or reduction in amounts received or receivable hereunder and (z) in the
case of clause (iii) above, the relevant Borrowers shall take one of the actions
specified in clause (c) below as promptly as possible and, in any event, within
the time period required by law. Each request for compensation by a Lender
under this clause (b) shall be submitted within 90 days following the date upon
which such Lender first becomes aware of the events giving rise to the request
for compensation.
(c) In the case of any Eurodollar Loan or requested Eurodollar
Loan affected by the circumstances described in clause (b)(iii) above the
relevant Borrowers shall, either if any such Eurodollar Loan has not yet been
made but is then the subject of a Request for Loan, or if any such Eurodollar
Loan is then outstanding, require the affected Lender to convert each such
Eurodollar Loan into a Base Rate Loan at the end of the applicable Interest
Period or such earlier time as may be required by law, in each case by giving
the Administrative Agent notice (by telephone promptly confirmed in writing)
thereof on the Business Day that such Borrower was notified by the Lender
pursuant to clause (b) above; PROVIDED, however, that all Lenders whose
Eurodollar Loans are affected by the circumstances described above shall be
treated in the same manner under this clause (c).
(d) Promptly after giving any notice to the Borrowers as a
result of a circumstance described in Section 3.5(b)(ii) or 3.5(b)(iii), any
Lender giving such notice will use good faith efforts to designate one of its
offices located at an address other than that set forth on the signature pages
hereto as the office from which any Advances to be made by such Lender will be
made after such designation if such designation will
<PAGE>
(i) avoid the need for, or reduce the amount of, any payment to which such
Lender would otherwise be entitled pursuant to Section 3.5 or causing the
Borrowers to take any of the actions described in Section 3.5(c) and (ii) not,
in the sole discretion of such Lender, be otherwise disadvantageous to such
Lender. If a Lender ("Affected Lender") shall have requested compensation from
Borrowers under Sections 3.5(a) or 3.5(b)(ii) hereof to recover additional costs
incurred by such Lender which are not being incurred generally by the other
Lenders, then Borrowers may make written demand on such Affected Lender (with a
copy to the Administrative Agent) for the Affected Lender to assign, and such
Affected Lender shall assign pursuant to one or more duly executed Commitment
Assignment and Acceptance Agreements sixty (60) Business Days after the date of
such demand, to one or more financial institutions that comply with the
provisions of Section 12.8(b) (and that are reasonably acceptable to the
Administrative Agent) which Borrowers shall have engaged for such purpose, all
of such Affected Lender's rights and obligations under this Agreement and the
other Loan Documents in accordance with Section 12.8.
(e) In the event that the Administrative Agent determines at any
time following its giving of notice based on the conditions described in clause
(b)(i) above that none of such conditions exist, the Administrative Agent shall
promptly give notice thereof to the Borrowers and the Lenders, whereupon the
Borrowers' right to request Eurodollar Loans from the Lenders and the Lenders'
obligation to make Eurodollar Loans shall be restored.
(f) In the event that a Lender determines at any time following
its giving of a notice based on the conditions described in clause (b)(iii)
above that none of such conditions exist, such Lender shall promptly give notice
thereof to the Borrowers and the Administrative Agent, whereupon the Borrowers'
right to request Eurodollar Loans from such Lender and such Lender's obligation
to make Eurodollar Loans shall be restored.
(g) The Borrowers each shall compensate each Lender, upon such
Lender's delivery of a written demand therefor to the Borrowers, with a copy to
the Administrative Agent (which demand shall, absent manifest error, be final
and conclusive and binding upon all of the parties hereto), for all reasonable
losses, expenses and liabilities incurred by such Lender in connection with the
liquidation or reemployment of deposits or funds required by it to make or carry
its Eurodollar Loans, that such Lender sustains (any and all of the foregoing, a
"Breakage Fee"): (i) if for any reason (other than
<PAGE>
a default by such Lender or a circumstance described in Section 3.5(b)(iii) with
respect to such Lender) a borrowing of Eurodollar Loans does not occur on a date
specified therefor in a Request for Loan (whether or not rescinded, canceled or
withdrawn or deemed rescinded, canceled or withdrawn), (ii) if any repayment
(including, without limitation, payment after acceleration) of any of its
Eurodollar Loans occurs on a date which is not the last day of the Interest
Period applicable thereto, (iii) any prepayment of any of its Eurodollar Loans
is not made on any date specified in a notice of prepayment given by the Company
or is made on a date other than on the last day of the Interest Period
applicable thereto, or (iv) as a consequence of any default by Borrowers in
repaying their Eurodollar Loans or any other amounts owing hereunder with
respect to its Eurodollar Loans when required by the terms of this Agreement.
(h) The Lenders shall be entitled to fund all or any portion of
the Loans in any manner each Lender may determine in its sole discretion,
including, without limitation, in the Grand Cayman interbank market, the London
interbank market and within the United States, but all calculations and
transactions hereunder shall be made on the assumption that such Lender has
funded its relevant Eurodollar Loan through the purchase of a Eurodollar deposit
bearing interest at the Eurodollar Rate in an amount equal to the amount of such
Eurodollar Loan with a maturity equivalent to the Interest Period applicable to
such Eurodollar Loan, and through the transfer of such Eurodollar deposit from
an offshore office of such Lender to a domestic office of such Lender in the
United States of America, PROVIDED that each Lender may fund its Eurodollar
Loans in any manner that it in its sole discretion chooses and the foregoing
assumption shall only be made in order to calculate amounts payable under this
Section.
3.6 DEFAULT RATE. Upon the occurrence and during the continuance of
an Event of Default, (a) all Loans during such continuance shall bear interest
at the rate otherwise applicable thereto plus 2% per annum, (b) all fees (other
than Letter of Credit Fees) and costs and other amounts that are then due and
unpaid under any Loan Document shall during such continuance bear interest at a
fluctuating rate per annum at all times equal to the sum of the Base Rate PLUS
the Base Rate Margin, plus 2% per annum, and (c) all Letter of Credit Fees shall
continue at the then current rate, plus 2% per annum, in each case to the
fullest extent permitted by applicable Laws. All such interest and fees shall
be payable upon demand by the Administrative Agent (at the direction of the
Majority Lenders) Accrued and unpaid interest on the past due amounts
(INCLUDING, without limitation, interest on past due interest) shall be
compounded
<PAGE>
quarterly, on the last day of each calendar quarter, to the fullest extent
permitted by applicable Laws.
3.7 COMPUTATION OF INTEREST AND FEES. Computation of interest under
this Agreement and the other Loan Documents shall be made on the basis of a year
of 360 days and the actual number of days elapsed. Commitment fees will be
computed on the basis of a year of 365 or 366 days, as the case may be, and the
actual number of days elapsed. Any Loan that is repaid on the same day on which
it is made shall bear interest for one day. If any payment to be made by the
Company or any other Party under any Loan Document shall come due on a day other
than a Business Day, payment shall instead be considered due on the next
succeeding Business Day and the extension of time shall be reflected in
computing interest.
3.8 MANNER AND TREATMENT OF PAYMENTS.
(a) Each payment hereunder with respect to the Domestic Notes or
under any other Loan Document (to the extent that the same relate to the
Domestic Commitment) shall be made to the Administrative Agent, at the
Administrative Agent's account number 9301035763 at The Chase Manhattan
Bank, N.A., (ABA #021-000-021 ref: International Logistics Limited), for
the account of each of the Lenders or the Administrative Agent, as the
case may be, in immediately available funds not later than 1:00 p.m., New
York time, on the day of payment (which must be a Business Day);
PROVIDED, however, that the relevant Borrowers shall provide a minimum of
one hour's prior notice of any payments to be made after 11:30 a.m., New
York time. Each payment hereunder with respect to the UK Note or under
any other Loan Document (to the extent that the same relate to the UK
Commitment) shall be made to ING Bank, n.v. (London Branch) at an account
number designated by ING Bank, n.v., in immediately available funds not
later than 12:00 noon, London local time, on the day of payment (which
must be a Business Day); PROVIDED, however, that LEP UK shall provide a
minimum of one hour's prior notice to ING UK (with a copy to the
Administrative Agent) of any payments to be made after 11:00 a.m., London
local time. In addition thereto, all collected funds in the UK
Collection Account shall, at 12:00 noon, London local time on each
Business Day, be credited to the Loans under the UK Note (effective on
the same Business Day). ING UK shall provide to the Administrative
Agent, on the same Business Day, a report of all payments with respect to
the UK Note as aforesaid. All payments received after the deadlines
<PAGE>
described above on any particular Business Day and of which the
Administrative Agent did not receive at least one hour's prior notice,
shall be deemed received on the next succeeding Business Day, unless the
relevant Borrowers provide to the Administrative Agent reasonably
satisfactory evidence that it had initiated on a prior Business Day a
wire transfer of funds to be immediately available on the particular
Business Day, in which case such payment (whenever received) shall be
deemed received on the particular Business Day. The amount of all
payments received by the Administrative Agent for the account of each
Lender shall be paid by the Administrative Agent to the applicable Lender
in immediately available funds on the same day received by the
Administrative Agent (provided that payments received by the
Administrative Agent after 1:00 p.m, New York time on any Business Day,
and all payments received after 11:30 a.m., New York time, on any
particular Business Day and of which the Administrative Agent did not
receive at least one hour's prior notice, shall be deemed to be received
on the next Business Day). All payments shall be made in lawful money of
the United States of America.
(b) Each Lender shall use its best efforts to keep a record of
Advances made by it and payments received by it with respect to each of
its Notes and, subject to Section 11.6(g), such record shall be
presumptive evidence of the amounts owing. Notwithstanding the foregoing
sentence, no Lender shall be liable to any party for any failure to keep
such a record.
(c) Each payment of any amount payable by the Borrowers or any
other Party under this Agreement or any other Loan Document shall be made
free and clear of, and without reduction by reason of, any taxes,
assessments or other charges imposed by any Governmental Agency, central
bank or comparable authority (other than taxes on income, gross receipts
or net worth generally applicable to banks or financial institutions).
To the extent that any Borrower is obligated by applicable Law to make
any deduction or withholding on account of taxes, assessments or other
charges imposed by any Governmental Agency from any amount payable to any
Lender under this Agreement, that Borrower shall make such deduction or
withholding and pay the same to the relevant Governmental Agency and pay
such additional amount to that Lender as is necessary to result in that
Lender's receiving a net after-tax (or after assessment or after-charge)
amount equal to the amount to which that Lender would have been entitled
under this Agreement absent such deduction or withholding.
<PAGE>
If and when receipt of such payment results in an excess payment or credit
to that Lender on account of such taxes, assessments or other charges,
that Lender shall refund such excess to the relevant Borrowers.
(d) Each Lender that is organized outside the United States of
America shall promptly, and in any event prior to the due date of any
payment by the Company or the Borrowers hereunder, deliver to the Company
Internal Revenue Service Form 4224 and any other certificate or statement
or exemption required by applicable Laws, properly completed and duly
executed by such Lender, to establish that such payment is not subject to
withholding under the Code because such payment is effectively connected
with the conduct by such Lender of a trade or business in the United
States of America. Unless the Company and the Administrative Agent have
received such Form or other documents satisfactory to them indicating
that payments hereunder or under the Notes are not subject to United
States withholding tax, the Company or the Administrative Agent shall
withhold taxes from such payments at the applicable statutory rate in the
case of payments to or for any Lender organized under the Laws of a
jurisdiction outside the United States of America and Section 3.8(c)
shall not apply thereto.
3.9 FAILURE TO CHARGE NOT SUBSEQUENT WAIVER. Any decision by the
Administrative Agent or any Lender not to require payment of any interest
(INCLUDING interest at the Default Rate), fee, costs or other amount payable
under any Loan Document, or to calculate any amount payable by a particular
method, on any occasion, shall in no way limit or be deemed a waiver of the
Administrative Agent's or such Lender's respective right to require full payment
of any interest (INCLUDING interest at the Default Rate), fee, cost or other
amount payable under any Loan Document, or to calculate an amount payable by
another method, on any other or subsequent occasion.
3.10 ADMINISTRATIVE AGENT'S RIGHT TO ASSUME PAYMENTS WILL BE MADE BY
BORROWERS. Unless the Administrative Agent shall have been notified by the
relevant Borrowers prior to the date on which any payment to be made by that
Borrower hereunder is due that such Borrower does not intend to remit such
payment, the Administrative Agent may, in its discretion, assume that such
Borrower has remitted such payment when so due and the Administrative Agent may,
in its discretion and in reliance upon such assumption, make available to each
Lender on such payment date an amount equal to such Lender's share of such
assumed payment. If such Borrower has not in fact
<PAGE>
remitted such payment to the Administrative Agent, each Lender shall forthwith
on demand repay to the Administrative Agent the amount of such assumed payment
made available to such Lender, together with interest thereon with respect to
each day from and including the date such amount was made available by the
Administrative Agent to such Lender to the date such amount is repaid to the
Administrative Agent at a rate per annum equal to the Federal Funds Rate for
such period.
3.11 FEE AND COST DETERMINATION DETAIL. The Administrative Agent and
each Lender shall provide reasonable detail to the Company regarding the manner
in which the amount of any payment to the Administrative Agent or that Lender
under this Agreement has been determined.
3.12 SURVIVABILITY. All of the Borrowers' respective obligations
under Section 3.5 shall survive for three months following the date on which all
Loans hereunder are fully paid; PROVIDED, however, that such obligations shall
not, from and after the date on which all Loans hereunder are fully paid, be
deemed Obligations for any purpose under the Loan Documents.
<PAGE>
ARTICLE IV
COLLECTIONS OF COLLATERAL AND CASH MANAGEMENT
4.1 COLLECTION OF RECEIVABLES. The Company and each of the
Borrowers agree to cause all collections of Receivables which are received by
the Company and its Restricted Subsidiaries at any time and from time to time to
be deposited into the appropriate Lockbox Account or Depositary Account or
directly into relevant Concentration Account. The Company and each of the
Borrowers agree to notify all account debtors with respect to Receivables now or
hereafter held by the Company and its Restricted Subsidiaries to remit their
payments directly to the appropriate Lockbox Account. All funds deposited into
the Lockbox Accounts shall be immediately transferred to a Depositary Account.
If the Company or any of its Restricted Subsidiaries receives any
payment from any account debtor with respect to any Receivable, the Company or
such Restricted Subsidiary shall hold such payments as trustee for the
Administrative Agent, for the benefit of the Creditors, and shall immediately
deposit all such payments (and other Cash proceeds thereof now or hereafter in
the possession of the Company or its Restricted Subsidiaries) in a Lockbox
Account or a Depositary Account or deliver the same to Administrative Agent or
to the financial institution at which the appropriate Concentration Account is
maintained for deposit into that Concentration Account in their original form,
except for the Company's or such Subsidiaries' endorsement where necessary.
Until the relevant Commitment has been terminated, all Letters of Credit then
outstanding under that Commitment shall have been fully Cash-collateralized to
the Administrative Agent's satisfaction or terminated and all of the other
Obligations then due and payable under that Commitment shall have been fully
paid and satisfied, the Company and its Restricted Subsidiaries shall continue
to remit to the Lockbox Accounts, the Depositary Accounts, that Concentration
Account or to the Administrative Agent, as applicable, all collections of
Receivables. The Administrative Agent shall have the exclusive power of
withdrawal from the Lockbox Accounts, the Depositary Accounts and (except to the
extent that withdrawals therefrom are permitted by Section 4.2(b)) that
Concentration Account, and the Company and each Borrower acknowledges that the
Company and its Restricted Subsidiaries do not and will not have any right,
title or interest in such accounts or the amounts at any time appearing to the
credit of such Lockbox Accounts, the Depositary Accounts or the Concentration
Account.
<PAGE>
Notwithstanding the foregoing, the Administrative Agent agrees that,
until notice given by the Administrative Agent in its sole unfettered
discretion, LEP Canada shall be entitled to collect its Receivables and deposit
same into an account with a chartered bank in Canada acceptable to the
Administrative Agent and to use such funds in the conduct of its business
PROVIDED THAT such chartered bank, the Administrative Agent and LEP Canada have
entered into a collection account agreement on terms satisfactory to the
Administrative Agent which will provide, INTER ALIA, that upon notice from the
Administrative Agent (which notice may be given if an Event of Default occurs or
if Minimum Availability at any time is less than $20,000,000), LEP Canada shall
have no further authority or control over funds in such account and such account
shall daily be swept and all funds therein transferred to such account or
accounts as may be designated by the Administrative Agent. The Administrative
Agent shall endeavor to provide LEP Canada and the Company with prompt notice of
its delivery of any notice under this paragraph (without liability for any
failure to do so).
4.2 CONCENTRATION ACCOUNTS. (a) On a daily basis, the Company and
each Borrower will or will cause all immediately available funds in each
Depositary Account to be immediately transferred into relevant Concentration
Account.
(b) All collected funds contained in the Domestic Concentration
Account shall be applied, on a daily basis, to the Obligations under the
Domestic Commitment, PROVIDED THAT if, as of any date of determination, (i) no
Default or Event of Default has then occurred and remains continuing, and (ii)
Minimum Availability is not less than $20,000,000 then the collected funds shall
not be so applied, and the Administrative Agent shall remit any or all such
funds to an account designated by the Company and the Domestic Borrowers.
(c) From and after the date upon which the initial UK Loans are made,
all collected funds contained in the Concentration Account relating to the UK
Commitment shall be applied, on a daily basis, to the Obligations under the UK
Commitment (without regard to the then current level of Minimum Availability),
PROVIDED that, if no Event of Default exists, any such funds contained in such
Concentration Account which are in excess of the then outstanding UK Loans shall
be remitted to an account designated by the UK Borrower.
4.3 APPLICATION OF FUNDS. Except as hereinafter provided in this
Section, all payments received in each Concentration Accounts shall be the sole
property of the
<PAGE>
Administrative Agent, for the benefit of the Creditors. Any amounts received in
the Concentration Account at ING Bank, n.v. (or any other bank holding the
Concentration Account for the UK Commitment) will be credited to the Obligations
under the UK Commitment and any amounts received in the other Concentration
Account shall be credited to the Obligations under the Domestic Commitment as
follows: (a) after allowing two (2) Business Days for collection of checks and
other instruments in the case of checks and other instruments received directly
in the Concentration Account, all such payments will be credited (conditional
upon final collection), and (b) all Cash payments, including payments made by
wire transfer of immediately available funds received in time for the then
posted clearing time on the date received, will be credited immediately after
receipt thereof or, if not received in time for posting, on the next succeeding
Business Day. All payments received from LEP Canada, whether following a demand
pursuant to the Guarantee signed by it or otherwise will be applied in
accordance with Section 10.2(e). If any Person makes any payment to the Lenders
or the Lenders receive any payment or proceeds of Collateral for the benefit of
the Company or any of its Restricted Subsidiaries, which payment is subsequently
invalidated, declared to be fraudulent or preferential, set aside and/or
required to be repaid to a trustee, receiver or any other party under any Debtor
Relief Law or for any other reason, then, to the extent of such payment or
proceeds, the Obligations shall be revived and continue in full force and
effect, as if such payment or proceeds had not been received by the Lenders.
The financial institutions at which the Concentration Account are maintained
shall disburse amounts credited to the Concentration Accounts in such manner as
the Administrative Agent may from time to time direct, in its sole discretion.
At such time as the relevant Commitment has terminated, all outstanding Letters
of Credit under that Commitment have terminated or been fully Cash
collateralized to the Administrative Agent's satisfaction and all Obligations
under that Commitment have been fully paid and satisfied, all amounts in the
Concentration Account, the Disbursement Accounts and the Lockbox Accounts shall
be paid over to the relevant Borrower.
4.4 ADDITIONAL LENDER ACCOUNTS. Schedule 4.4 lists each demand and
time deposit account maintained by the Company and each Restricted Subsidiary as
of the Closing Date with any financial institution, and sets forth the correct
account name and number with respect to each such account. The Company and its
Restricted Subsidiaries shall not deposit any collections or Receivables in any
demand or time deposit account that is not a Blocked Account, a Depositary
Account, a Lockbox Account, or the Concentration Account or, in the case of LEP
Canada, the account with a Canadian chartered bank subject to a collection
account agreement all as provided in Section 4.1
<PAGE>
until such time as the Administrative Agent in its discretion gives notice of
the termination of such rights as provided in Section 4.1. At such times as
Minimum Availability is less than $20,000,000, unless the Administrative Agent
otherwise consents in writing, the Company and its Restricted Subsidiaries shall
not permit more than $500,000 in the aggregate at any time to be kept on deposit
in Blocked Accounts. The Company and its Active Subsidiaries shall not open any
new account, nor close any existing account, without prior notice to the
Administrative Agent and in no event shall open any new account unless such
account is subject to blocked account arrangements (or, in the case of LEP
Canada, collection account agreements) in form and substance reasonably
satisfactory to Administrative Agent.
<PAGE>
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Company and each Borrower (in the case of LEP UK, as to itself only)
represents and warrants to the Lenders that, in each case after giving effect to
the transactions contemplated hereby:
5.1 SOLVENCY. (i) On the Closing Date and after giving effect to
the transactions contemplated hereby, the Company, each Domestic Borrower, and
each Restricted Subsidiary of the Domestic Borrowers shall be Solvent, and (ii)
on the date of any Request for Loan and after giving effect to the borrowing of
such Loan, the Company and each Domestic Borrower and, on and after the date of
the first extension of credit under the UK Commitment, LEP UK shall be Solvent.
5.2 EXISTENCE AND QUALIFICATION, POWER, COMPLIANCE WITH LAWS. The
Company is a corporation duly formed, validly existing and in good standing
under the Laws of Delaware. The Company is duly qualified to transact business,
and is in good standing in Delaware and each other jurisdiction in which the
conduct of its business or the ownership or leasing of its Properties makes such
qualification or registration necessary, EXCEPT where the failure so to qualify
or register and to be in good standing would not constitute a Material Adverse
Effect. The Company has all requisite corporate power and authority to conduct
its business, to own and lease its Properties and to execute and deliver each
Loan Document to which it is a Party and to perform the Obligations to be
performed by it thereunder. The Company and its Restricted Subsidiaries have
each duly executed and delivered each Loan Document to which each is a party.
As of the Closing Date, the chief executive offices of the Company are located
in Hillside, Illinois at the address for notices set forth in the signature
pages to this Agreement. All outstanding shares of capital stock of the Company
are duly authorized, validly issued, fully paid, non-assessable and issued in
compliance with all applicable state, provincial and federal securities and
other Laws. As of the Closing Date, there are 5,000,000 shares of common stock
of the Company authorized and (as of June 30, 1997) 2,051,996 shares of common
stock of the Company issued and outstanding and not less than eighty-five
percent (85%) of the issued and outstanding shares of the capital stock of the
Company are then owned collectively by the Sponsors and the management of the
Company and its Subsidiaries. No Person holds any option, warrant or other
right to acquire any shares of capital stock of the Company except as disclosed
in Schedule 5.2. The Company is in
<PAGE>
compliance with all Laws and other legal requirements applicable to its
business, has obtained all authorizations, consents, approvals, orders, licenses
and permits from, and has accomplished all Filings, registrations and
qualifications with, or obtained exemptions from any of the foregoing from, any
Governmental Agency that are necessary for the transaction of its business,
EXCEPT where the failure so to comply, file, register, qualify or obtain
exemptions does not constitute a Material Adverse Effect.
5.3 AUTHORITY; COMPLIANCE WITH OTHER AGREEMENTS AND INSTRUMENTS AND
GOVERNMENT REGULATIONS. Except as set forth in Schedule 5.3, the execution,
delivery and performance by each of the Company and its Restricted Subsidiaries
of the Loan Documents to which it is a Party have been duly authorized by all
necessary corporate action, and do not:
(a) Require any consent or approval not heretofore obtained of
any partner, director, stockholder, security holder or creditor of such
Party;
(b) Violate or conflict with any provision of such Party's
charter, consenting documents, articles of incorporation or bylaws, as
applicable;
(c) Result in or require the creation or imposition of any Lien
or Right of Others (other than pursuant to the Collateral Documents) upon
or with respect to any Property now owned or leased or hereafter acquired
by such Party;
(d) Violate any Requirement of Law applicable to such Party;
(e) Constitute a "transfer of an interest" or an "obligation
incurred" that is avoidable by a trustee under Section 548 of the
Bankruptcy Code of 1978, as amended, or constitute a ''fraudulent
conveyance," "fraudulent obligation" or "fraudulent transfer" within the
meanings of the Uniform Fraudulent Conveyance Act or Uniform Fraudulent
Transfer Act or any similar law, as enacted in any jurisdiction or
constitute any fraudulent preference, fraudulent transfer or other
transaction reviewable under the Bankruptcy and Insolvency Act of Canada
or any other Law of Canada or any province of Canada; or
(f) Result in a breach of or default under or would, with the
giving of notice or the lapse of time or both, constitute a breach of or
default under, or cause or permit the acceleration of any obligation owed
under, any
<PAGE>
indenture or loan or credit agreement or any other Contractual Obligation
to which such Party is a party or by which such Party or any of its
Property is bound or affected; and neither the Company nor any of its
Subsidiaries is in violation of, or default under, any Requirement of Law
or Contractual Obligation, or any indenture, loan or credit agreement
described in Section 5.3(f), in any respect that constitutes a Material
Adverse Effect.
5.4 NO GOVERNMENTAL APPROVALS REQUIRED. Except as set forth in
Schedule 5.4, no authorization, consent, approval, order, license or permit
from, or filing, registration or qualification with, any Governmental Agency is
required to authorize or permit under applicable Laws the execution, delivery
and performance by the Company and each of its Restricted Subsidiaries of the
Loan Documents to which it is a Party. All or filings with, any Governmental
Agency described in Schedule 5.4, except as otherwise specified therein, will be
accomplished as of the Closing Date.
5.5 SUBSIDIARIES.
(a) Schedule 5.5 hereto correctly sets forth as of the Closing
Date the names, the form of legal entity, jurisdictions of organization
and (in the case of the Domestic Subsidiaries) locations of the chief
executive offices of all Subsidiaries of the Company, and the number of
shares of capital stock issued and outstanding of each Restricted
Subsidiary of the Company. As of the Closing Date, the Company does not
own any capital stock or equity interest in any Person other than its
Subsidiaries. Unless otherwise indicated on Schedule 5.5, as of the
Closing Date, all of the outstanding shares of capital stock or all of
the units of equity interest, as the case may be, of each Restricted
Subsidiary are owned of record and beneficially by the Person designated
on Schedule 5.5, there are no outstanding options, warrants or other
rights to purchase capital stock of any Restricted Subsidiary, and all
such shares or equity interests so owned are duly authorized, validly
issued, fully paid, nonassessable, and were issued in compliance with all
applicable Laws, and are free and clear of all Liens and Rights of
Others, EXCEPT for Permitted Encumbrances and Permitted Rights of Others.
(b) As of the Closing Date, Schedule 5.5 correctly identifies
those Subsidiaries of the Company which are Restricted Subsidiaries or
Inactive Subsidiaries.
<PAGE>
(c) Each Restricted Subsidiary which is an Active Subsidiary is
a legal entity of the form described for that Subsidiary in Schedule 5.5,
duly organized, validly existing, and in good standing under the Laws of
its jurisdiction of organization, is duly qualified to do business as a
foreign organization and is in good standing as such in each jurisdiction
in which the conduct of its business or the ownership or leasing of its
properties makes such qualification necessary (EXCEPT where the failure
to be so duly qualified and in good standing does not constitute a
Material Adverse Effect), and has all requisite power and authority to
conduct its business and to own and lease its Properties.
(d) Except as set forth on Schedule 5.5, each Restricted
Subsidiary which is an Active Subsidiary is in compliance with all Laws
and other requirements applicable to its business and has obtained all
authorizations, consents, approvals, orders, licenses, and permits from,
and each such Subsidiary has accomplished all filings, registrations, and
qualifications with, or obtained exemptions from any of the foregoing
from, any Governmental Agency that are necessary for the transaction of
its business EXCEPT where the failure to be in such compliance, obtain
such authorizations, consents, approvals, orders, licenses, and permits,
accomplish such filings, registrations, and qualifications, or obtain
such exemptions, does not constitute a Material Adverse Effect.
5.6 FINANCIAL STATEMENTS. The Company has furnished to the Lenders
(a) the audited financial statements of the Company and its Subsidiaries as at
December 31, 1996, (b) and the unaudited consolidated and consolidating
financial statements of the Company and its Subsidiaries as of June 30, 1997.
The financial statements described above fairly present the financial condition
and the results of operations of the Persons described as at such dates and for
such periods in accordance with Generally Accepted Accounting Principles
consistently applied, subject to year-end adjustments and the absence of
footnotes.
5.7 NO OTHER LIABILITIES; NO MATERIAL ADVERSE EFFECT. EXCEPT as
described in Schedule 5.7, as of the Closing Date, the Company and its
Restricted Subsidiaries do not and will not have any material liability or
material contingent liability not reflected or disclosed in the financial
statements described in Section 5.6. Except as otherwise disclosed in writing
to the Lenders prior to the Closing Date, there has been no event or
circumstance that has occurred that constitutes a Material Adverse Effect since
December 31, 1996 or at the Closing Date.
<PAGE>
5.8 TITLE TO PROPERTY. As of June 30, 1997, the Company and its
Subsidiaries have, good and valid title to all the Property reflected in the
financial statements described in Section 5.6 other than Property subsequently
sold or disposed of in the ordinary course of business, free and clear of all
Liens and Rights of Others, other than Permitted Encumbrances and Permitted
Rights of Others and as otherwise permitted by Section 7.11.
5.9 INTANGIBLE ASSETS. Except as set forth in Schedule 5.9, the
Company and its Restricted Subsidiaries own, or possess the right to use to the
extent necessary in their respective businesses, all trademarks, trade names,
copyrights, patents, patent rights, computer software, licenses and other
Intangible Assets that are used in the conduct of their respective businesses as
now operated and which are material to the condition (financial or otherwise),
business or operations of the Company and its Restricted Subsidiaries, taken as
a whole, and no such Intangible Asset, to the Best Knowledge of the Company,
conflicts with the valid trademark, trade name, copyright, patent, patent right
or Intangible Asset of any other Person to the extent that such conflict
constitutes a Material Adverse Effect.
5.10 GOVERNMENTAL REGULATION. Neither the Company nor any of its
Restricted Subsidiaries is subject to regulation under any Law limiting or
regulating its ability to incur Indebtedness for money borrowed.
5.11 LITIGATION. As of the Closing Date, there are no actions, suits,
proceedings or investigations pending as to which the Company or its Restricted
Subsidiaries have been served or have received notice or, to the Best Knowledge
of the Company, have been threatened against or affecting the Company or its
Restricted Subsidiaries or any Property of any of them before any Governmental
Agency that individually could be reasonably expected to (i) result in an
adverse decision which could, in a manner not involving the payment of money,
materially and adversely affect the condition (financial or otherwise) or
business operations of the Company and its Restricted Subsidiaries, taken as a
whole, or the properties and assets of the Company and its Subsidiaries, taken
as a whole, or (ii) in any manner draw into question the validity or
enforceability of any Loan Document. As of the Closing Date, except as set
forth in Schedule 5.11, there are no actions, suits, proceedings or
investigations pending as the Company and its Restricted Subsidiaries, or, to
the Best Knowledge of the Company and its Restricted Subsidiaries, threatened
against or affecting the Company or its Restricted
<PAGE>
Subsidiaries which could reasonably be expected to result in a judgment in
excess of $500,000 (other than a money judgment covered by insurance as to which
the insurance the Company has not disclaimed or reserved the right to disclaim
coverage) being entered or filed against the Company or any of its Restricted
Subsidiaries.
5.12 BINDING OBLIGATIONS. Each of the Loan Documents to which the
Company or any of its Restricted Subsidiaries is a Party will, when executed and
delivered by such Party, constitute the legal, valid and binding obligation of
such Party, enforceable against such Party in accordance with its terms, EXCEPT
as enforcement may be limited by Debtor Relief Laws or equitable principles
relating to the granting of specific performance and other equitable remedies as
a matter of judicial discretion.
5.13 NO DEFAULT. As of the Closing Date, and giving effect to each of
the transactions contemplated to occur thereon, no event has occurred and is
continuing that is a Default or an Event of Default.
5.14 ERISA.
(a) EXCEPT as disclosed in Schedule 5.14, neither the Company
nor any ERISA Affiliate maintains, contributes to or is required to or
will maintain, contribute to or will be required to contribute to, any
"employee pension benefit plan" that is subject to Title IV of ERISA.
(b) With respect to each Pension Plan disclosed in Schedule 5.14
and except as may be otherwise therein described:
(i) such Pension Plan complies in all material respects
with ERISA and any other applicable Laws;
(ii) such Pension Plan has not incurred any material
"accumulated funding deficiency," as that term is defined in Section
302 of ERISA;
(iii) no "reportable event" (as defined in Section 4043 of
ERISA) has occurred that would subject the Company or any of its ERISA
Affiliates to any liability with respect to such Pension Plan that
would constitute a Material Adverse Effect;
<PAGE>
(iv) neither the Company nor any ERISA Affiliate thereof has
engaged in any nonexempt "prohibited transaction" (as defined in
Section 4975 of the Code) that would subject the Company or any of its
ERISA Affiliates to any penalty that would constitute a Material
Adverse Effect;
(v) no Termination Event has occurred or may reasonably be
expected to occur that would constitute a Material Adverse Effect;
(vi) no material liability to the PBGC (other than required
premium payments), the Internal Revenue Service, any Pension Plan,
Multiemployer Plan or any trust related thereto has been, or is
expected by the Company or any of its ERISA Affiliates to be, incurred
by the Company or any of its ERISA Affiliates that would constitute a
Material Adverse Effect;
(vii) neither the Company nor any of its ERISA Affiliates has
any contingent liability with respect to any post-retirement benefit
under any "Welfare plan" (as defined in Section 3(1) of ERISA) that
would constitute a Material Adverse Effect, other than liability for
continuation coverage under Part 6 of Title I of ERISA; and
(viii) no lien under Section 412(n) of the Code or 302(f) of
ERISA or requirement to provide security under Section 401(a)(29) of
the Code or Section 307 of ERISA has been or is reasonably expected by
the Company or any of its ERISA Affiliates to be imposed on the assets
of the Company or any member of its ERISA Affiliates that would
constitute a Material Adverse Effect.
(c) As of the Closing Date, all contributions required to be
made by the Company or any of its ERISA Affiliates to a Multiemployer
Plan described in Schedule 5.14 have been made or will have been made
except as may be described in Schedule 5.14.
<PAGE>
5.1 CAN PLANS.
(a) All CAN Plans, which will be maintained by the Company or
its Subsidiaries, are described on Schedule 5.15 hereto:
(b) no CAN Plan which is a registered pension plan has been
terminated (in whole or in part) nor have any proceedings been instituted
or threatened to terminate (in whole or in part) any such CAN Plan which
termination has or could reasonably be expected to have a Material
Adverse Effect or could reasonably be expected to give rise to a Lien,
(c) neither the Company nor any of its Subsidiaries has ceased
to participate (in whole or in part) as a participating employer in any
CAN Plan which is a registered pension plan;
(d) except as disclosed on Schedule 5.15 hereto, neither the
Company nor any of its Subsidiaries has any unfunded liability (including
contingent unfunded liability) on wind up (in whole or in part) to any
CAN Plan which is a registered pension plan or any solvency deficiency in
any such CAN Plan in excess of $1,000,000;
(e) except as disclosed on Schedule 5.15 hereto, neither the
Company nor any of its Subsidiaries has any material liability in respect
of any CAN Plan other than for required insurance premiums or
contributions or remittances which have been paid, contributed and
remitted when due;
(f) all contributions have been made to the CAN Plans as
required by law or the terms thereof to be made when due and neither the
Company nor any of its Subsidiaries is in arrears in the payment of any
contribution, payment, remittance or assessment or in default in filing
any reports, returns, statements and similar documents in respect of the
CAN Plans required to be made or paid pursuant to any CAN Plan any law,
act, regulation, directive or order or any employment, union, pension,
deferred profit sharing, benefit, bonus or other similar agreement or
arrangement;
<PAGE>
(g) neither the Company nor any of its Subsidiaries is liable
or, to the Best Knowledge of the Company, alleged to be liable, to any
employee or former employee, director or former director, officer or
former officer resulting from any violation or alleged violation of any
CAN Plan which is a registered pension plan, any fiduciary duty, any law
or agreement in relation to any such CAN Plan, except as disclosed in
Schedule 5.15 hereof, does not have any unfunded pension or like
obligations or solvency deficiency in excess of $1,000,000 (including any
past service or experience deficiency funding liabilities), other than
accrued obligations not yet due, for which it has made full provision in
its books and records;
(h) without limiting the foregoing, all of the CAN Plans are and
have been since their inception, administered in accordance with their
terms and all applicable laws in all material respects and are duly
registered where required by, and are in compliance and good standing in
all material respects under, all applicable laws, acts, statutes,
regulations, orders, directives and agreements, including, without
limitation, the Income Tax Act of Canada, and the Pension Benefits Act of
Ontario, any successor legislation thereto, and other applicable laws of
any jurisdiction; and
(i) except for claims for benefit payments in the normal course,
there are no material outstanding or pending or threatened
investigations, claims, suits or proceedings in respect of any CAN Plans
(including to assert rights or claims to benefit payment other than in
the normal course or that could give rise to any material liability).
5.16 REGULATIONS G, T, U AND X. No part of the proceeds of any Loan
hereunder will be used to purchase or carry, or to extend credit to others for
the purpose of purchasing or carrying, any "margin stock" (as such term is
defined in Regulations G, T, U and X) in violation of Regulations G, T, U or X.
Neither the Company nor any of its Subsidiaries is engaged principally, or as
one of its important activities, in the business of extending credit for the
purpose of purchasing or carrying any such "margin stock."
5.17 DISCLOSURE. No written statement made by a Senior Officer of the
Company or any of its Subsidiaries to any Creditor in connection with this
Agreement, or in connection with any Loan, as such statement may be amended,
modified or supplemented prior to the Closing Date, contains any untrue
statement of a material fact
<PAGE>
or omits a material fact necessary in order to make the statement made not
misleading in light of all the circumstances existing at the date the statement
was made. To the Best Knowledge of the Company there is no fact (other than
matters of a general economic nature or matter generally applicable to
businesses of the types engaged in by the Company and its Subsidiaries) that
would constitute a Material Adverse effect that has not been disclosed in
writing to the Administrative Agent and the Lenders.
5.18 TAX LIABILITY. Except as disclosed on Schedule 5.18, the Company
and its Restricted Subsidiaries have filed all material tax returns that are
required to be filed, and have paid, or made provision for the payment of, all
taxes with respect to the periods, Property or transactions covered by said
returns, or pursuant to any assessment received by the Company or any of its
Restricted Subsidiaries, EXCEPT:
(a) taxes for which the Company or its relevant Restricted
Subsidiaries have been fully indemnified;
(b) such taxes, if any, as are being contested in good faith by
appropriate proceedings and as to `which adequate accounting reserves
have been established and maintained; and
(c) such minor taxes involving not more than $25,000 in
potential liability in any particular instance (or more than $100,000 in
the aggregate) imposed by a political subdivision of a State of the
United States of America or the United Kingdom.
To the Best Knowledge of the Company, there is no tax assessment
contemplated or proposed by any Governmental Agency against the Company or any
of its Restricted Subsidiaries that would constitute a Material Adverse Effect
OTHER than, (x) as of each date subsequent to the Closing Date, such
contemplated or proposed tax assessments with respect to which the Company (i)
has promptly notified Administrative Agent in writing of its knowledge and (ii)
the Company or the appropriate Restricted Subsidiary of the Company has in good
faith commenced, and thereafter diligently pursued, appropriate proceedings in
opposition to such assessments and (y) as of the Closing Date and each date
subsequent thereto, such matters as are disclosed on Schedule 5.15.
<PAGE>
5.19 PROJECTIONS. As of the Closing Date, to the Best Knowledge of
the Company, the assumptions set forth in the Projections attached hereto as
Schedule 5.19 are reasonable and consistent with each other and with all facts
known to any Senior Officer of the Company, and in the reasonable judgment of
the Company, no material assumption is omitted as a basis for the Projections,
and the Projections are reasonably based on such assumptions. Nothing in this
Section shall be construed as a representation or covenant that the Projections
in fact will be achieved.
5.20 EMPLOYEE MATTERS. There is no strike or work stoppage in
existence or threatened involving the Company or its Restricted Subsidiaries
that would constitute a Material Adverse Effect.
5.21 SECURITY INTERESTS. Upon the execution and delivery of this
Agreement, the Pledge and Security Agreements and the Canadian Security
Documents, and the delivery of the Pledged Collateral to the Administrative
Agent, the Pledge and Security Agreements and the Canadian Security Documents
will create a valid first priority security interest in favor of the
Administrative Agent for the ratable benefit of the Lenders in the Pledged
Collateral therein described securing the Obligations, and all action necessary
to perfect the security interest so created will have been taken and completed.
Except in respect of LEP UK, upon the execution and delivery of this Agreement
and the Pledge and Security Agreements, and upon the upon the filing of Uniform
Commercial Code financing statements (or, in the case of the Canadian
Subsidiaries, Personal Property Security Act financing statements or recording
and filing of such instruments or notice thereof, as applicable, under the
governing law of each province in which Collateral may be located) with the
appropriate Governmental Agencies a valid first priority security interest (or
Lien in the case of Collateral of LEP Canada located in a province not governed
by a Personal Property Security Act) in the Collateral described therein
securing the Obligations (subject only to then existing Permitted Encumbrances,
Permitted Rights of Others and matters permitted by Section 7.11 and to such
qualifications and exceptions as are contained in the Uniform Commercial Code
(as in effect in the relevant jurisdiction) with respect to the priority of
security interests perfected by means other than the filing of a financing
statement or with respect to the creation of security interests in Property to
which Article 9 of said Code does not apply) shall be perfected. Upon the
execution and delivery of the UK Security Documents by LEP UK, the UK Security
Documents will create valid first priority security interests in the Collateral
therein described in favor of the Administrative Agent for the ratable benefit
of the Lenders securing the Obligations. Upon delivery for
<PAGE>
registration of the UK Security Documents to the Registrar of Companies together
with prescribed particulars thereof within 21 days of the date of creation of
the security interests therein, the security interests contained therein will
not be void against any liquidator of LEP UK nor any person who for value
acquires an interest in or right over the Collateral.
5.22 HAZARDOUS MATERIALS. Except as specifically described in
Schedule 5.22, neither the Company nor any of its Restricted Subsidiaries, nor
any predecessor in title or any third person at any time occupying or present on
the real property owned or leased at any time by the Company or any of its
Restricted Subsidiaries, has disposed of, discharged, released or threatened the
release of any material amount of Hazardous Materials on, from or under such
real property in any manner that violates any Hazardous Materials Laws which
violation could reasonably be expected to have a Material Adverse Effect.
Except as specifically described in Schedule 5.11 or Schedule 5.22, there have
been no actions, events, conditions or circumstances that might cause the
Company or any Restricted Subsidiary to incur response costs under environmental
Law, or costs relating to personal or property injury relating to owned or
leased real property, except as would not individually or in the aggregate have
a Material Adverse Effect. Except as specifically described in Schedule 5.22,
no real property owned or leased by the Company or any of its Restricted
Subsidiaries or portion thereof is or has been utilized by the Company or any of
its Restricted Subsidiaries as a site for the manufacture, handling, treatment,
storage or disposal of any Hazardous Materials and all such real property is in
compliance in all material respects with all Hazardous Materials Laws. To the
extent that any Hazardous Materials have been, or are used, generated or stored
by the Company or any of its Restricted Subsidiaries on any real property, or
transported to or from such real property by the Company or its Restricted
Subsidiaries, such use, generation, storage and transportation have been, and
are, in compliance in all material respects with all Hazardous Materials Laws.
For the purposes of this Section, the phrase "real property owned or leased"
includes, without limitation, any real property which is in the charge,
management or control of the Company or any of its Restricted Subsidiaries or
otherwise for which the Company or any of its Restricted Subsidiaries may be
liable or responsible under any Hazardous Materials Laws.
5.23 LABOR DISPUTES. Except as set forth in Schedule 5.23, (a) There
is no collective bargaining agreement or other labor contract covering any
employees of the Company or its Restricted Subsidiaries except for that covering
employees of any Canadian Subsidiaries of the Company; (b) to the Best Knowledge
of the Company,
<PAGE>
except for the contract referred to in clause (a) above, no union or other labor
organization is seeking to organize, or to be recognized as, a collective
bargaining unit of employees of any Canadian Subsidiaries of the Company or for
any similar purpose; and (c) there is no pending or, to the Best Knowledge of
the Company, threatened strike, work stoppage, material unfair labor practice
claims or other material labor dispute against or affecting any Canadian
Subsidiaries of the Company or their respective employees that could reasonably
be expected to result in a Material Adverse Effect.
5.24 WORKERS' COMPENSATION. None of the Canadian Subsidiaries of the
Company has any unpaid workers' compensation or like obligations except as are
being incurred, and paid on a current basis in the ordinary course of business,
and there are no proceedings, claims, actions, orders or investigation of any
Governmental Agency relating to workers' compensation outstanding, pending or,
to the Best Knowledge of the Company, threatened relating to them or any of
their employees or former employees that could reasonably be expected to result
in a Lien or to result in a Material Adverse Effect.
5.25 INTERCOMPANY DEBT ARRANGEMENTS. Each of the Drop-Down Notes is
properly described on Schedule 5.25, and there are no instruments, documents or
agreements evidencing or representing Indebtedness by any Restricted Subsidiary
of the Company to the Company or to any other Restricted Subsidiary of the
Company other than the Drop-Down Notes or as set forth on Schedule 5.25.
5.26 CANADIAN SUBSIDIARIES. As of the Closing Date, except for LEP
Canada, none of the Canadian Subsidiaries owns any Property or carries on any
business activity.
<PAGE>
ARTICLE VI
AFFIRMATIVE COVENANTS
(OTHER THAN INFORMATION AND REPORTING REQUIREMENTS)
So long as any Advance remains unpaid, or any other Obligation remains
unpaid or unperformed, or any portion of the Commitments remains in force, the
Company and each Borrower shall (in the case of LEP UK, as to itself only), and
shall cause each of the Restricted Subsidiaries to, unless the Administrative
Agent (with the approval of the Majority Lenders) otherwise consents:
6.1 PAYMENT OF TAXES AND OTHER POTENTIAL LIENS. Pay and discharge
promptly all taxes, assessments and governmental charges or levies imposed upon
any of them, upon their respective Property or any part thereof, upon their
respective income or profits or any part thereof or upon any right or interest
of the Administrative Agent or any Lender under any Loan Document, EXCEPT that
the Company and its Restricted Subsidiaries shall not be required to pay or
cause to be paid:
(a) any income or gross receipts tax or any other tax on or
measured by income generally applicable to banks which is payable by the
Administrative Agent or any Lender;
(b) any tax, assessment, charge or levy that is not yet
delinquent, or is being contested in good faith by appropriate
proceedings, so long as the Company or its Restricted Subsidiaries, on a
consolidated basis, have established and maintain adequate accounting
reserves for the payment of the same and by reason of such nonpayment and
contest no material item or portion of Property of the Company and its
Restricted Subsidiaries, taken as a whole, is in jeopardy of being
seized, levied upon or forfeited; and
(c) such minor taxes involving not more than $250,000 in
potential tax liability in any particular instance (or more than
$1,000,000 in the aggregate) imposed by a political subdivision of a
State of the United States of America or the United Kingdom; and by
reason of such nonpayment no material item or portion of Property of the
Company and its Restricted Subsidiaries, taken as a whole, is in jeopardy
of being seized, levied upon or forfeited.
<PAGE>
6.2 PRESERVATION OF EXISTENCE. Except as to Inactive Subsidiaries,
preserve and maintain their respective existences in the jurisdiction of their
formation and all authorizations, rights, franchises, privileges, consents,
approvals, orders, licenses, permits, or registrations from any Governmental
Agency that are necessary for the transaction of their respective businesses,
and qualify and remain qualified to transact business in each jurisdiction in
which such qualification is necessary in view of their respective businesses or
the ownership or leasing of their respective Properties EXCEPT (a) where the
failure to preserve and maintain any such authorizations, rights, franchises,
privileges, consents, approvals, orders, licenses, permits or registrations or
to so qualify or remain qualified would not constitute a Material Adverse
Effect, and (b) that a Disposition permitted under Section 7.4 or a merger
permitted under Section 7.5 shall not constitute a violation of this covenant.
6.3 MAINTENANCE OF PROPERTIES. Maintain, preserve and protect all of
their respective depreciable properties in good order and condition, subject to
wear and tear in the ordinary course of business, and not permit any waste of
their respective Properties, EXCEPT that the failure to maintain, preserve and
protect a particular item of depreciable Property that is not of significant
value, either intrinsically or to the operations of the Company and its
Restricted Subsidiaries, taken as a whole, shall not constitute a violation of
this covenant.
6.4 MAINTENANCE OF INSURANCE. Maintain liability, casualty and other
insurance (subject to customary deductibles and retention) with responsible
insurance companies in such amounts and against such risks as is carried by
responsible companies engaged in similar businesses and owning similar assets in
the general areas in which the Company and its Restricted Subsidiaries operate.
Upon request by the Administrative Agent, the Company and each of its Restricted
Subsidiaries shall furnish to the Administrative Agent copies of the policies
under which such insurance is maintained, certificates of insurance and such
other information relating to insurance as the Administrative Agent may request.
6.5 COMPLIANCE WITH LAWS. Comply with all Requirements of Laws,
noncompliance with which would constitute a Material Adverse Effect, except that
the Company and its Restricted Subsidiaries need not comply with a Requirement
of Law then being contested by any of them in good faith by appropriate
proceedings.
<PAGE>
6.6 INSPECTION RIGHTS. Upon reasonable notice, at any time during
regular business hours and as often as requested (but not so as to materially
interfere with the business of the Company and its Restricted Subsidiaries),
permit the Administrative Agent or any Lender, or any authorized employee, agent
or representative thereof, to examine, audit and make copies and abstracts from
the records and books of account of, and to visit, inspect and to discuss the
affairs, finances and accounts of the Company and its Restricted Subsidiaries
with any of their officers, key employees and accountants, and, with the prior
approval of the Company, the customers or vendors of the Company and its
Restricted Subsidiaries, and, upon request, furnish promptly to the
Administrative Agent or any Lender true copies of all financial information made
available to the senior management of the Company and its Restricted
Subsidiaries.
6.7 KEEPING OF RECORDS AND BOOKS OF ACCOUNT. Keep adequate records
and books of account reflecting all financial transactions in conformity with
Generally Accepted Accounting Principles and in material conformity with all
applicable requirements of any Governmental Agency having regulatory
jurisdiction over the Company or any of its Restricted Subsidiaries.
6.8 COMPLIANCE WITH AGREEMENTS. Promptly and fully comply with all
Contractual Obligations under all material agreements, indentures, leases and/or
instruments to which any one or more of them is a party, whether such material
agreements, indentures, leases or instruments are with a Lender or another
Person, EXCEPT that the Company and its Restricted Subsidiaries need not comply
with Contractual Obligations under any such agreements, indentures, leases or
instruments then being contested by any of them in good faith by appropriate
proceedings or if the failure to comply with such agreements, indentures, leases
or instruments does not constitute a Material Adverse Effect.
6.9 USE OF PROCEEDS. Use the proceeds of the Loans to refinance the
obligations and Indebtedness under the Existing Loan Agreement, and for proper
working capital purposes, and for other proper corporate purposes not prohibited
hereunder.
6.10 HAZARDOUS MATERIALS LAWS. Keep and maintain all real property
owned or leased by the Company or any of its Restricted Subsidiaries and each
portion thereof in compliance in all material respects with all Hazardous
Materials Laws and promptly advise the Administrative Agent in writing of: (a)
any and all enforcement, cleanup, removal, compliance or other governmental or
regulatory actions instituted,
<PAGE>
completed or threatened in writing pursuant to any applicable Hazardous
Materials Laws, (b) any and all claims made or threatened in writing by any
third party against the Company or its Restricted Subsidiaries or any real
property owned or leased by the Company or any of its Restricted Subsidiaries
relating to damage, contribution, cost recovery, compensation, loss or injury
resulting from any Hazardous Materials ("Hazardous Material Claims") and (c)
discovery by any Senior Officer of the Company or any Borrower of any occurrence
or condition on any real property adjoining or in the vicinity of real property
owned or leased by the Company or any of its Restricted Subsidiaries that could
reasonably be expected to cause the such real property or any part thereof to be
subject to any restrictions on the ownership, occupancy, transferability or use
of such real property under any Hazardous Materials Laws. For the purposes of
this Section, the phrase "real property owned or leased" includes, without
limitation, any real property which is in the charge, management or control of
the Company or any of its Restricted Subsidiaries or otherwise for which the
Company or any of its Restricted Subsidiaries may be liable or responsible under
any Hazardous Materials Law.
6.11 ADDITIONAL COLLATERAL. With respect to each Inactive Subsidiary
which hereafter becomes an Active Subsidiary, and each Restricted Subsidiary
which is an Active Subsidiary of the Company formed or acquired after the
Closing Date in accordance with the other terms of this Agreement, in each case
concurrently with its becoming an Active Subsidiary, deliver to the
Administrative Agent 100% of the capital stock of such Subsidiary and a
Drop-Down Note and Drop Down Note Security Agreement executed by such
Subsidiary, and cause such Subsidiary to enter into a Pledge and Security
Agreement and to execute and deliver any financing statements or Canadian
Personal Property Security Act filings which the Administrative Agent may
reasonably request.
6.12 COLLATERAL. Create and maintain a valid first priority perfected
security interest and Lien in favor of the Administrative Agent in all of the
Collateral (subject only to Permitted Encumbrances, Permitted Rights of Others
and matters permitted by Section 7.11). In addition, the Company shall provide
the Administrative Agent, within a reasonable time period following the
Administrative Agent's request therefor, with such Uniform Commercial Code,
Personal Property Security Act, Register of Personal and Movable Real Rights (of
Quebec), Companies Act of Nova Scotia, and, in England and Wales, searches of
the public register maintained by the Registrar of Companies pursuant to, inter
alia, the Companies Act of 1985 (as amended by the Companies Act of 1989) and
other search reports as the Administrative Agent shall
<PAGE>
reasonably request. Notwithstanding any other provision in any Loan Document,
LEP UK shall be under no obligation to execute, deliver, file, record or perfect
any UK Security Documents or other documents providing for the granting of
collateral security, to create, attach or establish any lien or charge upon any
Pledged Collateral or other asset of LEP UK or to comply with the provisions of
Article IV until such time as it requests any extension of credit under the UK
Commitment.
<PAGE>
ARTICLE VII
NEGATIVE COVENANTS
So long as any Advance remains unpaid, or any other Obligation remains
unpaid or unperformed, or any portion of the Commitments remains in force, the
Company and the Borrowers shall not (in the case of LEP UK, as to itself only),
and shall not permit the Restricted Subsidiaries to, unless the Administrative
Agent (with the approval of the Majority Lenders) otherwise consents:
7.1 CREATION OR DISSOLUTION OF SUBSIDIARIES. Establish any new
Restricted Subsidiary, or allow any Inactive Subsidiary of a Restricted
Subsidiary to become an Active Subsidiary, unless the Administrative Agent shall
have been given at least five (5) days prior written notice thereof (other than
as permitted by Section 7.6 hereof) or terminate, dispose of, dissolve, or
otherwise liquidate any Restricted Subsidiary (other than the termination or
dissolution of an Inactive Subsidiary or as permitted by Sections 6.2, 7.4 or
7.5 hereof).
7.2 PREPAYMENT OF INDEBTEDNESS. Prepay any principal or interest on
any Indebtedness of the Company or any of its Restricted Subsidiaries prior to
the date when due, or make any payment or deposit with any Person that has the
effect of providing for the satisfaction of any Indebtedness of the Company or
its Restricted Subsidiaries prior to the date when due, except Indebtedness to
the Lenders under the Loan Documents, PROVIDED that this covenant shall not
prohibit the prepayment of (a) the obligations described on Schedule 7.12B, (b)
the Senior Notes out of (x) the net cash proceeds of Dispositions permitted
hereunder, PROVIDED that no Default or Event of Default then exists and the
Company and the relevant Borrowers have, within the 30 day period prior to the
making of such prepayment offered to repay the Notes in such amount and to
permanently reduce the amount of the Credit Limit by the amount of such
repayment, and the Majority Lenders shall have rejected that offer, (y) the net
cash proceeds of equity issuances made by the Company following the Closing
Date, and (z) Subordinated Obligations incurred by the Company following the
Closing Date in an aggregate principal amount not to exceed $25,000,000, and (c)
other obligations and indebtedness of the Company and its Restricted
Subsidiaries (not including the Senior Notes) in an aggregate principal amount
which does not exceed $2,000,000 during the term of this Agreement.
<PAGE>
7.3 PAYMENT OF SUBORDINATED OBLIGATIONS. Pay any principal
(including sinking fund payments), interest or any other amount with respect to
any Subordinated Obligation, or purchase or redeem (or make, or become obligated
to make, any offer to purchase or redeem) any Subordinated Obligation, EXCEPT
payment of interest in accordance with the terms of any Subordinated Obligation;
PROVIDED, however, that during any period in which an Event of Default is then
continuing, no such payment of interest shall be made prior to the expiration of
the maximum period of interest blockage provided for under the terms of that
Subordinated Obligation.
7.4 DISPOSITION OF PROPERTY. Make any Disposition of its Property,
whether now owned or hereafter acquired, EXCEPT (a) a Disposition to the Company
or to a wholly owned Restricted Subsidiary in compliance with all Laws
(including applicable tax Laws); and (b) other Dispositions made when no Default
or Event of Default exists or would result therefrom, PROVIDED that (i) as of
the date of any Disposition which, when aggregated with all other Dispositions
theretofore made since the Closing Date, results in the aggregate non-cash
proceeds of all such Dispositions being in excess of $20,000,000, the Interest
Charge Coverage Ratio for the twelve month period then ending shall be not less
than 2.25:1.00, and (ii) if any Disposition involves the direct or indirect
transfer of ownership to any accounts receivable, concurrently with the making
of any such Disposition, the Company shall deliver a Borrowing Base making PRO
FORMA adjustments to the Borrowing Base reflecting such Disposition.
7.5 MERGERS. Merge, consolidate or amalgamate with or into any
Person, EXCEPT mergers, consolidations or amalgamations of a Subsidiary of the
Company into the Company (with the Company as the surviving entity) or into a
wholly owned Subsidiary of the Company; PROVIDED that (a) the Company and each
of its Restricted Subsidiaries has executed such amendments to the Loan
Documents and/or assumptions of liability under the Loan Documents at the
Administrative Agent may determine are appropriate as a result of any such
merger, consolidation or amalgamation, (b) LIWDE shall not merge, consolidate or
amalgamate with any Person, and (c) LEP UK shall not merge, combine, consolidate
or amalgamate with any Person (other than a Subsidiary of LIWDE, with LEP UK the
surviving Person).
7.6 INVESTMENTS AND ACQUISITIONS. Make any Acquisition or enter into
any agreement to make any Acquisition, or make or suffer to exist any Investment
which is not in existence on the date of this Agreement and disclosed in
Schedule 7.6 EXCEPT: (a) Investments consisting of Cash Equivalents, (b)
Investments by the Company in any
<PAGE>
Restricted Subsidiary and by any Restricted Subsidiary in the Company or in any
other Restricted Subsidiary so long as any such investment is documented under a
Drop-Down Note or otherwise evidenced in a manner satisfactory to the
Administrative Agent; (c) Investments by any Borrower in its Active Subsidiaries
or by the Subsidiaries of any Active Subsidiary of the Company in such Active
Subsidiary, so long as any such Investment shall be documented under a Drop-Down
Note; (d) the LIW Acquisition and the Investments resulting therefrom; (e) any
other Permitted Acquisition and the Investments resulting therefrom, and (f)
Investments by the Borrowers in Unrestricted Subsidiaries which are made when no
Default or Event of Default has occurred and remains continuing and which do not
result in Minimum Availability being less than $10,000,000. Investments by, and
Acquisitions made through, Unrestricted Subsidiaries shall not in and of
themselves, be deemed to be Investments or Acquisitions by the Company.
7.7 HOSTILE TENDER OFFERS. Make any offer to purchase or acquire, or
consummate a purchase or acquisition of, 5% or more of the capital stock of any
corporation or other business entity if the board of directors or management of
such corporation or business entity has notified the Company that it opposes
such offer or purchase; provided that such acquisition or purchase is otherwise
permitted pursuant to the terms of this Agreement.
7.8 DISTRIBUTIONS. Make any Distribution, whether from capital,
income or otherwise, and whether in Cash or other Property, EXCEPT (a)
Distributions to the Company or to a wholly owned Subsidiary of the Company,
(b) unless an Event of Default has occurred and is continuing, distributions to
pay management fees, pursuant to the Management Agreements, not to exceed
$700,000, in the aggregate, per annum, (c) unless an Event of Default has
occurred and is continuing, distributions to repurchase the stock held by an
employee of the Company or any Subsidiary upon termination of employment of such
employee, not to exceed $3,000,000 in any Fiscal Year and $10,000,000 in the
aggregate, and (d) so long as no Default or Event of Default is existing or will
be created thereby, other Distributions which, after giving effect thereto, do
not result in Minimum Availability being less than $20,000,000, and which do not
exceed $20,000,000 in the aggregate during the term of this Agreement, PROVIDED
that in no event shall any Distributions be made pursuant to this clause (d)
prior to October 31, 1998.
7.9 ERISA. (a) At any time, maintain, or be or become obligated to
contribute on behalf of its employees to, any "employee pension benefit plan"
that is
<PAGE>
subject to Title IV of ERISA other than those Pension Plans disclosed in
Schedule 5.14 and Multiemployer Plans to which the Company or any of its
Subsidiaries is or becomes obligated to contribute pursuant to the terms of a
collective bargaining agreement, (b) at any time, permit any Pension Plan
disclosed in Schedule 5.14 in such case if to do so would constitute a Material
Adverse Effect, to: (i) engage in any non-exempt "prohibited transaction," as
such term is defined in Section 4975 of the Code; (ii) incur any material
"accumulated funding deficiency," as that term is defined in Section 302 of
ERISA, or (iii) suffer a Termination Event to occur which may reasonably be
expected to result in liability of the Company or any ERISA Affiliate thereof to
the Pension Plan or Multiemployer Plan or to the PBGC that could have a Material
Adverse Effect or the imposition of a Lien on the Property of the Company or any
ERISA Affiliate thereof pursuant to Section 4068 of ERISA, (c) fail, upon a
Senior Officer of the Company becoming aware thereof, promptly to notify the
Administrative Agent of the occurrence of any "reportable event" (as defined in
Section 4043 of ERISA) (other than a reportable event that is not subject to the
provision for 30-day notice to the PBGQ or of any non-exempt "prohibited
transaction" (as defined in Section 4975 of the Code) with respect to any
Pension Plan described in Schedule 5.14 or any trust created thereunder, or (d)
at any time, permit any Pension Plan described in Schedule 5.14 to fail to
comply with ERISA, the Code or other applicable Laws in any respect that would
result in a Material Adverse Effect.
7.10 CHANGE IN NATURE OF BUSINESS. Make any material change in the
nature of the business of the Company and its Subsidiaries, taken as a whole, as
at present conducted.
7.11 LIENS, NEGATIVE PLEDGES, SALES AND LEASEBACK. Create, incur,
assume or suffer to exist any Lien or Right of Others of any nature upon or with
respect to any of their respective Property, whether now owned or hereafter
acquired or suffer to exist any Negative Pledge with respect to any of their
respective Property, or engage in any sale and leaseback transaction with
respect to any of their respective Property; EXCEPT: (a) Permitted Encumbrances
and Permitted Rights of Others; (b) Liens and Negative Pledges in favor of the
Administrative Agent or the Lenders under the Loan Documents; (c) existing Liens
disclosed in Schedule 7.11, and refinances thereof, PROVIDED that the
obligations secured thereby are not increased, (d) existing Rights of Others and
Negative Pledges disclosed in Schedule 7.11; (e) Negative Pledges contained in a
lease of Property that do not extend to any Property other than the leasehold
estate created by such lease, (f) involuntary Liens arising solely by operation
of Law which do
<PAGE>
not secure any single obligation in excess of $250,000 or aggregate obligations
in excess of $1,000,000; (g) Liens arising in connection with Capitalized Leases
to the extent permitted hereunder; provided that no such Lien shall extend to or
cover any assets other than the assets subject to such capitalized Lease; (h)
Liens arising in connection with purchase money security interests to the extent
permitted hereunder; provided that no such Lien shall extend to or cover any
assets other than the assets subject to such purchase money security interest
and the proceeds thereof; (i) Liens and negative pledges on any real property,
equipment or fixtures now or hereafter owned by the Company or any of is
Subsidiaries securing indebtedness permitted by Section 7.12(d); (j) deposits or
other obligations in the form of a performance bond, if any, to secure the U.N.
Guaranty; (k) until the making of the initial UK Loans and the issuance of the
initial UK Letters of Credit, Liens in the assets of LEP UK (and related
Negative Pledges with respect thereto) in favor of National Westminster Bank,
plc, as security representative for the account of various other financial
institutions, to secure the Indebtedness described in Section 7.12(k); and
(l) the Negative Pledge contained in the Indenture governing the Senior Notes,
as in effect on the date of this Agreement.
7.12 INDEBTEDNESS AND CONTINGENT OBLIGATIONS. Create, incur, assume
or suffer to exist any Indebtedness or Contingent Obligation, EXCEPT: (a)
existing Indebtedness and Contingent Obligations disclosed on Schedule 7.12A and
any Indebtedness or Contingent Obligation existing on the Closing Date in an
amount less than $500,000, in the aggregate; (b) Indebtedness and Contingent
Obligations in favor of the Lenders or the Administrative Agent under the Loan
Documents; (c) Indebtedness of Borrowers and their Restricted Subsidiaries to
and Contingent Obligations of Borrowers and their Restricted Subsidiaries in
favor of , the Company or any Borrower, so long as any such Indebtedness is
documented under by a Drop-Down Note Pledge and Security Agreement or otherwise
evidenced in a manner satisfactory to the Administrative Agent, and (except in
the case of the Borrowers, LEP Canada and its Canadian Subsidiaries), is secured
pursuant to a Drop-Down Note Pledge and Security Agreement; (d) Indebtedness
secured solely by real property, equipment and fixtures; (e) Indebtedness to
Representative Agents and Contractors for services rendered; (f) Indebtedness to
Contractors incurred in connection with the advance payment by such Contractors
of vehicle insurance premiums to the Company or any of its Subsidiaries; (g)
purchase money Indebtedness and Capital Lease obligations in an amount which
does not exceed $30,000,000; (h) other Indebtedness or Contingent Obligation
with an aggregate face amount not to exceed $10,000,000, so long as such
Indebtedness or Contingent Obligation is unsecured, and the aggregate of all
principal, interest, and fee payments due
<PAGE>
thereunder in any Fiscal Year does not exceed $2,000,000; (i) interest rate and
currency hedging agreements and arrangements on commercially reasonable terms;
(j) Contingent Obligations of the Company or any of its Subsidiaries under the
U.N. Guaranty; (k) Indebtedness and Contingent Obligations of LEP UK to the
lenders described on Schedule 7.12B (but not any refinancings thereof); and (l)
Subordinated Obligations incurred when no Default or Event of Default exists..
7.13 CAN PLANS. (a) Cause, allow or permit any CAN Plan to be other
than duly qualified and administered in all respects in compliance with all
applicable Laws (including regulations, orders and directives) and the terms of
the CAN Plan and any agreement relating thereto; (b) cause, allow or permit any
CAN Plan to have any unfunded liability or contribution due and not paid which
does or is capable of giving rise to any trust or Lien; (c) fail to ensure that
all amounts required to be paid by it under or in connection with any CAN Plan
are paid when due and, notwithstanding the foregoing, that written notice is
provided to the Administrative Agent of any amount due and unpaid under or in
connection with any CAN Plan; (d) cause, allow or permit any liability upon it
or Lien on any of its Property to arise in respect of any CAN Plan; (e) cause,
allow or permit any Termination Event to occur in respect of any CAN Plan which
could reasonably be expected to have a Material Adverse Effect; (f) make any
payments in respect of any CAN Plan in excess of any minimum amounts required to
be made by law and the terms of the CAN Plan; (g) after the Closing Date, amend
or create any CAN Plan, if the result thereof is to increase the payment
obligations in respect of any CAN Plan or the amounts of any solvency
deficiencies or liabilities on wind up (in whole or in part) of any CAN Plan
which could reasonably be expected to have a Material Adverse Effect; (h)
maintain any new trust accounts for payments or contributions in respect of any
CAN Plan other than those opened in substitution for existing trust accounts;
and (i) fail to ensure that all contributions in respect of any CAN Plan are
actually paid to the trustee under such CAN Plan prior to the date when due.
The Company hereby irrevocably directs the trustee under the CAN Plans to apply
an appropriate amount of any current credit to reduce and eliminate (to the
extent of available surpluses under the CAN Plans) any Plan contributions or
payments not made when due.
7.14 TRANSACTIONS WITH AFFILIATES. Enter into any transaction of any
kind with any Affiliate of the Company other than (a) transactions between or
among the Company and the Borrowers or between or among the Borrowers and their
respective wholly-owned Subsidiaries, (b) transactions in the ordinary course
and on terms at least as favorable to the Company and its Restricted
Subsidiaries as would be the case in an
<PAGE>
arm's-length transaction between unrelated parties of equal bargaining power,
(c) transactions involving the payment of a management or other similar fee to
each of the Sponsors on the Closing Date in the amount of $1,250,000 and
thereafter periodically in accordance with the terms of the Management
Agreements, not to exceed $700,000, in the aggregate per annum, and
(d) transactions with Unrestricted Subsidiaries in the ordinary course and in
accordance with past practices conducted prior to the Closing Date.
7.15 EBITDA. Permit EBITDA for the twelve month period ending on the
last day of any Fiscal Quarter to be less than the amounts set forth below
opposite that Fiscal Quarter or the period in which that Fiscal Quarter occurs:
<PAGE>
FISCAL QUARTER ENDING AMOUNT
--------------------- ------
December 31, 1997 and
March 31, 1998 $18,000,000
June 30, 1998 through and including
September 30, 1999 $21,000,000
December 31, 1999 through and including $24,000,000
September 30, 2000
December 31, 2000 through and including $29,000,000
September 30, 2001
December 31, 2001 and thereafter $32,000,000;
PROVIDED THAT (a) the amount set forth above with respect to each Fiscal Quarter
shall be reduced by that portion of EBITDA for the twelve month period
immediately preceding the last day of that Fiscal Quarter which is attributable
to any Subsidiaries of the Company which are the subject of a Disposition or
other sale permitted hereunder, and (b) for the purpose of calculating
compliance with this covenant, to the extent that such twelve month period
contains any period prior to September 30, 1997, EBITDA shall be calculated as
described on Schedule 7.15 to the extent set forth thereon on a pro forma basis
for that period.
7.16 INTEREST CHARGE COVERAGE RATIO. As of the last day of any Fiscal
Quarter which is a Test Quarter, permit the Interest Charge Coverage Ratio to be
less than the ratio set forth opposite the period in which that Fiscal Quarter
occurs:
FISCAL QUARTER ENDING DURING THE PERIOD RATIO
--------------------------------------- -----
Closing Date through and
including September 30, 2000 2.00:1.00
Thereafter 2.25:1.00
7.17 HOLDING COMPANY RESTRICTIONS. Allow or permit any Person owning
any interest, directly or indirectly, in any Canadian Subsidiary, to create,
incur, assume or suffer to exist any Indebtedness or Contingent Obligation, or
to own or hold any asset other than equity interests in a Canadian Subsidiary;
PROVIDED that LEP Canada may incur Indebtedness in favor of ILLCAN, Inc. and
ILLSCOT, Inc. pursuant to Section 7.12.
<PAGE>
7.18 NEW SUBSIDIARIES.
(a) Fail to cause each new Active Subsidiary hereafter formed or
acquired by the Company (and any Restricted Subsidiary which hereafter
becomes an Active Subsidiary) to execute and deliver when so formed or
acquired:
(i) a Drop-Down Note (in the case of a Subsidiary of the
Domestic Borrowers);
(ii) a joinder to the appropriate Guaranty (as determined by
the Administrative Agent);
(iii) joinders to the related Pledge and Security Agreement,
Drop Down Note Pledge and Security Agreement and to the Drop Down Note
Subordination Agreement; and
(iv) such financing statements and other instruments,
documents and agreements as the Administrative Agent or the Majority
Lenders may request in relation thereto.
(b) Fail to deliver or cause to be delivered to the
Administrative Agent, in pledge to secure the Obligations:
(i) each Drop-Down Note referred to above, together with
the original Drop-Down Note Pledge and Security Agreement executed in
relation thereto; and
(ii) 100% of the capital stock and other equity securities
of such Active Subsidiaries, except for Foreign Subsidiaries, as to
which 66% of such capital stock and other equity securities shall be
delivered.
7.19 AMENDMENTS TO SUBORDINATED OBLIGATIONS. Amend or modify any
Subordinated Obligations in a manner which is materially adverse to the
interests of the Creditors, or in any event enter into any amendment or
modification thereto without 30 days prior written notice to the Administrative
Agent.
<PAGE>
ARTICLE VIII
INFORMATION AND REPORTING REQUIREMENTS
8.1 FINANCIAL AND BUSINESS INFORMATION. So long as any Advance
remains unpaid, or any other Obligation remains unpaid or unperformed, or any
portion of the Commitments remains in force, the Company and, to the extent
applicable, each Borrower shall, unless the Administrative Agent (with the
approval of the Majority Lenders) otherwise consents, deliver, at the Company's
and the Borrowers' sole expense:
(a) to each Lender, as soon as practicable, and in any event
within 30 days after the end of each calendar month and within 45 days
after the end of each calendar quarter, the consolidated and
consolidating balance sheets of the Company and its Subsidiaries, as at
the end of such calendar month or quarter, consolidated and consolidating
statements of income of the Company and the Borrowers, and consolidated
and consolidating cash flow statements for the Company and its
Subsidiaries for such calendar month or quarter and for the portion of
the Fiscal Year ended with such calendar month or quarter. Such
consolidated financial statements shall be in comparative form with such
figures for the current budget for both month- and year-to-date and a
financial narrative explaining all material variances from the budget.
Such financial statements shall be prepared in accordance with Generally
Accepted Accounting Principles (other than any requirement for footnote
disclosures, supporting schedules and certain other informational
disclosures) both in reasonable detail, subject only to normal quarterly
and year-end accruals and audit adjustments;
(b) to the Lenders, concurrent with the delivery of the monthly
financial statements required to be delivered pursuant to Section 8.l(a)
hereof, a certificate of a Senior Officer of the Company and each
Borrower stating that the Best Knowledge of such Person (in the case of
LEP UK, as to itself only), no Event of Default has occurred and is
continuing or, if an Event of Default has occurred and is continuing, a
statement as to the nature thereof and the action that the Company and
the Borrowers propose to take with respect thereto;
(c) to the Administrative Agent, promptly, such additional
financial and other information including, without limitation, financial
statements of the Company and its Restricted Subsidiaries and information
regarding the Collateral as the Administrative Agent or any of the
Lenders may from time to
<PAGE>
time reasonably request including, without limitation, such information
as is necessary for the Lenders to participate out any of its interests
in the Loans hereunder or to enable other financial institutions to
become signatories hereto and statements of income for any or all
segments of the Company's and its Restricted Subsidiaries' operations;
(d) to the Administrative Agent, concurrent with the delivery of
the monthly financial statements required to be delivered pursuant to
Section 8.l(a) hereof, a Receivables aging report as of the last day of
such calendar month;
(e) to the Administrative Agent, concurrent with the delivery of
the monthly financial statements required to be delivered pursuant to
Section 8.1(a) hereof, a written report (i) listing the addresses of all
new locations, offices, or places of business opened or closed by the
Company or any Restricted Subsidiary, or to which the Company or any
Restricted Subsidiary has relocated its headquarters, during that
calendar month, and (ii) listing all bank accounts opened or closed by
the Company or any Restricted Subsidiary during that calendar month;
(f) to the Administrative Agent, copies of any management
reports submitted to the Company or any of its Restricted Subsidiaries by
independent accountants in connection with the accounts or books of the
Company or any of its Restricted Subsidiaries, or any audit of any of
them;
(g) to the Lenders, as soon as practicable, and in any event
within 105 days after the end of each Fiscal Year, (i) the audited
consolidated balance sheets of the Company and its Subsidiaries as at the
end of such Fiscal Year, (ii) audited consolidated statements of income
for such Fiscal Year, and (iii) audited consolidated statements of cash
flow for such Fiscal Year, all in reasonable detail. Such financial
statements shall be prepared in accordance with Generally Accepted
Accounting Principles, consistently applied, and such consolidated
balance sheet and consolidated statements shall be accompanied by a
report and opinion of Deloitte & Touche or other independent public
accountants of recognized standing selected by the Company and if other
than a "Big Six" public accounting firm, reasonably satisfactory to the
Majority Lenders, which report shall be based on an audit conducted in
accordance with generally accepted
<PAGE>
auditing standards as at such date, and which opinion shall be an
unqualified opinion;
(h) to the Lenders, as soon as practicable, and in any event
prior to the commencement of each Fiscal Year, a budget by month for that
Fiscal Year, INCLUDING, in each case, projected consolidated balance
sheets, statements of income and statements of cash flow of the Company
and its Subsidiaries, all in reasonable detail;
(i) to the Administrative Agent, promptly after the same are
available, copies of each annual report, proxy or financial statement or
other report or communication sent to the shareholders of the Company
generally and copies of all annual, regular, periodic and special reports
and registration statements which the Company may file or be required to
file with the Commission under Sections 13 or 15(d) of the Securities
Exchange Act of 1934;
(j) to the Administrative Agent, promptly after request
therefor, copies of any other specific report or other document that was
filed by the Company or any of its Restricted Subsidiaries with any
Governmental Agency,
(k) to the Administrative Agent, promptly after request
therefor, a copy of the Form 5500 series report of each Pension Plan
maintained by the Company or any of its Subsidiaries as filed with the
Internal Revenue Service for each Fiscal Year;
(l) to the Administrative Agent, promptly upon a Senior Officer
of the Company or any Borrower becoming aware, and in any event within
ten Business Days after becoming aware, of the occurrence of any (i)
"reportable event" (as such term is defined in Section 4043 of ERISA)
(other than a reportable event that is not subject to the provision for
30-day notice to the PBGC) or (ii) "prohibited transaction" (as such term
is defined in Section 406 of ERISA or Section 4975 of the Code) or (iii)
Termination Event in connection with any Pension Plan or any trust
created thereunder, written notice specifying the nature thereof and
specifying what action the Company or any of its Subsidiaries is taking
or proposes to take with respect thereto, and, when known, any action
taken by the Internal Revenue Service or any other Governmental Agency
with respect thereto;
<PAGE>
(m) to the Administrative Agent, as soon as practicable, and in
any event within two Business Days after a Senior Officer of the Company
or any Borrower becomes aware of the existence of any condition or event
which constitutes a Default, written notice specifying the nature and
period of existence thereof and specifying what action the Company or any
of its Subsidiaries are taking or propose to take with respect thereto;
(n) to the Administrative Agent, within two Business Days of a
Senior Officer of the Company or any Borrower becoming aware that (i) any
Person commenced a legal proceeding with respect to a claim against the
Company or any of its Restricted Subsidiaries that is $3,000,000 or more
in excess of the amount thereof that is fully covered by insurance
(subject to applicable deductibles and retentions), (ii) any creditor or
lessor under a written credit agreement with respect to Indebtedness in
excess of $3,000,000 or lease involving unpaid rent in excess of
$1,500,000 has asserted a default thereunder on the part of the Company
or any of its Restricted Subsidiaries, (iii) any Person commenced a legal
proceeding with respect to a claim against the Company or any of its
Restricted Subsidiaries in excess of $3,000,000 under a contract that is
not a credit agreement or a lease, (iv) any labor union has notified the
Company or its Restricted of its intent to strike the Company or any of
its Restricted Subsidiaries on a date certain, which strike could
reasonably be expected to have a Material Adverse Effect, or (v) any
other event or circumstance occurs or exists (other than matters of a
general economic nature) that would constitute a Material Adverse Effect,
in each case a written notice describing the pertinent facts relating
thereto and what action the Company or any of its Subsidiaries are taking
or propose to take with respect thereto;
(o) as promptly as practicable, and in any event not later than
10 days following the date upon which the Company becomes aware that any
Change of Control Event is reasonably likely to occur, notice thereof and
a written description of the manner in which such Change of Control Event
is likely to occur; and
(p) such other data and information as from time to time may be
reasonably requested by the Administrative Agent.
<PAGE>
8.2 COMPLIANCE CERTIFICATES. So long as any Advance remains unpaid,
or any other Obligation remains unpaid or unperformed, or any portion of the
Commitment remains in force, the Company and the Borrowers shall deliver to the
Administrative Agent, at the Company's sole expense, concurrently with the
financial statements required pursuant to Section 8.1(a) at the end of a Fiscal
Quarter in each Fiscal Year, a Compliance Certificate signed by a Senior Officer
of the Company and each Borrower.
8.3 BORROWING BASE CERTIFICATES. So long as any Advance remains
unpaid, or any other Obligation remains unpaid or unperformed, or any portion of
the Commitment remains in force, the Borrowers shall deliver periodic Borrowing
Base Certificates to the Administrative Agent on a monthly basis, together with
a summary accounts receivable aging and other information reasonably requested
by the Administrative Agent, not later than the 15th day following the end of
each calendar month, at their sole expense. Each Borrowing Base Certificate
shall set forth the Domestic Borrowing Bases and the UK Borrowing Base as of the
last business day of the preceding calendar month. In the event that the sum of
Average Availability for any calendar month is less than $20,000,000 then, upon
the request of the Administrative Agent, Borrower shall thereafter submit weekly
Borrowing Base Certificates not later than 10:30 a.m. New York time on the
second Business Day of each week, setting forth calculations of the Domestic
Borrowing Bases and the UK Borrowing Base as of the close of business on the
last Business Day of the immediately preceding week, PROVIDED that Borrowers'
obligations to deliver weekly Borrowing Base Certificates as aforesaid shall
terminate when the sum of Average Domestic Availability PLUS Average UK
Availability again exceeds $20,000,000 for a full calendar month period.
<PAGE>
ARTICLE IX
CONDITIONS
9.1 INITIAL ADVANCES. The effectiveness of the Agreement and the
obligations of each Lender hereunder are subject to the following conditions
precedent:
(a) The Administrative Agent shall have received all of the
following, each of which shall be an original unless otherwise specified,
each properly executed by a Responsible Official of each party thereto,
each dated as of the Closing Date and each in form and substance
satisfactory to the Administrative Agent and its legal counsel (unless
otherwise specified or, in the case of the date of any of the following,
unless the Administrative Agent otherwise agrees or directs):
(i) executed counterparts of the Agreement, sufficient in
number for distribution to the Lenders and the Company;
(ii) Domestic Notes executed by the Domestic Borrowers in
favor of each Lender in an amount each to that Lender's Pro Rata Share
of the Domestic Commitment;
(iii) the Guaranties executed by the Company and each Active
Subsidiary, other than LEP UK;
(iv) with respect to the Company and each Active Subsidiary
of the Company, such documentation as the Administrative Agent may
reasonably require to establish the due organization, valid existence
and good standing thereof , its qualification to engage in business in
each jurisdiction in which it is engaged in business or required to be
so qualified, its authority to execute, deliver and perform any Loan
Documents to which it is a Party, and the identity, authority and
capacity of each Responsible Official thereof authorized to act on its
behalf, INCLUDING, without limitation, certified copies of articles of
incorporation and amendments thereto, bylaws and amendments thereto,
partnership agreements and amendments thereto, certificates of good
standing and/or qualification to engage in business, tax clearance
certificates, certificates of corporate resolutions, incumbency
certificates, Certificates of Responsible Officials, and the like;
<PAGE>
(v) the Pledge and Security Agreements executed by the
Company and each Active Subsidiary, other than LEP UK, LEP Canada, and
LIWDE, together with the original stock certificates evidencing the
stock pledged pursuant thereto and undated stock powers duly executed
in blank in connection therewith and executed originals of each note
pledged pursuant thereto, the delivery of which is required hereunder
(each of which has been duly indorsed to the Administrative Agent);
(vi) the Canadian Security Documents executed by LEP Canada;
(vii) Drop-Down Notes executed by each Restricted Subsidiary
of the Company;
(viii) the Drop-Down Note Pledge and Security Agreements,
executed by each of the Active Subsidiaries, other than the Borrowers
and LEP Canada, and the Drop-Down Note Subordination Agreement
executed by all parties thereto;
(ix) Uniform Commercial Code or Personal Property Security
Act financing statements, registrations or filing copies of any of the
Loan Documents, or notices thereof, as applicable, in form and
substance acceptable to the Administrative Agent and acceptable for
recording with the appropriate Governmental Agency;
(x) the Opinions of Counsel (other than that of
Freshfields);
(xi) such documentation with respect to the Concentration
Accounts, the Depositary Accounts, the Blocked Accounts and the
Lockbox Accounts (other than with respect to the deposit accounts and
accounts receivable of LEP UK) existing as of the Closing Date as may
reasonably be requested by Administrative Agent;
(xii) a Certificate of a Responsible Official signed by a
Senior Officer of the Company and each Domestic Borrower certifying
that
<PAGE>
the conditions specified in Sections 9.1(c), 9.1(d), 9.1(e) and 9.1(f)
of the Agreement have been satisfied;
(xiii) a Certificate of a Responsible Official of the Company
and each Domestic Borrower signed by a Senior Officer thereof,
certifying as to the Solvency of the Company, the Domestic Borrowers
and their Restricted Subsidiaries as of the Closing Date;
(xiv) a completed Borrowing Base Certificate:
(xv) the payment of all fees and expenses of the
Administrative Agent required hereby or pursuant to the terms of the
Fee Letter; and
(xvi) a Certificate of a Responsible Official, signed by a
Senior Officer of the Company, attaching correct copies of each of the
LIW Acquisition Documents and the Indenture governing the Senior
Notes.
(b) the Prior Agent shall have delivered all of the Pledged
Collateral in its possession to the Administrative Agent, and shall have
executed all assignments of financing statements, Personal Property
Security Act filings and other instruments of assignment with respect to
the Liens granted pursuant to the Existing Loan Agreement in favor of the
Administrative Agent as the Administrative Agent shall have requested,
PROVIDED that promptly following the Closing Date the Administrative
Agent shall execute and deliver termination statements and partial
releases of any and all such filings except those which relate to the
Pledged Collateral.
(c) As of the Closing Date, the representations and warranties
contained in Article V of this Agreement shall be true and correct.
(d) As of the Closing Date, the Company and its Subsidiaries and
any other Parties shall be in compliance with all the terms and
provisions of the Loan Documents, and no Default or Event of Default
shall have occurred and be continuing.
<PAGE>
(e) No material adverse change in the property, operations,
business prospects, profits or financial condition of (i) the Company and
its Subsidiaries since December 31, 1996 or (ii) LIW and its Subsidiaries
since December 31, 1996.
(f) The Company shall have received the proceeds of the Senior
Notes, and the terms of the instruments, documents and agreements governing
the Senior Notes shall be acceptable to the Administrative Agent in its
sole discretion.
9.2 CONDITIONS TO AVAILABILITY OF THE UK COMMITMENT. In addition to
the conditions set forth in Section 9.1, the obligations of the Creditors to
make UK Loans and issue UK Letters of Credit are also subject to the following
conditions precedent:
(a) The Administrative Agent shall have received all of the
following, each of which shall be an original unless otherwise specified,
each properly executed by a Responsible Official of each party thereto,
each dated as of the date of the first extension of credit under the UK
Commitment or another date satisfactory to the Administrative Agent and
each in form and substance satisfactory to the Administrative Agent and its
legal counsel (unless otherwise specified or, in the case of the date of
any of the following, unless the Administrative Agent otherwise agrees or
directs):
(i) the UK Note executed by LEP UK in favor of ING UK in
the principal amount of $30,000,000;
(ii) the Participation Agreement executed by each Lender in
favor of the Administrative Agent and ING UK;
(iii) the UK Security Documents, together with any
instruments, documents and agreements reasonably requested by the
Administrative Agent to establish and perfect the Lien of the
Administrative Agent in the Collateral described therein;
(iv) a Certificate of a Responsible Official of LEP UK
signed by a Senior Officer thereof, certifying as to the Solvency of
LEP UK as of the date of such UK Loans and UK Letters of Credit; and
<PAGE>
(v) the Opinion of Freshfields.
(b) LIWDE shall have executed its Pledge and Security Agreement
and shall have pledged 66 % of the capital stock of LIW owned by it to the
Administrative Agent pursuant to the Pledge and Security Agreement to which
LIWDE is a party.
(c) The Lien referred to in Section 7.11(k) and the Indebtedness
referred to in Section 7.12(k) shall have been discharged.
9.3 ANY ADVANCE. In addition to any applicable conditions precedent
set forth elsewhere in this Article IX, the obligation of each Lender to make
any Advance, and the obligation of the Issuing Lender to issue any Letter of
Credit, is subject to the following conditions precedent (unless the Majority
Lenders, in their sole and absolute discretion, agree otherwise):
(a) except as disclosed by the Company and approved in writing
by the Majority Lenders, the representations and warranties contained in
Article V (OTHER THAN Sections 5.5(a), 5,5(b) , 5.7 (first sentence), 5.8,
5.9, 5.12, 5.14, 5.15 and 5.19) shall be true and correct on and as of the
date of the Advance or the issuance of the Letter of Credit as though made
on that date;
(b) other than matters described in Schedule 5.11 or not
required as of the Closing Date to be therein described, there shall not be
then pending or threatened any action, suit, proceeding or investigation
against or affecting the Company or any of its Subsidiaries or any Property
of any of them before any Governmental Agency that could reasonably be
expected to have a Material Adverse Effect;
(c) no Default or Event of Default shall then exist;
(d) the Administrative Agent shall have timely received a
Request for Loan in compliance with Article II or, in the appropriate case,
a completed Request for Letter of Credit; and
(e) the Administrative Agent shall have received, in form and
substance reasonably satisfactory to the Administrative Agent, such other
<PAGE>
assurances, certificates, documents or consents related to the foregoing as
the Administrative Agent reasonably may require.
<PAGE>
ARTICLE X
EVENTS OF DEFAULT AND REMEDIES UPON EVENT OF DEFAULT
10.1 EVENTS OF DEFAULT. The existence or occurrence of any one or
more of the following events, whatever the reason therefor and under any
circumstances whatsoever, shall constitute an Event of Default:
(a) The Domestic Borrowers fail to pay any principal on any of
the Domestic Notes, or any portion thereof, when due; or
(b) LEP UK fails to pay any principal on the UK Note, or any
portion thereof, when due; or
(c) The Domestic Borrowers fail to pay any interest on any of
the Domestic Notes or any fee or other amount payable by the Domestic
Borrowers to any of the Creditors under any Loan Document within three
Business Days after the date when due; or
(d) LEP UK fails to pay any interest on the UK Note or any other
amount payable by LEP UK to any of the Creditors within three Business Days
after the date when due; or
(e) The Company or any of its Restricted Subsidiaries fails to
perform or observe any of the covenants contained in Article VII (other
than that contained in Section 7.18) or Section 8.l(p), or
(f) The Company, any of its Restricted Subsidiaries or any other
Party fails to perform or observe any other covenant or agreement contained
in any Loan Document on its part to be performed or observed within 15 days
after the giving of notice by the Administrative Agent at the request of
the Majority Lenders of such Default; or
(g) Any representation or warranty made in any Loan Document
proves to have been incorrect when made or reaffirmed in any respect that
is materially adverse to the interests of the Administrative Agent or the
Lenders, or
(h) The Company or any of its Restricted Subsidiaries:
<PAGE>
(i) fails to pay the principal, or any principal
installment, of any present or future indebtedness for borrowed money
of $5,000,000 or more, or any guaranty of present or future
indebtedness for borrowed money of $5,000,000 or more, on its part to
be paid, when due (or within any stated grace period), whether at the
stated maturity, upon acceleration, by reason of required prepayment
or otherwise or
(ii) fails to perform or observe any other term, covenant or
agreement on its part to be performed or observed, or suffers any
event to occur, in connection with any present or future indebtedness
for borrowed money of $5,000,000 or more, or of any guaranty of
present or future indebtedness for borrowed money of $5,000,000 or
more, if as a result of such failure or sufferance any holder or
holders thereof (or an agent or trustee on its or their behalf) has
the right to declare such indebtedness due before the date on which it
otherwise would become due; or
(i) Any event occurs which gives the holder or holders of any
Subordinated Obligation in a principal amount which is in excess of
$5,000,000 (or an agent or trustee on its or their behalf) the right to
declare such indebtedness due before the date on which it otherwise would
become due, or the right to require the issuer thereof to redeem or
purchase, or offer to redeem or purchase, all or any portion of any
Subordinated Obligation; or
(j) Any Loan Document, at any time after its execution and
delivery and for any reason other than the agreement of the Lenders or
satisfaction in full of all the Obligations, ceases to be in full force and
effect or is declared by a court of competent jurisdiction to be null and
void, invalid or unenforceable in any respect which, in any such event in
the reasonable opinion of the Majority Lenders, is materially adverse to
the interests of the Lenders; or any Party thereto denies that it has any
or further liability or obligation under any Loan Document, or purports to
revoke, terminate or rescind same; or
(k) A judgment against the Company or its Restricted
Subsidiaries is entered for the payment of money in excess of $3,000,000
and, absent procurement of a stay of execution, such judgment remains
unbonded or
<PAGE>
unsatisfied for thirty calendar days after the date of entry of judgment,
or in any event later than five days prior to the date of any proposed sale
thereunder; or
(l) The Company or any of its Restricted Subsidiaries institutes
or consents to any proceeding under a Debtor Relief Law relating to it or
to all or any part of its Property, or its board of directors or other
governing body authorizes the making of any arrangement, proposal or
commencement of any such proceeding, or files a petition or answer seeking
reorganization or arrangement or similar relief under any Debtor Relief
Law, or files a proposal or gives notice of its intent to make a proposal
under any Debtor Relief Law, or is unable or admits in writing its
inability to pay its debts as they mature, or makes an assignment for the
benefit of creditors; or applies for or consents to the appointment of any
receiver, trustee, custodian, conservator, liquidator, administrator,
monitor, rehabilitator or similar officer for it or for all or any part of
its Property; or any receiver, trustee, custodian, conservator, liquidator,
rehabilitator or similar officer is appointed without the application or
consent of that Person and the appointment continues undischarged or
unstayed for 60 calendar days; or any proceeding under a Debtor Relief Law
relating to any such Person or to all or any part of its Property is
instituted without the consent of that Person and continues undismissed or
unstayed for 60 calendar days; or any judgment, writ, warrant of attachment
or execution or similar process is issued or levied against all or any
material part of the Property of any such Person and is not released,
vacated or fully bonded within 30 calendar days after its issue or levy, or
(m) The occurrence of a Termination Event with respect to any
Pension Plan if the aggregate tax, penalty or other liability of the
Company and its ERISA Affiliates as a result thereof exceeds $5,000,000; or
the complete or partial withdrawal by the Company or any of its ERISA
Affiliates from any Multiemployer Plan if the aggregate liability of the
Company and its ERISA affiliates as a result thereof exceeds $5,000,000; or
(n) If any Person commences any proceeding or otherwise does or
fails to do any act or thing whereby any Pension Plan may be wound up,
terminated or discontinued in whole or in part, or which may give rise to
any Lien relating to any Pension Plan; or
<PAGE>
(o) Any determination is made by a court of competent
jurisdiction that payment of principal or interest or both shall be made to
the holder of any Subordinated Obligation which would not be permitted by
Section 7.3 or that any Subordinated Obligation is not subordinated in
accordance with its terms to the Obligations.
10.2 REMEDIES UPON EVENT OF DEFAULT. Without limiting any other
rights or remedies of the Administrative Agent or the Lenders provided for
elsewhere in this Agreement, or the Loan Documents, or by applicable Law, or in
equity, or otherwise:
(a) Upon the occurrence, and during the continuance, of any
Event of Default, other than an Event of Default described in
Section 10.1(l) with respect to the Company or any of the Borrowers:
(i) the commitment to make Loans and Advances or issue
Letters of Credit and all other obligations of the Creditors and all
rights of the Company, the Borrowers and any other Parties under the
Loan Documents shall be suspended without notice to or demand upon the
Company or the Borrowers, which are expressly waived by the Company
and the Borrowers, EXCEPT that the Majority Lenders may waive the
Event of Default or, without waiving, determine, upon terms and
conditions satisfactory to the Majority Lenders, to reinstate the
Commitments and make further Loans and Advances, which waiver or
determination shall apply equally to, and shall be binding upon, all
the Lenders;
(ii) the Issuing Lender may, with the approval of the
Majority Lenders, and the Issuing Lender shall, upon the direction of
the Majority Lenders, demand immediate payment (a) by the Domestic
Borrowers of an amount equal to the aggregate effective face amount of
all outstanding Domestic Letters of Credit, and (b) by LEP UK of an
amount equal to the aggregate effective base amount of all outstanding
UK Letters of Credit, in each case to be held by the Issuing Lender in
an interest bearing cash collateral account as Collateral hereunder;
and
(iii) the Majority Lenders may request the Administrative
Agent to, and the Administrative Agent thereupon shall, terminate the
Commitment and declare all or any part of the unpaid principal of all
Notes,
<PAGE>
all interest accrued and unpaid thereon and all amounts payable under
the Loan Documents to be forthwith due and payable, whereupon the same
shall become and be forthwith due and payable, without protest,
presentment, notice of dishonor, demand or further notice of any kind,
all of which are expressly waived by the Company and the Borrowers.
(b) Upon the occurrence of any Event of Default described in
Section 10.l(l) with respect to the Company or any of the Borrowers:
(i) the commitment to make Loans and Advances or issue
Letters of Credit and all other obligations of the Creditors and all
rights of the Company and the Borrowers and any other Parties under
the Loan Documents shall terminate without notice to or demand upon
the Company or the Borrowers, which are expressly waived by the
Company and the Borrowers, EXCEPT that all the Lenders may waive the
Event of Default or, without waiving, determine, upon terms and
conditions satisfactory to all the Lenders, to reinstate the
Commitments and make further Loans and Advances, which waiver or
determination shall apply equally to, and shall be binding upon, all
the Lenders;
(ii) an amount equal to the aggregate amount of all
outstanding Letters of Credit shall be immediately due and payable to
the Issuing Lender without notice to or demand upon the Borrowers, and
such amount shall automatically be deemed to have been paid to the
Issuing Lender under such Letters of Credit to be held by the Issuing
Lender in an interest bearing cash collateral account as Collateral
hereunder; and
(iii) the unpaid principal of all Notes, all interest accrued
and unpaid thereon and all other amounts payable under the Loan
Documents shall be forthwith due and payable, without protest,
presentment, notice of dishonor, demand or further notice of any kind,
all of which are expressly waived by the Company and each Borrower.
(c) Upon the occurrence of any Event of Default, the
Administrative Agent shall, upon the direction of the Majority Lenders,
without notice to (EXCEPT as expressly provided for in any Loan Document)
or demand upon the Company or the Borrowers, which are expressly waived by
the Company
<PAGE>
and the Borrowers (EXCEPT as to notices expressly provided for in any Loan
Document), proceed in accordance with applicable Laws (but only with the
consent of the Majority Lenders) to protect, exercise and enforce their
rights and remedies under the Loan Documents (including the Collateral
Documents) against the Company, the Borrowers (but in the case of LEP UK,
only as to the obligations under the UK Commitment), the Restricted
Subsidiaries and any other Party and such other rights and remedies as are
provided by Law or equity. ING UK shall follow the instructions of the
Administrative Agent, given in accordance with this Section, with respect
to the obligations under the UK Commitment.
(d) The Administrative Agent shall not have the right, in its
sole discretion, to determine which rights, Liens or remedies it shall at
any time pursue, relinquish, subordinate, modify or take any other action
with respect thereto, without in any way modifying or affecting any of them
or any of the Lenders' rights hereunder; and any moneys, deposits,
receivables, balances or other property which may come into any Lender's or
the Administrative Agent's possession at any time or in any manner, may be
retained by such Lender or the Administrative Agent and applied to any of
the Obligations as provided under any of the Loan Documents or as provided
under applicable law.
(e) The order and manner in which the Lenders' rights and
remedies are to be exercised shall be determined by the Majority Lenders in
their sole discretion, and all payments received by the Administrative
Agent and the Lenders, or any of them, shall be applied first to the costs
and expenses (including attorneys' fees and disbursements payable pursuant
to Section 12.3) of the Administrative Agent, acting as Administrative
Agent, of ING UK and of the Lenders, and thereafter paid pro rata to the
Lenders in the same proportions that the aggregate Obligations owed to each
Lender under the Loan Documents bear to the aggregate Obligations owed
under the Loan Documents to all the Lenders, without priority or preference
among the Lenders. Notwithstanding the foregoing, the proceeds of any
Collateral provided by LEP UK and its Subsidiaries shall be applied solely
to the Obligations under the UK Commitment. Regardless of how each Lender
may treat payments for the purpose of its own accounting, for the purpose
of computing the Obligations hereunder and under the Notes, payments shall
be applied first, to the costs and expenses of the Administrative Agent,
acting as the Administrative Agent, ING UK, and the Lenders, as set forth
above, second, to the payment of accrued and unpaid interest due under any
Loan Documents to
<PAGE>
and including the date of such application (ratably, and without
duplication, according to the accrued and unpaid interest due under each of
the Loan Documents), and third, to the payment of all other amounts
(including principal and fees) then owing to the Administrative Agent, ING
UK or the Lenders under the Loan Documents. Notwithstanding the foregoing,
the proceeds of any Collateral provided by LEP Canada shall be applied
FIRST, to the costs and expenses of the Administrative Agent, SECOND, to
the principal amount of Obligations then owing to the Administrative Agent,
ING UK or the Lenders under the Loan Documents and THIRD, to the payment of
accrued and unpaid interest due under any of the Loan Documents and to all
other amounts then owing to the Administrative Agent, ING UK and the
Lenders under the Loan Documents. No application of payments will cure any
Event of Default, or prevent acceleration, or continued acceleration, of
amounts payable under the Loan Documents, or prevent the exercise, or
continued exercise, of rights or remedies of the Lenders hereunder or
thereunder or at law or in equity.
<PAGE>
ARTICLE XI
THE ADMINISTRATIVE AGENT
11.1 APPOINTMENT AND AUTHORIZATION. Each Lender hereby irrevocably
appoints ING Capital as successor Administrative Agent to the Prior Agent, and
authorizes ING Capital, as the Administrative Agent, to take such action as
agent on that Lender's behalf and to exercise such powers under the Loan
Documents as are delegated to the Administrative Agent by the terms thereof or
are reasonably incidental thereto, as determined by the Administrative Agent.
This appointment and authorization is intended solely for the purpose of
facilitating the servicing of the Loans and does not constitute appointment of
the Administrative Agent as trustee for any Lender or as representative of any
Lender for any other purpose and, EXCEPT as specifically set forth in the Loan
Documents to the contrary, the Administrative Agent shall each take such action
and exercise such powers only in an administrative and ministerial capacity.
The Administrative Agent is a representative of the Lenders only and assumes no
agency, trust, fiduciary or other special relationship with any other party
hereto, express or implied.
11.2 AGENT AND AFFILIATES. ING Capital (and each successor
Administrative Agent has the same rights and powers under the Loan Documents as
any other Lender and may exercise the same as though it were not the
Administrative Agent. The term "Lender" or "Lenders" includes ING Capital in
its individual capacity. ING Capital (and each successor Administrative Agent)
and its Affiliates may accept deposits from, lend money to and generally engage
in any kind of banking, trust or other business with the Company, any Subsidiary
thereof, or any Affiliate of the Company or any Subsidiary thereof, as if it
were not the Administrative Agent, and without any duty to account therefor to
the Lenders. No implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or otherwise exist
against the Administrative Agent.
11.3 PROPORTIONATE INTEREST OF THE LENDERS IN ANY COLLATERAL. The
Administrative Agent, on behalf of all the Lenders, shall hold in accordance
with the Loan Documents all items of any collateral or interests therein
received or held by the Administrative Agent. Subject to the Administrative
Agent's and the Lenders' rights to reimbursement for their costs and expenses
hereunder (INCLUDING attorneys' fees and disbursements and other professional
services) and subject to the application of payments
<PAGE>
in accordance with Section 10.2(d), each Lender shall have an interest in any
collateral or interests therein in the same proportions that the aggregate
Obligations owed such Lender under the Loan Documents bear to the aggregate
Obligations owed under the Loan Documents to all the Lenders, without priority
or preference among the Lenders.
11.4 LENDERS' CREDIT DECISIONS. Each Lender agrees that it has,
independently and without reliance upon the Administrative Agent, any other
Lender or the directors, officers, agents, employees or attorneys of the
Administrative Agent or any other Lender, and instead in reliance upon
information supplied to it by or on behalf of the Company and its Subsidiaries
and upon such other information as it has deemed appropriate, made its own
independent credit analysis and decision to enter into this Agreement. Each
Lender also agrees that it shall, independently and without reliance upon the
Administrative Agent, any other Lender or the directors, officers, agents,
employees or attorneys of the Administrative Agent or any other Lender, continue
to make its own independent credit analyses and decisions in acting or not
acting under the Loan Documents.
11.5 ACTION BY ADMINISTRATIVE AGENT.
(a) The Administrative Agent may assume that no Default has
occurred and is continuing, unless the Administrative Agent has received
notice from the Company or a Borrower stating the nature of the Default or
has received notice from a Lender stating the nature of the Default and
that such Lender considers the Default to have occurred and to be
continuing.
(b) The Administrative Agent has only those obligations under
the Loan Documents as are expressly set forth therein.
(c) Except for any obligation expressly set forth in the Loan
Documents and as long as the Administrative Agent may assume that no Event
of Default has occurred and is continuing, the Administrative Agent may,
but shall not be required to exercise its discretion to act or not act,
EXCEPT that the Administrative Agent shall be required to act or not act
upon the instructions of the Majority Lenders (or of all the Lenders, to
the extent required by Section 12.2) and those instructions shall be
binding upon the Administrative Agent and all the Lenders, PROVIDED that
the Administrative Agent shall not be required to act or not act if to do
so would be contrary to any Loan Document or to applicable Law or
<PAGE>
would result, in the reasonable judgment of the Administrative Agent in
substantial risk of liability to the Administrative Agent.
(d) If the Administrative Agent has received a notice specified
in Section 11.5(a), the recipient of such notice shall immediately give
notice thereof to the Lenders and shall act or not act upon the
instructions of the Majority Lenders (or of all the Lenders, to the extent
required by Section 12.2), PROVIDED that the Administrative Agent shall not
be required to act or not act if to do so would be contrary to any Loan
Document or to applicable Law or would result, in the reasonable judgment
of the Administrative Agent, in a substantial risk of liability to the
Administrative Agent.
(e) The Administrative Agent shall not have any liability to any
Lender for acting, or not acting, as instructed by the Majority Lenders (or
all the Lenders, if required under Section 12.2), notwithstanding any other
provision hereof.
11.6 LIABILITY OF ADMINISTRATIVE AGENT. Neither the Administrative
Agent nor any of its directors, officers, agents, employees or attorneys shall
be liable for any action taken or not taken by them under or in connection with
the Loan Documents, EXCEPT for their own gross negligence or willful misconduct.
Without limitation on the foregoing, the Administrative Agent and its directors,
officers, agents, employees and attorneys:
(a) May treat the payee of any Note as the holder thereof until
the Administrative Agent receives notice of the assignment or transfer
thereof, in form satisfactory to the Administrative Agent, signed by the
payee, and may treat each Lender as the owner of that Lender's interest in
the Obligations for all purposes of this Agreement until the Administrative
Agent receives notice of the assignment or transfer thereof, in form
satisfactory to the Administrative Agent, signed by that Lender.
(b) May consult with legal counsel (INCLUDING internal legal
counsel), accountants (INCLUDING internal accountants) and other
professionals or experts selected by it, or with legal counsel, accountants
or other professionals or experts for the Company or its Subsidiaries or
the Lenders, and shall not be liable
<PAGE>
for any action taken or not taken by it in good faith in accordance with
any advice of such legal counsel, accountants or other professionals or
experts.
(c) Shall not be responsible to any Lender for any statement,
warranty or representation made in any of the Loan Documents or in any
notice, certificate, report, request or other statement (written or oral)
given or made in connection with any of the Loan Documents.
(d) EXCEPT to the extent expressly set forth in the Loan
Documents, shall have no duty to ask or inquire as to the performance or
observance by the Company or its Subsidiaries of any of the terms,
conditions or covenants of any of the Loan Documents or to inspect any
collateral or the Property books or records of the Company or its
Subsidiaries.
(e) Will not be responsible to any Lender for the due execution,
legality, validity, enforceability, genuineness, effectiveness, sufficiency
or value of any Loan Document, any other instrument or writing furnished
pursuant thereto or in connection therewith, or any collateral.
(f) Will not incur any liability by acting or not acting in
reliance upon any Loan Document, notice, consent, certificate, statement,
request or other instrument or writing believed by it to be genuine and
signed or sent by the proper party or parties.
(g) Will not incur any liability for any arithmetical error in
computing any amount paid or payable by the Company or any Subsidiary or
Affiliate thereof or paid or payable to or received or receivable from any
Lender under any Loan Document, INCLUDING, without limitation, principal,
interest, commitment fees, Advances and other amounts; PROVIDED that,
promptly upon discovery of such an error in computation, the Administrative
Agent, the Co-Agents, the Lenders and (to the extent applicable) the
Company or its Subsidiaries or Affiliates shall make such adjustments as
are necessary to correct such error and to restore the parties to the
position that they would have occupied had the error not occurred.
11.7 INDEMNIFICATION. Each Lender shall, ratably in accordance with
its Pro Rata Share, indemnify and hold the Administrative Agent and its
directors, officers,
<PAGE>
agents, employees and attorneys harmless against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature, whatsoever (INCLUDING, without
limitation, attorneys' fees and disbursements) that may be imposed on, incurred
by or asserted against it or them in any way relating to or arising out of the
Loan Documents (other than losses incurred by reason of the failure of the
Borrowers to pay the indebtedness represented by the Notes) or any action taken
or not taken by it as Administrative Agent thereunder, EXCEPT such as result
from its own gross negligence or willful misconduct. Without limitation on the
foregoing, each Lender shall reimburse the Administrative Agent upon demand for
that Lender's ratable share of any cost or expense incurred by the
Administrative Agent in connection with the negotiation, preparation, execution,
delivery, amendment, waiver, restructuring, reorganization (INCLUDING a
bankruptcy reorganization), enforcement or attempted enforcement of the Loan
Documents, to the extent that the Company or any other Party is required by
Section 12.3 to pay that cost or expense but fails to do so upon demand.
Nothing in this Section shall entitle the Administrative Agent or the Co-Agents
to recover any amount from the Lenders if and to the extent that such amount has
theretofore been recovered from the Company or any of its Subsidiaries.
11.8 SUCCESSOR ADMINISTRATIVE AGENT. If the Administrative Agent
determines that for it to continue as Administrative Agent would result in a
conflict of interest, or would create an unacceptable risk of significant
liability of the Administrative Agent or to a third party, or would otherwise be
inadvisable under prevailing standards of banking prudence, it may resign as
such at any time upon prior written notice to the Company and the Lenders, to be
effective upon a successor's acceptance of appointment as Administrative Agent.
The Administrative Agent may also resign as such absent such a determination by
it with the consent of the Company, which shall not be unreasonably withheld, to
be likewise effective.
If the Administrative Agent so resigns,
(a) the Majority Lenders shall appoint a successor
Administrative Agent, who must be from among the Lenders and be reasonably
acceptable to the Company, PROVIDED that any resigning Administrative Agent
shall be entitled to appoint a successor Administrative Agent from among
the Lenders, subject to acceptance of appointment by that successor
Administrative Agent, if the Majority Lenders have not appointed a
successor within 30 days after the date the resigning Administrative Agent
gave notice of resignation;
<PAGE>
(b) upon a successor's acceptance of appointment as
Administrative Agent the successor will thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the resigning
or removed Administrative Agent;
(c) upon the effectiveness of any resignation, the resigning
Administrative Agent thereupon will deliver to the successor Administrative
Agent, all Records and all other books and records related to its former
role as Administrative Agent; and
(d) upon the delivery of those items specified in
Section 11.8(c), the resigning Administrative Agent thereupon will be
discharged from its duties and obligations thereafter arising under the
Loan Documents other than obligations arising as a result of any action or
inaction of the resigning Administrative Agent prior to the effectiveness
of such resignation.
11.9 RESIGNATION OF PRIOR AGENT; CONTINUED PROTECTION. Banque Paribas
hereby resigns as Administrative Agent under the Existing Loan Agreement, with
such resignation to be effective concurrently with the effectiveness of this
Agreement and the appointment of ING Capital as successor Administrative Agent.
The Prior Agent shall be entitled to the continued protection of Section 11.7 of
the Existing Loan Agreement with respect to all actions and omissions of the
Prior Agent as Administrative Agent under the Existing Loan Agreement.
11.10 ING UK. In order to facilitate the making of UK Loans, the
Administrative Agent and each Lender hereby designate ING UK as their
representative and agent for the making of UK Loans, and severally agree to
participate in each UK Loan in accordance with the terms of the Participation
Agreement. ING UK's appointment is intended to be administrative and
ministerial in nature, and (in its capacity as lender under the UK Commitment),
ING UK shall be treated as the agent and representative of the Administrative
Agent and shall be entitled to the indemnifications and other protections
afforded hereby to the Administrative Agent, MUTATIS MUTANDIS.
11.11 NO OBLIGATIONS OF THE COMPANY OR BORROWERS. Nothing contained in
this Article XI shall be deemed to impose upon the Company or the Borrowers any
obligation with respect to the due and punctual performance by the
Administrative Agent
<PAGE>
of its obligations to the Lenders under any provision of this Agreement and the
Company and the Borrowers shall have no liability to the Administrative Agent or
any of the Lenders with respect to any failure by the Administrative Agent or
any Lender to perform any of its obligations to the Administrative Agent or the
Lenders under this Agreement. Without limiting the generality of the foregoing,
where any provision of this Agreement relating to the payment of any amounts due
and owing under the Loan Documents provides that such payments shall be made by
the Company or any of the Borrowers to the Administrative Agent or ING UK for
the account of the Lenders, the Company's and the Borrowers' respective
obligations to the Lenders with respect to such payments shall be deemed to be
satisfied upon the making of such payments to the Administrative Agent or ING UK
in the manner provided by this Agreement.
<PAGE>
ARTICLE XII
MISCELLANEOUS
12.1 CUMULATIVE REMEDIES: NO WAIVER. The rights, powers, privileges
and remedies of the Administrative Agent, ING UK and the Lenders provided herein
or in any Note or other Loan Document are cumulative and not exclusive of any
right, power, privilege or remedy provided by Law or equity. No failure or
delay on the part of the Administrative Agent, ING UK or any Lender in
exercising any right, power, privilege or remedy may be, or may be deemed to be,
a waiver thereof; nor may any single or partial exercise of any right, power,
privilege or remedy preclude any other or further exercise of the same or any
other right, power, privilege or remedy. The terms and conditions of Article XI
(other than Section 11.8 and 11.9) hereof are inserted for the sole benefit of
the Administrative Agent, ING UK and the Lenders; the same may be waived in
whole or in part, with or without terms or conditions, with respect to any Loan
without prejudicing the Administrative Agent's, ING UK's or the Lenders' rights
to assert them in whole or in part with respect to any other Loan.
12.2 AMENDMENT: CONSENTS. No amendment, modification, supplement,
extension, termination or waiver of any provision of this Agreement or any other
Loan Document, no approval or consent thereunder, and no consent to any
departure by the Company, the Borrowers or any other Party therefrom, may in any
event be effective unless in writing signed by the Administrative Agent with the
approval in writing of the Majority Lenders (and, in the case of amendments,
modifications or supplements of or to any Loan Document to which the Company or
any of its Restricted Subsidiaries is a Party, the approval in writing of that
Party), and then only in the specific instance and for the specific purpose
given; and, without the approval in writing of all the Lenders, no amendment,
modification, supplement, termination, waiver or consent may be effective:
(a) To amend or modify the principal of, or the amount of
principal, principal prepayments or the rate of interest payable on, any
Note, or, except as provided herein, the amount of the Commitments or of
any commitment fee payable to any Lender or any other fee payable to any
Lender under the Loan Documents;
(b) To postpone any date fixed for any payment of principal of,
prepayment of principal of or any installment of interest on, any Note or
any
<PAGE>
installment of any commitment fee, or to extend the Maturity Date, or to
release any Collateral (except as specifically provided for in any Loan
Document);
(c) To amend or modify the provisions of (but not to grant a
waiver under) the definition of "Majority Lenders"; ARTICLES X OR XI; or
this Section; or
(d) To amend or modify any provision of this Agreement that
expressly requires the consent or approval of all the Lenders.
Any amendment, modification, supplement, termination, waiver or
consent pursuant to this Section shall apply equally to, and shall be binding
upon, all the Lenders, ING UK and the Administrative Agent. No amendment,
modification, supplement, termination, waiver or consent which has a negative
effect upon, or increases the obligations or liabilities of, ING UK or the
Administrative Agent, may be effective without the consent of ING UK or the
Administrative Agent.
12.3 COSTS, EXPENSES AND TAXES. The Company and each Borrower shall
each pay on demand the reasonable costs and expenses of the Administrative Agent
in connection with the negotiation, preparation, execution and delivery of the
Loan Documents, and of the Administrative Agent, ING UK and the Lenders in
connection with the amendment, waiver, refinancing, restructuring,
reorganization (INCLUDING a bankruptcy proposal, plan of arrangement or
reorganization) and enforcement or attempted enforcement of the Loan Documents,
and any matter related thereto, INCLUDING, without limitation, filing fees,
recording fees, title insurance fees, appraisal fees, search fees and other
out-of-pocket expenses and the reasonable fees and out-of-pocket expenses of any
legal counsel, independent public accountants and other outside experts retained
by the Administrative Agent and ING UK and INCLUDING, without limitation, any
costs, expenses or fees incurred or suffered by the Administrative Agent, ING UK
or any Lender in connection with or during the course of any bankruptcy or
insolvency proceedings or proceedings under any Debtor Relief Law of the
Company, or any Subsidiary of the Company; PROVIDED that the Administrative
Agent, ING UK and the Lenders shall, in connection with any such amendment,
waiver, refinancing, restructuring, reorganization, enforcement or attempted
enforcement of the Loan Documents be entitled to the services of only one firm
of independent public accountants and shall use their best efforts to avoid
duplicative efforts by legal counsel on behalf of Administrative Agent, and one
or more Lenders. Without limitation on the foregoing, the
<PAGE>
Company and each Borrower shall pay on demand the reasonable costs and expenses
of the Administrative Agent in connection with semi-annual audits of the
business of the Company and its Restricted Subsidiaries and the Collateral,
PROVIDED THAT the cost associated with each individual auditor engaged in any
such audit shall not exceed $350 per day. The Company and each Borrower each
shall pay any and all documentary and other taxes (other than income or gross
receipts taxes generally applicable to banks) and all costs, expenses, fees and
charges payable or determined to be payable in connection with the filing or
recording of this Agreement, any other Loan Document or any other instrument or
writing to be delivered hereunder or thereunder, or in connection with any
transaction pursuant hereto or thereto, and shall reimburse, hold harmless and
indemnify the Creditors from and against any and all loss, liability or legal or
other expense with respect to or resulting from any delay in paying or failure
to pay any tax, cost, expense, fee or charge or that any of them may suffer or
incur by reason of the failure of any Party to perform any of its Obligations.
Any amount payable to the Administrative Agent, ING UK or any Lender under this
Section shall bear interest at the Default Rate from the thirtieth day after a
demand for payment. Notwithstanding any provision of this Section to the
contrary, the obligations of LEP UK under this Section shall not extend to any
costs or expenses, taxes, fees or charges payable with respect to or relating to
the Domestic Commitment and which do not relate to the UK Commitment.
12.4 NATURE OF LENDERS' OBLIGATIONS. The obligations of the Lenders
hereunder are several and not joint or joint and several. Nothing contained in
this Agreement or any other Loan Document and no action taken by the
Administrative Agent, ING UK or the Lenders or any of them pursuant hereto or
thereto may, or may be deemed to, make the Lenders a partnership, an
association, a joint venture or other entity, either among themselves or with
the Company or any Affiliate of the Company. Each Lender's obligation to make
any Advance pursuant hereto is several and not joint or joint and several. A
default by any Lender will not increase the percentage of the Commitments
attributable to any other Lender.
12.5 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties contained herein or in any other Loan Document, or in any
certificate or other writing delivered by or on behalf of any one or more of the
Parties to any Loan Document, will survive the making of the Loans hereunder and
the execution and delivery of the Notes, and have been or will be relied upon by
the Administrative Agent and each Lender, notwithstanding any investigation made
by the Administrative Agent or any Lender or on their behalf.
<PAGE>
12.6 NOTICES. EXCEPT as otherwise expressly provided in the Loan
Documents:
(a) All notices, requests, demands, directions and other
communications provided for hereunder or under any other Loan Document must
be in writing and must be telecopied (followed within 48 hours by an
original of such notice, request, demand, direction or other communication
delivered in via one of the other methods specified in this Section,
hand-delivered or sent by reputable overnight carrier for next-day
delivery, addressed to the appropriate party at the address set forth on
the signature pages of this Agreement or other applicable Loan Document or,
as to any party to any Loan Document, at any other address as may be
designated by it in a written notice sent to all other parties to such Loan
Document in accordance with this Section.
(b) Except as otherwise expressly provided in any Loan Document,
if any notice, request, demand, direction or other communication required
or permitted by any Loan Document is given by telecopier, when sent, or if
given by personal delivery, when delivered, or if given by reputable
overnight carrier for next-day delivery, on the next Business Day following
the date of delivery to such carrier.
12.7 EXECUTION OF LOAN DOCUMENTS. Unless the Administrative Agent
otherwise specifies with respect to any Loan Document and except as specifically
provided in any other Loan Document, this Agreement and any other Loan Document
may be executed in any number of counterparts and any party hereto or thereto
may execute any counterpart, each of which when executed and delivered will be
deemed to be an original and all of which counterparts of this Agreement or any
other Loan Document, as the case may be when taken together will be deemed to be
but one and the same instrument. The execution of this Agreement or any other
Loan Document (except as specifically provided in such other Loan Document) by
any party hereto or thereto will no become effective until counterparts hereof
or thereof, as the case may be, have been executed by all the parties hereto or
thereto.
<PAGE>
12.8 BINDING EFFECT; ASSIGNMENT.
(a) This Agreement and the other Loan Documents shall be binding
upon and inure to the benefit of the Company, the Borrowers, the
Administrative Agent, each of the Lenders, and their respective successors
and assigns, EXCEPT that the Company, the Borrowers and their respective
Affiliates may not assign their rights hereunder or thereunder or any
interest herein or therein without the prior written consent of all the
Lenders. Each Lender shall have the right to sell or transfer any
participation interest in this Agreement, its Notes and its Pro Rata Share
in accordance with the provisions of this Section. Each Lender represents
that it is not acquiring its Note with a view to the distribution thereof
within the meaning of the Securities Act of 1933, as amended (subject to
any requirement that disposition of its Notes must be within the control of
such Lender).
(b) Any Lender may assign all or any portion of its Pro Rata
Share to a bank or other financial institution reasonably acceptable to the
Administrative Agent and the Borrowers; PROVIDED that
(i) such assignment shall be evidenced by a Commitment
Assignment and Acceptance;
(ii) such assignment (except to an assignee which is then a
Lender) shall be in a minimum amount of $10,000,000 and in integral
multiples of $1,000,000 thereafter, and shall be in a proportionate
share of both Commitments;
(iii) such assignee has a minimum net worth of $200,000,000;
(iv) the Administrative Agent consents to such assignment
and has received the payment of an assignment fee from such assignee
(for its sole account) of $3500; and
(v) unless an Event of Default has occurred and remains
continuing, the Company consents to such assignment (such consent not
to be unreasonably withheld).
<PAGE>
Upon the execution and delivery of the Commitment Assignment and
Acceptance, each assignee financial institution named therein shall be a
Lender for all purposes of this Agreement, with the respective Pro Rata
Share therein set forth and, to the extent of such Pro Rata Share, the
assigning Lender shall be released from its Obligations under this
Agreement. Each Borrower agrees that it shall execute and deliver (against
delivery by the assigning Lender to the Borrowers of its Notes) to each
such assignee financial institution Note evidencing that assignee's Pro
Rata Share of the Commitments and to the assigning Lender, Notes evidencing
the remaining such Pro Rata Share retained by the assigning Lender. Upon
request by any such assignee financial institution, the Company shall also
provide to that assignee financial institution such original or conformed
copies of documents described in Section 9.1(a) as may be requested by that
assignee financial institution, and shall execute and deliver such
instruments, documents and confirmations, including for the purposes of
protecting and preserving in favor of such assignee, any of the Liens of
the Administrative Agent and Lenders as may be requested.
(c) In the event that the Administrative Agent elects to assign
any portion of its Pro Rata Share which results in its Pro Rata Share being
less than $15,000,000 after giving effect to such assignment, it will use
its best reasonable efforts to assign its remaining Pro Rata Share within a
reasonable period of time. Upon the assignment of all of its Pro Rata
Share, the Administrative Agent will resign as Administrative Agent.
(d) By executing and delivering a Commitment Assignment and
Acceptance, the assignee financial institution thereunder acknowledges and
agrees that:
(i) other than the representation and warranty that it is
the legal and beneficial owner of the Pro Rata Share being assigned
thereby free and clear of an adverse claim, the assigning Lender has
made no representation or warranty and assumes no responsibility with
respect to any statements, warranties or representations made in or in
connection with this Agreement or the execution, legality, validity,
enforceability, genuineness or sufficiency of this Agreement or any
other Loan Document;
<PAGE>
(ii) the assigning Lender has made no representation or
warranty and assumes no responsibility with respect to the financial
condition of the Company and its Restricted Subsidiaries or the
performance by the Company or the Borrowers of the Obligations;
(iii) it has received a copy of this Agreement, together with
copies of the most recent financial statements delivered pursuant to
this Agreement and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to
enter into such Commitment Assignment and Acceptance;
(iv) it will, independently and without reliance upon the
Administrative Agent or any Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make
its own credit decisions in taking or not taking action under this
Agreement;
(v) it appoints and authorizes the Administrative Agent to
take such action and to exercise such powers under this Agreement as
are delegated to the Administrative Agent by Article XI; and
(vi) it will perform in accordance with their terms all of
the Obligations which by the terms of this Agreement are required to
be performed by it as a Lender.
(e) The Administrative Agent shall maintain at the
Administrative Agent's Office a copy of each Commitment Assignment and
Acceptance delivered to it and a register for recordation of the names and
addresses of the Lenders and their respective Pro Rata Shares. The entries
in such register shall be conclusive, in the absence of manifest error, and
the Company, the Borrowers, the Administrative Agent and the Lenders may
treat each Person whose name is recorded in the register as a Lender
hereunder for all purposes of this Agreement. Promptly following any entry
in the register, the Administrative Agent shall provide to the Company, the
Borrowers and the Lenders a revised listing of each Lender's Pro Rata Share
giving effect thereto.
(f) Each Lender may from time to time without the consent of the
Company, the Borrowers or the Administrative Agent grant participations to
one
<PAGE>
or more banks or other financial institutions in a portion of its Pro Rata
Share; PROVIDED, HOWEVER, that
(i) such Lender's obligations under this Agreement and each
of the other Loan Documents shall remain unchanged,
(ii) such Lender shall remain solely responsible to the
other parties hereto for the performance of such obligations,
(iii) the Company, the Borrowers, and the Creditors shall
continue to deal solely and directly with such Lender in connection
with such Lender's rights and obligations under this Agreement, and
(iv) the consent of the holder of such participation
interest shall not be required for amendments of waivers of provisions
of the Loan Documents other than those that
(A) increase the monetary amount of the Commitments
such that the participation interest would also increase,
(B) extend any maturity date or any other date upon
which any payment of money is due to the Lenders,
(C) reduce the rate of interest on the Notes, any fee
or any other monetary amount payable to the Lenders in which such
participant has a participating interest or
(D) release all or substantially all of the
Collateral, except as otherwise permitted under the Loan
Documents.
(v) such participation interest shall be in a minimum
amount of $5,000,000.
(g) Each Lender which hereafter becomes a party to this
Agreement by means of the execution of a Commitment Assignment and
Acceptance acknowledges receipt of a copy of the Participation Agreement,
shall
<PAGE>
be deemed to have become a party to the Participation Agreement by means of
its Commitment Assignment and Acceptance, and shall be deemed to have a
risk participation in the UK Loans and the UK Letters of Credit in
accordance with its Pro Rata Share in accordance therewith.
12.9 LIEN ON DEPOSITS AND PROPERTY IN POSSESSION OF ANY LENDER. As
security for the prompt payment and performance of all Obligations, each
Borrower hereby grants to the Administrative Agent, ING UK and the Lenders and
each of them a Lien on and a security interest in all its right, title, and
interest in and to any and all deposit accounts now or hereafter maintained with
the Administrative Agent, ING UK or any Lender and in and to any and all of its
Property and the proceeds thereof now or hereafter in the possession of the
Administrative Agent, ING UK or any Lender. The preceding sentence shall not be
construed as a grant of a Lien by LEP UK to secure any portion of the Domestic
Commitment. If an Event of Default has occurred and is continuing and has
resulted in the taking of the actions contemplated in Section 10.2(a)(iii) or
10.2(b), the Administrative Agent, ING UK or any Lender (but only with the
consent of the Majority Lenders) may, to the extent permitted by applicable
Laws, exercise its rights under Article 9 of the Uniform Commercial Code and
other applicable Laws and apply any funds in any deposit account maintained with
it by Borrower and any Property of the Borrower in its possession against the
Obligations.
12.10 SHARING OF SETOFFS. Each Lender severally agrees that if it,
through the exercise of any right of setoff, banker's lien or counterclaim
against the Borrower, or otherwise, receives payment of the Obligations held by
it that is ratably more than any other Lender, through any means, receives in
payment of the Obligations held by that Lender, then:
(a) The Lender exercising the right of setoff, banker's lien or
counterclaim or otherwise receiving such payment shall purchase, and shall
be deemed to have simultaneously purchased, from the other Lender a
participation in the Obligations held by the other Lender and shall pay to
the other Lender a purchase price in an amount so that the share of the
Obligations held by each Lender after the exercise of the right of setoff,
banker's lien or counterclaim or receipt of payment shall be in the same
proportion that existed, prior to the exercise of the right of setoff,
banker's lien or counterclaim or receipt of payment; and (b) such other
adjustments and purchases of participations shall be made from time to time
as shall be equitable to ensure that all of the Lenders share any
<PAGE>
payment obtained with respect to the Obligations ratably in accordance with
each Lender's share of the Obligations immediately prior to, and without
taking into account, the payment; PROVIDED that, if all or any portion of a
disproportionate payment obtained, as a result of the exercise of the right
of setoff, banker's lien, counterclaim or otherwise is thereafter recovered
from the purchasing Lender by the Borrowers or any Person claiming through
or succeeding to the rights of the Borrowers the purchase of a
participation shall be rescinded and the purchase price thereof shall be
restored to the extent of the recovery, but without interest. Each Lender
that purchases a participation in the Obligations pursuant to this Section
shall from and after the purchase have the right to give all notices,
requests, demands, directions and other communications under this Agreement
with respect to the portion of the Obligations purchased to the same extent
as though the purchasing Lender were the original owner of the Obligations
purchased. Each Borrower expressly consents to the foregoing arrangements
and agrees that any Lender holding a participation in an Obligation so
purchased may exercise any and all rights of setoff, banker's lien or
counterclaim with respect to the participation as fully as if the Lender
were the original owner of the Obligation purchased.
12.11 INDEMNITY. The Company and each Borrower agrees to indemnify,
save and hold harmless each Creditor and their respective Affiliates, directors,
officers, agents, attorneys and employees (collectively, the "INDEMNITEES") from
and against:
(a) Any and all claims, demands, actions or causes of action
that are asserted against any Indemnitee by any Person (other than another
Creditor) if the claim, demand, action or cause of action directly or
indirectly relates to a claim, demand, action or cause of action that such
Person asserts or may assert against the Company, the Borrowers, any
Affiliate thereof or any officer, director or shareholder of the Company,
the Borrowers or their Affiliates;
(b) Any and all claims, demands, actions or causes of action if
the claim, demand, action or cause of action arises out of or relates to
the Commitments, the use or contemplated use of proceeds of any Loan or
Letter of Credit, or the relationship of the Company, the Borrowers and the
Lenders under this Agreement;
(c) Any and all claims, demands, actions or causes of action if
the claim, demand, action or cause of action arises out of or relates to
any failure of
<PAGE>
the Company or any of its Subsidiaries to comply with any tax Law,
including without limitation, any failure to pay or remit any withholding
taxes;
(d) Any administrative or investigative proceeding by any
Governmental Agency arising out of or related to a claim, demand, action or
cause of action described in clauses (a), (b) or (c) above; and
(e) Any and all liabilities, losses, costs or expenses
(INCLUDING reasonable attorneys' fees and disbursements and other
professional services) that any Indemnitee suffers or incurs as a result of
the assertion of any foregoing claim, demand, action or cause of action;
PROVIDED that no Indemnitee shall be entitled to indemnification for any loss
caused by its own gross negligence or willful misconduct. If any claim, demand,
action or cause of action is asserted against any Indemnitee, such Indemnitee
shall promptly notify the Borrowers, but the failure to so promptly notify the
Borrowers shall not affect the Borrowers' obligations under this Section unless
such failure materially prejudices the Borrowers' right to participate in the
contest of such claim, demand, action or cause of action, as hereinafter
provided. Each Indemnitee may, and if requested by the Borrowers in writing
shall, in good faith contest the validity, applicability and amount of such
claim, demand, action or cause of action with counsel selected by such
Indemnitee and reasonably acceptable to the Borrowers, and shall permit the
Borrowers to participate in such contest. Any Indemnitee that proposes to
settle or compromise any claim or proceeding for which the Borrowers may be
liable for payment of indemnity hereunder shall give the Borrowers written
notice of the terms of such proposed settlement or compromise reasonably in
advance of settling or compromising such claim or proceeding and shall obtain
the Borrowers' prior consent, which consent shall not unreasonably be withheld.
In connection with any claim, demand, action or cause of action covered by this
Section against more than one Indemnitee, all such Indemnitees shall be
represented by the same legal counsel selected by the Indemnitees and reasonably
acceptable to the Borrowers; PROVIDED, that if such legal counsel determines in
good faith that representing all such Indemnitees would or could result in a
conflict of interest under Laws or ethical principles applicable to such legal
counsel or that a defense or counterclaim is available to an Indemnitee that is
not available to all such Indemnitees, then to the extent reasonably necessary
to avoid such a conflict of interest or to permit unqualified assertion of such
a defense or counterclaim, each Indemnitee shall be entitled to separate
representation by legal counsel selected by that Indemnitee and reasonably
acceptable to the Borrowers.
<PAGE>
Any obligation or liability of the Company and the Borrowers to any Indemnitee
under this Section shall survive the expiration or termination of this Agreement
and the repayment of all Loans and the payment and performance of all other
Obligations owed to the Lenders; PROVIDED, however, that such obligations or
liabilities shall not, from and after the date on which the Notes are fully paid
and the Commitments terminated, be deemed Obligations for any purpose under the
Loan Documents.
12.12 NONLIABILITY OF THE LENDERS. The Company and each Borrower
acknowledges and agrees that:
(a) Any inspections of any Property of the Company and its
Subsidiaries made by or through the Administrative Agent or the Lenders are
for purposes of administration of the Loan Documents only and the Company
and its Subsidiaries are not entitled to rely upon the same;
(b) By accepting or approving anything required to be observed,
performed, fulfilled or given to the Administrative Agent or the Lenders
pursuant to the Loan Documents, neither the Administrative Agent nor the
Lenders shall be deemed to have warranted or represented the sufficiency,
legality, effectiveness or legal effect of the same, or of any term,
provision or condition thereof, and such acceptance or approval thereof
shall not constitute a warranty or representation to anyone with respect
thereto by the Administrative Agent or the Lenders;
(c) The relationship between the Company, Borrowers and the
Creditors is, and shall at all times remain, solely that of borrowers and
lenders; and no Creditor shall under any circumstances be construed to be
partners or joint venturers of the Company or its Affiliates; no Creditor
shall under any circumstance be deemed to be in a relationship of
confidence or trust or a fiduciary relationship with the Company or its
Affiliates, or to owe any fiduciary duty to the Company or its Affiliates;
no Creditor undertakes or assumes any responsibility or duty to the Company
or its Affiliates to select, review, inspect, supervise, pass judgment upon
or inform the Company or its Affiliates of any matter in connection with
their Property or the operations of the Company or its Affiliates; the
Company and its Affiliates shall rely entirely upon their own judgment with
respect to such matters and any review, inspection, supervision, exercise
of judgment or supply of information undertaken or assumed by the
Administrative Agent, ING UK or the Lenders in connection with such matters
is solely for the
<PAGE>
protection of the Administrative Agent and the Lenders and neither the
Company nor any other Person is entitled to rely thereon; and
(d) No Creditor shall be responsible or liable to any Person for
any loss, damage, liability or claim of any kind relating to injury or
death to Persons or damage to Property or other loss, damage, liability or
claim caused by the actions, inaction or negligence of the Company and its
Affiliates and each Borrower hereby indemnities and holds each Creditor
harmless from any such loss, damage, liability or claim.
12.13 NO THIRD PARTIES BENEFITED. This Agreement is made for the
purpose of defining and setting forth certain obligations, rights and duties of
the Company, the Borrowers and the Creditors in connection with the Obligations,
and is made for the sole benefit of the Company, the Borrowers and the Creditors
and the Creditors' respective successors and assigns. EXCEPT as provided in
Sections 12.8 and 12.11, no other person shall have any rights of any nature
hereunder or by reason hereof.
12.14 CONFIDENTIALITY. Each Creditor agrees to hold any
confidential information that it may receive from the Company and its Restricted
Subsidiaries pursuant to this Agreement in confidence, EXCEPT for disclosure;
(a) to other Creditors;
(b) to legal counsel, accountants and other professional
advisors to the Company and its Subsidiaries or any Creditor;
(c) to regulatory officials having jurisdiction over the
Creditors;
(d) as required by Law or legal process (PROVIDED that in the
event any Creditor is so required to disclose any such confidential
information, that Creditor shall endeavor promptly to notify the Borrowers,
so that the Borrowers may seek a protective order or other appropriate
remedy) or in connection with any legal proceeding to which any Creditor or
the Borrowers are adverse parties;
(e) to another financial institution in connection with a
disposition or proposed disposition to that financial institution of all or
part of that
<PAGE>
Creditor's interests hereunder or a participation interest in its Notes,
provided that such disclosure is made subject to an appropriate
confidentiality agreement on terms substantially similar to this Section
and
(f) to prospective purchasers of any Collateral (OTHER than
competitors of the Company or its Subsidiaries unless all the Indebtedness
evidenced by the Notes is then due and payable) in connection with any
disposition thereof, PROVIDED that such disclosure is made subject to an
appropriate confidentiality agreement on terms substantially similar to
this Section.
For purposes of the foregoing, "confidential information" shall mean
all information respecting the Company or its Subsidiaries, OTHER THAN
(g) information previously filed with any Governmental Agency
and available to the public,
(h) information previously published in any public medium from a
source other than, directly or indirectly, that Creditor and
(i) information previously disclosed by the Company or any of
its Subsidiaries to any Person not associated with the Company without a
written confidentiality agreement.
Nothing in this Section shall be construed to create or give rise to
any fiduciary duty on the part of any Creditor to the Company or its
Subsidiaries.
12.15 HAZARDOUS MATERIALS INDEMNITY. The Company and each Borrower
hereby agrees to indemnify, hold harmless and defend (by counsel reasonably
satisfactory to the Administrative Agent) each of the Creditors and their
respective directors, officers, employees, agents, successors and assigns from
and against any and all claims, losses, damages, liabilities, fines, penalties,
charges, administrative and judicial proceedings and orders, judgments, remedial
action requirements, enforcement actions of any kind, and all costs and expenses
incurred in connection therewith (including but not limited to reasonable
attorneys' fees and expenses to the extent that the defense of any such action
has not been assumed by the Company and the Borrowers), arising directly or
indirectly, in whole or in part, out of the presence on or under any owned or
leased real property of any Hazardous Materials, or any releases or discharges
of any Hazardous Materials on,
<PAGE>
under or from any real property owned or leased by the Company or any of its
Restricted Subsidiaries and any activity carried on OR undertaken on or off such
owned or leased real property by the Company or any of its Subsidiaries or any
of their respective predecessors in title, whether prior to or during the term
of this Agreement, and whether-by the Company, its Restricted Subsidiaries or
any predecessor in title or any employees, agents, contractors or subcontractors
of the Company, its Restricted Subsidiaries or any predecessor in title, or any
third persons at any time occupying or present on any owned or leased real
property, in connection with the handling, treatment, removal, storage,
decontamination, clean-up, transport or disposal of any Hazardous Materials.
The foregoing indemnity shall further apply to any residual contamination on or
under such owned or leased real property, or affecting any natural resources,
and to any contamination of any property or natural resources arising in
connection with the generation, use, handling, storage, transport or disposal of
any such Hazardous Materials, and irrespective of whether any of such activities
were or will be undertaken in accordance with applicable Laws, but the foregoing
indemnity shall not apply to Hazardous Materials on such real property, the
presence of which is caused by any Creditor (or their respective agents,
employees, or consultants) or activities (other than environmental assessment or
response actions) carried on or undertaken by any Creditor, in each case
subsequent to their entry into such owned or leased real property pursuant to an
exercise of remedies hereunder. The Company and each Borrower hereby
acknowledges and agrees that, notwithstanding any other provision of this
Agreement or any of the other Loan Documents to the contrary, the obligations of
the Company and the Borrowers under this Section shall be unlimited personal
corporate obligations of the Company and the Borrowers and shall not be secured
by any deed of trust or mortgage on such real property. The Company and each
Borrower acknowledges that the Lenders' appraisal of such real property is such
that the Lenders are not willing to accept the consequences of inclusion of the
Obligations under this Section among the Obligations secured by any deed of
trust or mortgage and that the Lenders would not enter into this Agreement and
the transactions contemplated hereby but for the personal corporate liability
undertaken by the Company and the Borrowers for such Obligations. The Company
and each Borrower acknowledges and agrees, for purposes of this Section 12.15,
that the phrase "owned or leased real property" includes, without limitation,
any real property which is considered to, be in its or any Subsidiary's charge,
management or control or otherwise for which the Company or any of its
Subsidiaries may be liable or responsible under any Hazardous Materials Law.
<PAGE>
12.16 FURTHER ASSURANCES. The Company and its Subsidiaries shall, at
their expense and without expense to the Creditors, do, execute and deliver such
further acts and documents as any Creditor from time to time reasonably requires
for the assuring and confirming unto the Creditors of the rights hereby created
or intended now or hereafter so to be, or for carrying out the intention or
facilitating the performance of the terms of any Loan Document.
12.17 INTEGRATION. This Agreement, together with the other Loan
Documents, comprises the complete and integrated agreement of the parties on the
subject matter hereof and supersedes all prior agreements, written or oral, on
the subject matter hereof. In the event of any conflict between the provisions
of this Agreement and those of any other Loan Document, the provisions of this
Agreement shall control and govern; PROVIDED that the inclusion of supplemental
rights or remedies in favor of the Creditors in any other Loan Document shall
not be deemed a conflict with this Agreement. Each Loan Document was drafted
with the joint, participation of the respective parties thereto and shall be
construed neither against nor in favor of any party, but rather in accordance
with the fair meaning thereof.
12.18 GOVERNING LAW. EXCEPT TO THE EXTENT OTHERWISE EXPRESSLY
PROVIDED THEREIN, EACH LOAN DOCUMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAWS.
12.19 SEVERABILITY OF PROVISIONS. Any provision in any Loan Document
that is held to be inoperative, unenforceable or invalid as to any party or in
any jurisdiction shall, as to that party or jurisdiction, be inoperative,
unenforceable or invalid without affecting the remaining provisions or the
operation, enforceability or validity of that provision as to any other party or
in any other jurisdiction, and to this end the provisions of all Loan Documents
are declared to be severable.
12.20 INDEPENDENT REPRESENTATIONS, WARRANTIES, AND COVENANTS. Each
representation, warranty, and covenant in ARTICLES V, VI, VII and VIII is
independent of the other representations, warranties, land covenants in those
Articles; the breach of any such representation, warranty, or covenant shall not
be excused by the fact that the circumstances underlying such breach would be
permitted by another such representation, warranty or covenant.
<PAGE>
12.21 HEADINGS. Article and Section headings in this Agreement and
the other Loan Documents are included for convenience of reference only and are
not part of this Agreement or the other Loan Documents for any other purpose.
12.22 TIME OF THE ESSENCE. Time is of the essence in the Loan
Documents.
12.23 SUBMISSION TO JURISDICTION. Any legal action or proceeding
with respect to this Agreement or any other Loan Document and any action for
enforcement of any judgment in respect thereof may be brought in the courts of
the State of New York or of the United States of America for the Southern
District of New York, and, by execution and delivery of this Agreement, each
Borrower hereby accepts for itself and with respect to its property, generally
and unconditionally, the non-exclusive jurisdiction of the aforesaid courts and
appellate courts from any thereof. The Company and each Borrower irrevocably
consents to the service of process out of any of the aforementioned courts in
any such action or proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to that Person at its address set forth
opposite its signature below. The Company and each Borrower hereby irrevocably
waives any objection which it may now or hereafter have to the laying of venue
of any of the aforesaid actions or proceedings arising out of or in connection
with this Agreement or any other Loan Document brought in the courts referred to
above and hereby further irrevocably waives and agrees not to plead or claim in
any such court that any such action or proceeding brought in any such court has
been brought in an inconvenient forum. Nothing herein shall affect the right of
the Creditors or any other Person to serve process in any other manner permitted
by law or to commence legal proceedings or otherwise proceed against the Company
or any Borrowers in any other jurisdiction.
12.24 PURPORTED ORAL AMENDMENTS. THE COMPANY, EACH BORROWER AND THE
CREDITORS EXPRESSLY ACKNOWLEDGES THAT THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS MAY ONLY BE AMENDED OR MODIFIED, OR THE PROVISIONS HEREOF OR THEREOF
WAIVED OR SUPPLEMENTED, BY AN INSTRUMENT IN WRITING THAT COMPLIES WITH SECTION
12.2. EACH BORROWER AND EACH CREDITOR AGREES THAT THEY WILL NOT RELY ON ANY
COURSE OF DEALING, COURSE OF PERFORMANCE, OR ORAL OR WRITTEN STATEMENTS BY ANY
REPRESENTATIVE OF THE COMPANY, THE BORROWERS OR ANY CREDITOR THAT DOES NOT
COMPLY WITH SECTION 12.2 TO EFFECT AN AMENDMENT,
<PAGE>
MODIFICATION, WAIVER OR SUPPLEMENT TO THE AGREEMENT OF THE OTHER LOAN DOCUMENTS.
12.25 REPLACEMENT OF A LENDER. Each Lender agrees that if requested
by the Borrowers, it will assign its Pro Rata Share to a willing lender
designated by the Borrowers, and reasonably acceptable to the Administrative
Agent, if, within 90 days of such request, that Lender has claimed material
compensation pursuant to Section 3.5 (but only if the impositions referred to
therein are not imposed generally on commercial banks) or if, within 90 days of
such request, the Borrowers have become obligated for any material amount with
respect to that Lender pursuant to Section 3.8(d) or such Lender is unable to
make or maintain Eurodollar Loans.
12.26 WAIVER OF RIGHT TO TRIAL BY JURY. EACH PARTY TO THIS AGREEMENT
HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION
OR CAUSE OF ACTION ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH
OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM
WITH RESPECT TO ANY LOAN DOCUMENT, OR THE TRANSACTIONS RELATED THERETO IN EACH
CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT
OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY TRIAL COURT WITHOUT
A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR
A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE
PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
12.27 JUDGEMENT CURRENCY. If, for the purposes of obtaining
judgement in any court or obtaining an order enforcing a judgement, it becomes
necessary to convert any amount due under this Agreement in Dollars or in any
other currency (hereinafter referred to in this Section as the "First Currency")
into any other currency (hereinafter referred to in this Section as the "Second
Currency"), then the conversion shall be made at the Administrative Agent's spot
rate of exchange for buying the First Currency with the Second Currency
prevailing at the Administrative Agent's close of business on the Business Day
next preceding the day on which the judgement is given or (as the case may be)
the order is made. In the event that there is a difference between the rate of
exchange
<PAGE>
on the basis of which the amount of such judgement order is determined and the
rate of exchange prevailing on the date of payment, then the rate of exchange
prevailing on the date of payment shall govern the amount owing hereunder, and
each Borrower hereby agrees to pays such additional amount as may be necessary
to ensure that the amount paid on such date in the Second Currency is the amount
in said such Second Currency which, when converted at the Administrative Agent's
spot rate of exchange for buying the First Currency with the Second Currency
prevailing at the Administrative Agent's opening of business on the date of
payment, as the amount which was due under this Agreement in the First Currency
before such judgement was obtained or made. Any amount due from the Borrowers
to the Lenders under the second sentence of this Section will be due as separate
debt of the Company to the Lenders and shall not be affected by judgement or
order being obtained for any other sum due under or in respect of this
Agreement. The covenant contained in this Section shall survive the payment in
full of all of the other Obligations.
12.28 JOINT AND SEVERAL NATURE OF THE DOMESTIC OBLIGATIONS - SEVERAL
NATURE OF THE UK OBLIGATIONS. (a) Notwithstanding the making of any Loan or
the provision of any Letter of Credit for the account of any Domestic Borrower,
each Domestic Borrower acknowledges and agrees that the Obligations of the
Domestic Borrowers for each Loan and Letter of Credit under the Domestic
Commitment are joint and several. Each Domestic Borrower shall be fully liable
for any and all Loans made and Letters of Credit issued to the other Domestic
Borrowers as a primary obligor, and not merely as a surety.
(b) Notwithstanding any other provision of the Loan Documents to the
contrary, the Obligations of LEP UK are limited to the repayment, in full and in
cash, of the Obligations under the UK Commitment, and LEP UK shall have no
obligation with respect to or liability for, any Obligation, whether for
principal, interest, commitment fees, other fees, expenses or otherwise, to the
extent that the same arises under the Domestic Commitment. The provision of the
Domestic Commitment and the UK
<PAGE>
Commitment in a single Loan Agreement is for the convenience of the parties
only, and shall not infer that the obligations of LEP UK (as borrower under the
UK Commitment) on the one hand, and the Domestic Borrowers (as joint and several
borrowers under the Domestic Commitment) on the other hand, are joint and
several as to the two Commitments.
(c) In furtherance of the provisions of this Section, each of the
Company and each of the Domestic Borrowers agrees to the Joint Borrower
Provisions attached hereto as Exhibit H and incorporated herein by this
reference.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
BORROWER:
INTERNATIONAL LOGISTICS LIMITED
By: /s/ TERRY CLARKE
--------------------------------
Terry Clarke, Treasurer
Address:
330 S. Mannheim Road
Hillside, IL 60162
Telecopy: _________________________
Telephone: ________________________
THE BEKINS COMPANY
By: /s/ TERRY CLARKE
--------------------------------
Terry Clarke, Assistant Treasurer
Address:
330 S. Mannheim Road
Hillside, IL 60162
Telecopy: _________________________
Telephone: ________________________
<PAGE>
MATRIX INTERNATIONAL LOGISTICS, INC.
By: /s/ TERRY CLARKE
--------------------------------
Terry Clarke, Assistant Treasurer
Address:
200 Connecticut Avenue
Norwalk, Connecticut 06859
Telecopy: _________________________
Telephone: ________________________
ILLCAN, INC.
By: /s/ TERRY CLARKE
--------------------------------
Terry Clarke, Assistant Treasurer
Address:
330 S. Mannheim Road
Hillside, IL 60162
Telecopy: _________________________
Telephone: ________________________
ILLSCOT, INC.
By: /s/ TERRY CLARKE
--------------------------------
Terry Clarke, Assistant Treasurer
Address:
330 S. Mannheim Road
Hillside, IL 60162
Telecopy: _________________________
Telephone: ________________________
<PAGE>
LEP PROFIT INTERNATIONAL, INC.
By: /s/ TERRY CLARKE
--------------------------------
Terry Clarke, Assistant Treasurer
Address:
1950 Spectrum Circle
Marietta, Georgia 30067
Telecopy: _________________________
Telephone: ________________________
LEP INTERNATIONAL LIMITED
By: /s/ TERRY CLARKE
--------------------------------
Terry Clarke, Assistant Treasurer
Address:
______________________________
______________________________
Telecopy: _________________________
Telephone: ________________________
LENDERS:
ING (U.S.) CAPITAL CORPORATION,
individually and as Administrative Agent
By: /s/ MICHAEL W. ADLER
--------------------------------
Michael W. Adler, Senior Vice President
Address: 333 South Grand Avenue, Suite 4200
Los Angeles, California 90071
Attn.: Michael W. Adler
Senior Vice President
Telecopy: (213) 346-3991
Telephone: (213) 346-3900
<PAGE>
ING BANK, N.V. (London Branch),
as primary lender under the UK Commitment
but not as a "Lender"
By:______________________________
Richard Kirby, Director - Banking
By: ______________________________
N.J. Marchant
Manager, Lending Risk Management
Address for notices:
James W. Rowe
Manager UK Corporate and Relationship Banking
ING - Barings
60 London Wall
London, ENGLAND EC2M 5TQ
Telephone: 011-44171-767-5932
Telecopier: 011-44171-767-7323
<PAGE>
Exhibit 10.3
SECOND AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
This SECOND AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT (this
"AGREEMENT") is made and entered into as of November 7, 1996, by and between
International Logistics Limited, a Delaware corporation (the "COMPANY"), and
each of the Investors listed on EXHIBIT A hereto (singularly an "INVESTOR" and
collectively, the "INVESTORS").
In consideration of the agreements and mutual covenants set forth
herein, the parties hereby agree as follows:
SECTION 1. DEFINITIONS. As used in this Agreement, the following
terms shall have the following meanings, and capitalized terms not otherwise
defined herein have the meanings assigned to them in that certain Stockholders
Agreement dated as of even date herewith, among the Company and the Investors,
as the same may be modified or amended from time to time:
"AFFILIATE" of a Holder means any Person which directly or indirectly
controls, is controlled by, or is under common control with such Holder.
"Control," "controlled by" and "under common control with" means direct or
indirect possession of the power to direct or cause the direction of management
or policies (whether through ownership of voting securities, by contract or
otherwise); PROVIDED that control shall be conclusively presumed when any Person
or entity or affiliated group directly or indirectly owns ten percent (10%) or
more of the securities having ordinary voting power for the election of a
majority of the directors of a corporation.
"AGREEMENT" shall have the meaning assigned to such term in the
introductory paragraph hereof.
"CLOSING DATE" means November 7, 1996.
"COMMISSION" means the Securities and Exchange Commission, or any
other federal agency then administering the Securities Act and the Exchange Act.
"COMMON STOCK" means the common stock, $.001 par value per share, of
the Company.
"COMPANY" shall have the meaning assigned to such term in the
introductory paragraph hereof.
"CONTROLLING PERSON" shall have the meaning assigned to such term in
SECTION 9.
<PAGE>
"CUTBACK" shall have the meaning assigned to such term in SECTION
3(C)(II).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
or any similar Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect from time to time.
"FAMILY MEMBER" means any Holder's spouse, siblings, children,
children's spouses, grandchildren or their spouses or any trusts for the benefit
of any of the foregoing.
"HOLDER" means any Investor who holds any shares of Common Stock
entitled to registration rights hereunder.
"ING" means Internationale Nederlanden (U.S.) Capital Corporation.
"ING HOLDERS" shall mean the Holders of the ING Shares.
"ING SHARES" means all the Common Stock now and hereafter held by ING.
"INDEMNIFIED PARTY" shall have the meaning assigned to such term in
SECTION 9.
"INDEMNIFYING PARTY" shall have the meaning assigned to such term in
SECTION 9.
"INITIAL PUBLIC OFFERING" means the first underwritten public offering
of Common Stock by the Company pursuant to a registration of shares under the
Securities Act on a Form S-1 Registration Statement (or equivalent or successor
form).
"LOSSES" means all losses, claims, damages or liabilities (other than
consequential damages or incidental lost profits) and reasonable costs and
expenses related thereto.
"MYERS" shall mean William E. Myers, Jr. and any Myers Affiliate.
"MYERS AFFILIATE" shall mean any (i) bona fide officer, director,
shareholder or employee of W.E. Myers & Company reasonably acceptable to the
Company, (ii) Family Member of any of the foregoing individuals and (iii)
partnership, corporation, trust or other entity controlled by William E. Myers,
Jr.
"MYERS SHARES" means all the Common Stock now and hereafter held by
Myers; PROVIDED, HOWEVER, that all Warrants convertible or exercisable into
shares of Common Stock pursuant to the Warrants held by Myers shall constitute
"WES&S Shares" so
-2-
<PAGE>
long as Myers exercises such warrants prior to the date when the Commission
declares effective any registration statement pursuant to a Public Offering
under which such shares are registered.
"OCM" means OCM Principal Opportunities Fund, L.P., a Delaware limited
partnership.
"OCM SHARES" means all the Common Stock now and hereafter held by OCM
and any OCM Affiliate.
"OCM HOLDERS" shall mean the Holders of the (a) OCM Shares and (b) TCW
Shares. Upon the occurrence of any Cutback (as defined in Section 3(c)(ii)
below) hereunder with respect to the OCM Shares, such Cutback shall be allocated
to the TCW Shares in the same percentage Cutback as applied to the OCM Shares
pursuant to the applicable offering.
"OCM AFFILIATE" means any investor in or any employee of OCM, TCW
Asset Management Company, a California corporation ("TAMCO"), Trust Company of
the West, a California trust company ("TRUSTCO") or Oaktree Capital Management,
LLC ("OAKTREE"), a California limited liability company, or in any company,
joint venture, limited liability company, association or partnership of which
the OCM, TAMCO, Trustco or Oaktree, is a shareholder, manager or general
partner, as the case may be.
"PARIBAS" means Banque Paribas.
"PARIBAS HOLDERS" shall mean the Holders of the Paribas Shares.
"PARIBAS SHARES" means all the Common Stock now and hereafter held by
Paribas.
"PERSON" shall mean any individual, corporation, partnership, limited
liability company, joint venture, association, joint stock company, trust,
unincorporated organization or government or agency or political subdivision
thereof.
"PIGGYBACK RIGHT" shall have the meaning assigned to such term in
SECTION 3(H).
"PUBLIC OFFERING" means any offering of Common Stock to the public,
including the Initial Public Offering, either on behalf of the Company or any of
its stockholders, pursuant to an effective registration statement.
"REGISTRATION EXPENSES" shall have the meaning assigned to such term
in SECTION 7(A).
-3-
<PAGE>
"SECURITIES" shall mean the shares of Common Stock and any securities
convertible or exercisable into shares of Common Stock, and whenever an amount
of Securities is calculated or used in any provision of this Agreement,
convertible or exercisable securities shall be counted as the number of shares
of Common Stock issuable upon such conversion or exercise.
"SECURITIES ACT" means the Securities Act of 1933, as amended, or any
similar Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect from time to time.
"SELL-DOWN EVENT" means an event, subject to SECTIONS 2, 3 AND 4 of
the Stockholders Agreement, whereby WES&S sells or Transfers Securities (or an
economic "capital interest" therein, whether directly or indirectly) to any
Person; PROVIDED, HOWEVER, that the following Transfers shall not constitute a
Sell-Down Event: (i) any Transfer made to a WES&S Affiliate or (ii) any Transfer
made to any Person if (A) WES&S retains voting control of the Securities
transferred to such Person and (B) the cumulative number of Securities so
transferred (or the economic capital interest therein) by WES&S shall not exceed
the Threshold Amount.
"SIMON ENTITY" means Logistical Simon, L.L.C., a Delaware limited
liability company, WESINVEST, Inc., a Delaware corporation or William E. Simon &
Sons, L.L.C., a Delaware limited liability company.
"STOCKHOLDERS AGREEMENT" means the Second Amended and Restated
Stockholders Agreement dated as of November 7, 1996 by and among the Company and
each of the other Holders listed on EXHIBIT A thereto, as the same may be
amended from time to time.
"THRESHOLD AMOUNT" means thirty percent (30%) of the shares held by
WES&S as of the Closing Date (excluding for the purpose of this calculation any
shares owned by WES&S to the extent received upon the exercise of its Warrants
or otherwise acquired from parties other than the Company).
"TCW" means TCW Special Credits Fund V - The Principal Fund, a
California limited partnership.
"TCW SHARES" means all the Common Stock now and hereafter held by TCW
and any TCW Affiliate.
"TCW AFFILIATE" means any investor in or any employee of TCW, TCW
Asset Management Company, a California corporation ("TAMCO"), Trust Company of
the West, a California trust company ("TRUSTCO") or Oaktree Capital Management,
LLC ("OAKTREE"), a California limited liability company, or in any company,
joint
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venture, limited liability company, association or partnership of which TCW,
TAMCO, Trustco or Oaktree, is a shareholder, manager or general partner, as the
case may be.
"WARRANT(S)" has the meaning assigned to such term in the Stockholders
Agreement.
"WARRANTHOLDER" means any Investor who holds any Warrants.
"WES&S" means Logistical Simon, L.L.C., a Delaware limited liability
company.
"WES&S SHARES" means the shares of Common Stock now and hereafter
held by WES&S and any WES&S Affiliate; PROVIDED, HOWEVER, that all Warrants
convertible or exercisable into shares of Common Stock pursuant to the Warrants
held by WES&S or any WES&S Affiliate shall constitute "WES&S Shares" so long as
WES&S or a WES&S Affiliate exercises such warrants prior to the date that the
Commission declares effective any registration statement pursuant to a Public
Offering under which such shares are registered.
"WES&S HOLDERS" shall mean the Holders of the (a) WES&S Shares and (b)
and the Myers Shares. Upon the occurrence of any Cutback (as defined in Section
3(c)(ii) below) hereunder with respect to the WES&S Shares, such Cutback shall
be allocated to the Myers Shares in the same percentage Cutback as applied to
the WES&S Shares pursuant to the applicable offering.
"WES&S AFFILIATE" means any Simon Entity or any partnership, limited
liability company or corporation that directly or indirectly, through one or
more intermediaries, has control of, is controlled by or is under common control
with (i) any Simon Entity or (ii) any shareholder, partner or member of a Simon
Entity or any such shareholder's, partner's or member's spouse, siblings,
children, children's spouses, grandchildren or their spouses or any trusts for
the benefit of any of the foregoing.
SECTION 2. ACKNOWLEDGEMENT OF RIGHTS. The Company will, upon request
of a Holder, acknowledge in writing the Company's obligation in respect of the
rights to which a Holder shall be entitled under this Agreement, PROVIDED that
the failure of a Holder to make any such request shall not affect the continuing
obligation of the Company to the Holder in respect of such rights.
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SECTION 3. DEMAND REGISTRATION.
(a) Subject to the limitations contained in SECTION 5 and SECTION 6,
at any time on or after November 2, 1999, the OCM Holders representing a
majority of the Common Stock so held or the WES&S Holders representing a
majority of the Securities so held may give written notice to the Company
requesting the registration of such number of shares of Common Stock as shall be
requested by such requesting Holder (the "DEMAND NOTICE"), and thereupon, the
Company shall, as expeditiously as possible, prepare and file a registration
statement under the Securities Act covering the shares specified in such Demand
Notice, and shall use its best efforts to cause such registration statement to
become effective, all in accordance with the provisions of this Agreement;
PROVIDED that the Company shall be obligated to effect registration pursuant to
this SECTION 3(A) no more than two times for each of the OCM Holders and the
WES&S Holders.
(b) Whenever the Company shall have received a demand pursuant to
SECTION 3(A) above to effect the registration of any shares, the Company shall
promptly give written notice to: (i) in the event such requesting Holder holds a
majority of the Securities held by all OCM Holders, any other OCM Holder and to
the WES&S Holders, (ii) in the event such requesting Holder holds a majority of
the Securities held by all WES&S Holders, any other WES&S Holder and the OCM
Holders; (iii) the Paribas Holders; and (iv) the ING Holders, and allow each
such Holder the opportunity to participate in such registration. Each such
Holder may, within ten (10) days after receipt of such notice, request in
writing that all of such Holder's shares, or any portion thereof designated by
such Holder, be included in the offering.
(c) The Company shall proceed as expeditiously as possible after
receipt of a demand pursuant to SECTION 3(A) above to file a registration
statement and use its best efforts to effect, within ninety (90) days of the
date of the Demand Notice, the registration of an offering under the Securities
Act, such registration statement to be declared effective by the Commission not
later than one hundred and eighty (180) days from the date of such Demand Notice
under this SECTION 3. Such offering shall include:
(i) the shares specified in the Demand Notice given pursuant to
SECTION 3(A) above; and
(ii) all shares that other Holders have requested be included in
the offering pursuant to SECTION 3(B) above;
all to the extent required to permit the OCM Holders, the WES&S Holders, the
Paribas Holders and the ING Holders, as the case may be, to dispose of such
shares in compliance with applicable law;
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PROVIDED HOWEVER, that if the managing underwriter of such offering shall have
determined that the inclusion of any shares pursuant to SECTION 3(B) above shall
adversely affect the price, terms or number of securities to be underwritten and
sold on behalf of the Holders initiating such demand registration pursuant to
SECTION 3(A) above, then all Holders still desiring to participate in such
registration shall be subject to a reduction in the number of shares included in
such demand registration on a pro-rata basis (a "CUTBACK"). Holders of shares
(other than the Paribas Holders and the ING Holders) which either (i) elect to
withdraw from such registration because of the Cutback or (ii) participate in
the registration but have shares which are Cutback, shall in any case retain
their demand registration rights with respect to the shares which are so
withdrawn or Cutback. No other outstanding securities of the Company shall be
included in such demand registration. Notwithstanding the foregoing, if the OCM
Holders experience any Cutback due to the inclusion of the Myers Shares in such
demand registration, then additional WES&S Shares shall be Cutback so that there
is no incremental Cutback experienced by the OCM Holders by virtue of inclusion
of the Myers Shares in such demand registration.
(d) A registration statement filed pursuant to this SECTION 3 shall
remain effective until the first to occur of (i) the sale of all of the shares
registered under such registration statement or (ii) the date two years
following the date such registration statement was declared effective by the
Commission, excluding any periods during which the Commission shall have issued
any stop order with respect to such registration statement. If the registration
statement is part of a shelf offering, the Company shall be obligated to keep
such registration statement effective for a period of not less than two years.
(e) The Holders electing to participate in such offering shall have
the right to select the managing underwriter to be engaged in connection with
any such registration subject to the approval of the Company (which approval
shall not be unreasonably withheld). Any such underwriter shall be a member
firm of the New York Stock Exchange with a net capital of at least One-Hundred
Million Dollars ($100,000,000).
(f) If, at any time prior to the effectiveness of the registration
statement referred to in this SECTION 3, the Holders initiating the Demand
Notice in SECTION 3(A) above elect to withdraw such registration statement prior
to its date of effectiveness, the Company shall promptly withdraw such
registration statement prior to its effectiveness and such withdrawing Holders
shall forfeit the foregoing demand registration rights referred to in SECTIONS
3(A) AND (B) above.
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<PAGE>
Notwithstanding the foregoing, the demand registration rights referred to in
SECTIONS 3(A) OR (B) above shall survive a pre-effectiveness election to
withdraw as set forth in this SECTION 3(F), if either (i) such withdrawing
Holders reimburse the Company for all of its Registration Expenses in connection
with the preparation of such withdrawn registration statement or (B) the
non-demanding Holders elect to replace the withdrawing Holders (in which event
such non-demanding Holders shall have been deemed to have exercised their demand
registration right).
(g) To the extent any OCM Holders or WES&S Holders elect not to
participate in the demand registration requested by the majority of the OCM
Holders or WES&S Holders (a "NON-MAJORITY HOLDER"), such Non-Majority Holders
shall have the right to participate in the demand registration requested by the
other category of shares, subject to the foregoing provisions on Cutbacks.
(h) In addition to the restrictions on the Company set forth pursuant
to SECTION 8 hereof, the Company will not grant to any Person at any time on or
after the date hereof the right (a "PIGGYBACK RIGHT") to request the Company to
register any securities of the Company under the Securities Act by reason of the
exercise by any Holder of its rights under this SECTION 3 unless such Piggyback
Right provides that such securities shall not be registered and sold at the same
time if the managing underwriter for the respective Holders reasonably believes
that the sale of such securities would adversely affect the amount of, or price
at which, the respective shares being registered under this SECTION 3 can be
sold.
(i) The Company agrees not to effect any public or private sale or
distribution of its equity securities, including a sale pursuant to Regulation D
under the Securities Act, during the ten (10) day period prior to, and during
the one-hundred and twenty day (120) period beginning on, the closing date of an
underwritten offering made pursuant to a registration statement pursuant to this
SECTION 3.
(j) To the extent that any Holders electing a demand registration
determine as of the contemplated offering date not to sell their shares pursuant
to an underwritten offering and such Holders do not reimburse the Company for
Registration Expenses in the event that no Registration Statement is declared
effective, such Holders are nonetheless entitled to have their shares registered
pursuant to a "shelf registration" for the time period set forth in SECTION 3(D)
above.
(k) The Company recognizes that money damages may be inadequate to
compensate the Holders for a breach by the Company of its obligations under this
Section, and the Company agrees
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that in the event of such a breach the Holder may apply for an injunction of
specific performance or the granting of such other equitable remedies as may be
awarded by a court of competent jurisdiction in order to afford the Holder the
benefits of this SECTION 3 and that the Company shall not object to such
application, entry of such injunction or granting of such other equitable
remedies on the grounds that money damages will be sufficient to compensate the
Holder.
SECTION 4. PIGGYBACK REGISTRATION. (a) Except for a demand
registration as set forth in Section 3 and subject to SECTIONS 5 AND 6, if at
any time the Company proposes to register any offering of shares of its capital
stock under the Securities Act, and if such registration is to be on a form of
the Commission that may include, or is at any time amended or changed to such a
form that may include the shares of the Company's capital stock (other than (i)
a registration on Form S-4 or S-8 or any successor form to such Forms, (ii) in
connection with merger, acquisitions, exchange offers or comparable
transactions, or (iii) any registration of securities as it relates to an
offering and sale to management of the Company pursuant to any employee stock
plan or other employee benefit plan arrangement), the Company will at any such
time give written notice (a "PIGGYBACK NOTICE") to all Holders of Common Stock
and any Warrantholders of its intention so to do at least thirty (30) days prior
to the filing of said registration statement.
(b) If the managing underwriter, participating in the sale and
distribution of the Company's securities covered by said registration statement
agrees that a certain number of shares of Common Stock (the "PERMISSIBLE
SECONDARY SHARES") may be included in the offering covered by the registration
statement, the Company's Piggyback Notice shall afford the Holders of Common
Stock and any Warrantholder an opportunity to elect to include in such
registration the Permissible Secondary Shares owned by them. Each Holder of
Common Stock and any Warrantholder shall have twenty (20) days after receipt of
the Company's Piggyback Notice to notify the Company in writing of the number of
shares of Common Stock (the "ELECTED SHARES") which such Holder of Common Stock
and any Warrantholder elects to include in the offering and such Elected Shares
shall be included in the offering. If the aggregate number of Elected Shares
that the Holders thereof desire to include in such filing exceeds the number of
Permissible Secondary Shares, then each Holder of Common Stock and any
Warrantholder electing to participate in such Piggyback Registration shall be
subject to a reduction in the number of shares included in such registration on
a pro-rata basis. Such managing underwriter may increase or decrease the number
of Permissible Secondary Shares at any time until all shares included in such
registration shall have been sold by such
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underwriters. For purposes of this Section 4(b) only, all shares of Common
Stock underlying any Warrant shall constitute "Elected Shares" for such
Warrantholder so long as such Warrantholder exercises such Warrant prior to the
date when the Commission declares effective any registration statement pursuant
to a Public Offering under which such shares are registered.
SECTION 5. OPINION OF COUNSEL. The Company shall have no obligation
under SECTIONS 3 AND 4 hereof to register any shares if the Company shall
deliver to the requesting Holders an opinion of counsel in form and substance
reasonably satisfactory to such Holders and their counsel to the effect that the
proposed sale or disposition of all of the shares for which registration was
requested does not require registration under the Securities Act for a sale or
disposition in a single public transaction and the resale of such shares to any
purchaser does not require registration under the Securities Act. The Company
hereby agrees to indemnify the Holders against, and to hold them harmless from,
all Losses arising from violations of law, that they may incur under the
Securities Act or otherwise by reason of them proceeding in accordance with such
opinion of counsel, other than (i) any such Losses that arise in connection with
any willful misconduct on the part of such Holders or (ii) matters for which the
Holders are obligated to indemnify the Company for under SECTION 9 hereof.
SECTION 6. REGISTRATION PROCEDURES. If and whenever the Company is
required by the provisions of this Agreement to use its best efforts to effect
the registration of any of the shares of Common Stock under the Securities Act,
the Company will (except as otherwise provided in this Agreement), as
expeditiously as possible:
(a) cooperate with any underwriters for, and the sellers of, such
shares, and will enter into a usual and customary underwriting and
confidentiality agreements with respect thereto and take all such other
reasonable actions as are necessary or advisable to permit, expedite and
facilitate the disposition of such shares in the manner contemplated by the
related registration statement in each case to the same extent as if all the
securities then being offered were for the account of the Company and the
Company will provide to any Holder, any underwriter participating in any
distribution thereof pursuant to a registration statement, and any attorney,
accountant or other agent retained by any Holder or underwriter, reasonable
access to appropriate Company officers and employees to answer questions and to
supply information reasonably requested by any such Holder, underwriter,
attorney, accountant or agent in connection with such registration statement, so
long as such person shall
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have executed a confidentiality agreement in form reasonably satisfactory to the
Company;
(b) furnish or cause to be furnished to each Holder, addressed to
such Holder, a copy of the opinion of counsel for the Company, and a copy of the
"comfort" letter signed by the independent public accountants who have certified
the Company's financial statements included in the registration statement,
delivered on the closing date to the underwriters of such shares;
(c) prepare and file with the Commission a registration statement
with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective; and prepare and file with
the Commission such amendments and supplements to such registration statement
and the prospectus used in connection therewith as may be necessary to keep such
registration statement effective for the time period required pursuant to this
Agreement and to comply with the provisions of the Securities Act with respect
to the sale or other disposition of all securities covered by such registration
statement whenever the Holders shall desire to sell or otherwise dispose of the
same; PROVIDED that no such registration statement will be filed by the Company
until counsel for the Holders shall have had a reasonable opportunity to review
the same and to exercise their rights under clause (a) above with respect
thereto and no amendment to any such registration statement naming such Holders
as selling shareholders shall be filed with the Commission until such Holders
shall have had at least seven days to review such registration statement as
originally filed and theretofore amended, to exercise their rights under clause
(a) above and to approve or disapprove any portion of such registration
statement describing or referring to such Holders;
(d) furnish to each Holder such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents (excluding marketing and other selling
related materials), as such Holder may reasonably request in order to facilitate
the public sale or other disposition of the securities owned by such Holder;
(e) use its best efforts to register or qualify the securities covered
by such registration statement under such other securities or blue sky laws of
such jurisdictions as each Holder shall request, except that the Company shall
not for any such purpose be required to qualify to do business as a foreign
corporation in any jurisdiction wherein it is not so qualified or to file
therein any general consent to service;
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(f) in the event of the issuance of any stop order suspending the
effectiveness of any registration statement or of any order suspending or
preventing the use of any prospectus or suspending the qualification of any
shares for sale in any jurisdiction, use its best efforts promptly to obtain its
withdrawal;
(g) otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission, and make available to its security holders,
as soon as reasonably practicable, an earnings statement covering the period of
at least twelve months, beginning with the first fiscal quarter beginning after
the effective date of the registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act; and
(h) list such securities on any securities exchange on which any stock
of the Company is then listed, if the listing of such securities is then
permitted under the rules of such exchange;
PROVIDED, HOWEVER, that notwithstanding any other provision of this Agreement,
the Company shall not be required to maintain the effectiveness of any
registration statement for a period in excess of two years (plus any period
during which the effectiveness of such registration has been suspended), except
that from time to time after a transfer of shares pursuant to a registration
statement the Company will file all reports required to be filed by it under the
Securities Act and the Exchange Act, and will take such further action as any
Holder may reasonably request, all to the extent required to enable the Holder
to sell shares pursuant to Rule 144 promulgated under the Securities Act (or any
successor thereto). Upon written request, the Company will promptly deliver to
any Holder a written statement as to whether it has complied with such
requirements at any time after it has become subject to such requirements.
SECTION 7. REGISTRATION EXPENSES.
(a) All expenses incident to the Company's performance of its
obligations in connection with any registration of a Holder's shares under this
Agreement including, without limitation, printing expenses, fees and
disbursements of counsel for the Company, fees of the National Association of
Securities Dealers, Inc. in connection with its review of any offering
contemplated in any registration statement and expenses of any special audits
which shall be necessary to comply with governmental requirements in connection
with any such registration shall be paid by the Company. In connection with
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each registration the Company shall pay (i) all registration and filing fees for
the Holders' shares under Federal and state securities laws, (ii) expenses of
complying with the securities or blue sky laws of any jurisdictions pursuant to
SECTION 6(E) hereof, and (iii) reasonable fees and expenses of no more than one
counsel for the Holders (collectively, the "REGISTRATION EXPENSES"). The
underwriting discount paid to the underwriters in connection with any
registration shall be paid by the Company, the Holders and any other selling
securities holders pro rata based on the number of shares of Common Stock sold
by the Company, the Holders and such other securities holders; PROVIDED,
HOWEVER, that the Company shall have no obligation to pay any other fees to, or
reimburse expenses of, the underwriters hereunder.
(b) It shall be a condition precedent to the obligation of the
Company to take any action pursuant to this Agreement in respect of the shares
which are to be registered at the request of any Holder that such Holder shall
furnish to the Company such information regarding the securities held by such
Holder and the intended method of disposition thereof as the Company shall
reasonably request and as shall be required in connection with the action to be
taken by the Company.
(c) The Company agrees that it will not file a registration statement
under the Securities Act, either for securities held by any of the Company's
securityholders, other than the Holders, or for securities newly issued by the
Company, until thirty (30) days after the effective date of any registration
statement filed pursuant to the request of Holders made under SECTION 3 hereof.
SECTION 8. GRANT OF REGISTRATION RIGHTS TO OTHER STOCKHOLDER. If
registration rights are granted to any holder of shares of any class of capital
stock of the Company, other than a Holder ("ADDITIONAL REGISTRATION RIGHTS"),
then the Company shall promptly notify the Holders upon the grant of such
registration rights and offer to the Holders such additional registration rights
granted to such other holders so that the terms and conditions of all
registration rights granted to the Holders by this Agreement and any subsequent
agreement are at least as favorable as the registration rights granted to such
other holders in all terms and conditions, including without limitation, the
number of demand registrations, the number of piggyback registrations, the
number of registrable shares reduced in any registration at the request of the
underwriters, reimbursement of registration expenses, indemnities and any other
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term or condition of such Additional Registration Rights. Upon receipt of such
notice and offer, the Holders shall have thirty (30) days to provide notice to
the Company that any such Holder accepts such additional registration rights.
If any such other holder exercises any Additional Registration Rights during
such thirty (30) day period, the Holders shall have the right within such thirty
(30) day period to accept the offer, and to provide notice of the Holder's
intent to join in any such registration, subject to the terms and conditions of
the Additional Registration Rights and this Agreement, as applicable.
SECTION 9. INDEMNIFICATION.
(a) In the event of any registration of any of its securities under
the Securities Act pursuant to this Agreement, to the extent permitted by law,
the Company shall indemnify and hold harmless the Holders, such Holders'
directors, officers, employees and agents, and each other person, if any, who
controls any such Holder within the meaning of the Securities Act (a
"CONTROLLING PERSON"), against any Losses, joint or several, to which such
Holder or any such director or officer or Controlling Person may become subject
under the Securities Act or any other statute or at common law, insofar as such
Losses (or actions in respect thereof) arise out of or are based upon (i) any
alleged untrue statement of any material fact contained, on the effective date
thereof, in any registration statement under which such securities were
registered under the Securities Act, or in any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereto, or (ii)
any alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and shall
reimburse each such Holder or such director, officer, employee, agent or
Controlling Person for any legal or any other expenses reasonably incurred by
such Holder or such director, officer, employee, agent or Controlling Person in
connection with investigating or defending any Loss; PROVIDED, HOWEVER, that the
Company shall not be liable in any such case to the extent that any such Loss
arises out of or is based upon any alleged untrue statement or alleged omission
made in such registration statement, preliminary prospectus, prospectus, or
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company through an instrument duly executed by such
Holder specifically for use therein. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of the Holders
or such director, officer, employee, agent or Controlling Person, and shall
survive the transfer of shares by such Holder.
(b) To the extent permitted by law, each Holder of any shares shall,
by acceptance thereof, indemnify and hold harmless
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the Company, its directors, officers, employees and agents and each other
person, if any, who controls the Company against any Losses, joint or several,
to which the Company or any such director, officer, employee, agent or any such
person may become subject under the Securities Act or any other statute or at
common law, insofar as such Losses (or actions in respect thereof) arise out of
or are based upon (i) any untrue statement or omission of any material fact
contained, on the effective date thereof, in any registration statement under
which such securities were registered under the Securities Act, or in any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereto, or (ii) any omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent that such untrue
statement or omission was contained in written information furnished to the
Company through an instrument duly executed by such Holder specifically for use
therein, and shall reimburse the Company or such director, officer, employee,
agent or other person for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such Loss.
(c) Indemnification similar to that specified in SECTIONS 9(A) AND
9(B) hereof shall be given by the Company and each Holder of shares included in
a registration statement (with such modifications as shall be appropriate) to
any underwriter with respect to any required registration or other qualification
of such shares under any federal or state law or regulation of governmental
authority. The indemnity and expense reimbursement obligations of the Company
and the Holders under SECTIONS 9(A) AND 9(B) hereof shall be in addition to any
liability the Company and the Holders may otherwise have.
(d) If any action or proceeding (including any governmental
investigation or inquiry) shall be brought or any claim shall be asserted
against any person entitled to indemnity hereunder (an "INDEMNIFIED PARTY"),
such Indemnified Party shall promptly notify the party from which such indemnity
is sought (the "INDEMNIFYING PARTY") in writing, and the Indemnifying Party
shall assume the defense thereof, including the employment of counsel reasonably
satisfactory to the Indemnified Party and the payment of all reasonable fees and
expenses incurred in connection with the defense thereof. Any such fees and
expenses borne by the Indemnified Party (including any reasonable fees and
expenses incurred in connection with investigating or preparing to defend such
action or proceeding) shall be paid to the Indemnified Party, as incurred,
within fifteen days of written notice thereof to the Indemnifying Party
(regardless of whether it is ultimately determined that an Indemnified Party is
not entitled to indemnification hereunder), PROVIDED, that such Indemnified
Party shall first undertake to reimburse all such
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fees and expenses to the extent it is judicially determined that such
Indemnified Party is not entitled to indemnification hereunder. Any such
Indemnified Party shall have the right to employ separate counsel in any such
action, claim or proceeding and to participate in the defense thereof, but the
fees and expenses of such counsel shall be the expenses of such Indemnified
Party unless (i) the Indemnifying Party has agreed to pay such fees and expenses
or (ii) the Indemnifying Party shall have failed to promptly assume the defense
of such action, claim or proceeding or (iii) the named parties to any such
action, claim or proceeding (including any impleaded parties) include both such
Indemnified Party and the Indemnifying Party, and such Indemnified Party shall
have been advised by counsel that there may be one or more legal defenses
available to it which are different from or in addition to those available to
the Indemnifying Party and that the assertion of such defenses would create a
conflict of interest such that counsel employed by the Indemnifying Party could
not faithfully represent the Indemnified Party (in which case, if such
Indemnified Party notifies the Indemnifying Party in writing that it elects to
employ separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense of such
action, claim or proceeding on behalf of such Indemnified Party, it being
understood, however, that the Indemnifying Party shall not, in connection with
any one such action, claim or proceeding or separate but substantially similar
or related actions, claims or proceedings in the same jurisdiction arising out
of the same general allegations or circumstances, be liable for the reasonable
fees and expenses of more than one separate firm of attorneys (together with
appropriate local counsel) at any time for all such indemnified parties, unless
in the reasonable judgment of such Indemnified Party a conflict of interest may
exist between such Indemnified Party and any other of such indemnified parties
with respect to such action, claim or proceeding, in which event the
Indemnifying Party shall be obligated to pay the fees and expenses of such
additional counsel or counsels). The Indemnifying Party shall not be liable for
any settlement of any such action or proceeding effected without its written
consent, which consent shall not be unreasonably withheld.
(e) If the indemnification provided for in this SECTION 9 is
unavailable to an Indemnified Party (other than by reason of exceptions provided
in those Sections) in respect of any Losses, then each applicable Indemnifying
Party in lieu of indemnifying such Indemnified Party shall contribute to the
amount paid or payable by such Indemnified Party as a result of such Losses, in
such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party and indemnified parties in connection with the actions,
statements or omissions which resulted in such Losses as well as any other
relevant equitable
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considerations. The relative fault of such Indemnifying Party and the
Indemnified Party shall be determined by reference to, among other things,
whether any action in question, including any untrue statement or alleged untrue
statement of a material fact or omission or alleged omission of a material fact,
has been taken or made by, or relates to information supplied by, such
Indemnifying Party or Indemnified Party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action, statement or omission. The amount paid or payable by a party as a
result of any Losses shall be deemed to include, subject to the limitations set
forth in this paragraph any legal or other fees or expenses reasonably incurred
by such party in connection with any action, suit, claim, investigation or
proceeding. The parties hereto agree that it would not be just and equitable if
contribution pursuant to this paragraph were determined by pro rata allocation
or by any other method of allocation which does not take into account the
equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section, if a Holder is an Indemnifying
Party it shall not be required to contribute any amount in excess of the net
proceeds (after giving effect to the payment of underwriter's discounts and
other fees or expenses, if any) received by the Holder in connection with such
public offering. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
SECTION 10. ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause
the Company to register shares pursuant to this Agreement may be assigned (but
only with all related obligations) by a Holder to a transferee or assignee of
such securities who, after such assignment or transfer, holds at least 10,000
shares (subject to appropriate adjustment for stock splits, stock dividends,
combinations and other recapitalization), provided: (a) the Company is, within a
reasonable time after such transfer, furnished with written notice of the name
and address of such transferee or assignee and the securities with respect to
which such registration rights are being assigned; (b) such transferee or
assignee agrees in writing to be bound by and subject to the terms and
conditions of this Agreement, including without limitation the provisions of
SECTION 11 below; and (c) such assignment shall be effective only if immediately
following such transfer the further disposition of such securities by the
transferee or assignee is restricted under the Securities Act. For the purposes
of determining the number of shares held by a transferee or assignee, the
holdings of transferees and assignees of a partnership who are partners or
retired partners of such partnership (including spouses and ancestors, lineal
descendants and siblings of such partners or spouses who acquire shares by
-17-
<PAGE>
gift, will or intestate succession) shall be aggregated together and with the
partnership. Notwithstanding the foregoing, each of TCW and OCM may assign its
rights hereunder at any time in connection with a liquidating distribution of
assets to its partners. For purposes of this Agreement, any transferee or
assignee of securities pursuant to this Section 10 shall be deemed to be the
same category of Holder (I.E., OCM Holder, WES&S Holder or a Holder that is not
an OCM Holder or a WES&S Holder, as the case may be) as the transferor or
assignor of such securities.
SECTION 11. "MARKET STAND-OFF" AGREEMENT. Each Holder hereby agrees
that, during the period of duration specified by the Company and a managing
underwriter of Common Stock or other securities of the Company, following the
effective date of a registration statement of the Company filed under the
Securities Act, it shall not, to the extent requested by the Company and such
underwriter, directly or indirectly sell, offer to sell, contract to sell
(including, without limitation, any short sale), grant any option to purchase or
otherwise transfer or dispose of (other than to donees who agree to be similarly
bound) any securities of the Company held by it at any time during such period
except Common Stock included in such registration; PROVIDED, HOWEVER, that:
(a) such agreement shall be applicable only to registration
statements of the Company that cover Common Stock to be sold on its behalf, or
on behalf of Holders pursuant to demand registration rights hereunder, to the
public in an underwritten offering; and
(b) such market stand-off time period shall not exceed 120 days.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the shares (and the shares or
securities of every other person subject to the foregoing restriction) until the
end of such period.
Notwithstanding the foregoing, the obligations described in this
Section shall not apply to (i) transfers by OCM Holders in connection with a
private placement pursuant to exemptions from the registration requirements of
the Securities Act provided by Section 4(2) thereof and Regulation D thereunder,
(ii) transfers by OCM or TCW to an OCM Affiliate or a TCW Affiliate,
respectively, in connection with an in-kind distribution or (iii) transfers by
WES&S Holders so long as such transfer does not constitute a Sell-Down Event.
-18-
<PAGE>
SECTION 12. MISCELLANEOUS.
(a) NOTICES. All notices, requests and other communications
hereunder must be in writing and will be deemed to have been duly given only if
delivered personally or by facsimile transmission or mailed (first class postage
prepaid) to the parties at the following addresses or facsimile numbers:
(i) if to the Company, at
330 S. Mannheim Road, Ste. 200
Hillside, IL 60612
Facsimile No.: (708) 547-4524
Attention: Roger E. Payton
with copies to:
Latham & Watkins
633 West Fifth Street
Suite 4000
Los Angeles, CA 90071-2007
Facsimile No.: (213) 891-6763
Attention: Paul D. Tosetti
Milbank, Tweed, Hadley & McCloy
601 S. Figueroa St.
Suite 3100
Los Angeles, CA 90017
Facsimile No.: (213) 629-5063
Attention: Eric H. Schunk
(i) if to any other person who is the registered holder of any
Securities to the address for the purpose of such holder as it appears in
the stock ledger of the Company
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided in this Section, be deemed given upon receipt, and (iii) if delivered
by mail in the manner described above to the address as provided in this
Section, be deemed given upon receipt (in each case regardless of whether such
notice, request or other communication is received by any other Person to whom a
copy of such notice, request or other communication is to be delivered pursuant
to this Section). Any party from time to time may change its address, facsimile
number or other information for the purpose of notices to that party by giving
notice specifying such change to the other party hereto.
-19-
<PAGE>
(b) AMENDMENT. No change in or modification of this Agreement shall
be valid unless the same shall be in writing and signed by the Company and the
Holders.
(c) ASSIGNMENT. This Agreement shall inure to the benefit of and be
binding upon the successors and permitted assigns of the Holders. This
Agreement may not be assigned by the Company without the prior written consent
of the Holders.
(d) WAIVER. No failure or delay on the part of the parties or any of
them in exercising any right, power or privilege hereunder, nor any course of
dealing between the parties or any of them shall operate as a waiver of any such
right, power or privilege nor shall any single or partial exercise of any such
right, power or privilege preclude the simultaneous or later exercise of any
other right, power or privilege. The rights and remedies herein expressly
provided are cumulative and are not exclusive of any rights or remedies which
the parties or any of them would otherwise have. No notice to or demand on the
Company in any case shall entitle the Company to any other or further notice or
demand in similar or other circumstances or constitute a waiver of the rights of
the other parties or any of them to take any other or further action in any
circumstances without notice or demand.
(e) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
(f) GOVERNING LAW. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of California.
(g) FILING. A copy of this Agreement and of all amendments hereto
shall be filed at the principal office of the Company.
(h) TERMINATION. This Agreement may be terminated at any time by an
instrument in writing signed by the Company and each Holder.
(i) BENEFIT AND BINDING EFFECT. This Agreement shall be binding upon
and inure to the benefit of the parties and their executors, administrators,
personal representatives, heirs, successors and assigns.
(j) SEVERABILITY. In the event that any part of this Agreement
shall be held to be invalid or unenforceable, the remaining parts hereof shall
nevertheless continue to be valid
-20-
<PAGE>
and enforceable as though the invalid portions were not a part hereof.
(k) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(l) ATTORNEYS' FEES. In any action or proceeding brought to enforce
any provision of this Agreement, or where any provision hereof is validly
asserted as a defense, the successful party shall be entitled to recover
reasonable attorneys' fees (including any fees incurred in any appeal) in
addition to its costs and expenses and any other available remedy.
(m) EQUITABLE RELIEF. The parties hereto agree and declare that
legal remedies may be inadequate to enforce the provisions of this Agreement and
that equitable relief, including specific performance and injunctive relief, may
be used to enforce such provisions.
-21-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amended and
Restated Registration Rights Agreement as of the day and year first above
written.
The Company: INTERNATIONAL LOGISTICS LIMITED
By: /s/ ROGER E. PAYTON
-----------------------------
Roger E. Payton
President and
Chief Executive Officer
Holders: TCW SPECIAL CREDITS FUND V - THE
PRINCIPAL FUND
By: TCW ASSET MANAGEMENT COMPANY,
its General Partner
By: /s/ STEPHAN A. KAPLAN
-----------------------------
Stephen A. Kaplan
Authorized Signatory
By: /s/ VINCENT J. CEBULA
-----------------------------
Vincent J. Cebula
Authorized Signatory
OCM PRINCIPAL OPPORTUNITIES FUND, L.P.
By: OAKTREE CAPITAL MANAGEMENT, LLC,
its General Partner
By: /s/ STEPHAN A. KAPLAN
-----------------------------
Stephen A. Kaplan
Principal
By: /s/ VINCENT J. CEBULA
-----------------------------
Vincent J. Cebula
Senior Vice President
LOGISTICAL SIMON, L.L.C.
By: WESINVEST, Inc.
its Manager
By: /s/ MICHAEL B. LENARD
-----------------------------
Michael B. Lenard
President
[signature page continues]
<PAGE>
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION
By: /s/
-----------------------------
Name:
Title:
BANQUE PARIBAS
By: /s/ STEVEN M. HEINEN
-----------------------------
Name: Steven M. Heinen
Title: Vice President
/s/ ROGER E. PAYTON
----------------------------------
Roger E. Payton, as an individual
/s/ ANDREW ESTOCLET
----------------------------------
Andrew Estoclet, as an individual
/s/ GARY HOLTER
----------------------------------
Gary Holter, as an individual
/s/ LARRY MARZULLO
----------------------------------
Larry Marzullo, as an individual
/s/ WILLIAM E. MYERS, JR.
----------------------------------
William E. Myers, Jr., as an individual
/s/ KURT KAMM
----------------------------------
Kurt Kamm, as an individual
/s/ WILLIAM KIDD
----------------------------------
William Kidd, as an individual
/s/ DAVID W.M. HARVEY
----------------------------------
David W.M. Harvey, as an individual
/s/ BRIAN E. SANDERSON
----------------------------------
Brian E. Sanderson, as an individual
[signature page continues]
<PAGE>
/s/ EDWARD R. MANDELL
----------------------------------
Edward R. Mandell, as an individual
/s/ AUDREY M. JAKEL
----------------------------------
Audrey M. Jakel, as an individual
/s/ KENNETH S. OGDEN
----------------------------------
Kenneth S. Ogden, as an individual
/s/ JAMES L. MAZZUCA
----------------------------------
James L. Mazzuca, as an individual
/s/ MARK LUNDGREN
----------------------------------
Mark Lundgren, as an individual
/s/ CHRISTER G. CARLSSON
----------------------------------
Christer G. Carlsson, as an individual
----------------------------------
Susan M. Cauldwell, as an individual
/s/ PAUL STONE
----------------------------------
Paul Stone, as an individual
/s/ CHRISTINE STONE
----------------------------------
Christine Stone, as an individual
/s/ DOUGLAS CRUIKSHANK
----------------------------------
Douglas Cruikshank, as an individual
/s/ RONALD S. CRUSE
----------------------------------
Ronald S. Cruse, as an individual
/s/ STEVE HITCHCOCK
----------------------------------
Steve Hitchcock, as an individual
/s/ PAUL D. SMITH
----------------------------------
Paul D. Smith, as an individual
<PAGE>
/s/ ABE RANISH
----------------------------------
Abe Ranish, as an individual
PARIBAS NORTH AMERICA, INC.
By: /s/ JOHN MARTINEZ
-----------------------------
Name: John Martinez
Title: Financial Controller
-25-
<PAGE>
EXHIBIT "A"
HOLDERS COMMON STOCK WARRANTS
TCW SPECIAL CREDITS FUND V -
THE PRINCIPAL FUND 695,575 0
OCM PRINCIPAL OPPORTUNITIES
FUND, L.P. 600,000 0
LOGISTICAL SIMON, L.L.C. 469,532 125,000
ROGER E. PAYTON 22,500* 175,000
ANDREW ESTOCLET 23,060 0
GARY HOLTER 5,000 0
LARRY MARZULLO 17,500 0
ING 7,500 5,025
BANQUE PARIBAS 17,500 5,025
PARIBAS NORTH AMERICA, INC. 50,000 0
WILLIAM E. MYERS, JR. 0 59,938**
BRIAN E. SANDERSON 0 14,983**
KURT KAMM 0 6,516
WILLIAM KIDD 0 6,516
EDWARD R. MANDELL 0 266
DAVID W.M. HARVEY 0 5,620**
AUDREY M. JAKEL 2,500 0
KENNETH S. OGDEN 1,000 0
JAMES L. MAZZUCA 2,500 0
MARK LUNDGREN 500 0
PAUL STONE AND
CHRISTINE STONE 500 0
CHRISTER G. CARLSSON AND
SUSAN M. CAULDWELL 1,500 0
DOUGLAS CRUIKSHANK 24,000 0
RONALD S. CRUSE 24,000 0
STEVE HITCHCOCK 24,000 0
[Table continued on next page]
-26-
<PAGE>
PAUL D. SMITH 24,000 0
ABE RANISH 4,000 0
TOTAL 2,016,667 403,889
Common Stock Warrants
*Includes 10,000 shares issued to the Bekins Company Non-Qualified Plan dated
which shares are allocated for the benefit of Roger E. Payton.
**Includes 20,354, 5,087 and 1,909 additional Warrants issued to William E.
Myers, Jr., Brian E. Sanderson and David W.M. Harvey, respectively, with an
initial exercise price of $30.00 per share which represents on a fully-diluted
basis 2.5% of the 1,016,667 shares of Common Stock and 50,000 Warrants issued to
OCM, TCW, WES&S, Banque Paribas and Roger E. Payton on 10/31/96 and 11/7/96,
respectively.
-27-
<PAGE>
EXECUTIVE MANAGEMENT AGREEMENT
This Agreement is made and entered into as of the 31st day of
October, 1996, by and between International Logistics Limited, a Delaware
corporation (the "Company"), and William E. Simon & Sons, L.L.C., a limited
liability company organized under the laws of the state of Delaware ("Simon").
Capitalized terms, not defined herein, shall have the meaning ascribed to them
in the Amended and Restated Stockholders Agreement dated as of October 31, 1996
by and among the Company and each of the Holders listed on Exhibit A thereto.
W I T N E S S E T H:
WHEREAS, the Company desires to enter into a management agreement
with Simon for the provision of executive management services.
WHEREAS, Simon is willing and able to provide the Company with
executive management services.
NOW THEREFORE, in consideration of the premises and of other good and
valuable consideration, the sufficiency of which is hereby acknowledged, the
parties hereby agree as follows:
SECTION 1. SERVICES
A. The Company hereby retains Simon to provide the Company with
executive management services as provided herein. Such services shall include
consultation, advice and direct management assistance to the Company with
respect to operations, strategic planning, financing and other aspects of the
business of the Company. Simon shall devote such time as is reasonably
necessary to provide such services.
<PAGE>
B. Simon accepts the appointment provided in Section 1.A above and
agrees to provide executive management services to the Company in accordance
with the terms hereof.
SECTION 2. CONSIDERATION
A. BASE FEE. In consideration of the executive management services
to be provided by Simon to the Company, and provided there exists no continuing
or uncured material event of default under the material terms of indebtedness
of the Company or any of its Subsidiaries, the Company shall pay and Simon
shall be entitled to receive a management fee of $350,000 per year, which shall
be payable in arrears on a pro rata basis upon the completion of each fiscal
quarter of the Company (the "Base Fee"). The Base Fee shall be paid by wire
transfer of immediately available funds, to such account or accounts as shall
be designated from time to time by Simon. All payments with respect to the
Base Fee by the Company shall be subject to applicable restrictions contained
in the Company's and its Subsidiaries' debt and equity financing agreements.
If any such restrictions prohibit any payments with respect to the Base Fee
hereunder which the Company is otherwise obligated to make, the Company shall
make such payments as soon as it is permitted to do so under such restrictions.
B. EXPENSES. In addition to the Base Fee, Simon shall also be
entitled to reimbursement for all reasonable out-of-pocket expenses incurred by
Simon or its personnel in connection with the performance of Simon's duties
hereunder, which amounts shall be so reimbursed when invoices with respect
thereto are submitted by Simon to the Company.
2
<PAGE>
SECTION 3. TERM
This Agreement shall take effect as of the date first above written
and shall continue until automatically terminated by the first to occur of (i)
a Qualified Public Offering; (ii) a Sell-Down Event; (iii) a WES&S Purchase
Default; (iv) a WES&S Funding Default; or (v) Termination of the Agreement by
the Board as a result of criminal misconduct or fraud by Simon. Unless
terminated as set forth in clauses (i) through (v) above or pursuant to Section
4(c), this Agreement shall take effect from the date hereof and shall remain in
effect until May 2, 2000. This Agreement shall thereafter be renewed, subject
to approval by the Board, for successive annual periods unless the Company or
Simon terminates this Agreement by 90 days' notice to the other party prior to
the commencement of a renewal period.
SECTION 4. MISCELLANEOUS
A. Any notice required or desired to be given hereunder shall be in
writing and shall be personally served or shall be deemed given three business
days after deposit in the United States mail, registered or certified, postage
and fee prepaid, and addressed as follows:
If to the Company:
International Logistics Limited
310 South Street, P.O. Box 1913
Morristown, NJ 07962-1913
Attention: Roger E. Payton
If to Simon:
William E. Simon & Sons, L.L.C.
10990 Wilshire Boulevard, Suite 1750
Los Angeles, CA 90024
Attention: Michael Lenard
3
<PAGE>
B. This Agreement shall be binding upon the successors and assigns
of the parties hereto, including but not limited to any corporation or other
entity into which the Company is merged, liquidated or otherwise combined,
unless the Company shall be sold in its entirety.
C. If at any time (1) all Persons that presently directly, or
indirectly through one or more intermediaries, control Simon no longer control
Simon or (2) both Michael B. Lenard and William E. Simon Jr. are no longer
affiliated with Simon or any of its affiliates or subsidiaries, then this
Agreement shall terminate unless extended by mutual consent of Simon and the
Company. For the purposes of this Agreement, (1) "Person" shall mean an
individual, partnership, corporation, association, joint stock company, trust,
joint venture, unincorporated organization or governmental entity and (2)
"control" shall mean (a) direct or indirect ownership of 50% or more of the
members' capital interests of Simon (or the economic value thereof), (b) direct
or indirect ownership by Simon of its assets under circumstances whereby not
more than 50% of the value of such assets has been pledged or sold to persons
other than Simon or (c) possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of Simon, whether
through the ownership of voting securities or by agreement or otherwise.
D. This Agreement shall not be amended except by a written
instrument executed by the parties.
E. This Agreement is made under and shall be construed in
accordance with the laws of the State of California.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date above written.
INTERNATIONAL LOGISTICS LIMITED
By: /s/ Roger E. Payton
-----------------------------
WILLIAM E. SIMON & SONS, L.L.C.
By: /s/ Michael B. Lenard
-----------------------------
5
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "AGREEMENT") is dated as of April 30, 1996,
between International Logistics Limited, a Delaware corporation (the "COMPANY"),
and Roger E. Payton (the "EXECUTIVE").
1. EMPLOYMENT. The Company hereby agrees to employ the Executive, and
the Executive hereby agrees to be employed by the Company, on the terms and
conditions set forth herein.
2. TERM. The employment of the Executive by the Company as provided in
Section 1 will commence on the date hereof and terminate at 12:01 a.m. on April
30, 2000 (the "EXPIRATION DATE") unless sooner terminated as hereinafter
provided (such period, the "EMPLOYMENT PERIOD"). No later than November 30,
1999, the Company shall provide the Executive with written notice as to whether
(a) the Company intends to renew the Agreement (including proposed terms for
such renewal which the Executive may accept, reject or negotiate, at his
discretion), or (b) the Agreement will be terminated at the conclusion of the
Employment Period.
3. POSITION, DUTIES AND RESPONSIBILITIES.
(a) POSITION. The Executive hereby agrees to serve as Chief
Executive Officer of the Company and a member of the Board of Directors of
the Company (the "BOARD"). The Executive shall devote his best efforts and
his full business time and attention to the performance of services to the
Company in his capacity as an officer thereof and in such other executive
capacity as may reasonably be requested by the Board. The Company shall
retain full direction and control of the means and methods by which the
Executive performs the above services. The Company recognizes that the
Executive is subject to non-competition agreement dated as of December 19,
1995, by and between the Executive and NFC, plc. (the "NON-COMPETITION
AGREEMENT") and that the Executive may notify the Company from time to time
that he cannot provide certain services which conflict with the terms of the
Non-Competition Agreement.
(b) PLACE OF EMPLOYMENT. During the term of this Agreement, the
Executive shall perform the services required by this Agreement by spending
(i) at least four (4) days per week at the Company's principal place or
places of business or at such other location(s) as may be prescribed by the
Company (the "OFFICE LOCATION") and (ii) at least one (1) day per week at
such other location (E.G., his home office) as the Executive and the Company
shall mutually determine (the "NON-OFFICE LOCATION"); PROVIDED, HOWEVER, that
the Company may from time to time require the Executive to travel temporarily
to other locations on the Company's business. Any and all costs and expense
related to the performance of service by the Executive at the Non-Office
Location (including, without limitation, travel to and from the Non-Office
Location and related out-of-pocket expenses and equipment for the Non-Office
Location) shall be borne solely by the Executive and shall not be paid or
reimbursed by the Company. The Company shall reimburse the Executive for
business- related telephone (including fax) charges incurred by the Executive
at the Non-Office Location.
(c) OTHER ACTIVITIES. Except with the prior written approval of the
Board (which the Board may grant or withhold in its sole and absolute
discretion), the Executive, during the Employment Period, will not (i) accept
any other employment, (ii) serve on the board of directors or
<PAGE>
similar body of any other business entity, or (iii) engage, directly or
indirectly, in any other business activity (whether or not pursued for
pecuniary advantage) that is or may be competitive with, or that might place
him in a competing position to, that of the Company or any of its affiliates.
4. COMPENSATION AND RELATED MATTERS.
(a) SALARY. During the Employment Period, the Company shall pay the
Executive a salary of not less than $315,000 per year, to be paid consistent
with the standard payroll practices of The Bekins Company, a Delaware company
and a wholly-owned subsidiary of the Company ("TBC") (E.G., timing of payments
and standard employee deductions, such as income tax withholdings, social
security, etc., shall be substantially similar to those of TBC). The Board
shall review the Executive's performance and salary annually upon each
anniversary of the Effective Date and may increase Executive's salary if it
deems an increase appropriate in its sole and absolute discretion.
(b) BUSINESS EXPENSES. The Company shall reimburse the Executive in
connection with the conduct of the Company's business upon presentation of
sufficient evidence of such expenditures consistent with TBC's policies as in
place from time to time (and subject to the limitations set forth herein).
(c) OTHER BENEFITS. The Executive shall be entitled to participate
in or receive such health, welfare, life insurance (which shall currently
entail, among other things, (i) a $750,000 term life insurance policy, and
(ii) a $2,000,000 accidental death policy), long-term disability insurance
(which shall currently entail, among other things, annual benefits in the
amount of 60% of the Executive's annual salary), bonus plan and similar
benefits as TBC provides generally from time to time to its executives. The
Company acknowledges that within a reasonable time following the execution of
this Agreement, TBC intends to institute a non-qualified pension plan to
offset reductions for high compensation individuals due to statutory limits
and discriminatory testing applicable to qualified pension plans (the
"Non-Qualified Plan"). Except with respect to TBC's obligations with respect
to the Non-Qualified Plan, nothing herein is intended, or shall be construed
to require the Company or TBC to institute or continue any, or any
particular, plan or benefits.
(d) BONUS. The Executive shall be entitled to receive additional
bonus compensation at the sole and absolute discretion of the Board, if and
when approved by the Board.
(e) AUTOMOBILE. The Company shall provide the Executive with an
annual automobile allowance of $12,000 payable in equal installments
consistent with the standard payroll practice of TBC.
(f) RELOCATION. The Company shall relocate the Executive pursuant
to the terms of that certain Prudential Resources Management Relocation
Agreement dated as of March 29, 1996 by and between William E. Simon & Sons,
LLC or its assigns ("WESS") and Prudential Residential Services, Limited
Partnership ("PRUDENTIAL"), that certain letter dated April 19, 1996 from
WESS to Prudential and that certain memorandum dated April 29, 1996 from the
Executive to WESS (each of which is attached hereto as Exhibit A, and all of
which are collectively referred to herein as the "RELOCATION AGREEMENTS") and
shall reimburse the Executive for (i) reasonable and customary closing costs
paid by the Executive in connection with the purchase of a new principal
residence, and (ii) all reasonable expenses related to the physical
relocation of the Executive's family and possessions.
(g) VACATION. The Executive shall be entitled to twenty vacation
days in each calendar year. The Executive will be entitled to all Company
holidays.
<PAGE>
(h) ADDITIONAL LIFE INSURANCE. The Company shall assume payment of
the premium presently in effect on the Executive's $257,030 New England
Mutual Life Insurance Company life insurance policy, dated September 3, 1991,
Policy #8670595, the proceeds of which shall be paid to the Executive's
beneficiaries in the event of the Executive's death.
(i) ALLOCATIONS OF MANAGEMENT EQUITY. The Company contemplates
that it may, from time to time at the sole and absolute discretion of the
Board, issue additional equity in the Company in order to fund future
acquisitions. In such event, the Company currently contemplates that it will
issue warrants for common stock in the Company, upon such terms and
conditions as the Board may determine at such time, for up to 10% (on a
fully-diluted basis) of common stock of the Company issued and issuable in
connection with such acquisition for certain employees, executive officers
and directors of the Company pursuant to any stock option plan approved by
the Board. The Executive may, at the sole and absolute discretion of the
Board, be entitled to participate in any issuance of such warrants.
5. TERMINATION. The Executive's employment hereunder may be terminated
under the following circumstances:
(a) DEATH. The Executive's employment hereunder shall terminate
upon his death.
(b) DISABILITY. This Agreement shall terminate if the Executive
has been unable to perform his duties under this Agreement for more than 120
days during any 180-day period as a result of any physical or mental
disability or infirmity, as determined in the opinion of a competent
physician selected by the Board.
(c) CAUSE. The Company may terminate the Executive's employment
hereunder for "CAUSE." Cause shall mean (i) the Executive's material breach
of any of the terms of this Agreement, (ii) his conviction of a crime
involving moral turpitude or constituting a felony under the laws of any
state, the District of Columbia or of the United States, or (iii) his
misconduct in the performance of his duties hereunder, including without
limitation, his failure or refusal to carry out any proper direction by the
Board with respect to the services to be rendered by him hereunder or his
habitual neglect of his duties as an officer of the Company, which misconduct
or neglect, if capable of cure in the Board's sole and absolute discretion,
shall continue after receipt of written notice from the Company.
(d) EMPLOYMENT-AT-WILL/TERMINATION FOR ANY REASON. The Executive
hereby agrees that the Company may dismiss him under this Section 5 without
regard (i) to any general or specific policies (whether written or oral) of
the Company relating to the employment or termination of its employees, or
(ii) to any statements made to the Executive, whether made orally or
contained in any document, pertaining to the Executive's relationship with
the Company. Notwithstanding anything to the contrary contained herein,
including Section 2, the Executive's employment with the Company is not for
any specified term and may be terminated by the Company at any time, for any
reason, with or without cause, without liability except with respect to the
payments provided for by Section 6.
(e) VOLUNTARY RESIGNATION. The Executive may voluntarily resign
his position and terminate his employment with the Company at any time by
delivery of a written notice of resignation to the Company (the "NOTICE OF
RESIGNATION"). The Notice of Resignation shall set forth the date such
resignation shall become effective (the "DATE OF RESIGNATION"), which date
shall, in any event, be no more than thirty (30) days from the date the
Notice of Resignation is delivered to the Company.
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(f) CONSTRUCTIVE DISCHARGE. The Executive may regard his
employment as being constructively terminated by the Company and may resign
his position by delivery of a Notice of Resignation as described in Section
5(e) above if there has been a substantial diminution in the Executive's
duties and responsibilities with the Company as directed by the Board since
the date of this Agreement (a "CONSTRUCTIVE DISCHARGE").
(g) NOTICE. Any termination of the Executive's employment by the
Company shall be communicated by written Notice of Termination to the Executive.
For purposes of this Agreement, a "NOTICE OF TERMINATION" shall mean a notice
that shall indicate the specific termination provision in this Agreement relied
upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated.
(h) "DATE OF TERMINATION" shall mean (i) if the Executive's
employment is terminated by his death, the date of his death, (ii) if the
Executive's employment is terminated by reason of his disability, the date of
the opinion of the physician referred to in Section 5(b), above, (iii) if the
Executive's employment is terminated pursuant to subsection (c) above, or
without cause by the Company, the date specified in the Notice of Termination,
and (iv) if the Executive resigns, the Date of Resignation.
(i) TERMINATION OBLIGATIONS.
(i) The Executive hereby acknowledges and agrees that all
personal property and equipment furnished to or prepared by the Executive
in the course of or incident to his employment belongs to the Company and
shall be promptly returned to the Company upon termination of the
Employment Period. "PERSONAL PROPERTY" includes, without limitation, all
books, manuals, records, reports, notes, contracts, lists, blueprints, and
other documents, or materials, or copies thereof (including computer
files), and all other proprietary information relating to the business of
the Company. Following termination, the Executive will not retain any
written or other tangible material containing any proprietary information
of the Company; PROVIDED, HOWEVER, that in the event of any contractual
dispute under this Agreement, the Executive may retain, subject to the
conditions of Section 7(a) below, copies of such materials necessary to
defend his position until such time as the dispute has been resolved.
(ii) Upon termination of the Employment Period, the Executive
shall be deemed to have resigned from all offices and directorships then
held with the Company or any affiliate.
(iii) The representations and warranties contained herein and
the Executive's obligations under Sections 5(i), 7, 8, 9 and 15 shall
survive termination of the Employment Period and the expiration of this
Agreement.
6. COMPENSATION UPON TERMINATION OR DURING DISABILITY.
(a) DEATH. If the Executive's employment shall be terminated
pursuant to Section 5(a), the Company shall pay the estate of the Executive his
salary through the Date of Termination. In addition, the Company shall keep in
force existing health insurance covering the Executive's dependents for a period
of one (1) year from Date of Termination on the basis in effect at the date of
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the termination of the Executive's employment, subject to the Company's right to
amend, modify or terminate any such plan. After the one (1) year period
described in the preceding sentence, the Executive's dependents shall also be
entitled to any continuation of coverage rights under any applicable law.
(b) DISABILITY. During any period that the Executive fails to
perform his duties hereunder as a result of disability due to physical or mental
illness, the Executive shall continue to receive his salary until his employment
is terminated pursuant to Section 5(b) hereof, provided that payments so made to
the Executive during the first 120 days of the disability shall be reduced by
the sum of the amounts, if any, payable to the Executive at or prior to the time
of any such payment under any disability benefit plan of the Company. In
addition, the Company shall keep in force existing health insurance covering the
Executive and his dependents for a period of one (1) year from the Date of
Termination on the basis in effect at the date of the termination of the
Executive's employment, subject to the Company's right to amend, modify or
terminate any such plan. After the one (1) year period described in the
preceding sentence, the Executive and his dependents shall also be entitled to
any continuation of coverage rights under any applicable law.
(c) CAUSE. If the Executive's employment shall be terminated for
Cause pursuant to Section 5(c) hereof, the Company shall pay the Executive his
salary through the Date of Termination. The Executive and his dependents shall
also be entitled to any continuation of health insurance coverage rights to the
extent required by any applicable law.
(d) OTHER TERMINATIONS BY THE COMPANY. If the Company shall
terminate the Executive's employment without Cause pursuant to Section 5(d)
hereof or if there has been a Constructive Discharge pursuant to Section 5(f)
hereof, the Company shall pay the Executive the salary payable to the Executive
pursuant to and in accordance with Section 4(a) hereof for the lesser of a
period of two (2) years from the Date of Termination or the remaining term
hereunder; PROVIDED, HOWEVER, that in no event shall the Executive receive less
than one (1) year's such salary. The Executive and his dependents shall also be
entitled to any continuation of health insurance coverage rights to the extent
required by any applicable law.
(e) VOLUNTARY RESIGNATION. If the Executive terminates his
employment with the Company pursuant to Section 5(e) hereof, the Company shall
pay the Executive the salary payable to the Executive pursuant to and in
accordance with the provisions of Section 4(a) hereof through the Date of
Resignation. The Executive and his dependents shall also be entitled to any
continuation of health insurance coverage rights to the extent required by any
applicable law.
(f) EXPIRATION OF TERM. If the Agreement has not been renewed on or
before the Expiration Date and the Executive's employment with the Company
terminates pursuant to the terms of the Agreement at the Expiration Date, the
Company shall pay the Executive the salary payable to the Executive pursuant to
and in accordance with Section 4(a) hereof for a period of one year from the
Expiration Date.
7. CONFIDENTIALITY AND NON-SOLICITATION COVENANTS.
(a) CONFIDENTIALITY. In addition to the agreements set forth in
Section 5(i), the Executive hereby agrees that the Executive will not, during or
after the Employment Period, directly or indirectly, disclose or make available
to any person, firm, corporation, association or other entity for
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any reason or purpose whatsoever, any Confidential Information (as defined
below). The Executive agrees that, upon termination of his employment with
the Company, all Confidential Information in his possession that is in
written or other tangible form (together with all copies or duplicates
thereof, including computer files) shall be returned to the Company and shall
not be retained by the Executive or furnished to any third party, in any form
except as provided herein; PROVIDED, HOWEVER, that the Executive shall not be
obligated to treat as confidential, or return to the Company copies of any
Confidential Information that (i) was publicly known at the time of
disclosure to the Executive, (ii) becomes publicly known or available
thereafter other than by any means in violation of this Agreement or any
other duty owed to the Company by any person or entity or (iii) is lawfully
disclosed to the Executive by a third party. As used in this Agreement the
term "CONFIDENTIAL INFORMATION" means: information disclosed to the
Executive or known by the Executive as a consequence of or through his
relationship with the Company, about the customers, employees, business
methods, public relations methods, organization, procedures or finances,
including, without limitation, information of or relating to customer lists
of the Company and its affiliates.
(b) NON-SOLICITATION. In addition, the Executive hereby agrees that
during the Employment Period or any period of time for which salary is obligated
to be paid to the Executive pursuant to and in accordance with the terms of
Section 6 (any such period referred to herein as the "SEVERANCE PERIOD"), the
Executive will not, either on his own account or jointly with or as a manager,
agent, officer, employee, consultant, partner, joint venturer, owner or
shareholder or otherwise on behalf of any other person, firm or corporation, (i)
endeavor, directly or indirectly, to solicit, the manufacture or sale of goods
or provision of services to any person, firm or corporation which, at any time
during the Employment Period has been or is a customer of or in the habit of
dealing with the Company in its business, (ii) endeavor directly or indirectly
to canvas or solicit in competition with the Company or to interfere with the
supply of orders for goods or services from or by any person, firm or
corporation which during the Employment Period has been or is a supplier of
goods or services to Company or (iii) directly or indirectly solicit or attempt
to solicit away from Company any of its officers or employees or offer
employment to any person who, on or during the 6 months immediately preceding
the date of such solicitation or offer, is or was an officer or employee of
Company.
8. COVENANT NOT TO COMPETE. The Executive agrees that during the
Employment Period and any Severance Period, he will not, directly or indirectly,
own, manage, operate, join, control or participate in the ownership, management,
operation or control of, or be connected as a director, officer, employee,
partner, consultant or otherwise with, any profit or non-profit business or
organization which, directly or indirectly, competes with, or in way interferes
with, the business of the Company or any of its affiliates in any part of the
United States.
9. INJUNCTIVE RELIEF AND ENFORCEMENT. In the event of breach by the
Executive of the terms of Sections 5(i)(i), 7 or 8, the Company shall be
entitled to institute legal proceedings to obtain damages for any such breach,
or to enforce the specific performance of this Agreement by the Executive and to
enjoin the Executive from any further violation of Sections 5(i)(i), 7 or 8 and
to exercise such remedies cumulatively or in conjunction with all other rights
and remedies provided by law. The Executive acknowledges, however, that the
remedies at law for any breach by him of the provisions of Sections 5(i)(i), 7
or 8 may be inadequate. In addition, in the event the agreements set forth in
Sections 5(i)(i), 7 or 8 shall be determined by any court of competent
jurisdiction to be unenforceable by reason of extending for too great a period
of time or over too great a geographical area or by reason of being too
extensive in any other respect, each such agreement shall be interpreted to
extend over the maximum period of time for which it may be enforceable and to
the maximum extent
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in all other respects as to which it may be enforceable, and enforced as so
interpreted, all as determined by such court in such action.
10. NOTICE. For the purposes of this Agreement, notices, demands and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when personally delivered when
transmitted by telecopy with receipt confirmed, or one day after delivery to an
overnight air courier guaranteeing next day delivery, addressed as follows:
If to the Executive: Roger E. Payton
6108 South Lone Peak Drive
Evergreen, Colorado 80439
If to the Company: International Logistics Limited
c/o William E. Simon & Sons, LLC
310 South Street
Morristown, New Jersey 07962
Attention: Michael B. Lenard
With a copy to: Latham & Watkins
633 West Fifth Street
Suite 4000
Los Angeles, California 90071-2007
Attention: Paul D. Tosetti, Esq.
or to such other address as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
11. SEVERABILITY. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect; PROVIDED, HOWEVER, that if any one or more of the terms contained in
Sections 5(i), 7 or 8 hereto shall for any reason be held to be excessively
broad with regard to time, duration, geographic scope or activity, that term
shall not be deleted but shall be reformed and constructed in a manner to enable
it to be enforced to the extent compatible with applicable law.
12. ASSIGNMENT. This Agreement may not be assigned by the Executive, but
may be assigned by the Company to any successor to its business and will inure
to the benefit and be binding upon any such successor.
13. COUNTERPARTS. This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
14. HEADINGS. The headings contained herein are for reference purposes
only and shall not in any way affect the meaning or interpretation of this
Agreement.
15. CHOICE OF LAW. This Agreement shall be construed, interpreted and the
rights of the parties determined in accordance with the laws of the State of
Illinois (without reference to the choice of law provisions of Illinois law),
except with respect to matters of law concerning the internal corporate affairs
of any corporate entity which is a party to or the subject of this Agreement,
and as to
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those matters the law of the jurisdiction under which the respective entity
derives its powers shall govern.
16. LIMITATION ON LIABILITIES. If the Executive is awarded any damages as
compensation for any breach or action related to this Agreement, a breach of any
covenant contained in this Agreement (whether express or implied by either law
or fact), or any other cause of action based in whole or in part on any breach
of any provision of this Agreement, such damages shall be limited to contractual
damages and shall exclude (i) punitive damages, and (ii) consequential and/or
incidental damages (E.G., lost profits and other indirect or speculative
damages). The maximum amount of damages that the Executive may recover for any
reason shall be the amount equal to all amounts (including the value of any
benefits) owed (but not yet paid) to the Executive pursuant to this Agreement
through its natural term or through any Severance Period.
17. ENTIRE AGREEMENT. This Agreement contains the entire agreement and
understanding between the Company and the Executive with respect to the
employment of the Executive by the Company as contemplated hereby, and no
representations, promises, agreements or understandings, written or oral, not
herein contained shall be of any force or effect. This Agreement shall not be
changed unless in writing and signed by both the Executive and the Board of
Directors of the Company.
18. THE EXECUTIVE'S ACKNOWLEDGMENT. The Executive acknowledges (a) that
he has consulted with or has had the opportunity to consult with independent
counsel of his own choice concerning this Agreement and has been advised to do
so by the Company, and (b) that he has read and understands the Agreement, is
fully aware of its legal effect, and has entered into it freely based on his own
judgment.
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IN WITNESS WHEREOF, the parties have executed this Employment
Agreement as of the date and year first above written.
INTERNATIONAL LOGISTICS LIMITED
/s/ Michael B. Lenard
-----------------------------------
Name: Michael B. Lenard
Title: President
EXECUTIVE
/s/ Roger E. Payton
-----------------------------------
Roger E. Payton
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EXHIBIT A TO EMPLOYMENT AGREEMENT
RELOCATION AGREEMENTS
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EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "AGREEMENT") is dated as of
_____________, between International Logistics Limited, a Delaware
corporation (the "COMPANY"), and _____________ (the "EXECUTIVE").
1. EMPLOYMENT. The Company hereby agrees to employ the
Executive, and the Executive hereby agrees to be employed by the Company, on
the terms and conditions set forth herein.
2. TERM. The employment of the Executive by the Company as
provided in Section 1 will commence on the date hereof and terminate at 12:01
a.m. on _____________ (the "EXPIRATION DATE") unless sooner terminated as
hereinafter provided (such period, the "EMPLOYMENT PERIOD"). No later than
_______________, the Company shall provide the Executive with written notice
as to whether (a) the Company intends to renew the Agreement (including
proposed terms for such renewal which the Executive may accept, reject or
negotiate, at his discretion), or (b) the Agreement will be terminated at the
conclusion of the Employment Period.
3. POSITION, DUTIES AND RESPONSIBILITIES.
(a) POSITION. The Executive hereby agrees to serve
as_____________________________________________________________ of the
Company. The Executive shall devote his best efforts and his full business
time and attention to the performance of services to the Company in his
capacity as an officer thereof and as may reasonably be requested by the
Board of Directors of the Company (the "BOARD"). The Company shall retain
full direction and control of the means and methods by which the Executive
performs the above services.
(b) PLACE OF EMPLOYMENT. Unless the parties agree otherwise
in writing, during the term of this Agreement, the Executive shall perform
the services required by this Agreement at the offices of
_________________________________, or at such other location(s) as may be
prescribed by the Company; PROVIDED, HOWEVER, that no sooner than eighteen
months and no later than 24 months from the date of this Agreement, the
Executive shall perform the services required by this Agreement at the
Company's principal offices in Hillside, Illinois. It is agreed that the
Executive will be prepared to travel extensively in support of the companies
objectives and while based at ______________________ will be expected to
travel Tuesday through Thursday on a weekly basis.
(c) OTHER ACTIVITIES. Except with the prior written
approval of the Board (which the Board may grant or withhold in its sole
discretion), the Executive, during the
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Employment Period, will not (i) accept any other employment, (ii) serve on
the board of directors or similar body of any other business entity, or (iii)
engage, directly or indirectly, in any other business activity (whether or
not pursued for pecuniary advantage) that is or may be competitive with, or
that might place in a competing position to, that of the Company or any of
its affiliates.
4. COMPENSATION AND RELATED MATTERS.
(a) SALARY. During the Employment Period, the Company shall
pay the Executive a salary of not less than $_________ per year, to be paid
consistent with the standard payroll practices of the Company (E.G., timing
of payments and standard employee deductions, such as income tax
withholdings, social security, etc.).
(b) BUSINESS EXPENSES. The Company shall reimburse the
Executive in connection with the conduct of the Company's business upon
presentation of sufficient evidence of such expenditures consistent with the
Company's policies as in place from time to time.
(c) OTHER BENEFITS. The Executive shall be entitled to
participate in or receive health, welfare, life insurance in the amount of
$_______, long-term disability insurance, bonus plan, 401(k), non-qualified
plan and similar benefits as the Company provides generally from time to time
to its executives. Nothing herein, however, is intended, or shall be
construed to require the Company to institute or continue any, or any
particular, plan or benefits.
(d) BONUS. The Executive shall have the opportunity to
receive additional performance-based cash bonus compensation (the "Cash
Incentive Compensation") of up to _____ percent (__%) of the Executive's
annual salary for each fiscal year upon the satisfaction of certain financial
targets, based on the targets agreed by the Board for ILL and consistent with
those agreed for the Chief Executive Officer and other clearly defined
management objectives (the "Cash Incentive Objectives") to be agreed upon
annually between the Executive and the Company. For the Company's 1997
fiscal year, the Cash Incentive Objectives shall be agreed upon within thirty
(30) days of the date hereof, and, for each subsequent fiscal year, the Cash
Incentive Objectives shall be agreed upon no later than thirty (30) days
following the commencement of such fiscal year. In addition, the Executive
shall have the opportunity to receive additional performance-based equity
compensation (the "Equity Incentive Compensation") each fiscal year
consisting of warrants to purchase up to _____ shares of the Company's common
stock upon the satisfaction of certain financial and strategic targets (the
"Equity Incentive Objectives") to be
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agreed upon annually between the Executive and the Company. For the
Company's 1997 fiscal year, the Equity Incentive Objectives shall be agreed
upon within sixty (60) days of the date hereof, and, for each subsequent
fiscal year, the Equity Incentive Objectives shall be agreed upon no later
than thirty (30) days following the commencement of such fiscal year. If the
Equity Incentive Objectives are not fully achieved for any fiscal year, then
no Equity Incentive Compensation shall be due or payable to the Executive
unless the Board, in its sole discretion, chooses to grant all or any part of
such Equity Incentive Compensation to the Executive (it being understood that
the Board shall be under no obligation to make any such grant). The warrants
vest on issuance and will be issued subject to the price and other customary
terms set forth in the warrant agreement with respect thereto and will also
be subject (as will any equity received upon warrant exercise) to a
subscription agreement executed by the Executive and the Company in
connection with such issuance containing investor representations, buy-back
provisions and other customary terms. With respect to the terms and
conditions of the Executive's purchase and ownership of any such warrants,
anything in this Agreement to the contrary notwithstanding, the parties
hereto intend that all of the terms, conditions and provisions of the
subscription agreement, with respect to the Executive's purchase and
ownership of any such warrants, shall remain in full force and effect. To
the extent that this Agreement is deemed to be inconsistent in any way with
the subscription agreement regarding the terms and conditions of the
Executive's purchase and ownership of any such warrants, then the terms,
conditions and provisions of the subscription agreement shall prevail to the
extent of such inconsistency. Such cash and equity incentives will be paid
in accordance with standard company policy and in any event no later than
March 15 following the end of each fiscal year.
(e) AUTOMOBILE. The Company shall provide the Executive
with an annual automobile allowance of $12,000, payable in equal installments
on a monthly basis.
(f) VACATION. The Executive will be entitled to four
vacation weeks in each calendar year. The Executive will be entitled to all
Company holidays.
(g) WARRANTS. The Company shall provide the Executive with
warrants for ______ shares of Company stock. The warrants will be issued
with an exercise strike price of $__ and shall be subject to increases in
strike price, vesting and other customary terms set forth in the warrant
agreement with respect thereto and will also be subject (as will any equity
received upon warrant exercise) to a subscription agreement executed by the
Executive and the Company in connection with such issuance containing
investor representations, buy-back provisions and other customary terms.
With respect to the terms and conditions of the
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Executive's purchase and ownership of any such warrants, anything in this
Agreement to the contrary notwithstanding, the parties hereto intend that all
of the terms, conditions and provisions of the subscription agreement, with
respect to the Executive's purchase and ownership of any such warrants, shall
remain in full force and effect. To the extent that this Agreement is deemed
to be inconsistent in any way with the subscription agreement regarding the
terms and conditions of the Executive's purchase and ownership of any such
warrants, then the terms, conditions and provisions of the subscription
agreement shall prevail to the extent of such inconsistency.
With respect to any warrants issued to the Executive pursuant to
this Section 4(g), the Company will use its best reasonable efforts to cause
the warrents (or their equivalents) to be issued such that the Executive
shall have no liability for income taxes upon the vesting of such warrants.
In the event that the Internal Revenue Service determines that the vesting of
the warrants results in an income tax liability to the Executive, the Company
shall reimburse the Executive for any such income taxes and the interest and
penalties relating thereto but only to the extent that such taxes, interest
and penalties would not have otherwise been incurred or imposed upon the
ultimate sale or disposition by the Executive of such warrants or the shares
exercisable therefore. If, upon the vesting of the warrants issued to the
Executive pursuant to this Section 4(g), (i) the Executive is determined by
the Internal Revenue Service to be liable for any income taxes and (ii) such
income taxes, if not then due and payable by the Executive, would be due and
payable by the Executive upon the ultimate sale or disposition by the
Executive of such warrants or the shares exercisable thereunder, then the
Company will lend the Executive the amount necessary to presently pay such
income taxes and any interest or penalties assessed to the Executive in
connection therewith. Such loan by the Company shall be secured by a
promissory note delivered by the Executive at the time of such loan and
payable to the Company. The promissory note will (i) be secured by the
warrants issued to the Executive pursuant to this Section 4(g) and the shares
exercisable thereunder, (ii) have a face value identical to the amount of
such loan, (iii) incur interest at a rate of five percent (5%) per year
accruing annually, (iv) become due and payable immediately upon any sale or
other disposition by the Executive, whether in whole or in part, of such
warrant or the shares exercisable thereunder.
(h) RELOCATION EXPENSES. In connection with the Executive's
relocation to the Hillside, Illinois area, the Executive shall be entitled to
reimbursement for (i) the reasonable expenses for moving household goods by
the Executive in connection with the Executive's relocation to the Hillside,
Illinois area, (ii) the customary commission paid by the Executive in
connection with the sale of his current, primary residence, (iii) the
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customary commission paid by the Executive in connection with the purchase of
a residence in the Hillside, Illinois area and surrounding vicinity (within
50 miles), (iv) financing fees, up to one and one half points, in connection
with the Executive's purchase of a residence in the Hillside, Illinois area,
(v) the customary and reasonable costs of appraisals paid by the Executive in
connection with the sale of his current, primary residence and the purchase
of a residence in the Hillside, Illinois area, and (vi) reasonable travel
expenses incurred by the Executive for the transportation of the Executive
and his immediate family for house hunting trips and from the Executive's
current, primary residence to the Executive's new residence in the Hillside,
Illinois area. If necessary, the Company shall purchase the Executive's
current residence at its fair market value pursuant to the terms of that
certain Prudential Resources Management Relocation Agreement by and between
the Company and Prudential Residential Services, Limited Partnership. Except
as set forth above, the Executive will bear all expenses, costs and capital
losses associated with his relocation.
(i) The Company shall provide the Executive with the necessary
office equipment including laptop PC, cellular phone, pager and fax machine
for home use. The Executive shall reimburse the Company for all non-business
calls made on Company equipment and the Company shall reimburse the Executive
for all business calls made on personal phone lines.
(j) The Executive shall be entitled to purchase up to $_______ of
ILL Stock at $__ per share within 90 days of commencing employment.
5. TERMINATION. The Executive's employment hereunder shall be or
may be terminated, as the case may be, under the following circumstances:
(a) DEATH. The Executive's employment hereunder shall
terminate upon his death.
(b) DISABILITY. The Executive's employment hereunder shall
terminate upon the Executive's physical or mental disability or infirmity
which, in the opinion of a competent physician selected by the Board, renders
the Executive unable to perform his duties under this Agreement for more than
90 days during any 180-day period.
(c) CAUSE. The Company may terminate the Executive's
employment hereunder for "CAUSE" by delivery of written notice to the
Executive concerning the same. Cause shall mean (i) Executive's material
breach of any of the covenants made by him in Sections 3(a), 3(c), 7 and 8 of
this Agreement, (ii) his conviction of a crime involving moral turpitude or
constituting a
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felony under the laws of any state, the District of Columbia or of the United
States, (iii) his misconduct in the performance of his duties hereunder,
including without limitation, his willful failure or refusal to carry out any
proper direction by the Board with respect to the services to be rendered by
him hereunder or the manner of rendering such services or his habitual
neglect of his duties as an officer of the Company, which misconduct or
neglect, if capable of cure, shall continue for thirty (30) days after
receipt of written notice from the Company, or (iv) his engaging in any
material misconduct, dishonesty, misappropriation of the assets of the
Company, its equity holders or any of its or their, as the case may be,
affiliates, or any negligent acts, in each case, detrimental in any material
respect to any of the foregoing.
(d) EMPLOYMENT-AT-WILL. The Executive hereby agrees that
the Company may dismiss him under this Section 5 without regard (i) to any
general or specific policies (whether written or oral) of the Company
relating to the employment or termination of its employees, or (ii) to any
statements made to the Executive, whether made orally or contained in any
document, pertaining to the Executive's relationship with the Company.
Notwithstanding anything to the contrary contained herein, including in
Section 2 of this Agreement, the Executive's employment with the Company is
not for any specified term and may be terminated by the Company at any time,
for any reason, with or without cause, without liability except with respect
to the payments provided for by Section 6.
(e) VOLUNTARY RESIGNATION. The Executive may voluntarily
resign his position and terminate his employment with the Company at any time
by delivery of a written notice of resignation to the Company (the "NOTICE OF
RESIGNATION"). The Notice of Resignation shall set forth the date such
resignation shall become effective (the "DATE OF RESIGNATION"), which date
shall, in any event, be no more than thirty days from the date the Notice of
Resignation is delivered to the Company.
(f) CONSTRUCTIVE DISCHARGE. The Executive may regard his
employment as being constructively terminated by the Company and may resign
his position by delivery of Notice of Resignation as described in Section
5(e) above if there has been a substantial diminution in the Executive's
duties and responsibilities with the Company since the date of this Agreement
(a "CONSTRUCTIVE DISCHARGE").
(g) NOTICE. Any termination of the Executive's employment
by the Company shall be communicated by written Notice of Termination to the
Executive. For purposes of this Agreement, a "NOTICE OF TERMINATION" shall
mean a notice that shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts and
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circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated.
(h) "DATE OF TERMINATION" shall mean (i) if the Executive's
employment is terminated by his death, the date of his death, (ii) if the
Executive's employment is terminated by reason of his disability, the date of
the opinion of the physician referred to in Section 5(b), above, (iii) if the
Executive's employment is terminated pursuant to subsection (c) above, or
without cause by the Company, the date specified in the Notice of
Termination, and (iv) if the Executive resigns, the Date of Resignation.
(i) TERMINATION OBLIGATIONS.
(i) The Executive hereby acknowledges and agrees that all
personal property and equipment furnished to or prepared by the
Executive in the course of or incident to his employment, belongs to the
Company and shall be promptly returned to the Company upon termination
of the Employment Period. "PERSONAL PROPERTY" includes, without
limitation, all books, manuals, records, reports, notes, contracts,
lists, blueprints, and other documents, or materials, or copies thereof
(including computer files), and all other proprietary information
relating to the business of the Company. Following termination, the
Executive will not retain any written or other tangible material
containing any proprietary information of the Company.
(ii) Upon termination of the Employment Period, the Executive
shall be deemed to have resigned from all offices and directorships then
held with the Company or any affiliate.
(iii) The representations and warranties contained herein and the
Executive's obligations under Sections 5(h), 7, 8, 9 and 15 shall
survive termination of the Employment Period and the expiration of this
Agreement.
6. COMPENSATION UPON TERMINATION OR DURING DISABILITY.
(a) DISABILITY. During any period that the Executive fails
to perform his duties hereunder as a result of disability due to physical or
mental illness, the Executive shall continue to receive the salary payable to
the Executive pursuant to and in accordance with the terms of Section 4(a)
hereof until his employment is terminated pursuant to Section 5(b) hereof,
provided that payments so made to the Executive during the first 90 days of
the disability shall be reduced by the sum of the amounts, if any, payable to
the Executive at or prior to the time of any such payment under any
disability benefit plan of the Company. In the
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<PAGE>
event that the Cash Incentive Objectives are met at the end of the fiscal
year in which the Executive is terminated, the Company shall also pay to the
Executive, within thirty (30) days after receipt by the Company of the
audited financial statements for such fiscal year and confirmation that the
Cash Incentive Objectives have been met, a proportionate share of the Cash
Incentive Compensation due to the Executive for such fiscal year based upon
the percent of the fiscal year that the Executive worked for the Company
prior to such termination. In addition, the Company shall keep in force
existing health insurance covering the Executive and his dependents for a
period of one (1) year from Date of Termination on the basis in effect at the
date of the termination of the Executive's employment, subject to the
Company's right to amend, modify or terminate any such plan. The Executive
and his dependents shall also be entitled to any continuation of coverage
rights under any applicable law,
(b) DEATH. If the Executive's employment shall be
terminated by reason of the Executive's death, the Company shall pay the
Executive his salary through the Date of Termination and the Executive's
beneficiaries shall be entitled to receive any benefits due to them as a
result of any life insurance policy the Executive receives pursuant to
Section 4(c) of this Agreement. In the event that the Cash Incentive
Objectives are met at the end of the fiscal year in which the Executive is
terminated, the Company shall also pay to the Executive, within thirty (30)
days after receipt by the Company of the audited financial statements for
such fiscal year and confirmation that the Cash Incentive Objectives have
been met, a proportionate share of the Cash Incentive Compensation due to the
Executive for such fiscal year based upon the percent of the fiscal year that
the Executive worked for the Company prior to such termination. In addition,
the Company shall keep in force existing health insurance covering the
Executive's dependents for a period of one (1) year from Date of Termination
on the basis in effect at the date of the termination of the Executive's
employment, subject to the Company's right to amend, modify or terminate any
such plan. The Executive and his dependents shall also be entitled to any
continuation of coverage rights under any applicable law.
(c) CAUSE. If the Executive's employment shall be
terminated for cause pursuant to Section 5(c) hereof, the Company shall pay
the Executive his salary through the Date of Termination. The Executive and
his dependents shall also be entitled to any continuation of health insurance
coverage rights under any applicable law.
(d) OTHER TERMINATIONS BY THE COMPANY. If the Company shall
terminate the Executive's employment without cause pursuant to Section 5(d)
hereof or if there has been a Constructive Discharge pursuant to Section 5(f)
hereof, the Company shall pay
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<PAGE>
the Executive the salary payable to the Executive pursuant to and in
accordance with Section 4(a) hereof through the Expiration Date. The Company
shall also pay to the Executive, within thirty (30) days after the Date of
Termination, a proportionate share of the Cash Incentive Compensation due to
the Executive for the fiscal year in which the Date of Termination has
occurred based upon the percent of the fiscal year that the Executive worked
for the Company prior to such termination. The Executive and his dependents
shall also be entitled to any continuation of health insurance coverage
rights under any applicable law. In addition, the Company shall keep in
force existing health insurance covering the Executive's dependents through
the Expiration Date on the basis in effect at the date of the termination of
the Executive's employment, subject to the Company's right to amend, modify
or terminate any such plan. The Executive and his dependents shall also be
entitled to any continuation of coverage rights under any applicable law.
(e) VOLUNTARY RESIGNATION. If the Executive terminates his
employment with the Company pursuant to Section 5(e) hereof, the Company
shall pay the Executive the salary payable to the Executive pursuant to and
in accordance with the provisions of Section 4(a) hereof through the Date of
Resignation. The Executive and his dependents shall also be entitled to any
continuation of health insurance coverage rights under any applicable law.
7. CONFIDENTIALITY AND NON-SOLICITATION COVENANTS.
(a) CONFIDENTIALITY. In addition to the agreements set
forth in Section 5(h)(i), the Executive hereby agrees that the Executive will
not, during the Employment Period or any period thereafter, directly or
indirectly, disclose or make available to any person, firm, corporation,
association or other entity for any reason or purpose whatsoever, any
Confidential Information (as defined below). The Executive agrees that, upon
termination of his employment with the Company, all Confidential Information
in his possession that is in written or other tangible form (together with
all copies or duplicates thereof, including computer files) shall be returned
to the Company and shall not be retained by the Executive or furnished to any
third party, in any form except as provided herein; PROVIDED, HOWEVER, that
the Executive shall not be obligated to treat as confidential, or return to
the Company copies of any Confidential Information that (i) was publicly
known at the time of disclosure to the Executive, (ii) becomes publicly known
or available thereafter other than by any means in violation of this
Agreement or any other duty owed to the Company by any person or entity or
(iii) is lawfully disclosed to the Executive by a third party. As used in
this Agreement the term "CONFIDENTIAL INFORMATION" means: information
disclosed to the Executive or known by the Executive as a consequence of or
through his relationship with the Company, about the customers, employees,
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<PAGE>
business methods, public relations methods, organization, procedures or
finances, including, without limitation, information of or relating to
customer lists of the Company and its affiliates.
(b) NON-SOLICITATION. In addition, the Executive hereby
agrees that (A) during the Employment Period and any period of time for which
salary is obligated to be paid to the Executive pursuant to and in accordance
with the terms of Section 6 (any such period referred to herein as the
"SEVERANCE PERIOD") or (B) during the Employment Period and for one year
thereafter, whichever period is longer, the Executive will not, either on his
own account or jointly with or as a manager, agent, officer, employee,
consultant, partner, joint venturer, owner or shareholder or otherwise on
behalf of any other person, firm or corporation, (i) carry on or be engaged
or interested directly or indirectly in, or solicit, the sale of physical
logistics services to any person, firm or corporation which, at any time
during the Employment Period has been or is a customer of or in the habit of
dealing with the Company in its business, (ii) endeavor directly or
indirectly to canvas or solicit in competition with Company or to interfere
with the supply of orders for goods or services from or by any person, firm
or corporation which during the Employment Period has been or is a supplier
of goods or services to Company or (iii) directly or indirectly solicit or
attempt to solicit away from Company any of its officers or employees or
offer employment to any person who, on or during the six months immediately
preceding the date of such solicitation or offer, is or was an officer or
employee of Company.
8. COVENANT NOT TO COMPETE. The Executive agrees that (A) during
the Employment Period and the Severance Period or (B) during the Employment
Period and for one year thereafter, whichever period is longer, he will not
directly or indirectly, own, manage, operate, join, control or participate in
the ownership, management, operation or control of, or be connected as a
director, officer, employee, partner, consultant or otherwise with, any
profit or non-profit business or organization which, directly or indirectly,
competes with, or in any way interferes with, the business of physical
logistics services provided by the Company or any of its affiliates, in any
part of North America.
9. INJUNCTIVE RELIEF AND ENFORCEMENT. In the event of breach by
the Executive of the terms of Sections 5(h)(i), 7 or 8, the Company shall be
entitled to institute legal proceedings to obtain damages for any such
breach, or to enforce the specific performance of this Agreement by the
Executive and to enjoin the Executive from any further violation of Sections
5(h)(i), 7 or 8 and to exercise such remedies cumulatively or in conjunction
with all other rights and remedies provided by law. The Executive
acknowledges, however, that the remedies at law for any breach by him of the
provisions of Sections 5(h)(i), 7 or 8 may be inadequate. In addition, in
the event the agreements set forth in
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<PAGE>
Sections 5(h)(i), 7 or 8 shall be determined by any court of competent
jurisdiction to be unenforceable by reason of extending for too great a
period of time or over too great a geographical area or by reason of being
too extensive in any other respect, each such agreement shall be interpreted
to extend over the maximum period of time for which it may be enforceable and
to the maximum extent in all other respects as to which it may be
enforceable, and enforced as so interpreted, all as determined by such court
in such action.
10. NOTICE. For the purposes of this Agreement, notices, demands
and all other communications provided for in this Agreement shall be in
writing and shall be deemed to have been duly given when personally delivered
when transmitted by telecopy with receipt confirmed, or one day after
delivery to an overnight air courier guaranteeing next day delivery,
addressed as follows:
If to the Executive:
----------------------------
----------------------------
----------------------------
If to the Company: International Logistics Limited
330 South Mannheim Road
Hillside, Illinois 60162
Attention: Roger E. Payton
With a copy to:
----------------------------
----------------------------
----------------------------
or to such other address as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address
shall be effective only upon receipt.
11. SEVERABILITY. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall remain
in full force and effect; PROVIDED, HOWEVER, that if any one or more of the
terms contained in Sections 5(h), 7 or 8 hereto shall for any reason be held
to be excessively broad with regard to time, duration, geographic scope or
activity, that term shall not be deleted but shall be reformed and
constructed in a manner to enable it to be enforced to the extent compatible
with applicable law.
12. ASSIGNMENT. This Agreement may not be assigned by the
Executive, but may be assigned by the Company to any successor to its
business and will inure to the benefit and be binding upon any such successor.
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<PAGE>
13. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
14. HEADINGS. The headings contained herein are for reference
purposes only and shall not in any way affect the meaning or interpretation
of this Agreement.
15. CHOICE OF LAW. This Agreement shall be construed, interpreted
and the rights of the parties determined in accordance with the laws of the
State of Illinois (without reference to the choice of law provisions of
Illinois law), except with respect to matters of law concerning the internal
corporate affairs of any corporate entity which is a party to or the subject
of this Agreement, and as to those matters the law of the jurisdiction under
which the respective entity derives its powers shall govern.
16. ARBITRATION. Notwithstanding anything herein to the contrary,
in the event that there shall be a dispute among the parties arising out of
or relating to this Agreement, or the breach thereof, the parties agree that
such dispute shall be resolved by final and binding arbitration in Chicago,
Illinois, administered by AAA, in accordance with AAA's Commercial
Arbitration Rules then in effect. Depositions may be taken and other
discovery may be obtained during such arbitration proceedings to the same
extent as authorized in civil judicial proceedings. Any award issued as a
result of such arbitration shall be final and binding between the parties
thereto, and shall be enforceable by any court having jurisdiction over the
party against whom enforcement is sought. The fees and expenses of such
arbitration (including reasonable attorneys' fees) or any action to enforce
an arbitration award shall be paid by the party that does not prevail in such
arbitration.
17. LIMITATION ON LIABILITIES. If the Executive is awarded any
damages as compensation for any breach or action related to this Agreement, a
breach of any covenant contained in this Agreement (whether express or
implied by either law or fact), or any other cause of action based in whole
or in part on any breach of any provision of this Agreement, such damages
shall be limited to contractual damages and shall exclude (i) punitive
damages, and (ii) consequential and/or incidental damages (E.G., lost profits
and other indirect or speculative damages). The maximum amount of damages
that the Executive may recover for any reason shall be the amount equal to
all amounts owed (but not yet paid) to the Executive pursuant to this
Agreement through its natural term or through any Severance Period.
18. ENTIRE AGREEMENT. This Agreement contains the entire
agreement and understanding between the Company and the
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<PAGE>
Executive with respect to the employment of the Executive by the Company as
contemplated hereby, and this Agreement supersedes all prior agreements,
understandings, representations, promises, negotiations and discussions,
whether written or oral. This Agreement shall not be changed unless in
writing and signed by both the Executive and the Board of Directors of the
Company.
19. THE EXECUTIVE'S ACKNOWLEDGMENT. The Executive acknowledges
(a) that he has consulted with or has had the opportunity to consult with
independent counsel of his own choice concerning this Agreement and has been
advised to do so by the Company, and (b) that he has read and understands the
Agreement, is fully aware of its legal effect, and has entered into it freely
based on his own judgment.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Employment
Agreement as of the date and year first above written.
INTERNATIONAL LOGISTICS LIMITED
------------------------------------------------
Name: Roger E. Payton
Title: Chief Executive Officer
------------------------------------------------
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<PAGE>
SECURED PROMISSORY NOTE
$150,240.00
FOR VALUE RECEIVED, the undersigned, Roger E. Payton ("Borrower") promises
to pay to the order of INTERNATIONAL LOGISTICS LIMITED, a Delaware corporation
("Holder"), at its offices at 330 South Mannheim Road, Hillside, Illinois
60162, or at such other place as Holder may from time to time specify in
writing, one hundred fifty thousand two hundred and forty dollars ($150,240.00)
in lawful money of the United States of America and in immediately available
funds, together with the interest on the outstanding and unpaid portion thereof
from the date hereof at the annual rate equal to eight percent (8%). The
unpaid principal balance hereof, together with all unpaid interest accrued
thereon, shall be due and payable in full on April 30, 2000.
Borrower agrees to make payments to Holder in respect of unpaid principal
and interest hereon on the 1st and 15th day of each month, each of which
payments shall be in the amount of $625 during the period beginning on October
1, 1997 and ending on December 31, 1997 and in the amount of $1,650 during the
period beginning on January 1, 1998 and ending on April 30, 2000. Borrower
further agrees that, in the event any cash distribution or cash dividend is
made in respect of the shares of International Logistics Limited common stock
that are subject to that certain Pledge Agreement dated as of even date
herewith, Borrower shall make a mandatory prepayment of unpaid principal and
accrued and unpaid interest hereon by immediately remitting to Holder the
lesser of (a) 80% of the excess of (i) the aggregate amount of such dividend or
distribution less (ii) an amount equal to the federal and state income taxes
payable by Borrower with respect to such dividend or distribution and (b) the
aggregate unpaid principal amount hereof plus accrued and unpaid interest. In
addition, Borrower agrees that Borrower will make mandatory prepayments of
principal and accrued and unpaid interest hereon immediately upon payment of
any Bonus Compensation (as defined herein), which payments shall be an amount
equal to the lesser of (i) 75% of such Bonus Compensation and (ii) the
aggregate unpaid principal amount hereof plus accrued and unpaid interest.
"Bonus Compensation" as used herein shall mean any cash compensation paid by
International Logistics Limited or any of its subsidiaries to Borrower in
excess of salary paid to Borrower by such entity, less an amount equal to
federal and state income taxes payable by Borrower with respect to such
compensation.
All payments made hereunder shall be applied first to accrued and unpaid
interest and the remainder to principal. The undersigned shall have the right
and option to prepay this Promissory Note at any time without penalty, together
with interest to the date of prepayment accrued on the amount prepaid.
In the event that the Borrower ceases to be an employee of the Holder or
any of its subsidiaries for any reason, then all the remaining indebtedness due
under this Promissory Note shall, at the option of Holder, become immediately
due and payable without demand or notice. Interest shall continue to accrue on
the unpaid balance of this Promissory Note after the
<PAGE>
scheduled or any accelerated maturity of this Promissory Note at the rate of
interest stated in this Promissory Note until the entire principal has been
paid in full.
In the event that this Promissory Note is placed in the hands of an
attorney for collection, for protection or preservation of the rights of
Holder, for suit, or to compromise or take any other action with regard
thereto, the undersigned agrees to pay all costs and expenses relating thereto,
including the reasonable fees of said attorney.
To the extent allowed by law, the undersigned hereby waives presentment,
demand for payment, notice of dishonor, protest, and any and all other notices
or demands in connection with the delivery, acceptance, performance, default or
enforcement of this Promissory Note.
Holder shall not by any act of omission or commission be deemed to waive
any of its rights or remedies hereunder unless such waiver is in writing and
signed by an authorized officer of Holder and then only to the extent
specifically set forth therein. A waiver on one occasion shall not be
construed to be a continuing waiver of such right or remedy on any other
occasion. All remedies conferred upon Holder by this Promissory Note shall be
cumulative and none is exclusive, and such remedies may be exercised
concurrently or consecutively at the option of Holder.
This Promissory Note is secured by and entitled to the benefits of that
certain Pledge Agreement dated as of May 2, 1996 between Holder and Borrower
(the "Pledge Agreement"). Holder hereby agrees that its rights under and in
respect of this Promissory Note and any claim or liability under this
Promissory Note or the Pledge Agreement shall be limited to satisfaction out
of, and enforcement against, the Collateral (as defined in the Pledge
Agreement).
Any provision contained in this Promissory Note which is contrary to,
prohibited by or invalid under applicable laws or regulations shall be deemed
omitted from this Promissory Note and shall not invalidate the remaining
provisions hereof.
The form and validity of this Promissory Note and the rights and duties of
the parties hereto shall be governed by the laws of the State of Illinois.
Borrower:
__________________________________
Roger E. Payton
2
<PAGE>
SECURED PROMISSORY NOTE
$157,500 July 11, 1997
FOR VALUE RECEIVED, the undersigned, Luis F. Solis ("Borrower") promises
to pay to the order of INTERNATIONAL LOGISTICS LIMITED, a Delaware
corporation ("Holder"), at its offices at 330 South Mannheim Road, Hillside,
Illinois 60162, or at such other place as Holder may from time to time
specify in writing, $157,500 in lawful money of the United States of America
and in immediately available funds, together with the interest on the
outstanding and unpaid portion thereof from the date hereof at the annual
rate equal to ten percent (10%). The unpaid principal balance hereof,
together with all unpaid interest accrued thereon, shall be due and payable
in full on March 1, 1998.
Borrower agrees that, in the event any cash distribution or cash
dividend is made in respect of the shares of International Logistics Limited
common stock that are subject to that certain Pledge Agreement dated as of
even date herewith, Borrower shall make a mandatory prepayment of unpaid
principal and accrued and unpaid interest hereon by remitting to Holder the
lesser of (a) the excess of (i) the aggregate amount of such dividend or
distribution less (ii) an amount equal to the federal and state income taxes
payable by Borrower with respect to such dividend or distribution and (b) the
aggregate unpaid principal amount hereof plus accrued and unpaid interest.
All payments made hereunder shall be applied first to accrued and unpaid
interest and the remainder to principal. The undersigned shall have the
right and option to prepay this Promissory Note at any time without penalty,
together with interest to the date of prepayment accrued on the amount
prepaid.
In the event that the Borrower ceases to be an employee of the Holder or
any of its subsidiaries for any reason, then all the remaining indebtedness
due under this Promissory Note shall, at the option of Holder, become
immediately due and payable without demand or notice. Interest shall
continue to accrue on the unpaid balance of this Promissory Note after the
scheduled or any accelerated maturity of this Promissory Note at the rate of
interest stated in this Promissory Note until the entire principal has been
paid in full.
In the event that this Promissory Note is placed in the hands of an
attorney for collection, for protection or preservation of the rights of
Holder, for suit, or to compromise or take any other action with regard
thereto, the undersigned agrees to pay all costs and expenses relating
thereto, including the reasonable fees of said attorney.
To the extent allowed by law, the undersigned hereby waives presentment,
demand for payment, notice of dishonor, protest, and any and all other
notices or demands in connection with the delivery, acceptance, performance,
default or enforcement of this Promissory Note and hereby
<PAGE>
consents to any modification or indulgence that may be granted or consented
to by Holder in respect to the time of payment or any other provisions of
this Promissory Note.
Holder shall not by any act of omission or commission be deemed to waive
any of its rights or remedies hereunder unless such waiver is in writing and
signed by an authorized officer of Holder and then only to the extent
specifically set forth therein. A waiver on one occasion shall not be
construed to be a continuing waiver of such right or remedy on any other
occasion. All remedies conferred upon Holder by this Promissory Note shall
be cumulative and none is exclusive, and such remedies may be exercised
concurrently or consecutively at the option of Holder.
This Promissory Note is secured by and entitled to the benefits of that
certain Pledge Agreement dated as of July 11, 1997 between Holder and
Borrower.
Any provision contained in this Promissory Note which is contrary to,
prohibited by or invalid under applicable laws or regulations shall be deemed
omitted from this Promissory Note and shall not invalidate the remaining
provisions hereof.
The form and validity of this Promissory Note and the rights and duties
of the parties hereto shall be governed by the laws of the State of Illinois.
Borrower:
--------------------
Luis F. Solis
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<PAGE>
PLEDGE AGREEMENT
This PLEDGE AGREEMENT (this "AGREEMENT") dated as of June __, 1997,
is made between _____________ (the "OBLIGOR") and International Logistics
Limited, a Delaware corporation (the "COMPANY").
WHEREAS, to induce the Company to lend the Obligor the funds
evidenced by the Promissory Note (as defined below) and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Obligor has agreed to pledge and grant a security interest in
the Collateral as security for the Secured Obligations.
NOW, THEREFORE, in consideration of the foregoing, the Obligor agrees
with the Company as follows:
SECTION 1. DEFINITIONS AND INTERPRETATION.
1.01 CERTAIN DEFINED TERMS. The following terms shall have the
following meanings under this Agreement:
"COLLATERAL" shall have the meaning assigned to that term in
Section 2.01.
"DISTRIBUTIONS" shall have the meaning assigned to such term in
Section 2.04.
"EVENT OF DEFAULT" shall mean (i) the failure of the Obligor to pay
in full the Obligations as and when they become due and payable or (ii) the
Obligor's ceasing to be employed by the Company or any of its subsidiaries for
any reason.
"LIENS" shall mean, with respect to any property, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
property or any agreement to give, or notice of, any of the foregoing.
"PLEDGED STOCK" shall have the meaning assigned to that term in
Section 2.01(a).
"PROMISSORY NOTE" shall mean the Promissory Note dated _____________
of the Obligor in favor of the Company, as amended from time to time.
"SECURED OBLIGATIONS" shall mean any and all obligations of the
Obligor to the Company evidenced by the Promissory Note or arising under this
Agreement.
"STOCK COLLATERAL" shall have the meaning assigned to that term in
Section 2.01(a).
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<PAGE>
"STOCKHOLDERS AGREEMENT" shall mean the Stockholders Agreement
between the Company and each of the Holders listed on Exhibit A thereto, as the
same may be amended from time to time.
"UNIFORM COMMERCIAL CODE" shall mean the Uniform Commercial Code as
in effect in the State of Illinois from time to time or, by reason of mandatory
application, any other applicable jurisdiction.
SECTION 2. COLLATERAL.
2.01 GRANT. As collateral security for the prompt payment in
full when due (whether at stated maturity, by acceleration or otherwise) and
performance of the Secured Obligations, the Obligor hereby pledges and grants
to the Company, for the benefit of the Company, a security interest in all of
the Obligor's right, title and interest in and to the following property,
whether now owned or hereafter acquired by the Obligor and whether now
existing or hereafter coming into existence (collectively, the "COLLATERAL"):
(a) (i) all of the shares of capital stock of the Obligor
represented by the respective certificates identified in Annex 1 together
with, in each case, the certificates representing the same (collectively, the
"PLEDGED STOCK");
(ii) all shares, securities, moneys or property
representing a dividend on, or a distribution or return of capital in respect
of any of the Pledged Stock, resulting from a split-up, revision,
reclassification or other like change of any of the Pledged Stock or
otherwise received in exchange for any of the Pledged Stock and all equity
rights issued to the holders of, or otherwise in respect of, any of the
Pledged Stock; and
(iii) in the event of any consolidation or merger in
which the Company is not the surviving corporation, all shares of each class
of the capital stock of the successor corporation (unless such successor
corporation is the Company itself) formed by or resulting from such
consolidation or merger (collectively, and together with the property
described in clauses (i) and (ii) above, the "STOCK COLLATERAL");
(b) all proceeds and products in whatever form of all or any
part of the foregoing Collateral.
2.02 PERFECTION. Concurrently with the execution and delivery of
this Agreement, the Obligor shall (i) deliver to the Company all certificates
identified in Annex 1, accompanied by undated stock powers duly executed in
blank and (ii) take all such other actions as shall be necessary or as the
Company may
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<PAGE>
reasonably request to perfect and establish the priority of the Liens granted
by this Agreement.
2.03 PRESERVATION AND PROTECTION OF SECURITY INTERESTS. The
Obligor shall give, execute, deliver, file or record any and all financing
statements, notices, contracts, agreements or other instruments, obtain any
and all governmental approvals and take any and all steps that may be
necessary or as the Company may reasonably request to create, perfect,
establish the priority of, or to preserve the validity, perfection or
priority of, the Liens granted by this Agreement or to enable the Company to
exercise and enforce its rights, remedies, powers and privileges under this
Agreement with respect to such Liens. The Company shall be entitled to
reflect the Lien of this Agreement in its stock records and to refuse to
recognize any transfer of the Stock Collateral not in accordance with this
Agreement.
2.04 DISTRIBUTIONS. The proceeds from all cash dividends or
other cash distributions on the Collateral and any proceeds from the sale of
all or any part of the Obligor's interest therein (the "DISTRIBUTIONS") shall
be paid directly to the Company. Any Distributions shall first be applied to
the unpaid accrued interest then due on the Promissory Note and then to
reduce the outstanding principal balance of the Promissory Note.
2.05 ATTORNEY-IN-FACT. Subject to the rights of the Obligor
under Section 2.06, the Company is hereby appointed the attorney-in-fact of
the Obligor for the purpose of carrying out the provisions of this Agreement
and taking any action and executing any instruments which the Company may
deem necessary or advisable to accomplish the purposes of this Agreement, to
preserve the validity, perfection and priority of the Liens granted by this
Agreement and, following any Event of Default, to exercise its rights,
remedies, powers and privileges under this Agreement. This appointment as
attorney-in-fact is irrevocable and coupled with an interest. Without
limiting the generality of the foregoing, the Company shall be entitled under
this Agreement upon the occurrence and continuation of any Event of Default
(i) to ask, demand, collect, sue for, recover, receive and give receipt and
discharge for amounts due and to become due under and in respect of all or
any part of the Collateral; (ii) to receive, endorse and collect any drafts,
instruments, documents and chattel paper in connection with clause (i) above;
(iii) to file any claims or take any action or proceeding that the Company
may deem necessary or advisable for the collection of all or any part of the
Collateral; and (iv) to execute, in connection with any sale or disposition
of the collateral under Section 5, any endorsements, assignments, bills of
sale or other instruments of conveyance or transfer with respect to all or
any part of the Collateral.
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<PAGE>
2.06 SPECIAL PROVISIONS RELATING TO STOCK COLLATERAL. So long
as no Event of Default shall have occurred and be continuing, the Obligor
shall have the right to exercise all voting, consensual and other powers of
ownership pertaining to the Stock Collateral for all purposes not
inconsistent with the terms of this Agreement or the Stockholders Agreement;
and the Company shall, at the Obligor's expense, execute and deliver to the
Obligor or cause to be executed and delivered to the Obligor all such
proxies, powers of attorney, dividend and other orders and other instruments,
without recourse, as the Obligor may reasonably request for the purpose of
enabling the Obligor to exercise the rights and powers which it is entitled
to exercise pursuant to this Section 2.06.
2.07 RIGHTS AND OBLIGATIONS.
(a) No reference in this Agreement to proceeds or to the sale or
other disposition of Collateral shall authorize the Obligor to sell or
otherwise dispose of any Collateral except to the extent otherwise expressly
permitted by the terms of the Stockholders Agreement.
(b) The Company shall not be required to take steps necessary to
preserve any rights against prior parties as to any part of the Collateral.
2.08 TERMINATION. On the date when all Secured Obligations shall
have been paid in full, this Agreement shall terminate, and the Company shall
forthwith cause to be assigned, transferred and delivered, against receipt
but without any recourse, warranty or representation whatsoever, any
remaining Collateral and money received in respect of the Collateral, to or
on the order of the Obligor or as required by applicable law or court order.
2.09 RIGHT TO SET OFF. The Obligor acknowledges that under the
Company's Employee Stock Purchase Plan II (the "PLAN") the Company has the
option to repurchase (the "CALL OPTION") the Stock Collateral and the Obligor
has the option to sell (the "PUT OPTION") to the Company the Stock Collateral
if the Obligor's employment with the Company or its subsidiaries is
terminated for any reason and further agrees and acknowledges that the
Company may set off any amounts payable to the Obligor upon exercise of the
Call Option or the Put Option against any and all unpaid principal and
accrued interest payable by the Obligor under the Promissory Note.
3. REPRESENTATIONS AND WARRANTIES. As of the date hereof and
as of the date of the delivery of the Collateral, the Obligor represents and
warrants to the Company as follows:
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<PAGE>
3.01 TITLE. The Obligor is the sole beneficial owner of the
Collateral, and such Collateral is free and clear of all Liens except the
Lien of this Agreement. The Liens granted by this Agreement in favor of the
Company for the benefit of the Company have attached and constitute a
perfected security interest in all of such Collateral prior to all other
Liens.
3.02 PLEDGED STOCK. The Pledged Stock evidenced by the certificates
identified in Annex 1 is duly authorized, validly existing, fully paid and
nonassessable.
SECTION 4. COVENANTS.
4.01 SALES AND OTHER LIENS. Without the prior written consent of
the Company, the Obligor shall not dispose of any Collateral, create, incur,
assume or suffer to exist any Lien upon any Collateral or file or suffer to
be on file or authorize to be filed, in any jurisdiction, any financing
statement or like instrument with respect to all or any part of the
Collateral.
4.02 FURTHER ASSURANCES. The Obligor agrees that, from time to
time upon the written request of the Company, the Obligor will execute and
deliver such further documents and do such other acts and things as the
Company may reasonably request in order fully to effect the purposes of this
Agreement.
SECTION 5. REMEDIES.
5.01 EVENTS OF DEFAULT, ETC. If any Event of Default shall have
occurred and be continuing:
(a) The Company in its discretion may, in its name or in the
name of the Obligor or otherwise, demand, sue for, collect or receive any
money or property at any time payable or receivable on account of or in
exchange for all or any part of the Collateral, but shall be under no
obligation to do so;
(b) the Company in its discretion may, upon ten business days'
prior written notice (or such lesser notice as is provided by applicable law)
to the Obligor of the time and place, with respect to all or any part of the
Collateral which shall then be or shall thereafter come into the possession,
custody or control of the Company or any of its assigns, sell, lease or
otherwise dispose of all or any part of such Collateral, at such place or
places as the Company deems best, for cash, for credit or for future delivery
(without thereby assuming any credit risk) and at public or private sale,
without demand of performance or notice of intention to effect any such
disposition or of time or place of any such sale (except such notice as is
required above or by applicable statute and cannot be waived), and the
Company or any of its assigns may be the purchaser, lessee or recipient
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<PAGE>
of any or all of the Collateral so disposed of at any public sale (or, to the
extent permitted by law, at any private sale) and thereafter hold the same
absolutely, free from any claim or right of whatsoever kind, including any
right or equity of redemption (statutory or otherwise), of the Obligor, any
such demand, notice and right or equity being hereby expressly waived and
released. The Company may, without notice or publication, adjourn any public
or private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for the sale, and such sale may be
made at any time or place to which the sale may be so adjourned; and
(c) the Company shall have, and in its discretion may
exercise, all of the rights, remedies, powers and privileges with respect to
the Collateral of a secured party under the Uniform Commercial Code (whether
or not the Uniform Commercial Code is in effect in the jurisdiction where
such rights, remedies, powers and privileges are asserted) and such
additional rights, remedies, powers and privileges to which a secured party
is entitled under the laws in effect in any jurisdiction where any rights,
remedies, powers and privileges in respect of this Agreement or the
Collateral may be asserted, including the right, to the maximum extent
permitted by law, to exercise all voting, consensual and other powers of
ownership pertaining to the Collateral as if the Company were the sole and
absolute owner of the Collateral (and the Obligor agrees to take all such
action as may be appropriate to give effect to such right).
The proceeds of, and other realization upon, the Collateral by virtue of the
exercise of remedies under this Section 5.01 shall be applied in accordance
with Section 5.03.
5.02 PRIVATE SALE.
(a) Neither the Company nor any of its assigns shall incur
any liability as a result of the sale, lease or other disposition of all or
any part of the Collateral at any private sale pursuant to Section 5.01
conducted in a commercially reasonable manner. The Obligor hereby waives any
claims against the Company or its assigns arising by reason of the fact that
the price at which the Collateral may have been sold at such a private sale
was less than the price which might have been obtained at a public sale or
was less than the aggregate amount of the Secured Obligations, even if the
Company accepts the first offer received and does not offer the Collateral to
more than one offeree.
(b) The Obligor recognizes that, by reason of certain
prohibitions contained in the Securities Act of 1933, as amended, and
applicable state securities laws, the Company or its assigns
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<PAGE>
may be compelled, with respect to any sale of all or any part of the
Collateral, to limit purchasers to those who will agree, among other things,
to acquire the Collateral for their own account, for investment and not with
a view to distribution or resale. The Obligor acknowledges that any such
private sales may be at prices and on terms less favorable to the Company or
its assigns than those obtainable through a public sale without such
restrictions, and, notwithstanding such circumstances, agrees that any such
private sale shall be deemed to have been made in a commercially reasonable
manner and that the Company or its assigns shall have no obligation to engage
in public sales and no obligation to delay the sale of any Collateral for the
period of time necessary to permit the Company to register it for public sale.
5.03 APPLICATION OF PROCEEDS. Except as otherwise expressly
provided in this Agreement and except as provided below in this Section 5.03,
the proceeds of, or other realization upon, all or any part of the Collateral
by virtue of the exercise of remedies under Section 5.01, and any other cash
at the time held by the Company under this Section 5, shall be applied by the
Company:
FIRST, to the payment of the costs and expenses of such exercise of
remedies, including reasonable out-of-pocket costs and expenses of the
Company, the fees and expenses of its agents and counsel and all other
expenses incurred and advances made by the Company in that connection;
NEXT, to the payment in full of the remaining Secured Obligations;
and
FINALLY, to the payment to the Obligor, or its respective
successors or assigns, or as a court of competent jurisdiction may direct, of
any surplus then remaining.
As used in this Section 5, "PROCEEDS" of Collateral shall mean
cash, securities and other property realized in respect of, and distributions
in kind of, Collateral, including any property received under any bankruptcy,
reorganization or other similar proceeding as to the Obligor or any issuer
of, or account debtor or other obligor on, any of the Collateral.
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<PAGE>
SECTION 6. MISCELLANEOUS.
6.01 WAIVER. No failure on the part of the Company or its
assigns to exercise and no delay in exercising, and no course of dealing with
respect to, any right, remedy, power or privilege under this Agreement shall
operate as a waiver of such right, remedy, power or privilege, nor shall any
single or partial exercise of any right, remedy, power or privilege under
this Agreement preclude any other or further exercise of any such right,
remedy, power or privilege or the exercise of any other right, remedy, power
or privilege. The rights, remedies, powers and privileges provided in this
Agreement are cumulative and not exclusive of any rights, remedies, powers
and privileges provided by law.
6.02 NOTICES. All notices and communications to be given under
this Agreement shall be given or made in writing to the intended recipient at
the address specified below or, as to any party, at such other address as
shall be designated by such party in a notice to each other party. Except as
otherwise provided in this Agreement, all such communications shall be deemed
to have been duly given when transmitted by telex or telecopier, delivered to
the telegraph or cable office or personally delivered or, in the case of a
mailed notice, upon receipt, in each case, given or addressed as provided in
this Section 6.02:
To the Obligor: ___________________________
___________________________
___________________________
To the Company: International Logistics Limited
330 S. Mannheim Road
Hillside, IL 60162
Attention: Chief Financial Officer
with a copy to: Milbank, Tweed, Hadley & McCloy
601 S. Figueroa St., Suite 3100
Los Angeles, CA 90017
Attention: Eric H. Schunk, Esq.
6.03 EXPENSES, ETC. The Obligor agrees to pay or to reimburse
the Company or its assigns for all costs and expenses (including reasonable
attorney's fees and expenses) that may be incurred by the Company or its
assigns in any effort to enforce any of the provisions of Section 5 or any of
the obligations of the Obligor in respect of the Collateral or in connection
with (a) the preservation of the Lien of, or the rights of the Company under
this Agreement or (b) any actual or attempted sale, lease, disposition,
exchange, collection, compromise, settlement or other realization in respect
of, or care of, the Collateral,
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<PAGE>
including all such costs and expenses (and reasonable attorney's fees and
expenses) incurred in any bankruptcy, reorganization, workout or other
similar proceeding.
6.04 AMENDMENTS, ETC. Any provision of this Agreement may be
modified, supplemented or waived only by an instrument in writing duly
executed by the Obligor and the Company. Any such modification, supplement
or waiver shall be for such period and subject to such conditions as shall be
specified in the instrument effecting the same and shall be binding upon the
Company, each holder of any of the Secured Obligations and the Obligor, and
any such waiver shall be effective only in the specific instance and for the
purposes for which given.
6.05 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the Obligor, the Company and each holder of
any of the Secured Obligations and their respective successors and permitted
assigns. The Obligor shall not assign or transfer its rights under this
Agreement without the prior written consent of the Company.
6.06 SURVIVAL. All representations and warranties made in this
Agreement or in any certificate or other document delivered pursuant to or in
connection with this Agreement shall survive the execution and delivery of
this Agreement or such certificate or other document (as the case may be) or
any deemed repetition of any such representation or warranty.
6.07 AGREEMENTS SUPERSEDED. This Agreement supersedes all prior
agreements and understandings, written or oral, among the parties with
respect to the subject matter of this Agreement.
6.08 SEVERABILITY. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this
Agreement, and any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction.
6.09 CAPTIONS. The captions and section headings appearing in
this Agreement are included solely for convenience of reference and are not
intended to affect the interpretation of any provision of this Agreement.
6.10 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one and the
same instrument and any of the parties to this Agreement may execute this
Agreement by signing any such counterpart.
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<PAGE>
6.11 GOVERNING LAW; SUBMISSION TO JURISDICTION. THIS AGREEMENT
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE
OF ILLINOIS. THE OBLIGOR HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF
THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS AND OF
ANY ILLINOIS STATE COURT SITTING IN CHICAGO, ILLINOIS FOR THE PURPOSES OF ALL
LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. THE OBLIGOR IRREVOCABLY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION WHICH IT MAY
NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING
BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN
SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
6.13 WAIVER OF JURY TRIAL. THE OBLIGOR AND THE COMPANY HEREBY
IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the day and year first above written.
By:_________________________
_____________, an individual
INTERNATIONAL LOGISTICS
LIMITED, a Delaware corporation
By:_________________________
Name: __________________
Title: __________________
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<PAGE>
ANNEX 1
PLEDGED STOCK
Certificate Registered
Nos. Owner Number of Shares
- ----------- ---------- ----------------
---
ANNEX 1 TO PLEDGE AGREEMENT
<PAGE>
Exhibit 10.14
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (the "Agreement") is made as of the 30th day of
September, 1997, between INTERNATIONAL LOGISTICS LIMITED, a Delaware corporation
(the "Company") and _______________ ("Agent").
RECITALS
1. The Certificate of Incorporation of the Company (the
"Certificate") contains provisions indemnifying the Company's current and former
directors, officers, employees or agents, and authorizing the Company to enter
into individual indemnification agreements with any person entitled to be
indemnified by the Company, without specific approval of the shareholders of the
Company, subject to certain requirements as set forth in the Certificate;
2. The Bylaws of the Company (the "Bylaws") contain provisions
indemnifying the Company's current and former directors, officers, or agents;
3. The Agent is currently serving as a director, officer, employee
or agent of the Company;
4. The Board of Directors of the Company (the "Board") has
determined that it is in the best interests of the shareholders of the Company
for the Company to provide Agent with additional assurance of protection against
personal liability; and
5. This Agreement is being entered into pursuant to and in
furtherance of the Certificate and the Bylaws, as authorized by the Board.
NOW, THEREFORE, in consideration of the foregoing recitals and of
other good and valuable consideration, the receipt of which is acknowledged, the
parties agree as follows:
1. INDEMNIFICATION.
(a) The Company shall hold harmless and indemnify the Agent
against any and all expenses, liabilities and losses (including, without
limitation, investigation expenses and expert witnesses' and attorneys' fees and
expenses, judgments, penalties, fines, ERISA excise taxes and amounts paid or to
be paid in settlement) actually incurred by the Agent (net of any related
insurance proceeds or other amounts received by Agent or paid by or on behalf of
the Company on the Agent's behalf), in connection with any action, suit,
arbitration or proceeding (or any inquiry or investigation, whether brought by
or in the right of the
<PAGE>
Company, any subsidiary or affiliate of the Company, or otherwise, that Agent in
good faith believes might lead to the institution of any such action, suit,
arbitration or proceeding), whether civil, criminal, administrative or
investigative, or any appeal therefrom, in which the Agent is a party, is
threatened to be made a party, is a witness or is participating (a "Proceeding")
based upon, arising from, relating to, or by reason of the fact that Agent was a
director, officer, employee or agent of the Company, whether or not arising
prior to the date of this Agreement;
(b) If Agent is entitled under this Agreement to indemnification
by the Company for some or a portion of the Indemnified Amounts (defined below)
but not, however, for all of the total amount thereof, the Company shall
nevertheless indemnify Agent for the portion thereof to which Agent is entitled.
2. LIMITATIONS ON INDEMNIFICATION. Notwithstanding any other
provision of this Agreement, Agent shall not be entitled to indemnification
under Section 1:
(a) if the claim, obligation or liability with respect to which
indemnity is sought shall have been determined by a court of competent
jurisdiction, by a final judgment or decree, or, in case of settlement, which in
the opinion of counsel for the Company would, if determined by a court of
competent jurisdiction, likely have been determined to have arisen out of or
been based upon Agent's willful misfeasance, bad faith, gross negligence or
reckless disregard of duty or for Agent's failure to act in good faith in the
reasonable belief that Agent's action was in the best interests of the Company;
(b) if a court of competent jurisdiction shall determine, by a
final judgment or decree, that such indemnity is not permitted under applicable
law;
(c) on account of any suit in which judgment is rendered for an
accounting of profits made from the purchase or sale by Agent of securities of
the Company in violation of the provisions of Section 16(b) of the Securities
Exchange Act of 1934 and amendments thereto or similar provisions of any
federal, state or local statutory law; or
(d) on account of any suit brought against Agent for misuse or
misappropriation of non-public information, or otherwise involving Agent's
status as an "insider" of the Company in connection with any purchase or sale by
Agent of securities of the Company.
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3. OTHER INDEMNIFICATION ARRANGEMENTS. The Company's purchase,
establishment and maintenance of insurance or similar protection or other
arrangements, including, but not limited to, providing a trust fund, letter of
credit, or surety bond ("Indemnification Arrangements") on behalf of the Agent
against any liability asserted against him, her or it or incurred by or on
behalf of him, her or it in such capacity as a director, officer, employee or
agent of the Company, or arising out of his, her or its status as such, whether
or not the Company would have the power to indemnify him, her or it against such
liability under the provisions of this Agreement or under applicable law, shall
not in any way limit or affect the rights and obligations of the Company or of
the Agent under this Agreement except as expressly provided herein, and the
execution and delivery of this Agreement by the Company and the Agent shall not
in any way limit or affect the rights and obligations of the Company or the
other party or parties thereto under any such indemnification Arrangement. All
amounts payable by the Company pursuant to this Section 3 and to Section 1 of
this Agreement are herein referred to as "Indemnified Amounts."
4. ADVANCE PAYMENT OF INDEMNIFIED AMOUNTS.
(a) The Agent hereby is granted the right to receive in advance
of a final, nonappealable judgment or other final adjudication of a Proceeding
(a "Final Determination") the amount of any and all expenses, including, without
limitation, investigation expenses, expert witnesses' and attorney's fees and
other expenses expended or incurred by the Agent in connection with any
Proceeding or otherwise expended or incurred by the Agent (such amounts so
expended or incurred being referred to as "Advanced Amounts").
(b) In making any written request for Advanced Amounts, the
Agent shall submit to the Company a schedule setting forth in reasonable detail
the dollar amount expended or incurred or an estimate of the current dollar
amount expected to be expended. Each such listing shall be supported by the
bill, agreement, or other documentation relating thereto (if reasonably
available at that time). In addition, before the Agent may receive Advanced
Amounts from the Company, the Agent shall provide to the Company (i) a written
affirmation of the Agent's good faith belief that the applicable standard of
conduct required for indemnification by the Company under this Agreement has
been satisfied by the Agent, and (ii) a written undertaking by or on behalf of
the Agent to repay the Advanced Amount if it shall ultimately be determined that
the Agent has not satisfied the applicable standard of conduct. The written
undertaking required from the Agent shall not be secured. The Company shall pay
to the Agent all Advanced Amounts within five (5) days after
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receipt by the Company of all information and documentation required to be
provided by the Agent pursuant to this paragraph.
5. PROCEDURE FOR PAYMENT OF INDEMNIFIED AMOUNTS.
(a) To obtain indemnification under this Agreement, the Agent
shall submit to the Company a written request for payment of the appropriate
Indemnified Amounts, including with such requests such documentation and
information as is reasonably available to the Agent and reasonably necessary to
determine whether and to what extent the Agent is entitled to indemnification.
(b) The Company shall pay the Agent the appropriate Indemnified
Amounts unless it is established that the Agent has not met any applicable
standard of conduct provided in this Agreement or applicable law. For purposes
of determining whether the Agent is entitled to Indemnified Amounts, in order to
deny indemnification to the Agent the Company has the burden of proof in
establishing that the Agent did not meet the applicable standard of conduct. In
this regard, a termination of any Proceeding by judgment, order or settlement
does not create a presumption that the Agent did not meet the requisite standard
of conduct; provided, however, that the termination of any criminal proceeding
by conviction, or a pleading of nolo contendere or its equivalent, or any entry
of an order of probation prior to judgment, creates a rebuttable presumption
that the Agent did not meet the applicable standard of conduct.
(c) Any determination that the Agent has not met the applicable
standard of conduct required to qualify for indemnification shall be made either
(i) by the Board of Directors by a majority vote of a quorum consisting of
directors who were not parties of such action, suit or Proceeding; or
(ii) by independent legal counsel (who may be the outside counsel regularly
employed by the Company); provided that the manner in which (and, if applicable,
the counsel by which) the right to indemnification is to be determined shall be
approved in advance in writing by both the highest ranking executive officer of
the Company who is not party to the Proceeding (sometimes hereinafter referred
to as "Senior Officer") and by the Agent. In the event that such parties are
unable to agree on the manner in which any such determination is to be made,
such determination shall be made by independent legal counsel retained by the
Company especially for such purpose, provided that such counsel be approved in
advance in writing by both the said Senior Officer and Agent, and provided
further that such counsel shall not be outside counsel regularly employed by the
Company. The fees and expenses of counsel in connection with making said
determination contemplated hereunder shall be paid by the Company, and, if
requested by such counsel, the Company shall give such counsel an appropriate
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written agreement with respect to the payment of their fees and expenses and
such other matters as may be reasonably requested by counsel.
(d) The Company will use its best efforts to conclude as soon as
practicable any requested determination pursuant to subparagraph (c) above and
promptly will advise the Agent in writing with respect to any determination that
the Agent is or is not entitled to indemnification, including a description of
any reason or basis for which indemnification has been denied. Payment of any
applicable Indemnified Amounts will be made to the Agent within ten (10) days
after any determination of the Agent's entitlement to indemnification.
(e) Notwithstanding the foregoing, Agent may, at any time after
sixty (60) days after a claim for Indemnified Amounts has been filed with the
Company (or upon receipt of written notice that a claim for Indemnified Amounts
has been rejected, if earlier) and before three (3) years after a claim for
Indemnified Amounts has been filed, petition a court of competent jurisdiction
to determine whether the Agent is entitled to indemnification under the
provisions of this Agreement, and such court shall thereupon have the exclusive
authority to make such determination unless and until such court dismisses or
otherwise terminates such action without having made such determination. The
court shall, as petitioned, make an independent determination of whether the
Agent is entitled to indemnification as provided under this Agreement,
irrespective of any prior determination made by the Board or Directors or
independent counsel. If the court shall determine that the Agent is entitled to
indemnification as to any claim, issue or matter involved in the Proceeding with
respect to which there has been no prior determination pursuant to this
Agreement or with respect to which there has been a prior determination that the
Agent was not entitled to indemnification hereunder, the Company shall pay all
expenses (including attorneys' fees) actually incurred by the Agent in
connection with such judicial determination.
(f) Nothing set forth in this Section 5 shall limit or affect
the timing or amount, or the right of Agent to payment, of any Advanced Amounts
pursuant to Section 4 hereof.
6. AGREEMENT NOT EXCLUSIVE: SUBROGATION RIGHTS, ETC.
(a) This Agreement shall not be deemed exclusive of and shall
not diminish any other rights the Agent may have to be indemnified or insured or
otherwise protected against any liability, loss, or expense by the Company, any
subsidiary of the Company, or any other person or entity under any charter,
bylaws, law, agreement, policy of insurance or similar protection, vote of
stockholders or directors, disinterested or not, or otherwise,
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<PAGE>
whether or not now in effect, both as to actions in the Agent's official
capacity with the Company, and as to actions in another capacity while holding
such office, including Agent's right to contribution as may be available under
applicable law. The Company's obligations to make payments of Indemnified
Amounts hereunder shall be satisfied to the extent that payments with respect to
the same Proceeding (or part thereof) have been made to or for the benefit of
the Agent by reason of the indemnification of the Agent pursuant to any other
arrangement made by the Company for the benefit of the Agent.
(b) In the event the Agent shall receive payment from any
insurance carrier or from the plaintiff in any Proceeding against such Agent in
respect of Indemnified Amounts after payments on account of all or part of such
Indemnified Amounts have been made by the Company pursuant hereto, such Agent
shall promptly reimburse to the Company the amount, if any, by which the sum of
such payment by such insurance carrier or such plaintiff and payments by the
Company or pursuant to arrangements made by the Company to Agent exceeds such
indemnified Amounts; provided, however, that such portions, if any, of such
insurance proceeds that are required to be reimbursed to the insurance carrier
under the terms of its insurance policy, such as deductible or co-insurance
payments, shall not be deemed to be payments to the Agent hereunder. In
addition, upon payment of indemnified Amounts hereunder, the Company shall be
subrogated to the rights of Agent receiving such payments (to the extent
thereof) against any insurance carrier (to the extent permitted under such
insurance policies) or plaintiff in respect of such Indemnified Amounts and the
Agent shall execute and deliver any and all instruments and documents and
perform any and all other acts or deeds which the Company deems necessary or
advisable to secure such rights. Such right of subrogation shall be terminated
upon receipt by the Company of the amount to be reimbursed by the Agent pursuant
to the first sentence of this paragraph.
7. ADDITIONAL INDEMNIFICATION RIGHTS. Notwithstanding any other
provision of this Agreement, the Company hereby agrees to indemnify Agent to the
fullest extent permitted by law, notwithstanding that such indemnification is
not specifically authorized by the other provisions of this Agreement, the
Certificate, the Bylaws or by statute. In the event of any change, after the
date of this Agreement, in any applicable law, statute or rule, whether by case
law or otherwise which expands the right of a Delaware corporation to indemnify
a member of its board of directors or an officer, such changes shall be, ipso
facto, within the purview of Agent's rights and Company's obligations, under
this Agreement. In the event of any change in any applicable law, statute or
rule which narrows the right of a Delaware corporation to indemnify a member of
its
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Board of Directors or an officer, such changes, to the extent not otherwise
required by such law, statute or rule to be applied to this Agreement shall have
no effect on this Agreement or the parties, rights and obligations hereunder.
8. INSURANCE. In the event that the Company maintains directors,
and officers, liability insurance to protect itself and any of its directors or
officers against any expense, liability or loss, and such insurance may cover
the Agent, such insurance shall cover the Agent to at least the same extent as
any director or officer of the Company, provided that nothing in this Agreement
shall require the Company to obtain coverage relating to any acts occurring
prior to the date hereof.
9. SEVERABILITY. Each of the provisions of this Agreement is a
separate and distinct agreement and independent of the others, so that if any
provisions hereof shall be held to be invalid or unenforceable for any reason,
such invalidity or unenforceability shall not affect the validity or
enforceability of the other provisions hereof.
10. FURTHER ASSURANCES. The parties will do, execute and deliver, or
will cause to be done, executed and delivered, all such further acts, documents
and things as may be reasonably required for the purpose of giving effect to
this Agreement and the transactions contemplated hereby.
11. SUCCESSORS; BINDING AGREEMENT. This Agreement shall be binding
on and shall inure to the benefit of and be enforceable by the Company's
successors and assigns and by the Agent's personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees, and
legatees. The Company shall require any successor or assignee (whether direct
or indirect, by purchase, merger, consolidation, or otherwise) to all or
substantially all of the business or assets of the Company, by written agreement
in form and substance reasonably satisfactory to the Company and to the Agent,
expressly to assume and agree to perform this Agreement in the same manner and
to the same extent that the Company would be required to perform if no such
succession or assignment had taken place.
12. COUNTERPARTS. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute one
and the same instrument.
13. MISCELLANEOUS. No provision of this Agreement may be modified,
waived, or discharged unless such modification, waiver, or discharge is agreed
to in writing signed by Agent
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and either the Chairman of the Board or the President of the Company or another
officer of the Company specifically designated by the Board. No waiver by
either party at any time of any breach by the other party of, or of compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same time or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement. The validity, interpretation, construction, and
performance of this Agreement shall be governed by the laws of the State of
Delaware, without giving effect to the principles of conflict of laws thereof.
The Agent may bring an action seeking resolution of disputes or controversies
arising under or in any way related to this Agreement in the state or federal
court jurisdiction in which Agent resides or in which his, her or its place of
business is located, and in any related appellate courts, and the Company
consents to the jurisdiction of such courts and to such venue.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
AGENT: INTERNATIONAL LOGISTICS LIMITED
By:
- ----------------------- ------------------------------
Name:
----------------------------
Title:
---------------------------
<PAGE>
Exhibit 10.15
INTERNATIONAL LOGISTICS LIMITED
DEFERRED COMPENSATION PLAN
<PAGE>
TABLE OF CONTENTS
SECTION TITLE PAGE NO.
1 Name. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
2 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2-
3 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . -3-
4 Operation and Administration of the Plan. . . . . . . . . . . . . -10-
5 Eligibility for Participation . . . . . . . . . . . . . . . . . . -13-
6 Participant Allocations . . . . . . . . . . . . . . . . . . . . . -15-
7 Company Allocations . . . . . . . . . . . . . . . . . . . . . . . -18-
8 Establishment of Accounts . . . . . . . . . . . . . . . . . . . . -19-
9 Maintenance, Investment and Valuation of Accounts . . . . . . . . -20-
10 Funding Limitations . . . . . . . . . . . . . . . . . . . . . . . -22-
11 Vesting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
12 Regulations Governing Distribution of Benefits. . . . . . . . . . -25-
13 Beneficiary Designation . . . . . . . . . . . . . . . . . . . . . -36-
14 Amendment and Termination . . . . . . . . . . . . . . . . . . . . -37-
15 General Provisions. . . . . . . . . . . . . . . . . . . . . . . . -38-
<PAGE>
INTERNATIONAL LOGISTICS LIMITED
DEFERRED COMPENSATION PLAN
SECTION 1
NAME
The plan set forth herein shall be known as the International Logistics Limited
Deferred Compensation Plan.
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SECTION 2
PURPOSE
The Plan is intended to constitute a nonqualified deferred retirement plan
which, in accordance with ERISA Sections 201(2), 301(a)(3) and 401(a)(1), is
"unfunded and maintained by an employer primarily for the purpose of providing
deferred compensation for a select group of management or highly compensated
employees."
The purpose of the Plan is to acknowledge and reward certain key employees of
the Company for their efforts on behalf of the Company by maximizing their
ability to save on a tax-deferred basis and providing such key employees with
benefits that shall not be restricted by any qualified plan limitations and/or
requirements. Such limitations and requirements shall include, but not be
limited to, the following:
2.1 ELECTIVE DEFERRAL CONTRIBUTION LIMITATION
The $9,500 (1996 limit) limitation placed on elective employee
contributions in accordance with Sections 402(g) of the Internal Revenue
Code (the "Code"), which limitation shall be adjusted annually for
increases in the cost-of-living in accordance with Section 415(d) of the
Code.
2.2 COMPENSATION LIMITATION
The $150,000 (1996 limit) maximum on compensation taken into account for
all purposes under a qualified plan in accordance with Section 401(a)(17)
of the Code, which limitation shall be adjusted for increases in the
cost-of-living in accordance with Section 401(a)(17)(B) of the Code.
2.3 LIMITATION ON ANNUAL ADDITIONS
The limitation on annual additions to qualified retirement plans in
accordance with Section 415(c) of the Code, which limitation shall be
adjusted annually for increases in the cost-of-living in accordance with
Section 415(d) of the Code.
2.4 NONDISCRIMINATION REQUIREMENTS
The nondiscrimination testing requirements under Sections 401(k) and (m) of
the Code.
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SECTION 3
DEFINITIONS
For purposes of the Plan, the following words and phrases shall have the
following meanings unless a different meaning is plainly required by the
context. Wherever used, the masculine pronoun shall include the feminine
pronoun and the feminine pronoun shall include the masculine and the singular
shall include the plural and the plural shall include the singular.
3.1 "ACCOUNT" shall mean a recordkeeping source from which Plan benefits are
provided. The specific Accounts under this Plan are listed in Section 8.1
and described more fully in Section 12.
3.2 "BENEFICIARY" shall mean the person or persons designated in accordance
with Section 13 to receive any benefits under the Plan in the event of a
Participant's death.
3.3 "BENEFIT COMMENCEMENT DATE" shall mean the date as of which the
Participant's benefit commences. Such commencement shall occur as soon as
administratively possible following the Participant's Determination Date.
3.4 "BOARD OF DIRECTORS" shall mean the full Board of Directors of the Company.
3.5 "BONUS COMPENSATION" shall mean any cash remuneration paid to a
Participant, excluding Regular Compensation, as a specific incentive bonus
or award, including Voluntary Deferral Allocations made hereunder, the
source of which is Bonus Compensation.
3.6 "BONUS DEFERRAL RATE" shall have the meaning set forth in Section 6.1.
3.7 "BUSINESS DAY" means a day other than Saturday, Sunday or any other day on
which banks located in the State of Illinois are authorized or obligated to
close.
3.8 "COMMISSION" means the United States Securities and Exchange Commission.
3.9 "COMMITTEE" shall mean the Board of Directors or the person or persons
appointed by the Board of Directors to administer the Plan.
3.10 "COMPANY" shall mean International Logistics Limited, a Delaware
corporation, or any affiliate, subsidiary or associate company of
International Logistics Limited which
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shall adopt the Plan for its employees with the approval of International
Logistics Limited, including any successor to International Logistics
Limited as a result of a statutory merger, purchase of assets or any other
form of reorganization of the business of the Company.
3.11 "DESIGNATED EMPLOYEE" shall have the meaning set forth in Section 4.8.
3.12 "DETERMINATION DATE" shall mean, with respect to:
(a) the Participant's Retirement Account, the date on which the
Participant's termination of employment for any reason occurs;
(b) the Participant's Education Account(s), the January 1 of the calendar
year in which an Eligible Dependent attains age 18 or the date the
Participant terminates employment as a result of his Retirement during
or after such time period; and
(c) the Participant's Fixed Period Account(s), the January 1 of the
payment year specified by the Participant.
3.13 "DISABILITY" or "DISABLED" shall mean any physical or mental condition
which meets the definition and provisions described in the Company's group
long-term disability contract covering the Participants in this Plan.
3.14 "DISABILITY TERMINATION DATE" shall mean one year following the date on
which a Participant is Disabled if the Participant remains Disabled on such
date.
3.15 "DISCRETIONARY ALLOCATIONS" shall have the meaning set forth in Section
7.1.
3.16 "EDUCATION ACCOUNT" shall have the meaning set forth in Section 8.1.
3.17 "EFFECTIVE DATE" shall mean July 1, 1996, the date as of which the Plan was
established.
3.18 "EMPLOYEE" shall mean a person who is employed by the Company and falls
under the usual common law rules applicable in determining the
employer-employee relationship.
3.19 "FIXED PERIOD ACCOUNT" shall have the meaning set forth in Section 8.1.
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<PAGE>
3.20 "INITIAL PUBLIC OFFERING" means the first underwritten public offering of
Company common stock pursuant to a registration of shares under the
Securities Act, on a Form S-1 Registration Statement (or equivalent or
successor form).
3.21 "KEY EMPLOYEE" shall mean an Employee who is designated for eligibility in
the Plan by the Committee in accordance with Section 4.2.
3.22 "LEAVE OF ABSENCE" shall have the meaning set forth in the Company's
employee handbook.
3.23 "PARTICIPANT" shall mean any Employee who is participating in the Plan in
accordance with the provisions herein set forth.
(a) "GROUP I PARTICIPANT" shall mean a Participant who is so designated by
the Committee.
(b) "GROUP II PARTICIPANT" shall mean a Participant who is so designated
by the Committee.
3.24 "PER SHARE AGGREGATE VALUE" shall mean:
(i) if prior to an Initial Public Offering, the amount obtained by
dividing (A) (EBITDA X 5) - (Debt - CA) by (B) the number of
shares of common stock outstanding and the number of shares
subject to options and warrants (to the extent such options and
warrants are in the money) on the Valuation Date, where:
(a) EBITDA means the Company's consolidated earnings before interest,
taxes, depreciation and amortization for the four fiscal quarters
of the Company ending on the Valuation Date immediately preceding
the Determination Date, computed in accordance with generally
accepted accounting principles.
(b) Debt means any current or long-term indebtedness of the Company
as of the Valuation Date immediately preceding the Determination
Date (including capitalized lease obligations and accrued but
unpaid interest), as set forth on the Company's consolidated
balance sheet (prepared in accordance with generally accepted
accounting principles); and
(c) CA means the Company's consolidated cash and cash equivalents on
hand as of the Valuation Date
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<PAGE>
immediately preceding the Determination Date, including, without
limitation payments that have been received or will be received
upon the exercise of options and warrants to the extent such
options and warrants are "in the money" as set forth on its
consolidated balance sheet (prepared in accordance with generally
accepted accounting principles).
(ii) if subsequent to an Initial Public Offering, the per share
trading price for each trading day:
(A) if the Company common stock is traded on a national securities
exchange, its last reported sale price on the preceding Business
Day on such national securities exchange or, if there was no sale
on that day, the last reported sale price on such national
securities exchange on the next preceding Business Day on which
there was a sale, all as made available over the Consolidated
Last Sale Reporting System of the CTA Plan (the "CLSRS") or, if
the Company common stock is not then eligible for reporting over
the CLSRS, its last reported sale price on the preceding Business
Day on such national securities exchange or, if there was no sale
on that day, on the next preceding Business Day on which there
was a sale on such exchange; or
(B) if the principal market for the Company common stock is the
over-the-counter market, but the Company common stock is not then
eligible for reporting over the CLSRS, but the common stock is
quoted on the National Association of Securities Dealers
Automated Quotations System ("NASDAQ"), the last sale price
reported on NASDAQ on the preceding Business Day or, if the
Company common stock is an issue for which last sale prices are
not reported on NASDAQ, the closing bid quotation on such day,
but in each of the next preceding two cases, if the relevant
NASDAQ price or quotation did not exist on such day, then the
price or quotation on the next preceding Business Day in which
there was such a price or quotation.
3.25 "PLAN" shall mean the International Logistics Limited Deferred Compensation
Plan as it may be amended from time to time.
3.26 "PLAN CONTRIBUTIONS" shall mean the total of the Participant's Voluntary
Deferral Allocations made in
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accordance with Section 6.1 and the Company's Discretionary Allocations
made in accordance with Section 7.1 for the Plan Year of reference.
3.27 "PLAN SHARES" shall have the meaning set forth in Section 4.8.
3.28 "PLAN YEAR" shall mean a period of six consecutive months commencing on the
Effective Date and ending on December 31, 1996. Thereafter, "Plan Year"
shall mean a period of 12 consecutive months commencing on January 1, 1997
and each January 1 thereafter.
3.29 "QUALIFIED PLAN" shall mean the Bekins 401(k) Profit Sharing Plan.
3.30 "REGULAR COMPENSATION" shall mean the Participant's wages for the Plan Year
paid by the Company of the type reported in box 1 of Form W-2. Such wages
shall include amounts within the meaning of Section 3401(a) of the Code
plus any other amounts paid to the Participant by the Company for which the
Company is required to furnish a written statement under Sections 6041(d),
6051(a)(3) and 6052 of the Code, determined without regard to any rules
that limit the amount required to be reported based on the nature or
location of the employment or services performed,
(a) exclusive of
(i) Bonus Compensation;
(ii) severance pay on a non payroll basis;
(iii) nonqualified plan payments; and
(iv) welfare benefits, fringe benefits (cash and non-cash),
reimbursements of other expense allowances and moving
expenses.
(b) inclusive of
(i) any amounts deferred under any nonqualified plan, including
the Plan; and
(ii) the amount of any contributions made by the Company under
any salary reduction or similar arrangement to a qualified
deferred compensation, pension or cafeteria plan, or
contributions to a simplified employee pension plan
described in Section 408(k) of the Code.
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<PAGE>
3.31 "REGULAR DEFERRAL RATE" shall have the meaning set forth in Section 6.1.
3.32 "RETIREMENT" shall mean the termination of employment of a Participant for
any reason other than Disability or death on or following his Retirement
Date.
3.33 "RETIREMENT ACCOUNT" shall have the meaning set forth in Section 8.1.
3.34 "RETIREMENT DATE" shall mean first date coincident with or following the
date on which a Participant attains age 55, provided he has completed at
least five Years of Service as of such date.
3.35 "SECURITIES ACT" means the Securities Act of 1933, as amended.
3.36 "SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
3.37 "TRUST AGREEMENT" shall mean the instrument executed by the Company and the
Trustee fixing the rights and liabilities of each with respect to holding
and administering the Trust Fund.
3.38 "TRUSTEE" shall mean the Trustee or any successor Trustee, appointed by the
Board of Directors, acting in accordance with the terms of the Trust
Agreement.
3.39 "TRUST FUND" shall mean all assets held by the Trustee for the purposes of
the Plan in accordance with the terms of the Trust Agreement. The Board of
Directors shall, subject to the provisions of Section 10, establish such a
Trust Fund (known as a "rabbi trust") for the purpose of accumulating funds
to satisfy the obligations incurred by the Company under the Plan.
3.40 "VALUATION DATE" shall mean the last day of each March, June, September and
December and such other dates as the Committee may determine from time to
time.
3.41 "VOLUNTARY DEFERRAL ALLOCATIONS" shall have the meaning set forth in
Section 6.1.
3.42 "YEAR OF SERVICE" shall mean the 12-month period beginning as of the date a
person was first hired by the Company and each anniversary thereof during
which such person remains in the employ of the Company.
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<PAGE>
SECTION 4
OPERATION AND ADMINISTRATION OF THE PLAN
4.1 ORGANIZATION OF THE COMMITTEE
(a) The Board of Directors shall serve as the Committee to administer the
Plan or shall appoint a Committee to administer the Plan, who, upon
acceptance of such appointment, shall serve at the pleasure of the
Board of Directors. Any member may resign by delivering his written
resignation to the Board of Directors and to the Committee. Vacancies
in the Committee arising from resignation, death, or removal shall be
filled by the Board of Directors.
(b) The Committee shall act by a majority of its members unless unanimous
consent is required by the Plan or by unanimous approval of its
members if there are two or less members in office at the time. In
the event of a Committee deadlock, the Committee shall determine the
method for resolving such deadlock. No Committee member shall act
upon any question pertaining solely to himself, and the other member
or members shall make any determination required by the Plan in
respect to such member.
(c) The Committee may, by unanimous consent, delegate specific authority
and responsibilities to one or more of its members. The member or
members so designated shall be solely liable, jointly and severally,
for their acts or omissions with respect to such delegated authority
and responsibilities. Committee members not so designated shall be
relieved from liability for any act or omission resulting from such
delegation.
4.2 COMMITTEE DISCRETION
The Committee shall, by written action, designate those Employees, if any,
who are to be Key Employees for purposes of Section 5. Such designation
shall remain in effect for all future Plan Years unless and until removed
by the Committee. Such removal must be made in writing and communicated to
the applicable Key Employee prior to the Plan Year for which such action
shall take effect.
No such change of status shall become effective during a Plan Year in which
a Key Employee is currently participating unless the provisions of
Subsection 5.4(c) apply.
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<PAGE>
4.3 AUTHORITY AND RESPONSIBILITY
The Committee shall have full authority and responsibility to interpret and
construe the Plan and determine all questions of the status and rights of
the Participants and the amounts of their allocations. Its interpretation,
construction or determination, as the case may be, shall be final and
conclusive on both the Company and the Participants and their respective
successors, assigns, personal representatives and Beneficiaries. Such
authority and responsibility shall include, but shall not be limited to,
the following:
(a) appointment of qualified accountants, consultants, administrators,
counsel, appraisers, or other persons it deems necessary or advisable,
who shall serve the Committee as advisors only and shall not exercise
any discretionary authority, responsibility or control with respect to
the management or administration of the Plan;
(b) determination of all benefits, and resolution of all questions arising
from the administration, interpretation and application of the Plan;
(c) adoption of forms and regulations for the administration of the Plan;
(d) remedy of all inequity resulting from incorrect information received
or communicated, or of administrative error;
(e) settlement or compromise of any claims or debts arising from the
operation of the Plan and the commencement of any legal actions or
administrative proceeding.
4.4 RECORDS AND REPORTS
The Committee shall keep a record of its proceedings and acts and shall
keep books of account, records and other data necessary for the proper
administration of the Plan.
Following each Valuation Date, the Committee shall provide each Participant
with a detailed statement of his Account, including all transactions
affecting his Account during the calendar quarter of reference, and
reflecting the most recent valuation of his Account.
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4.5 REQUIRED INFORMATION
The Company, Participants or Beneficiaries entitled to benefits shall
furnish forms and any information or evidence as requested by the Committee
for the proper administration of the Plan. Failure on the part of any
Participant or Beneficiary to comply with such request within a reasonable
period of time shall be sufficient grounds for delay in the payment of
benefits until the information or evidence requested is received.
4.6 PAYMENT OF EXPENSES OF PLAN
The expenses of the Committee in connection with the administration of the
Plan shall be the responsibility of the Company.
4.7 INDEMNIFICATION
The Company shall indemnify the members of the Committee and advance
expenses as provided in the by-laws of the Company.
4.8 COMMITTEE COMMON STOCK ALLOCATION
The Committee may from time to time, in its sole discretion, direct the
Trustee to purchase shares of the Company's common stock (the "PLAN
SHARES"). The Committee may, by written action, designate (i) which Key
Employees (a "DESIGNATED EMPLOYEE"), if any, shall be entitled to receive
Plan Shares and (ii) the number of Plan Shares that may be distributed to a
Designated Employee pursuant to Sections 12.1(b)(i)(B) and (iii)(B). The
Committee may, in its sole discretion, redesignate to any other Key
Employee, consistent with the preceding sentence, any Plan Shares that are
not distributed to a Designated Employee pursuant to Sections 12.1(b)(i)(B)
and (iii)(B).
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SECTION 5
ELIGIBILITY FOR PARTICIPATION
5.1 INITIAL ELIGIBILITY
(a) Each Key Employee on the Effective Date will be eligible to
participate in the Plan as of such date.
(b) Each other Key Employee will be eligible to participate in the Plan as
of the first day of the month following the attainment of his status
as a Key Employee in accordance with Section 4.2.
5.2 VOLUNTARY PARTICIPATION
Participation in the Plan by Key Employees is entirely voluntary. As
further specified in Section 6.2, a Key Employee must sign an election form
and submit the signed form to the Committee before the date he elects to
become a Participant of the Plan.
5.3 COMMITTEE RULES AND REGULATIONS
The Committee shall, through the adoption of a set of rules and
regulations, provide for methods used in advising a Key Employee of his
eligibility in the Plan, and all forms necessary for the Key Employee to
elect to participate.
5.4 CESSATION OF PARTICIPATION
(a) For purposes of Articles 6, 7 and 11, an individual shall cease to be
a Participant on the earliest of:
(i) the date on which he ceases to be a Key Employee;
(ii) the date on which he terminates employment with the Company
for any reason; and
(iii) the date on which the Plan terminates.
(b) For all other Plan purposes, an individual shall cease to be a
Participant on the date the total vested value of his Account has been
paid.
(c) Notwithstanding the foregoing Subsections (a) and (b), in the event
that the Department of Labor ("DOL") issues regulations or other
official notice specifically defining the group of employees that may
participate in a plan of this type and any Participants
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at that time do not meet the criteria set forth in the DOL regulations
or notice, such Participants shall be deemed to be individuals
described under Subsection (a)(i) as of the later of the effective
date or publication date of the notice or regulations, provided such
notice or regulations include a grandfather provision for such
Participants with respect to their account balances on such date. In
the event no such grandfather provision is provided, the accounts of
such Participants shall be distributed in accordance with the second
paragraph of Subsection 12.1(a).
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SECTION 6
PARTICIPANT ALLOCATIONS
6.1 VOLUNTARY DEFERRAL ALLOCATIONS
(a) Until the date of his cessation of participation in accordance with
Subsection 5.4(a), by filing the applicable forms in accordance with
Section 6.2, a
(i) Group I Participant may, as of the Effective Date or, if
later, when first eligible or any January 1 thereafter elect
to reduce his
(A) Regular Compensation by any fixed percentage ("REGULAR
DEFERRAL RATE") for a current Plan Year up to a maximum
of 25% of such Regular Compensation, and/or
(B) Bonus Compensation by any fixed percentage ("BONUS
DEFERRAL RATE") for a current Plan Year up to a maximum
of 100% of such Bonus Compensation.
(ii) Group II Participant who shall contribute at less than the
maximum allowable level to the Qualified Plan for such Plan
Year may, as of the Effective Date or, if later, when first
eligible or any January 1 thereafter elect to reduce his
Regular Compensation by any Regular Deferral Rate for a
current Plan Year up to a maximum of 9% of such
Participant's Regular Compensation for the Plan Year.
(iii) Group II Participant who shall contribute at the maximum
allowable level to the Qualified Plan for such Plan Year
may, as of the Effective Date or, if later, when first
eligible or any January 1 thereafter elect to reduce his
Regular Compensation by any Regular Deferral Rate for a
current Plan Year up to a maximum of the difference between
(A) 15% of such Participant's Regular Compensation for the
Plan Year and (B) the anticipated amount, as determined by
the Committee, that the Participant is eligible to
contribute on a before tax basis to the Qualified Plan
during the Plan Year.
The election made by the Participant in accordance with Subsection (i)
or (ii) shall result in a corresponding
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amount being credited to his Accounts in accordance with Section 8.1.
In the case of Group I Participants, the deferral shall be made from
Regular or Bonus Compensation as the Participant shall specify;
however, to the extent the deferral is to be made from Bonus
Compensation and either no Bonus is paid or the Bonus which is paid
does not meet the minimum described in Subsection (e), no deferral
shall occur with respect to such Bonus Compensation.
(b) A Participant's Voluntary Deferral Allocations made in accordance with
Subsection (a) shall take the form of before tax deferrals to the
Participant's Voluntary Deferral Allocation Subaccount.
(c) Notwithstanding the foregoing, a Participant may not make
contributions to this Plan during any period for which contributions
must be suspended in accordance with regulation
section 1.401(k)-1(d)(2)(iii)(B)(3) of the Code, as a condition of the
Participant's receipt of a hardship withdrawal from any plan of the
Company which includes a qualified cash or deferred arrangement under
section 401(k) of the Code.
(d) The amount of Regular and Bonus Compensation that a Participant elects
to defer shall be credited to the Participant's Accounts as soon as
practicable, but no longer than 30 days following the date on which
the Participant is paid the nondeferred portion of the compensation
which is the source of the deferral.
(e) The minimum amount a Participant may defer for any Plan Year is
$1,000.
6.2 FORMS REQUIRED
A Participant shall elect to contribute on forms and in the manner
prescribed by the Committee. A new election must be made prior to each
Plan Year for which the Participant is eligible to participate in the Plan,
even if the Participant does not elect to contribute for such Plan Year.
6.3 IRREVOCABLE ELECTION
A Participant may not modify or discontinue his allocations for a Plan Year
after the first day thereof unless such discontinuance is necessary to
comply with the provisions of Subsection 6.1(c).
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SECTION 7
COMPANY ALLOCATIONS
7.1 DISCRETIONARY ALLOCATIONS
(a) The Company may, in its sole discretion, make an allocation on behalf
of each Participant who meets the requirements specified in Section 6.
The Company shall have the option of allocating a different designated
percentage or flat dollar amount to each Participant.
Such percentage or flat dollar amount shall be determined by the
Company and announced to the Participants as soon as practicable
following the Company's determination of such amount.
(b) A Participant shall share in the Discretionary Allocations made for
the Plan Year of reference in accordance with Section 6.1, provided he
is in the employ of the Company on the last business day of such Plan
Year.
Notwithstanding the foregoing provision, a Participant shall be
entitled to a share of the Company's Discretionary Allocations for the
Plan Year of (i) his Retirement or death, (ii) the commencement or end
of a Leave of Absence authorized by the Company or (iii) his transfer
to another business entity to which such Participant had been
transferred by the Company, even if the Participant is not in the
employ of the Company on the last business day of such Plan Year.
A Participant shall not share in the allocation of the Company's
Discretionary Allocations for any Plan Year during which he terminated
his employment for reasons other than specified in (b)(i), (ii) or
(iii) above.
(c) The amount of Discretionary Allocations that the Company, in its sole
discretion, allocates to a Participant shall be credited to such
Participant's Account as soon as practicable, but no longer than 45
days following the date on which the Company determines to make such
allocation.
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SECTION 8
ESTABLISHMENT OF ACCOUNTS
8.1 ESTABLISHMENT OF ACCOUNTS
The following Accounts shall be established with respect to each
Participant:
(a) Retirement Account,
(b) Education Account and
(c) Fixed Period Account.
8.2 ACCOUNT AND SUBACCOUNT ALLOCATION
(a) Each Participant shall submit to the Committee before the beginning of
the Plan Year of reference a written statement specifying the
respective percentages of the Plan Contributions which are to be
allocated to the Accounts listed in Subsection 8.1 and described more
fully in Section 12.
(b) In the event that the Participant elects to establish subaccounts
under his Education and/or Fixed Period Accounts, all allocations to
such Account(s) shall be equally divided among such subaccounts.
(c) The minimum amount which may be allocated to each Account and, if
applicable, to each subaccount, is $1,000.
8.3 IRREVOCABLE ALLOCATION
A Key Employee may not amend or revoke an allocation made for or during a
Plan Year.
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SECTION 9
MAINTENANCE, INVESTMENT AND VALUATION OF ACCOUNTS
9.1 MAINTENANCE OF ACCOUNTS
The Committee shall establish and maintain a separate accounting in the
name of each Participant, to which it shall credit all amounts allocated in
accordance with Sections 6 and 7 and all investment experience as
determined in accordance with Sections 9.2 and 9.3.
9.2 DEEMED INVESTMENT FUND ELECTION
(a) INITIAL ELECTION - Each Participant shall designate, in multiples of
1%, one or more of the funds referenced in Section 9.3 for the purpose
of attributing investment experience to his Accounts.
If the Participant fails to designate such funds, the entire Account
shall be deemed to be invested under the most conservative of the
funds selected by the Committee in accordance with Section 9.3 (e.g. a
money market fund or a fixed income fund).
(b) SUBSEQUENT ELECTION - A Participant may, by written election prior to
the date as of which an election is to be effective, change his fund
election with respect to subsequent allocations but, until changed, a
fund election shall remain in effect for all subsequent Plan Years.
(c) TRANSFER ELECTION - A Participant may, by written election change his
fund election with respect to his then existing Account, provided the
transfers from fund to fund are in multiples of 1%. Such change shall
become effective as soon as administratively possible.
(d) Such elections shall be the basis for the valuation of a Participant's
Account in accordance with Section 9.4 but shall not require the
Company to actually place assets in such funds or purchase any
specific assets for purposes of the Plan.
9.3 FUNDS
The Committee shall choose investment vehicles on which to base the imputed
investment experience of Participant Accounts.
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Prior to the beginning of each Plan Year, the Committee, in its sole
discretion, shall determine the general fund categories and the specific
investment vehicles to be offered to Participants and shall notify the
Participants of its decisions. Notwithstanding the foregoing sentence, the
Committee may, at any time during the Plan Year, choose the Company's
common stock as an investment vehicle on which to base the imputed
investment experience of Participant Accounts; PROVIDED, HOWEVER, that only
Designated Employees shall be entitled to make such an investment election
and such Designated Employees shall only be entitled to make an election in
an amount equal to the value of the Plan Shares allocated to such
Designated Employee pursuant to Section 4.8.
9.4 ALLOCATION OF INVESTMENT EXPERIENCE
(a) Each Participant's Account shall be valued based upon the performance
of the deemed investment fund or funds selected by the Participant.
(b) The fair market value of any fund or funds shall be determined by the
Committee.
(c) Notwithstanding the foregoing, in the event the Committee decides to
offer the common stock of the Company as a deemed investment option,
the value of such deemed investment shall be equal to the Per Share
Aggregate Value multiplied by the number of shares deemed credited to
such individual's account.
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SECTION 10
FUNDING LIMITATIONS
10.1 BENEFIT STATUS
(a) All benefits under the Plan are unfunded obligations of the Company.
(b) At no time shall a Participant or the Participant's Beneficiary have
any right, title or interest in or to any specific fund or assets of
the Company.
(c) As to any claim for benefits under the Plan, the Participant or the
Participant's Beneficiary shall be a creditor of the Company in the
same manner as any other creditor having a general claim for unpaid
compensation.
10.2 INVESTMENT AND BENEFIT PAYMENT OBLIGATION OF THE COMPANY
(a) Nothing contained herein shall require the Company to set aside or
earmark any monies or other assets specifically for payments under the
Plan.
(b) Neither the Company nor any Trustee shall be obligated to purchase or
maintain any asset, and any reference to investments is solely for the
purpose of computing the value of benefits.
(c) Neither this Plan nor any action taken pursuant to the terms of this
Plan shall be considered to create a fiduciary relationship between
the Company and the Plan Participants or any other persons, or to
establish a trust in which the assets are beyond the claims of any
unsecured creditor of the Company.
(d) Benefits are payable as they become due irrespective of any actual
investments the Company may make to meet its obligations.
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SECTION 11
VESTING
11.1 UPON RETIREMENT OR THE ATTAINMENT OF HIS DISABILITY TERMINATION DATE
Upon eligibility for Retirement or the attainment of his Disability
Termination Date, a Participant shall have a 100% vested interest in his
Account.
11.2 UPON DEATH
Upon the death of a Participant, such Participant's Beneficiary shall be
entitled to a 100% vested interest in the Participant's Account.
11.3 UPON OTHER TERMINATION OF EMPLOYMENT
Upon termination of a Participant's employment prior to his Retirement,
Disability Termination Date or death, the vested interest to which he shall
be entitled with respect to
(a) that portion of his Account attributable to his Voluntary Deferral
Allocations and any applicable investment experience credited to such
allocations shall be 100%;
(b) that portion of his Account attributable to his Company Discretionary
Allocations and any applicable investment experience credited to such
allocations shall be determined in accordance with the following
vesting schedules:
(i) For Employees who are designated as Key Employees as of the
Effective Date:
Years of Service
After Effective Date Vested Percentage
-------------------- -----------------
Less than 1 full year 0%
1 full year 33-1/3%
2 full years 66-2/3%
3 or more full years 100%
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(ii) For Employees who are designated as Key Employees after the
Effective Date:
"Years of Plan
Participation" Vested Percentage
-------------------- -----------------
Less than 1 full year 0%
1 full year 33-1/3%
2 full years 66-2/3%
3 or more full years 100%
For purposes of this Subparagraph, a "Year of Plan
Participation" shall mean each calendar year during which a
Participant elects to make Voluntary Deferral Allocations in
accordance with Section 6.
(c) Notwithstanding the foregoing, the Committee, in its sole discretion,
may, by written action, accelerate the vesting periods set forth in
Section 11.3(b) above.
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SECTION 12
REGULATIONS GOVERNING DISTRIBUTION OF BENEFITS
12.1 RETIREMENT ACCOUNT.
(a) COMMENCEMENT OF BENEFIT.
If a Participant terminates employment for any reason, including
death, the Company shall pay such Participant or his Beneficiary, if
applicable, a benefit in the form determined under Subsection (b),
which shall be distributed commencing on his Benefit Commencement
Date.
Notwithstanding the foregoing paragraph, if an individual ceases to be
a Participant in accordance with Subsection 5.4(c) and the
circumstances described in the last sentence of such Subsection apply,
the total value of his Retirement Account (whether or not vested)
shall be distributed as soon as administratively practicable following
the later of the effective date or publication date of the DOL notice
or regulations.
(b) METHOD OF DISTRIBUTION
(i) UPON RETIREMENT
Distribution of the Participant's Retirement Account as a result
of the Participant's Retirement shall be in one of the following
forms at the Participant's election, subject to the rules set
forth in Subsection (d):
(A) a single lump sum in cash;
(B) by combination of a single lump sum in cash and of a number
of Plan Shares of the Company not to exceed the number of
shares of common stock of the Company designated by the
Committee for allocation to the Participant pursuant to
Section 4.8 valued at the Per Share Aggregate Value; or
(C) substantially equal annual installments of cash over a
period of not less than two nor more than 15 full years.
Notwithstanding the foregoing, if the Participant's Retirement
Account has a value less
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than $10,000 at the time benefits are to commence, then the
Committee shall determine (subject to the rules set forth in
Subsection (d) below), in its sole discretion, whether the
Participant's benefit shall be paid as (i) a single lump sum in
cash or (ii) by combination of a single lump sum in cash and of a
number of Plan Shares of the Company not to exceed the number of
shares of common stock of the Company designated by the Committee
for allocation to the Participant pursuant to Section 4.8 valued
at the Per Share Aggregate Value.
(ii) UPON DEATH OR DISABILITY TERMINATION
Distribution of the Participant's Retirement Account, as a result
of the Participant's death or his attainment of the Disability
Termination Date, shall be in a single lump sum in cash.
(iii) UPON TERMINATION OF EMPLOYMENT (OTHER THAN RETIREMENT, DEATH
OR DISABILITY)
Distribution of the Participant's Retirement Account as a result
of the Participant's termination of employment (other than
Retirement, death or Disability) shall be in one of the following
forms at the Participant's election, subject to the rules set
forth in Subsection (d):
(A) a single lump sum in cash; or
(B) by combination of a single lump sum in cash and of a number
of Plan Shares of the Company not to exceed the number of
shares of common stock of the Company designated by the
Committee for allocation to the Participant pursuant to
Section 4.8 valued at the Per Share Aggregate Value;
Notwithstanding the foregoing, if the Participant's Retirement
Account has a value less than $10,000 at the time benefits are to
commence, then the Committee shall determine (subject to the
rules set forth in Subsection (d) below), in its sole discretion,
whether the Participant's benefit shall be paid as (i) a single
lump sum in cash or (ii) by combination of a single lump sum in
cash and of a number of Plan Shares of the Company not to exceed
the number of shares of common stock of the Company designated by
the Committee for
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allocation to the Participant pursuant to Section 4.8 valued at
the Per Share Aggregate Value.
(c) DETERMINATION OF BENEFITS
(i) In the event that the Participant elects to have his
benefits distributed in accordance with
Subsection (b)(i)(A), (b)(ii) or his benefits are
distributed in accordance with (b)(iii)(A), he shall receive
a single lump sum in cash equal to the total vested value of
his Account determined as of the Valuation Date immediately
preceding his Determination Date.
(ii) In the event that the Participant elects to have his
benefits distributed in accordance with Subsection (b)(i)(B)
or (b)(iii)(B), he shall receive (A) a combination of a
single lump sum in cash and (B) the number of Plan Shares
designated by the Committee pursuant to Section 4.8 for
allocation to the Participant (valued at the Per Share
Aggregate Value) equal to the total vested value of his
Account determined as of the Valuation Date immediately
preceding his Determination Date.
(iii) In the event that the Participant elects to have his
benefits distributed in accordance with
Subsection (b)(i)(C), the
(A) amount of the first payment shall be determined by
multiplying the vested value of the Participant's
Account as of the Valuation Date immediately preceding
his Determination Date, by a fraction
(1) the denominator of which equals the number of
years over which the benefits are to be paid; and
(2) the numerator of which is one.
(B) amounts of the payments for each succeeding year shall
be determined by multiplying the vested value of the
Participant's Account as of the Valuation Date
immediately preceding the
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applicable anniversary of his Determination Date by a
fraction,
(1) the denominator of which equals the number of
remaining years over which the benefits are to be
paid; and
(2) the numerator of which is one.
(d) ELECTION OF FORM OF BENEFIT PAYMENT.
(i) A Participant shall elect the form in which his benefits are
payable upon Retirement in accordance with Subsection (b).
Such election must be made when the Participant makes his
initial election to participate in the Plan in accordance
with Section 5.
(ii) Notwithstanding the foregoing, the Participant may elect to
change the form(s) elected in accordance with Subparagraph
(i), provided such new election is made at least one full
calendar year prior to the Participant's Determination Date.
If the Participant's Determination Date occurs prior to one
full calendar year following the new election, such election
shall not be honored and the Participant's prior election
shall remain in effect.
(iii) Notwithstanding any provision contained herein to the
contrary, before being required to issue any Plan Shares to
a Participant in accordance with this Section 12, the
Committee may require the Participant at the Participant's
expense to provide an opinion of counsel satisfactory to the
Committee that any such issuance is exempt from registration
or qualification under the federal and state securities laws
and the securities and other applicable laws of the
jurisdiction of residence of the Participant. If the
Participant is unable for any reason to provide an opinion
of counsel satisfactory to the Committee within 30 days
after the Determination Date, the Participant shall forfeit
his right to receive any Plan Shares pursuant to this Plan
and, notwithstanding
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Paragraph (d)(ii) above, shall promptly submit a new
distribution election form consistent with the elections
available under Sections 12.1(b)(i)(A) or (C) or Section
12.1(iii)(A), as applicable.
(iv) Any election made pursuant to this Section shall be made on
forms and in the manner prescribed by the Committee and
shall be irrevocable, except as provided in
Paragraphs (d)(ii) and (d)(iii) above.
12.2 EDUCATION ACCOUNT.
(a) If a Participant (i) remains continuously employed by the Company
until January 1 of the calendar year in which an Eligible Dependent
attains age 18 or (ii) terminates employment as a result of his
Retirement during or after such time period, the Company shall pay to
the Participant a portion of his benefit in cash on each Benefit
Commencement Date as determined in accordance with the following
schedule. The amount of the first payment shall be determined by
multiplying the value of the Participant's Education Account as of the
Valuation Date immediately preceding his Determination Date by the
percentage designated below for year 1. The amounts of the payments
for each succeeding year shall be determined by multiplying the value
of the Participant's Education Account as of the applicable
anniversary of the Valuation Date immediately preceding his
Determination Date by the percentage designated below for each
succeeding year.
January 1st Percentage of Eligible
Year Dependent's Subaccount
------------ ----------------------
1 25%
2 33-1/3%
3 50%
4 100%
(b) Subject to the requirements of Section 9.2, a Participant may
establish subaccounts under his Education Account by designating
Eligible Dependents. A Participant may have a maximum of three such
subaccounts at any time. A Participant's election pursuant to Section
8.2 shall apply uniformly to each subaccount.
(c) If a Participant terminates his employment for any reason other than
Retirement with a balance in his
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Education Account, the balance shall be transferred to his Retirement
Account and distributed in accordance with Subsections 12.1(a) and
(b); but no later than he would have received his benefit as provided
in Subsection 12.2(a) above; provided, however, that any such transfer
effected pursuant to this Subsection 12.2(c) shall only entitle the
Participant to receive a payment distribution with respect to his
Education Account under Subsection 12.1(b)(i)(A).
(d) Notwithstanding any provision to the contrary, if on the January 1 of
the calendar year in which an Eligible Dependent of a Participant
attains age 18, the Eligible Dependent's subaccount has a balance of
less than $10,000, then the Committee shall direct that the balance be
paid to the Participant in one lump sum in cash.
(e) If an Eligible Dependent dies prior to the payment of the full amount
credited to his subaccount, the balance shall be transferred to the
Participant's Retirement Account as soon as administratively
practicable following the Valuation Date coinciding with or
immediately following the Eligible Dependent's death.
(f) For purposes of this Section, "Eligible Dependent" means an individual
who is a child, stepchild, grandchild, niece or nephew, or who is
otherwise identified as a dependent of a Participant for purposes of
the Code who is living at any time throughout the Enrollment Period
and who is either younger than age 14 or younger than age 18 but for
whom a subaccount was initially established pursuant to Subsection (b)
prior to his attaining age 14.
12.3 FIXED PERIOD ACCOUNT.
(a) On his Benefit Commencement Date, the Participant shall receive a
benefit equal to the lump sum value in cash of the Participant's Fixed
Period Account determined as of the Valuation Date immediately
preceding the Determination Date.
(b) A Participant shall designate the payment year in the written
statement by which the Fixed Period Account is established. Such
payment year must not be less than four full calendar years subsequent
to the date the Fixed Period Account of reference is established.
Subject to the requirements of Section 8.2, a Participant may
establish subaccounts under his Fixed
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Period Account, with separate payment years for each. A Participant
may have a maximum of two such subaccounts at any time. A
Participant's election pursuant to Section 8.2 shall apply uniformly
to each subaccount.
(c) If a Participant's employment terminates for any reason and the
Participant has a balance in his Fixed Period Account, the balance
shall be transferred to his Retirement Account and be distributed in
accordance with Subsections 12.1(a) and (b); but no later than he
would have received his benefit as provided in Subsection 12.3(a)
above; provided, however that any such transfer effected pursuant to
this Subsection 12.3(c) shall only entitle the Participant to receive
a payment distribution with respect to his Fixed Period Account under
Subsection 12.1(b)(i)(A).
12.4 CLAIM PROCEDURE FOR BENEFITS
(a) Any request for specific information with respect to benefits under
the Plan must be made to the Committee in writing by a Participant or
his Beneficiary. Oral communications will not be recognized as a
formal request or claim for benefits.
(b) The Committee shall provide adequate notice in writing to any
Participant or Beneficiary whose claim for benefits under the Plan has
been denied, (i) setting forth the specific reasons for such denial;
specific references to pertinent plan provisions; a description of any
material and information which had been requested but not received by
the Committee; and, (ii) advising such Participant or Beneficiary that
any appeal of such adverse determination must be in writing to the
Committee, within such period of time designated by the Committee but,
until changed, not more than 60 days after receipt of such
notification, and must include a full description of the pertinent
issues and basis of such claim.
(c) If the Participant or Beneficiary fails to appeal such action to the
Committee in writing within the prescribed period of time, the
Committee's adverse determination shall be final.
(d) If an appeal is filed with the Committee, the Participant or
Beneficiary shall submit such issues he feels are pertinent and the
Committee shall reexamine all facts, make a final determination as to
whether the denial of benefits is justified under the
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circumstances, and advise the Participant or Beneficiary in writing of
its decision and the specific reasons on which such decision was
based, within 60 days of receipt of such written request, unless
special circumstances require a reasonable extension of such 60-day
period.
12.5 SUBSTITUTE PAYEE
If a Participant or Beneficiary entitled to receive any benefits hereunder
is in his minority, or is, in the judgment of the Committee, legally,
physically, or mentally incapable of personally receiving and receipting
any distribution, the Committee may make distributions to a legally
appointed guardian or to such other person or institution as, in the
judgment of the Committee, is then maintaining or has custody of the payee.
12.6 SATISFACTION OF LIABILITY
After all benefits have been distributed in full to a Participant or to his
Beneficiary, all liability to such Participant or to his Beneficiary under
the Plan shall cease.
12.7 NONASSIGNABILITY
No benefit under the Plan shall be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance or charge, and
any such action shall be void for all purposes of the Plan. No benefit
shall in any manner be subject to the debts, contracts, liabilities,
engagements or torts of any person, nor shall it be subject to attachments
or other legal process for or against any person, except to such extent as
may be required by law.
12.8 REPURCHASE PROVISIONS APPLICABLE TO PLAN SHARES
(a) REPURCHASE RIGHT IN CASE OF TERMINATION.
Notwithstanding any other provision of the Plan, if at any time prior to an
Initial Public Offering, a Participant's employment with the Company or any
of its subsidiaries is terminated for any reason whatsoever, including,
without limitation, death, disability, resignation, retirement or
termination with or without cause, the Company or its designee(s) (which
designee(s) may be any person or entity that shall have been approved by
the Committee) shall have the exclusive and irrevocable option (a "call"),
exercisable in its sole discretion, to repurchase, in whole or in part, the
Plan Shares that are then owned (or will be
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owned pursuant to an election made under Section 12.1(b)) by such
Participant or any transferee of the Plan Shares. The Company or its
designee(s) may exercise the call for all or any portion of the Plan Shares
subject to such repurchase hereunder by delivering written notice (a
"REPURCHASE NOTICE") to the holder or holders of such Plan Shares within 60
days of the Participant's Determination Date. The Repurchase Notice will
set forth the number of Plan Shares to be acquired from each holder, the
aggregate consideration to be paid for such shares and the time and place
for the closing of the transaction. Each terminated Participant and any
transferee shall be obligated to resell the Plan Shares as provided in this
Section 12.8 in response to an exercise by the Company of its call under
this Section.
The number of Plan Shares to be repurchased by the Company shall first be
satisfied to the extent possible from the Plan Shares held by the
terminated Participant. If the number of Plan Shares then held by such
Participant is less than the total number of Plan Shares the Company has
elected to call, the Company shall purchase the remaining Plan Shares
elected to be purchased from such Participant's transferees, PRO RATA
according to the number of Plan Shares held by such other transferees as of
the Determination Date (determined as nearly as practicable to the nearest
share).
The consummation of the purchase or purchases of such Plan Shares pursuant
to the Company's exercise of its call shall take place on the date and in
the manner designated by the Company in the Repurchase Notice, which date
shall not be more than 30 days after the delivery of Repurchase Notice;
PROVIDED, HOWEVER, that the Company may consummate its purchase of such
Plan Shares pursuant to its exercise of its call by delivering payment for
such Plan Shares being repurchased by it along with the Repurchase Notice.
The Company will pay for the Plan Shares to be purchased by it pursuant to
the exercise of a call by delivery of a check in an amount equal to the
applicable repurchase price for the Plan Shares being repurchased. The
Company will, in connection with such repurchase, be entitled to receive
customary representations and warranties from the sellers regarding such
sale and to require that all sellers' signatures be guaranteed.
Notwithstanding anything to the contrary contained in this Plan, all
repurchases of Plan Shares by the Company shall be subject to applicable
restrictions contained in the Delaware General Corporation Law and in the
Company's debt and equity financing agreements. If any such restrictions
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prohibit the repurchase of Plan Shares hereunder which the Company is
otherwise entitled to make, the Company may make such repurchases as soon
as it is permitted to do so under such restrictions and the time periods
for exercise of its rights hereunder shall be tolled during any such period
of disability. The Company shall pay interest on any portion of the Plan
Shares being repurchased subject to the restrictions set forth in this
paragraph, which interest shall accrue at an annual rate of 10% and be paid
on the date such restricted portion of the Plan Shares are repurchased.
(b) PURCHASE PRICE.
The purchase price per share for any Plan Shares purchased pursuant to
Section 12.8(a) shall be equal to the Per Share Aggregate Value determined
as of the Valuation Date immediately preceding the delivery date of the
Repurchase Notice. The Committee (excepting any director who is a
Participant) shall determine the purchase price per share in the manner set
forth in this Section; PROVIDED, HOWEVER, that the Participant or his
transferee, as applicable, may in good faith challenge the Committee's
determination and require that the purchase price per share be determined
by the Company's independent auditors in the manner set forth in this
section. The result of such determination shall be binding on the Company
and the Participant or his transferee, as the case may be. The expenses of
such determination shall be borne by the Company.
12.9 TRANSFER RESTRICTIONS.
Each Participant electing to receive Plan Shares shall hold those shares
subject to the terms of the Second Amended and Restated Stockholders
Agreement dated as of November 7, 1996, as the same shall be amended from
time to time (the "Stockholders Agreement"), and the Second Amended and
Restated Registration Rights Agreement dated as of November 7, 1996, as the
same shall be amended from time to time (the "Registration Rights
Agreement") and the terms of the subscription agreement executed by such
Participant. As provided in the Stockholders Agreement, the Plan Shares
may be transferred in certain limited circumstances. Any transferee of any
Plan Shares shall take those shares subject to the terms of the Plan,
including, without limitation, the repurchase rights set forth in this
Article XII, the subscription agreement executed by the transferor
Participant, the Stockholders Agreement and the Registration Rights
Agreement. Any such transferee must, upon the request of the Company,
execute an agreement agreeing to be bound by the Plan and such restrictions
and
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must agree to such other waivers, limitations and restrictions as the
Company may reasonably require. The Company shall not, and shall not
permit any transfer agent or registrar for any shares of the Company's
capital stock to, transfer upon the books of the Company any shares of the
Company's capital stock originally issued under or pursuant to the Plan in
any manner except in accordance with this provision, and any purported
transfer not in compliance herewith shall be void.
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SECTION 13
BENEFICIARY DESIGNATION
13.1 Each Participant, upon becoming eligible for participation in the
Plan, may designate a Beneficiary to receive the benefits payable in
the event of his death, and designate a successor Beneficiary to
receive any benefits payable in the event of the death of any other
Beneficiary.
13.2 A Participant may change his Beneficiary at any time. All Beneficiary
designations and changes shall be made on an appropriate form as
designated by the Committee and filed with the Committee.
13.3 If no person shall be designated by the Participant, or if the
designated Beneficiary shall not survive the Participant, payment of
the Participant's Account shall be made to the Participant's estate.
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SECTION 14
AMENDMENT AND TERMINATION
14.1 AMENDMENT
The Company may amend or otherwise modify the Plan by resolution of its
Board of Directors, in whole or in part, either retroactively or
prospectively, provided that no amendment or modification shall, with
respect to allocations already credited or investment experience accrued,
change the amount of allocations under Section 6 or Section 7 or investment
experience under Section 9 or increase the vesting requirements under
Section 11.
14.2 TERMINATION
The Plan may be terminated at any time at the discretion of the Company by
resolution of its Board of Directors. Written notification of such action
shall be given to each Participant, the Trustee and the Committee.
Thereafter, no further allocations or credits shall be made to the Plan.
As soon as administratively feasible following termination of the Plan, the
Committee shall distribute the amount in each Account (whether or not
vested) to or on behalf of the Participant or, if following the
Participant's death, the Beneficiary entitled thereto.
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SECTION 15
GENERAL PROVISIONS
15.1 LIMITATION OF RIGHTS
Neither the establishment of the Plan or the Trust Agreement, nor any
modification thereof, nor the creation of an account, nor the payment of
any benefits shall be construed as giving any Participant, Beneficiary, or
any other person whomsoever, any legal or equitable right against the
Company, the Trustee or the Committee unless such right shall be
specifically provided for in the Plan or the Trust Agreement or conferred
by affirmative action of the Committee in accordance with the terms and
provisions of the Plan; or as giving any Participant the right to be
retained in the service of the Company, and all Participants and other
employees shall remain subject to discharge to the same extent as if the
Plan had never been adopted.
15.2 CONSTRUCTION OF AGREEMENT
The Plan shall be construed according to the laws of the State of Illinois,
and all provisions hereof shall be administered according to, and its
validity shall be determined under, the laws of Illinois unless preempted
by Federal law.
15.3 SEVERABILITY
Should any provision of the Plan or any regulations adopted thereunder be
deemed or held to be unlawful or invalid for any reason, such fact shall
not adversely affect the other provisions or regulations unless such
invalidity shall render impossible or impractical the functioning of the
Plan and, in such case, the appropriate parties shall immediately adopt a
new provision or regulation to take the place of the one held illegal or
invalid.
15.4 TITLES AND HEADINGS
The titles and headings of the Sections in this instrument are for
convenience of reference only and, in the event of any conflict, the text
rather than such titles or headings shall control.
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15.5 BINDING UPON SUCCESSORS
The liabilities under the Plan shall be binding upon any successor or
assign of the Company and any purchaser of the Company or substantially all
of the assets of the Company.
15.6 NOTICES. All notices, requests, consents and other communications required
or permitted hereunder shall be in writing and shall be deemed to have been
duly given and made and served either by personal delivery to the person
for whom it is intended or if deposited, postage prepaid, registered or
certified mail, return receipt requested, in the United States mail or if
by facsimile transmission to the facsimile numbers below:
If to the Company, addressed to:
International Logistics Limited
330 South Mannheim Road
Hillside, Illinois 60162
Attention: Roger E. Payton
Facsimile No.: (708) 547-4524
With copies to:
Milbank, Tweed, Hadley & McCloy
601 South Figueroa Street
Suite 3100
Los Angeles, California 90017
Attention: Eric H. Schunk, Esq.
Facsimile No.: (213) 629-5063
If to any Participant, addressed to:
such Participant at its address shown on the stock records of the
Company, or at such other address as such Participant may specify
by written notice to the Company
15.7 SECURITIES LAWS RESTRICTIONS AND ADDITIONAL RESTRICTIONS ON TRANSFER OF
OFFERED SHARES.
(a) Each Participant electing to receive Plan Shares will be required to
represent to the Company in a subscription agreement that such
Participant is purchasing Plan Shares for his or her own account for
investment and not on behalf of others or otherwise with a view toward
distributing them. Each Participant is advised that federal and state
securities laws govern and restrict each Participant's right to offer,
sell or otherwise dispose of any Plan Shares unless
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such Participant's offer, sale or other disposition thereof is
registered under the Securities Act, and state securities laws, or in
the opinion of the Company's counsel, such offer, sale or other
disposition is exempt from registration or qualification thereunder.
Any Participant electing to receive Plan Shares will be required to
agree that such Participant will not offer, sell or otherwise dispose
of any such Plan Shares in any manner which would: (i) require the
Company to file any registration statement with the Commission (or any
similar filing under state law) or to amend or supplement any such
filing or (ii) violate or cause the Company to violate the Securities
Act, the rules and regulations promulgated thereunder or any other
state or federal law. The certificates for any Plan Shares will bear
such legends as the Company deems necessary or desirable in connection
with the Securities Act or other rules, regulations or laws.
(b) The certificates representing the Plan Shares will bear the following
legend:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY
STATE SECURITIES LAW, AND SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF UNLESS THE SAME ARE REGISTERED AND QUALIFIED
IN ACCORDANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS,
OR IN THE OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY
SUCH REGISTRATION AND QUALIFICATION ARE NOT REQUIRED."
"THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO THAT CERTAIN
SECOND AMENDED AND RESTATED STOCKHOLDERS AGREEMENT, DATED AS OF
NOVEMBER 7, 1996, A SUBSCRIPTION AGREEMENT, DATED ____________, 1997,
A SECOND AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT DATED AS
OF NOVEMBER 7, 1996, AND A DEFERRED COMPENSATION PLAN DATED AS OF JULY
1, 1996, COPIES OF WHICH ARE ON FILE AT THE PRINCIPAL OFFICE OF THE
COMPANY AND WILL BE FURNISHED TO THE HOLDER ON REQUEST TO THE
SECRETARY OF THE COMPANY. SUCH STOCKHOLDERS AGREEMENT, SUBSCRIPTION
AGREEMENT AND REGISTRATION RIGHTS AGREEMENT PROVIDE, AMONG OTHER
THINGS, FOR CERTAIN RESTRICTIONS ON VOTING, SALE, TRANSFER, PLEDGE,
HYPOTHECATION OR OTHER DISPOSITION OF THE SECURITIES EVIDENCED BY THIS
CERTIFICATE AND THAT SUCH SECURITIES MAY BE SUBJECT TO PURCHASE BY THE
COMPANY AS WELL AS CERTAIN OTHER PERSONS UPON THE OCCURRENCE OF
CERTAIN EVENTS. ANY ISSUANCE, SALE, ASSIGNMENT, TRANSFER OR
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OTHER DISPOSITION OF THE SECURITIES EVIDENCED BY THIS CERTIFICATE TO
PERSONS WHO ARE NOT A PARTY TO SUCH STOCKHOLDERS AGREEMENT SHALL BE
NULL AND VOID."
(c) Notwithstanding any other provision of this Plan, the Company may
refuse to register any transfer of Plan Shares if the registration of
such transfer would require the Company to register any class of
equity securities with the Commission under the Securities Exchange
Act (except in connection with an effective registration statement
under the Securities Act).
(d) Unless otherwise provided in the Stockholders Agreement or the
Registration Rights Agreement, each Participant electing to receive
Plan Shares agrees, by his acceptance of such Plan Shares, not to
effect any public sale or distribution of any Plan Shares or other
equity securities of the Company, or any securities convertible into
or exchangeable or exercisable for any of the Company's equity
securities, during the ten days prior to and the 120 days after the
effectiveness of any underwritten public offering of any class of the
Company's equity securities, except as part of such underwritten
public offering or if otherwise consented to by the Company in writing
prior to such sale or distribution.
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Exhibit 10.16
EMPLOYEE STOCK
PURCHASE PLAN II
This Employee Stock Purchase Plan II (the "Plan") is adopted by the
board of directors of International Logistics Limited, a Delaware corporation
(the "Company"), as of the Plan Date.
ARTICLE I
PURPOSE OF PLAN; STRUCTURE
The Plan is adopted by the Board for employees of the Company and its
Subsidiaries as a part of the compensation and incentive arrangements for such
employees. The Plan is intended to advance the best interests of the Company by
allowing such employees to acquire an ownership interest in the Company, thereby
motivating them to contribute to the success of the Company and to remain in the
employ of the Company and its Subsidiaries. The availability and offering of
stock under the Plan will also enhance the Company's ability to attract and
retain individuals of exceptional talent to contribute to the sustained
progress, growth and profitability of the Company.
Pursuant to the Plan, Participants will be granted the right to
acquire shares of the Company's Common Stock. Shares of the Company's Common
Stock issued hereunder will be subject to transfer and other restrictions
contained herein, the Subscription Agreement executed by such Participant, the
Stockholders Agreement, the Registration Rights Agreement and/or in other
similar agreements that may be executed by Participants.
Each Participant will execute a Subscription Agreement in connection
with his acquisition of Common Stock. All shares of such stock will be held
subject to the terms of such Subscription Agreement and to the terms of the
Stockholders Agreement and the Registration Rights Agreement (or to the terms of
similar agreements that may be executed by Participants).
ARTICLE II
DEFINITIONS
For purposes of the Plan, except where the context clearly indicates
otherwise, the following terms shall have the meanings set forth below:
"AGGREGATE VALUE" means (EBITDA x 5) - (Debt - CA), where:
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1. EBITDA means the Company's consolidated earnings before
interest, taxes, depreciation and amortization for the four
fiscal quarters of the Company ending on the Date of
Termination computed in accordance with generally accepted
accounting principles;
2. Debt means any current or long-term indebtedness of the
Company as of the Date of Termination (including capitalized
lease obligations and accrued but unpaid interest), as set
forth on the Company's consolidated balance sheet (prepared
in accordance with generally accepted accounting principles)
as of the Date of Termination; and
3. CA means the Company's consolidated cash and cash
equivalents on hand, including, without limitation, payments
that have been received or will be received upon the
exercise of options and warrants to the extent such options
and warrants are included in Section 6.1(b), as set forth on
its consolidated balance sheet (prepared in accordance with
generally accepted accounting principles) as of the Date of
Termination.
"BOARD" means the board of directors of the Company.
"COMMISSION" means the United States Securities and Exchange
Commission.
"COMMON STOCK" means the Company's common stock, par value $0.001 per
share, or in the event that the outstanding Common Stock is hereafter changed
into or exchanged for different stock or securities of the Company, such other
stock or securities.
"DATE OF TERMINATION" shall mean the date on which termination of the
Participant's employment occurs, for any reason whatsoever, including, without
limitation, death, disability, resignation, retirement or termination of
employment with or without cause.
"COMPANY" means International Logistics Limited, a Delaware
corporation, or any successor corporation (whether by merger or consolidation or
purchase of all or substantially all of the Company's assets determined on a
consolidated basis).
"EMPLOYEE" means an employee of the Company or any of its
Subsidiaries, whether such employee's employment commences before, on or after
the Plan Date.
"OFFERED SHARES" means, with respect to any Participant, (a) any
shares of Common Stock purchased by such Participant pursuant to Article V of
this Plan and (b) any shares of the capital stock of the Company issued in
respect of any of the securities described in clause (a) above, whether by way
of stock dividend, stock split, merger, consolidation, reorganization or other
recapitalization. Offered Shares shall remain Offered Shares in the hands of
any holder other than such Participant (except for (i) the Company and its
successors-in-interest and transferees, and (ii) transferees in a Public Sale of
Offered Shares that are vested
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<PAGE>
as provided herein on the date of transfer) and except as otherwise expressly
provided in this Plan, each such holder of Offered Shares shall succeed to all
rights and obligations hereunder attributable to such Participant as a holder of
Offered Shares.
"ORIGINAL COST" of each Offered Share purchased will be equal to the
amount of any consideration paid by the Participant for such Offered Share,
adjusted to give effect to any stock split, stock dividend, share combination or
other recapitalization occurring after such Offered Share was issued.
"PARTICIPANT" means any Employee who is eligible to participate in the
Plan as determined by the Board.
"PERSON" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization and a governmental entity or any department, agency or political
subdivision thereof.
"PLAN" means this Employee Stock Purchase Plan II, as amended from
time to time in accordance with its terms.
"PLAN DATE" means March 3, 1997.
"PUBLIC SALE" means any sale pursuant to a registered public offering
under the Securities Act or any sale to the public pursuant to Rule 144
promulgated under the Securities Act (if and as modified by Rule 701(c) under
the Securities Act) effected through a broker, dealer or market maker.
"REGISTRATION RIGHTS AGREEMENT" means the Second Amended and Restated
Registration Rights Agreement dated as of November 7, 1996, by and among the
Company and each of the holders listed on Exhibit A attached thereto, as the
same may be amended from time to time. Each Participant shall be a party to the
Registration Rights Agreement (or to an agreement containing comparable terms).
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended.
"STOCKHOLDERS AGREEMENT" means the Second Amended and Restated
Stockholders Agreement dated as of November 7, 1996 by and among the Company and
each of the holders listed on Exhibit A attached thereto, as the same may be
amended from time to time. Each Participant shall be a party to the
Stockholders Agreement (or to an agreement containing comparable terms).
"SUBSIDIARY" means any corporation of which the Company owns, directly
or through one or more intermediaries, securities having a majority of the
ordinary voting power in electing the board of directors of such corporation.
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<PAGE>
ARTICLE III
ADMINISTRATION
The Plan shall be administered by the Board upon consultation with the
Chairman and Chief Executive Officer of the Company. Subject to the
requirements and the limitations of the Plan, the Board shall have the sole and
complete responsibility and authority to: (a) select Participants; (b) issue
and sell Offered Shares to Participants in such amounts as it shall determine;
(c) interpret the Plan and adopt, amend and rescind administrative guidelines
and other rules and regulations relating to the Plan; (d) correct any defect or
omission or reconcile any inconsistency in the Plan; and (e) make all other
determinations and take all other actions necessary or advisable for the
implementation and administration of the Plan. The Board's determinations on
matters within its authority shall be conclusive and binding upon the
Participants, the Company and all other Persons. Except as otherwise provided
herein, all expenses associated with the administration of the Plan shall be
borne by the Company. The Board may, to the extent permissible by law, delegate
any of its authority hereunder to such Persons or committee as it deems
appropriate, and the use of the term "Board" herein shall be deemed to include
reference to such Person or committee as the context may require.
ARTICLE IV
LIMITATION ON AVAILABLE OFFERED SHARES
4.1 OFFERED SHARES. The aggregate number of Offered Shares that will
be made available for purchase by Participants pursuant to Article V hereof
shall equal 75,000 shares of Common Stock.
4.2 STATUS OF OFFERED SHARES. The Offered Shares available under the
Plan may be either authorized and unissued shares, treasury shares or a
combination thereof, as the Board shall determine and shall be reserved by the
Board for issuance as provided in the Plan. In the event any Offered Shares are
not subscribed for within the period permitted therefor in Article V, the
Offered Shares remaining unsubscribed shall resume the status of unreserved
shares, available for such other purposes as the Board may determine, and shall
not be available for purchase pursuant to the Plan (except as otherwise
authorized by the Board pursuant to Section 7.4).
ARTICLE V
OFFERED SHARES
5.1 RIGHT TO PURCHASE. Subject to the conditions set forth in this
Article V, the Participants, in the aggregate, shall have the right, during the
period specified in Section 5.2(a), to purchase all or any of such Participant's
allocated portion, as determined by the Board in its discretion, of 75,000
shares of Common Stock at a purchase price of $30.00 per share;
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<PAGE>
provided, however, that each Participant electing to purchase shares hereunder
must purchase a minimum of 500 shares of Common Stock.
5.2 EXERCISE OF RIGHT.
(a) During the period commencing on the Plan Date and terminating 180
days thereafter (the "Offering Period"), up to 15 Participants (or such greater
or lesser number as the Board shall determine, subject to Section 7.2) shall be
eligible to exercise their right to purchase Offered Shares at any one time
during the Offering Period.
(b) A Participant that wishes to exercise his or her right to
purchase Offered Shares must do so by completing, signing and delivering to the
Company (to the attention of the Company's Secretary) (i) a copy of the
subscription agreement attached hereto as ANNEX I (the "Subscription
Agreement"), (ii) a copy of the Stockholders Agreement attached hereto as ANNEX
II, (iii) a copy of the Registration Rights Agreement attached hereto as ANNEX
III and (iv) a copy of the Investment Consideration Letter attached hereto as
ANNEX IV (or, in each case, in such other form as the Board may adopt), together
with payment in full for the Offered Shares being purchased thereby. Payment of
the purchase price therefor shall be made in cash (including wire transfer,
check, bank draft or money order). A Participant's right to subscribe for and
purchase Offered Shares shall be subject to the satisfaction of all conditions
set forth in the Subscription Agreement.
5.3 TERMINATION OF RIGHT. Unless and to the extent otherwise
extended by the Board, a Participant's right to purchase Offered Shares pursuant
to this Article V shall terminate upon the expiration of the Offering Period.
ARTICLE VI
REPURCHASE PROVISIONS
6.1 REPURCHASE PROVISIONS APPLICABLE TO OFFERED SHARES
(a) REPURCHASE RIGHT IN CASE OF TERMINATION. If at any time prior to
an Initial Public Offering (as defined in the Stockholders Agreement attached
hereto as ANNEX II), a Participant's employment with the Company and its
Subsidiaries is terminated for any reason whatsoever, including, without
limitation, death, disability, resignation, retirement or termination with or
without cause, (i) the Company or its designee(s) (which designee(s) may be any
person or entity that shall have been approved by the Board pursuant to the
terms of the Stockholders Agreement) shall have the exclusive and irrevocable
option (a "call"), exercisable in its sole discretion, to repurchase, in whole
or in part, the Offered Shares that are then owned by such Participant or any
transferee and (ii) Participant shall have the exclusive and irrevocable option
(a "put"), exercisable in such Participant's sole discretion, to sell to the
Company, in whole or in part, the Offered Shares that are then owned by such
Participant or any transferee. Either party may exercise the call and/or the
put (as applicable) for all or any portion of the Offered Shares subject to such
repurchase hereunder by delivering written notice (a "Repurchase Notice")
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<PAGE>
(i) if by the Company, to the holder or holders of such Offered Shares, and (ii)
if by Participant, to the Company, within 60 days of the Participant's Date of
Termination. The Repurchase Notice will set forth the number of Offered Shares
to be acquired from or sold by each holder, the aggregate consideration to be
paid for such shares and the time and place for the closing of the transaction.
Each terminated Participant and transferee shall be obligated to resell the
Offered Shares as provided in this Section 6.1 in response to an exercise by the
Company of its call under this Section. The Company shall be obligated to
repurchase the Offered Shares as provided in this Section 6.1 in response to an
exercise by a Participant of its put under this Section.
The number of Offered Shares to be repurchased by the Company shall
first be satisfied to the extent possible from the Offered Shares held by the
terminated Participant. If the number of Offered Shares then held by such
Participant is less than the total number of Offered Shares the Company has
elected to call or the Participant has elected to put, the Company shall
purchase the remaining Offered Shares elected to be purchased from such
Participant's transferees, PRO RATA according to the number of Offered Shares
held by such other transferees as of the Date of Termination (determined as
nearly as practicable to the nearest share).
The consummation of the purchase or purchases of such Offered Shares
pursuant to the Company's exercise of its call or the Participant's exercise of
its put shall take place on the date and in the manner designated by the Company
or the Participant, as applicable, in the Repurchase Notice, which date shall
not be more than 30 days after the delivery of Repurchase Notice; PROVIDED,
HOWEVER, that the Company may consummate its purchase of such Offered Shares
pursuant to its exercise of its call by delivering payment for such Offered
Shares being repurchased by it along with the Repurchase Notice. The Company
will pay for the Offered Shares to be purchased by it pursuant to the exercise
of a call or a put by delivery of a check in an amount equal to the applicable
repurchase price for the Offered Shares being repurchased. The Company will, in
connection with such repurchase, be entitled to receive customary
representations and warranties from the sellers regarding such sale and to
require that all sellers' signatures be guaranteed.
Notwithstanding anything to the contrary contained in this Plan, all
repurchases of Offered Shares by the Company shall be subject to applicable
restrictions contained in the Delaware General Corporation Law and in the
Company's and its Subsidiaries' debt and equity financing agreements. If any
such restrictions prohibit the repurchase of Offered Shares hereunder which the
Company is otherwise entitled to make, the Company may make such repurchases as
soon as it is permitted to do so under such restrictions and the time periods
for exercise of its rights hereunder shall be tolled during any such period of
disability. The Company shall pay interest on any portion of the Offered Shares
being repurchased subject to the restrictions set forth in this paragraph, which
interest shall accrue at an annual rate of 10% and be paid on the date such
restricted portion of the Offered Shares are repurchased.
(b) PURCHASE PRICE. The purchase price per share for any Offered
Shares purchased pursuant to Section 6.1(a) shall be equal to the amount
obtained by dividing (A) the Aggregate Value determined as of the last day of
the Company's fiscal quarter ending
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<PAGE>
immediately preceding the Date of Termination by (B) the number of shares of
Common Stock outstanding and shares subject to options and warrants (to the
extent such options and warrants are in the money) on the Date of Termination.
The Board (excepting any director who is a Participant) shall determine the
purchase price per share in the manner set forth in this Section; PROVIDED,
HOWEVER, that the Participant or his transferee, as applicable, may in good
faith challenge the Board's determination and require that the purchase price
per share be determined by the Company's independent auditors in the manner set
forth in this section. The result of such determination shall be binding on the
Company and the Participant or his transferee, as the case may be. The expenses
of such determination shall be borne by the Company.
6.2 TRANSFER RESTRICTIONS. Each Participant acquiring Offered Shares
shall hold those shares subject to the terms of the Stockholders Agreement and
the Registration Rights Agreement and the terms of the Subscription Agreement
executed by such Participant. As provided in the Stockholders Agreement the
Offered Shares may be transferred in certain limited circumstances. Any
transferee of any Offered Shares shall take those shares subject to the terms of
the Plan, including, without limitation, the repurchase rights set forth in this
Article VI, the Subscription Agreement executed by the transferor Participant,
the Stockholders Agreement and the Registration Rights Agreement. Any such
transferee must, upon the request of the Company, execute an agreement agreeing
to be bound by the Plan and such restrictions and must agree to such other
waivers, limitations and restrictions as the Company may reasonably require.
The Company shall not, and shall not permit any transfer agent or registrar for
any shares of the Company's capital stock to, transfer upon the books of the
Company any shares of the Company's capital stock originally issued under or
pursuant to the Plan in any manner except in accordance with this provision, and
any purported transfer not in compliance herewith shall be void.
ARTICLE VII
MISCELLANEOUS
7.1 RIGHTS OF PARTICIPANTS. Nothing in the Plan shall interfere with
or limit in any way the right of the Company or any of its Subsidiaries to
terminate any Participant's employment at any time (with or without cause), nor
confer upon any Participant any right to continued employment by the Company or
any of its Subsidiaries for any period of time or to continue such employee's
present (or any other) rate of compensation. Transfer of an Employee from the
Company to a Subsidiary, from a Subsidiary to the Company and from one
Subsidiary to another shall not be considered a termination of such Employee's
employment for purposes of this Plan. No Employee shall have a right to be
selected as a Participant or, having been so selected, to be selected again as a
Participant.
7.2 SECURITIES LAWS RESTRICTIONS. Notwithstanding any other
provision of the Plan, the Company shall not be obligated to offer, issue or
sell any Offered Share to any Person if, in the judgment of the Board, such
offer, issuance, or sale may violate federal or applicable state securities laws
or regulations or may require the Company to register or qualify any such
securities under any federal or state securities laws, or require the Company or
any of its agents
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<PAGE>
or representatives to register or qualify with any governmental agency or
regulatory organization, pursuant to such laws or regulations.
7.3 AMENDMENT, SUSPENSION AND TERMINATION OF PLAN. The Board may
not suspend, terminate or materially amend the Plan or any portion thereof at
any time without the consent of Participants who hold a majority in interest of
the Offered Shares issued pursuant to the Plan (measured on the basis of
Original Cost), or without such greater or other stockholder approval to the
extent such approval is required by law, agreement or rules of any exchange upon
which the Common Stock is listed.
7.4 ADJUSTMENTS. In the event of a reorganization,
recapitalization, stock dividend, stock split, share combination or other change
in the shares of Common Stock, the Board may make such adjustments in the number
and type of shares authorized by the Plan as may be determined to be appropriate
and equitable.
7.5 CONSTRUCTION OF PLAN. The validity, construction,
interpretation, administration and effect of the Plan shall be determined in
accordance with the local law, and not the law of conflicts, of the State of
Delaware.
7.6 INDEMNIFICATION. In addition to such other rights of
indemnification as they may have as members of the Board, the members of the
Board shall be indemnified by the Company against all costs and expenses
reasonably incurred by them in connection with any action, suit or proceeding to
which they or any of them may be a party by reason of any action taken or
failure to act under or in connection with the Plan or any Offered Shares issued
hereunder, and against all amounts paid by them in settlement thereof (provided
such settlement is approved by independent legal counsel selected by the
Company) or paid by them in satisfaction of a judgment in any such action, suit
or proceeding; PROVIDED, HOWEVER, that any such Board member shall be entitled
to the indemnification rights set forth in this Section 7.6 only if such member
has acted in good faith and in a manner that such member reasonably believed to
be in or not opposed to the best interests of the Company and, with respect to
any criminal action or proceeding, had no reasonable cause to believe that such
conduct was unlawful, and further provided that upon the institution of any such
action, suit or proceeding a Board member shall give the Company written notice
thereof and an opportunity, at its own expense, to handle and defend the same
before such Board member undertakes to handle and defend it on his own behalf.
7.7 NOTICES. All notices, requests, consents and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given and made and served either by personal delivery
to the person for whom it is intended or if deposited, postage prepaid,
registered or certified mail, return receipt requested, in the United States
mail:
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If to the Company, addressed to:
International Logistics Limited
330 South Mannheim Road
Hillside, Illinois 60162
Attention: Chief Executive Officer
With copies to: Milbank, Tweed, Hadley & McCloy
601 South Figueroa Street
Suite 3100
Los Angeles, California 90017
Attention: Eric H. Schunk, Esq.
If to any Participant, addressed to:
such Participant at its address shown on the stock records
of the Company, or at such other address as such Participant
may specify by written notice to the Company
7.8 SECURITIES LAWS RESTRICTIONS AND ADDITIONAL RESTRICTIONS ON
TRANSFER OF OFFERED SHARES.
(a) Each Participant purchasing Offered Shares will be required to
represent to the Company in the Subscription Agreement that such Participant is
purchasing Offered Shares for his or her own account for investment and not on
behalf of others or otherwise with a view toward distributing them. Each
Participant is advised that federal securities laws, state securities laws and
foreign securities or other applicable laws govern and restrict each
Participant's right to offer, sell or otherwise dispose of any Offered Shares
unless such Participant's offer, sale or other disposition thereof is registered
under the Securities Act, state securities laws or applicable foreign securities
laws, or in the opinion of the Company's counsel, such offer, sale or other
disposition is exempt from registration or qualification thereunder. Any
Participant desiring to purchase Offered Shares will be required to agree that
such Participant will not offer, sell or otherwise dispose of any such Offered
Shares in any manner which would: (i) require the Company to file any
registration statement with the Commission (or any similar filing under state
law or foreign law) or to amend or supplement any such filing or (ii) violate or
cause the Company to violate the Securities Act, the rules and regulations
promulgated thereunder or any other state, federal law or foreign law. The
certificates for any Offered Shares will bear such legends as the Company deems
necessary or desirable in connection with the Securities Act or other rules,
regulations or laws.
(b) The certificates representing the Offered Shares will bear the
following legend:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), ANY STATE
SECURITIES LAW OR ANY FOREIGN SECURITIES
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OR OTHER APPLICABLE FOREIGN LAW, AND SUCH SECURITIES MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS THE SAME ARE REGISTERED AND
QUALIFIED IN ACCORDANCE WITH THE ACT, ANY APPLICABLE STATE SECURITIES LAW
OR ANY FOREIGN SECURITIES OR OTHER APPLICABLE FOREIGN LAW, OR IN THE
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY SUCH REGISTRATION
AND QUALIFICATION ARE NOT REQUIRED."
"THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO THAT CERTAIN
STOCKHOLDERS AGREEMENT, DATED AS OF NOVEMBER 7, 1996, A SUBSCRIPTION
AGREEMENT, DATED ________, 1997, A REGISTRATION RIGHTS AGREEMENT DATED AS
OF NOVEMBER 7, 1996, AND AN EMPLOYEE STOCK PURCHASE PLAN II ADOPTED AS OF
MARCH 3, 1997 COPIES OF WHICH ARE ON FILE AT THE PRINCIPAL OFFICE OF THE
COMPANY AND WILL BE FURNISHED TO THE HOLDER ON REQUEST TO THE SECRETARY OF
THE COMPANY. SUCH STOCKHOLDERS AGREEMENT, SUBSCRIPTION AGREEMENT AND
REGISTRATION RIGHTS AGREEMENT PROVIDE, AMONG OTHER THINGS, FOR CERTAIN
RESTRICTIONS ON VOTING, SALE, TRANSFER, PLEDGE, HYPOTHECATION OR OTHER
DISPOSITION OF THE SECURITIES EVIDENCED BY THIS CERTIFICATE AND THAT SUCH
SECURITIES MAY BE SUBJECT TO PURCHASE BY THE COMPANY AS WELL AS CERTAIN
OTHER PERSONS UPON THE OCCURRENCE OF CERTAIN EVENTS. ANY ISSUANCE, SALE,
ASSIGNMENT, TRANSFER OR OTHER DISPOSITION OF THE SECURITIES EVIDENCED BY
THIS CERTIFICATE TO PERSONS WHO ARE NOT A PARTY TO SUCH STOCKHOLDERS
AGREEMENT SHALL BE NULL AND VOID."
(c) Notwithstanding any other provision of this Plan, the Company may
refuse to register any transfer of Offered Shares if the registration of such
transfer would require the Company to register any class of equity securities
with the Commission under the Securities Exchange Act (except in connection with
an effective registration statement under the Securities Act).
(d) Unless otherwise provided in the Stockholders Agreement or the
Registration Rights Agreement, no holder of Offered Shares may effect any Public
Sale or distribution of any Offered Shares or other equity securities of the
Company, or any securities convertible into or exchangeable or exercisable for
any of the Company's equity securities, during the ten days prior to and the 120
days after the effectiveness of any underwritten public offering of any class of
the Company's equity securities, except as part of such underwritten public
offering or if otherwise consented to by the Company in writing prior to such
sale or distribution.
7.9 TERMINATION. Unless earlier terminated as expressly provided
herein, this Plan and all the restrictions and rights contained herein shall
terminate on the tenth anniversary from the Plan Date.
10
<PAGE>
ANNEXES
I. Subscription Agreement
II. Stockholders Agreement
III. Registration Rights Agreement
IV. Investment Consideration Letter
11
<PAGE>
AMENDMENT NO. 1 TO EMPLOYEE STOCK
PURCHASE PLAN II
This Amendment No. 1 to the Employee Stock Purchase Plan II (the
"Plan") is adopted by the Compensation Committee of the Board of Directors of
International Logistics Limited, a Delaware corporation (the "Company"),
effective as of the Plan Date (as such term is defined in the Plan).
A. AMENDMENT. The Executive Committee of the Board of Directors of
the Company hereby amends the first sentence of Section 5.2 of Article V of the
Plan in its entirety to read as follows:
"During the period commencing on the Plan Date and terminating 180
days thereafter (the "Offering Period"), up to 50 Participants (or
such greater or lesser number as the Board shall determine, subject to
Section 7.2) shall be eligible to exercise their right to purchase
Offered Shares at any one time during the Offering Period."
B. EFFECT. Except as otherwise modified herein, all other terms and
provisions of the Plan shall remain in full force and effect.
<PAGE>
AMENDMENT NO. 2 TO EMPLOYEE STOCK
PURCHASE PLAN II
This Amendment No. 2 to the Employee Stock Purchase Plan II (the
"Plan") is adopted by the Compensation Committee of the Board of Directors of
International Logistics Limited, a Delaware corporation (the "Company"),
effective as of the Plan Date (as such term is defined in the Plan).
A. AMENDMENT. The Executive Committee of the Board of Directors of
the Company hereby amends the first sentence of Section 5.2 of Article V of the
Plan in its entirety to read as follows:
"During the period commencing on the Plan Date and terminating on
September 30, 1997 (the "Offering Period"), up to 50 Participants (or
such greater or lesser number as the Board shall determine, subject to
Section 7.2) shall be eligible to exercise their right to purchase
Offered Shares at any one time during the Offering Period."
B. EFFECT. Except as otherwise modified herein, all other terms and
provisions of the Plan shall remain in full force and effect.
<PAGE>
Exhibit 10.17
EXECUTIVE MANAGEMENT AGREEMENT
This Agreement is made and entered into as of the 1st day of November,
1997 by and between International Logistics Limited, a Delaware corporation (the
"Company), TCW Special Credits Fund V - The Principal Fund ("TCW") and Oaktree
Capital Management, LLC ("Oaktree," and together with TCW, the "Oaktree
Entities"). Capitalized terms, not defined herein, shall have the meaning
ascribed to them in the Third Amended and Restated Stockholders Agreement dated
as of September 30, 1997 by and among the Company and each of the Holders listed
on Exhibit A thereto.
W I T N E S S E T H:
WHEREAS, the Company desires to enter into a management agreement with
the Oaktree Entities for the provision of executive management services.
WHEREAS, the Oaktree Entities are willing and able to provide the
Company with executive management services.
NOW, THEREFORE, in consideration of the premises and of other good and
valuable consideration, the sufficiency of which is hereby acknowledged, the
parties hereby agree as follows:
SECTION 1 SERVICES
A. The Company hereby retains the Oaktree Entities to provide the
Company with executive management services as provided herein. Such services
shall include consultation, advice and direct management assistance to the
Company with
<PAGE>
respect to operations, strategic planning, financing and other aspects of the
business of the Company. The Oaktree Entities shall devote such time as is
reasonably necessary to provide such services.
B. The Oaktree Entities accept the appointment provided in Section
1.A above and agree to provide executive management services to the Company in
accordance with the terms hereof.
SECTION 2 CONSIDERATION
A. Base Fee. In consideration of the executive management services
to be provided by the Oaktree Entities to the Company, and provided there exists
no continuing or uncured material event of default under the material terms of
indebtedness of the Company or any of its Subsidiaries, the Company shall pay
and the Oaktree Entities shall be entitled to receive a management fee of
$350,000 per year, which shall be payable in arrears on a pro rata basis upon
the completion of each fiscal quarter of the Company (the "Base Fee"). The Base
Fee shall be allocated as follows: (i) 53.7%, or $187,950 per year, to TCW and
(ii) 46.3%, or $162,050 per year, to Oaktree. The Base Fee shall be paid by
wire transfer of immediately available funds, to such account or accounts as
shall be designated from time to time by the Oaktree Entities. All payments
with respect to the Base Fee by the Company shall be subject to applicable
restrictions contained in the Company's and its Subsidiaries' debt and equity
financing agreements. If any
-2-
<PAGE>
such restrictions prohibit any payments with respect to the Base Fee hereunder
which the Company is otherwise obligated to make, the Company shall make such
payments as soon as it is permitted to do so under such restrictions.
B. Expenses. In addition to the Base Fee, the Oaktree Entities
shall also be entitled to reimbursement for all reasonable out-of-pocket
expenses incurred by the Oaktree Entities or their personnel in connection with
the performance of the Oaktree Entities' duties hereunder, which amounts shall
be so reimbursed when invoices with respect thereto are submitted by the Oaktree
Entities to the Company.
SECTION 3 TERM
A. This Agreement shall take effect as of the date first above
written and shall continue until automatically terminated by the first to occur
of (i) a Qualified Public Offering; (ii) an OCM Entity Purchase Default; (iii)
an OCM Entity Funding Default; or (iv) Termination of the Agreement by the Board
as a result of criminal misconduct or fraud by the Oaktree Entities. Unless
terminated as set forth in clauses (i) through (iv) above, this Agreement shall
take effect from the date hereof and shall remain in effect until May 2, 2000.
This Agreement shall thereafter be renewed, subject to approval by the Board,
for successive annual periods unless the Company or the Oaktree Entities
terminates this Agreement by 90 days' notice to the other party prior to the
commencement of a renewal period.
-3-
<PAGE>
SECTION 4 MISCELLANEOUS
A. Any notice required or desired to be given hereunder shall be in
writing and shall be personally served or shall be deemed given three business
days after deposit in the United States mail, registered or certified, postage
and fee prepaid, and addressed as follows:
If to the Company:
International Logistics Limited
330 South Mannheim Road, Suite 200
Hillside, IL 60162
Attention: Roger E. Payton
If to the Oaktree Entities:
TCW Special Credits Fund V - The Principal Fund
c/o Oaktree Capital Management, LLC
550 South Hope Street, 22nd Floor
Los Angeles, CA 90071
Attention: Vincent J. Cebula
Oaktree Capital Managemnet, LLC
550 South Hope Street, 22nd Floor
Los Angeles, CA 90071
Attention: Vincent J. Cebula
B. This Agreement shall be binding upon the successors and assigns
of the parties hereto, including but not limited to any corporation or other
entity into which the Company is merged, liquidated or otherwise combined,
unless the Company shall be sold in its entirety.
C. This Agreement shall not be amended except by a written
instrument executed by the parties.
D. This Agreement is made under and shall be construed in accordance
with the laws of the State of California.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date above written.
INTERNATIONAL LOGISTICS LIMITED
By: /s/ ROGER E. PAYTON
--------------------------------------
Roger E. Payton
President and Chief Executive Officer
TCW SPECIAL CREDITS FUND V - THE
PRINCIPAL FUND
By: TCW ASSET MANAGEMENT COMPANY
Its General Partner
By: /s/ STEPHEN J. KAPLAN
-------------------------------
Stephen J. Kaplan
Autorized Signatory
By: /s/ VINCENT J. CEBULA
-------------------------------
Vincent J. Cebula
Authorized Signatory
OAKTREE CAPITAL MANAGEMENT, LLC
By: /s/ STEPHEN A. KAPLAN
-------------------------------
Stephen A. Kaplan
Principal
By: /s/ VINCENT J. CEBULA
-------------------------------
Vincent J. Cebula
Managing Director
-5-
<PAGE>
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
INTERNATIONAL LOGISTICS LIMITED,
TRASUB, INC.,
THE BEKINS COMPANY,
IMR GENERAL, INC.
AND
IMR FUND, L.P.,
Dated as of: April 10, 1996
<PAGE>
TABLE OF CONTENTS
Page
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I.
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II.
THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.1 Approval of the Transactions . . . . . . . . . . . . . . . . . 16
2.2 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.3 Effect of the Merger . . . . . . . . . . . . . . . . . . . . . 17
2.4 Dissenting Shares. . . . . . . . . . . . . . . . . . . . . . . 18
2.5 Surrender and Payment. . . . . . . . . . . . . . . . . . . . . 18
2.6 Charter Documents; Directors; Officers . . . . . . . . . . . . 20
ARTICLE III.
PURCHASE PRICE ADJUSTMENT. . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.1 Purchase Price Adjustment. . . . . . . . . . . . . . . . . . . 20
3.2 Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE IV.
CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.1 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.2 Deliveries at Closing. . . . . . . . . . . . . . . . . . . . . 22
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF TBC, IMR AND IMR GENERAL . . . . . . . . . 22
5.1 Organization, Qualification and Corporate Power. . . . . . . . 23
5.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . 23
5.3 Authorization of TBC . . . . . . . . . . . . . . . . . . . . . 23
5.4 Authorization of IMR and IMR General . . . . . . . . . . . . . 24
5.5 Noncontravention . . . . . . . . . . . . . . . . . . . . . . . 24
5.6 Permits, Consents and Approvals. . . . . . . . . . . . . . . . 25
i
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Page
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5.7 Financial Statements . . . . . . . . . . . . . . . . . . . . . 25
5.8 Brokers' Fees. . . . . . . . . . . . . . . . . . . . . . . . . 26
5.9 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.10 Undisclosed Liabilities. . . . . . . . . . . . . . . . . . . . 27
5.11 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.12 Employment Matters . . . . . . . . . . . . . . . . . . . . . . 30
5.13 Labor Agreements and Actions . . . . . . . . . . . . . . . . . 33
5.14 Absence of Certain Changes . . . . . . . . . . . . . . . . . . 33
5.15 Books and Records. . . . . . . . . . . . . . . . . . . . . . . 36
5.16 Personal Property and Encumbrances; Assets . . . . . . . . . . 36
5.17 Intellectual Property. . . . . . . . . . . . . . . . . . . . . 37
5.18 Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.19 Material Contracts . . . . . . . . . . . . . . . . . . . . . . 40
5.20 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.21 Interests in Customers, Suppliers, etc . . . . . . . . . . . . 43
5.22 Environmental Matters. . . . . . . . . . . . . . . . . . . . . 43
5.23 Compliance with Law. . . . . . . . . . . . . . . . . . . . . . 45
5.24 No Other Agreements to Sell Assets or Capital Stock of TBC or
the TBC Subsidiaries . . . . . . . . . . . . . . . . . . . . . 45
5.25 Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . 45
5.26 Purchase Commitments and Outstanding Bids. . . . . . . . . . . 45
5.27 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
5.28 Bank Accounts, Powers of Attorney. . . . . . . . . . . . . . . 46
5.29 Compensation of Employees. . . . . . . . . . . . . . . . . . . 46
5.30 Customer and Agent Relations . . . . . . . . . . . . . . . . . 46
5.31 Information Provided . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES OF THE BUYER AND THE
TRANSITORY SUBSIDIARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
6.1 Organization. . . . . . . . . . . . . . . . . . . . . . . . . 47
6.2 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . 47
6.3 Noncontravention . . . . . . . . . . . . . . . . . . . . . . . 47
6.4 Brokers' Fees. . . . . . . . . . . . . . . . . . . . . . . . . 48
6.5 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . 48
6.6 Capitalization of Buyer and TBC and Fraudulent Conveyance . . 48
ARTICLE VII.
ADDITIONAL AGREEMENTS AND COVENANTS OF TBC,
THE TRANSITORY SUBSIDIARY AND THE BUYER. . . . . . . . . . . . . . . . . . . 49
7.1 Further Assurances . . . . . . . . . . . . . . . . . . . . . . 49
ii
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Page
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7.2 No Solicitation. . . . . . . . . . . . . . . . . . . . . . . . 50
7.3 Notice of Developments . . . . . . . . . . . . . . . . . . . . 50
7.4 Full Access. . . . . . . . . . . . . . . . . . . . . . . . . . 51
7.5 Operation of Business. . . . . . . . . . . . . . . . . . . . . 51
7.6 Voting of TBC Common Stock . . . . . . . . . . . . . . . . . . 54
7.7 Filing of Tax Returns. . . . . . . . . . . . . . . . . . . . . 54
7.8 Establishment of Reserve for Central States Pension Fund
Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . 55
7.9 Establishment of Reserve for Non-Core Assets . . . . . . . . . 55
ARTICLE VIII.
CONDITIONS TO THE OBLIGATIONS OF TBC, IMR, IMR GENERAL,
THE BUYER AND THE TRANSITORY SUBSIDIARY. . . . . . . . . . . . . . . . . . . 55
8.1 Conditions to the Obligation of the Buyer and the Transitory
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . 55
8.2 Conditions to Obligation of TBC, IMR and IMR General . . . . . 58
ARTICLE IX.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATIONS . . . . . . . . 60
9.1 Survival of Representations, Warranties and Agreements . . . . 60
9.2 Agreement to Defend and Indemnify. . . . . . . . . . . . . . . 60
ARTICLE X.
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
10.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . 66
10.2 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . 67
10.3 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
10.4 Entire Agreement; Amendments; Extensions and Waivers.. . . . . 68
10.5 Multiple Counterparts. . . . . . . . . . . . . . . . . . . . . 68
10.6 Invalidity . . . . . . . . . . . . . . . . . . . . . . . . . . 68
10.7 Titles . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
10.8 Press Releases and Public Announcements. . . . . . . . . . . . 69
10.9 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . 69
10.10 Cumulative Remedies. . . . . . . . . . . . . . . . . . . . . . 70
10.11 Fees and Expenses. . . . . . . . . . . . . . . . . . . . . . . 70
10.12 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . 71
10.13 No Solicitation of Employees or Agents . . . . . . . . . . . . 71
10.14 No Third-Party Beneficiaries . . . . . . . . . . . . . . . . . 71
10.15 Construction . . . . . . . . . . . . . . . . . . . . . . . . . 71
10.16 Supplementation of Schedules . . . . . . . . . . . . . . . . . 71
iii
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Page
----
10.17 Actions and Obligations of the Payment Agent . . . . . . . . . 72
10.18 Incorporation of Exhibits and Schedules. . . . . . . . . . . . 72
iv
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of this 10th day of April,
1996 (this "AGREEMENT"), is entered into by and among INTERNATIONAL LOGISTICS
LIMITED, a Delaware corporation (the "BUYER"), TRASUB, INC., a Delaware
corporation and a wholly owned subsidiary of the Buyer (the "TRANSITORY
SUBSIDIARY"), THE BEKINS COMPANY, a Delaware corporation ("TBC"), IMR FUND,
L.P., a Delaware limited partnership and the majority stockholder of TBC ("IMR")
and IMR GENERAL, INC., a Delaware corporation and the general partner of IMR
Management Partners, L.P., the general partner of IMR ("IMR GENERAL"). The
Buyer, the Transitory Subsidiary, TBC, IMR and IMR General are each referred to
herein individually as a "PARTY" and collectively as the "PARTIES."
RECITALS
A. The respective Boards of Directors, or the applicable governing
bodies, of the Buyer, the Transitory Subsidiary, IMR and TBC have approved the
acquisition of TBC pursuant to the terms of this Agreement.
B. In furtherance of such acquisition, the respective Boards of
Directors of the Buyer, the Transitory Subsidiary, IMR and TBC have approved the
merger of the Transitory Subsidiary with and into TBC (the "MERGER"), in
accordance with the General Corporation Law of the State of Delaware (the
"DELAWARE LAW"), pursuant to which TBC will be the surviving corporation in the
Merger.
C. Pursuant to the Merger, each TBC Share (as defined below) set
forth in SCHEDULE 5.2 shall be converted into the right to receive the Merger
Consideration (as defined below), subject to adjustment, specified in Section
2.3 hereof.
D. The Board of Directors of TBC has resolved to recommend the
Merger to holders of TBC Common Stock (as defined below), and IMR, which
beneficially and legally owns a majority of the outstanding shares of such TBC
Common Stock, has agreed to vote for and to take all steps within its power to
consummate the Merger, subject to the terms, conditions and agreements set forth
hereinafter.
AGREEMENT
NOW THEREFORE, in consideration of the mutual covenants and premises
contained herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Parties hereto agree as follows:
1
<PAGE>
ARTICLE I.
DEFINITIONS
1.1 DEFINED TERMS. As used herein, the terms below shall have the
following meanings. Any of such terms, unless the context otherwise requires,
may be used in the singular or plural, depending upon the reference.
"ACCOUNTING FIRM" shall have the meaning set forth in Section 3.1(a)
hereof.
"ACTION" shall mean any action, claim, suit, litigation, arbitration,
proceeding, labor dispute, governmental audit, criminal prosecution or unfair
labor practice charge or complaint.
"AFFILIATE" shall have the meaning set forth in the Exchange Act;
PROVIDED, HOWEVER, the following Persons (i) shall not be deemed Affiliates of
TBC or any of the TBC Subsidiaries: (a) Buyer and its Affiliates, (b) Household
Goods Business agents, (c) HVP Business agents, and (d) any driver, and (ii)
shall be deemed Affiliates of IMR and IMR General: (a) Jacobs Management
Corporation, (b) Jacobs Investors, Inc., and (c) IMR Management Partners, L.P..
"AGREEMENT" shall mean this Agreement and Plan of Merger.
"ASSETS" shall mean any and all right, title and interest of TBC or
any of the TBC Subsidiaries in and to the business, properties, assets and
rights of any kind, whether tangible or intangible, real or personal and
constituting, or used or useful in connection with, or related to, TBC or any of
the TBC Subsidiaries or in which TBC or any such TBC Subsidiary has any
interest, including without limitation any right, title and interest of each of
TBC and each TBC Subsidiary in and to the following:
(a) accounts and notes receivable (whether current or non-current),
refunds, deposits, prepayments or prepaid expenses (including without limitation
any prepaid insurance premiums) of such Person;
(b) Contract Rights of such Person;
(c) Leases of such Person;
(d) Leasehold Estates of such Person;
(e) Leasehold Improvements of such Person;
(f) Fixtures and Equipment of such Person;
(g) Inventory of such Person;
2
<PAGE>
(h) Books and Records of such Person;
(i) Intellectual Property of such Person;
(j) Permits of such Person;
(k) computers and software of such Person;
(l) Insurance Policies of such Person;
(m) available supplies, sales literature, promotional literature,
customer, supplier and distributor lists, art work, display units, telephone and
fax numbers and purchasing records of such Person;
(n) rights under or pursuant to all warranties, representations and
guarantees made by suppliers in connection with the Assets or services furnished
to such Person pertaining to the Business or affecting the Assets;
(o) deposits and prepaid expenses of such Person;
(p) claims, causes of action, choses in action, rights of recovery
and rights of set-off of any kind of such Person, against any Person or entity,
including without limitation any liens, security interests, pledges or other
rights to payment or to enforce payment in connection with products delivered by
such Person on or prior to the Effective Time; and
(q) goodwill related to the Business.
Notwithstanding the foregoing, Assets shall not include any Action or
right of Action against any current or former director, officer or shareholder
of TBC or any TBC Subsidiary, including without limitation IMR, IMR General and
IMR's general and limited partners, and Irwin L. Jacobs or any Affiliate of the
foregoing; except, however, those Actions that may arise from or in connection
with the Transactions.
"BECOM 2000" shall mean the upgrade to the existing BECOM Information
Technology platform for high value products to effect real-time updating of
information through the use of radio frequency/bar code technology.
"BENEFIT ARRANGEMENT" shall mean any employment, consulting, severance
or other similar contract, arrangement or policy and each plan, arrangement
(written or oral), program, agreement or commitment providing for insurance
coverage (including any self-insured arrangements), supplemental unemployment
benefits, retirement benefits, life, health, disability or accident benefits
(including, without limitation, any "voluntary employees' beneficiary
association" as defined in Section 501(c)(9) of the Code providing for the same
or other benefits) or for deferred compensation, profit-sharing bonuses, stock
options, stock appreciation rights, stock purchases or other forms of incentive
compensation or post-retirement insurance,
3
<PAGE>
compensation or benefits which (i) is not a Welfare Plan, Pension Plan or
Multiemployer Plan, (ii) is entered into, maintained, contributed to or
required to be contributed to, as the case may be, by TBC or an ERISA Affiliate
or under which TBC or any ERISA Affiliate may incur any liability, and (iii)
covers any employee or former employee of TBC or any ERISA Affiliate (with
respect to their employment relationship with such entities).
"BMS" shall mean the following TBC moving and storage operating
subsidiary entities: A-1, M.R.W., Inc., a Virginia corporation, Bekins Moving &
Storage Co., an Arizona corporation, Bekins Moving & Storage Co., a California
corporation, Bekins Moving & Storage Co., a Florida corporation, Bekins Moving &
Storage Co., a Georgia corporation, Bekins Moving & Storage, Co., a Missouri
corporation, Bekins Moving & Storage Co., a Nevada corporation, Bekins Moving &
Storage Co., a Texas corporation, Bekins Moving & Storage Co. of Hawaii, Inc., a
California corporation, and Bekins Moving & Storage Co., Inc., a New Mexico
corporation.
"BOOKS AND RECORDS" shall mean (a) records and lists of TBC and each
TBC Subsidiary pertaining to the Assets, (b) records and lists pertaining to the
Business or customers, agents, suppliers or Personnel of TBC and each of the TBC
Subsidiaries, (c) product, business and marketing plans of TBC and each of the
TBC Subsidiaries, and (d) books, ledgers, files, reports, plans, drawings and
operating records of every kind maintained by TBC and each of the TBC
Subsidiaries.
"BUSINESS" shall mean TBC's and the TBC Subsidiaries' Household Goods
Business and HVP Business.
"BUYER" shall mean International Logistics Limited, a Delaware
corporation.
"BUYER INDEMNIFIED PARTIES" shall have the meaning set forth in
Section 9.2(a) hereof.
"CERTIFICATE OF MERGER" shall mean that certain Certificate of Merger
dated as of the Effective Date, consistent with the terms of the Agreement,
containing customary terms and provisions, and otherwise in form mutually
satisfactory to the Parties.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. Section 9601 ET SEQ.).
"CERTIFICATES" shall have the meaning set forth in Section 2.5 hereof.
"CLAIM" shall have the meaning set forth in Section 9.2(e) hereof.
"CLAIM NOTICE" shall have the meaning set forth in Section 9.2(e)
hereof.
"CLOSING" shall mean the closing of the Transactions on the Effective
Date at and as of the Effective Time.
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<PAGE>
"CLOSING BALANCE SHEET" shall have the meaning set forth in Section
3.1(a) hereof.
"CLOSING BALANCE SHEET DATE" shall mean March 31, 1996.
"CLOSING FINANCIAL STATEMENTS" shall have the meaning set forth in
Section 3.1(a) hereof.
"CODE" shall mean the Internal Revenue Code of 1986, as amended, and
the rules and regulations thereunder.
"COMPANY PROPERTY" shall mean, collectively, the Facilities and other
present operating locations of TBC and the TBC Subsidiaries.
"CONFIDENTIAL INFORMATION" shall have the meaning set forth in Section
10.9(b) hereof.
"CONSTITUENT CORPORATIONS" shall have the meaning set forth in Section
2.2 hereof.
"CONTRACT" shall mean any agreement, contract, note, loan, evidence of
indebtedness, purchase, order, letter of credit, indenture, security or pledge
agreement, franchise agreement, covenant not to compete, employment agreement,
license, instrument, obligation or commitment to which TBC or any of the TBC
Subsidiaries is a party or is bound or to which any of the Assets are subject,
whether oral or written, express or implied, but excluding all Leases.
"CONTRACT RIGHTS" shall mean all of the rights and obligations under
the Contracts of TBC or any of the TBC Subsidiaries.
"COPYRIGHTS" shall mean registered copyrights, copyright applications
and unregistered copyrights.
"COURT ORDER" shall mean any judgment, award, decision, consent
decree, injunction, ruling, writ or order of any federal, state or local court
or governmental agency, department or authority that is binding on any Person or
its property under applicable law.
"DAMAGES" shall have the meaning set forth in Section 9.2(a) hereof.
"DEDUCTIBLE" shall have the meaning as set forth in Section 9.2(g)(ii)
hereof.
"DEFAULT" shall mean (i) a breach of or default under any Contract or
Lease, (ii) the occurrence of an event that with the passage of time or the
giving of notice or both would constitute a breach of or default under any
Contract or Lease, or (iii) the occurrence of an event that with or without the
passage of time or the giving of notice or both would give rise to a right of
termination, renegotiation or acceleration under any Contract or Lease.
"DELAWARE LAW" shall have the meaning set forth in Recital B.
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"DELIVERY DATE" shall have the meaning set forth in Section 10.16
hereof.
"DELOITTE" shall have the meaning set forth in Section 3.1(a) hereof.
"DISCLOSURE SCHEDULE" shall mean (i) the schedule prepared and
delivered by TBC and IMR to the Buyer and the Transitory Subsidiary and dated as
of the date hereof, and (ii) the Supplement (if accepted, as described in
Section 10.16 below), both of which set forth the exceptions to the
representations and warranties contained in Article V hereof and certain other
information called for by this Agreement. Unless otherwise specified each
reference in this Agreement to any numbered schedule is a reference to that
numbered schedule which is included in the Disclosure Schedule. As provided in
Section 10.16 hereof, no later than two (2) full calendar days prior to the
scheduled date of Closing, TBC, IMR and IMR General may deliver a Supplement to
the Disclosure Schedule so delivered, and if, and only if, such Supplement is
accepted by the Buyer and the Transitory Subsidiary as provided in such Section
10.16, the phrase the "Disclosure Schedule" shall be deemed to refer to the
initial Disclosure Schedule, as so supplemented.
"DISSENTING SHARES" shall mean TBC Shares held by any TBC Stockholder
who becomes entitled to the payment of the fair value for his TBC Shares under
the Delaware Law if the Delaware Law provides for such payment in connection
with the Merger.
"DRIVER CONTRACTS" shall mean independent operator agreements of TBC
and the TBC Subsidiaries with individuals for one or more tractor or
tractor-trailer units utilized in the transport of household or high value
products.
"EFFECTIVE DATE" shall have the meaning set forth in Section 2.2
hereof.
"EFFECTIVE TIME" shall have the meaning set forth in Section 2.2
hereof.
"ENCUMBRANCE" shall mean any claim, lien, pledge, option, charge,
easement, security interest, deed of trust, mortgage, right-of-way,
encroachment, building or use restriction, conditional sales agreement,
encumbrance or other right of third parties, whether voluntarily incurred or
arising by operation of law, and includes, without limitation, any agreement to
give any of the foregoing in the future, and any contingent sale or other title
retention agreement or lease in the nature thereof. Notwithstanding the
foregoing, the possession of an Asset by an independent agent of TBC or a Person
who is a party to a Driver Contract in the ordinary course of business shall not
be an Encumbrance to be separately disclosed (as an Encumbrance) under this
Agreement.
"ENVIRONMENTAL CLAIMS" shall mean administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens, notices of
non-compliance or violation, investigations or proceedings, consent decrees,
judgments, administrative orders or agreements relating in any way to any
Environmental Law or any permit issued under any such Law, including
(i) Environmental Claims by governmental or regulatory authorities for
enforcement, cleanup, removal, response, remedial or other actions or damages
pursuant to any applicable
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Environmental Law, and (ii) Environmental Claims by any third party seeking
damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from Hazardous Materials or arising from alleged
injury or threat of injury to health, safety or the environment.
"ENVIRONMENTAL CONDITIONS" shall mean the introduction into the
environment of any pollution, including without limitation any contaminant,
irritant or other Hazardous Materials as a result of which TBC or any TBC
Subsidiary has or may become liable to any Person or by reason of which the
Company Property or any of the Assets may suffer or be subjected to any lien.
"ENVIRONMENTAL LAW" shall mean any applicable federal, state or local
statute, law, rule, regulation, ordinance, code, policy or rule of common law in
effect and in each case as amended as of the Effective Time, and any judicial or
administrative interpretation thereof as of the Effective Time, including any
judicial or administrative order, consent decree or judgment, which (i)
regulates or relates to the protection or clean-up of the environment; the use,
treatment, storage, transportation, handling, disposal or Release of Hazardous
Materials, the preservation or protection of waterways, groundwater, drinking
water, air, wildlife, plants or other natural resources; or the health and
safety of Persons or property, including without limitation protection of the
health and safety of employees; or (ii) imposes liability with respect to any of
the foregoing, including without limitation CERCLA; RCRA; the Federal Water
Pollution Control Act, as amended, 33 U.S.C. Section 1251 ET SEQ.; the Toxic
Substances Control Act, 15 U.S.C. Section 2601 ET SEQ.; the Clean Air Act, 42
U.S.C. Section 7401 ET SEQ.; the Safe Drinking Water Act, 42 U.S.C. Section 300f
ET SEQ.; the Oil Pollution Act of 1990, 33 U.S.C. Section 2701 ET SEQ.; the
Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. Section 651 ET
SEQ.; or any other similar federal, state or local law of similar effect, each
as amended.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, and the rules and regulations promulgated thereunder, as amended.
"ERISA AFFILIATE" shall mean any entity which is (or at any relevant
time was) a member of a "controlled group of corporations" with, or under
"common control" with, or a member of an "affiliated service group" with, TBC or
any TBC Subsidiary, as defined in Section 414(b), (c) or (m) of the Code.
"ESTOCLET AGREEMENT" shall have the meaning set forth in Section
8.1(j) hereof.
"EXAMINATION PERIOD" shall have the meaning set forth in Section
9.2(e)(ii) hereof.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"FACILITIES" shall mean all of the plants, offices, manufacturing
facilities, stores, warehouses, improvements, administration buildings, and all
real property and related facilities of TBC or any of the TBC Subsidiaries as
identified or listed on SCHEDULE 5.18.
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"FACILITY LEASES" shall mean all of the leases of Facilities listed on
SCHEDULE 5.18.
"FINANCIAL STATEMENTS" shall have the meaning set forth in SECTION 5.7
hereof.
"FIXTURES AND EQUIPMENT" shall mean all of the furniture, fixtures,
furnishings, machinery, automobiles, tractors, trailers, spare parts, supplies,
equipment, tooling, molds, patterns, dies and other tangible personal property
owned by TBC or any of the TBC Subsidiaries, wherever located and including any
such Fixtures and Equipment in the possession of any supplier or agent of TBC or
any of the TBC Subsidiaries, including all warranty rights with respect thereto.
"FOREIGN SUBSIDIARY" shall mean any TBC Subsidiary organized under the
laws of or doing business in any country other than the United States.
"FORMER FACILITY" shall mean each plant, office, manufacturing
facility, store, warehouse, improvement, administrative building and all real
property and related facilities which was owned, leased or operated by TBC or
any of the TBC Subsidiaries at any time prior to the date hereof, but excluding
any Facilities.
"FORMER HOLDERS" shall mean all holders of TBC Shares, excluding
Dissenting Shares.
"FUNDS" shall have the meaning set forth in Section 2.5(a) hereof.
"GAAP" shall mean generally accepted accounting principles in the
United States of America, applied on a basis consistent with the basis on which
the Year End Financial Statements and other financial statements referred to in
Section 5.7 were prepared. The Parties acknowledge and agree, however, that the
following shall not be considered departures from GAAP for purposes of this
Agreement: (i) TBC's calculations of insurance reserves and cargo claim
reserves have been refined, but not changed, and Buyer has concurred with such
refinement and TBC's methods of such calculation (including the actuarial
casualty reserve rules and methods for establishing reserves and the computation
methodology for cargo claims as set forth on SCHEDULE 5.7), and (ii) Liabilities
for income Taxes as reflected on the Financial Statements do not include any
accruals for any audit assessment arising or resulting from the audit presently
being conducted by the IRS and any resulting state income tax adjustments.
"HAZARDOUS MATERIALS" shall mean (i) any petroleum or petroleum
products, radioactive materials, asbestos in any form, urea formaldehyde foam
insulation, polychlorinated biphenyls, and radon gas; (ii) any radioactive,
toxic, infectious, reactive, corrosive, ignitible or flammable chemical or
chemical compound; and (iii) any chemicals, materials or substances defined as
or included in the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," "extremely hazardous wastes," "restricted hazardous
wastes," "toxic substances," "toxic pollutants," or words of similar import,
under any applicable Environmental Law, whether solid, liquid or gas.
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"HSR ACT" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, and the rules and regulations promulgated thereunder.
"HOUSEHOLD GOODS BUSINESS" shall mean the business of TBC and the TBC
Subsidiaries of providing over-the-road transportation, packing, loading and
storage services of household and similar goods for individuals, corporations,
the United States military and other Persons.
"HVP BUSINESS" shall mean the business of TBC and the TBC Subsidiaries
of providing over-the-road transportation, warehousing, inventory management,
assembly, delivery and installation services of high value commercial and
consumer products for major commercial and consumer products manufacturers and
direct response marketing companies.
"IMR" shall mean IMR Fund, L.P., a Delaware limited partnership.
"IMR'S ACCOUNTANTS" shall have the meaning set forth in Section 3.1(a)
hereof.
"IMR ACQUISITION" shall mean the transactions effected pursuant to
that certain Stock Purchase Agreement dated as of July 22, 1992 by and among
Minstar, Inc., IMR and IJ Holdings Corp.
"IMR GENERAL" shall mean IMR General, Inc., a Delaware corporation.
"IMR SHARES" shall have the meaning set forth in Section 7.6 hereof.
"INSURANCE POLICIES" shall mean the insurance policies related to TBC
or any of the TBC Subsidiaries or the Assets as described in Section 5.20.
"INTELLECTUAL PROPERTY" shall mean all of the Copyrights, Patents,
Trademarks, technology rights and licenses, computer software (including without
limitation any source or object codes therefor or documentation relating
thereto), trade secrets, franchises, know-how, inventions, designs,
specifications, plans, drawings and intellectual property rights of each of TBC
or any of the TBC Subsidiaries.
"INVENTORY" shall mean (a) all of the inventories of TBC or any of the
TBC Subsidiaries within the Facilities of TBC or any of the TBC Subsidiaries
held for resale or lease in the ordinary course of the Business to the customers
of such Person, (b) all office supplies and similar materials of TBC or any of
the TBC Subsidiaries or any of their respective Affiliates located in the
Facilities of such Person, and (c) all of the raw materials, work in process,
spare parts, finished products, wrapping, supply and packaging items, employee
uniforms and similar items of TBC or any of the TBC Subsidiaries, in the
Facilities of such Person or wherever otherwise located.
"IRS" means the Internal Revenue Service of the United States Treasury
Department.
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"JACOBS DEBT" shall mean any and all amounts owing by TBC or any of
the TBC Subsidiaries in connection with the outstanding promissory note payable
to Irwin L. Jacobs, which, as of the Effective Date, will not exceed $1,250,000
(plus accrued interest).
"KNOWLEDGE" shall mean, and an individual shall be deemed to have
"Knowledge" if, (a) such individual is actually aware of a particular fact or
other matter, or (b) a prudent individual could be expected in the ordinary
course of business to discover or otherwise become aware of such fact or matter
in the course of conducting a reasonably diligent review concerning the
existence of such fact or matter. A Person (other than an individual) will be
deemed to have "Knowledge" of a particular fact or other matter if any
individual who is serving as a director, executive officer, partner, executor or
trustee of such Person (or in any similar capacity) has, or at any time had,
Knowledge of such fact or matter.
"KNOWLEDGE OF BUYER" shall mean the actual knowledge of a breach under
this Agreement or the other Transaction Documents, based upon a reasonably
diligent review of disclosures made in the Disclosure Schedules, of William
Simon, Jr., Michael Lenard, Conor Mullett, Roger Payton and Vincent Cebula.
"KNOWLEDGE OF TBC" or other similar phrase shall mean the Knowledge of
Andrew Estoclet, Gary Holter, Audrey Jakel, Scott Ogden, Larry Marzullo, Paul
Stone, Roger Cloutier, II and, solely with respect to matters related to income
tax and insurance, Warren Erdman and the actual knowledge of any other executive
officers and directors of TBC and each of the TBC Subsidiaries.
"LEASED REAL PROPERTY" shall mean all leased property described in the
Facility Leases.
"LEASEHOLD ESTATES" shall mean all of the rights and obligations of
TBC or any of the TBC Subsidiaries as lessee under the Leases listed on SCHEDULE
5.18.
"LEASEHOLD IMPROVEMENTS" shall mean all leasehold improvements
situated in or on the Leased Real Property leased under the Leases.
"LEASES" shall mean all of the existing leases with respect to the
personal or real property of TBC or any of the TBC Subsidiaries described in
Section 5.18 and all other leases relating to the Assets.
"LIABILITY" shall mean any direct or indirect liability, indebtedness,
obligation, commitment, expense, claim, deficiency, guaranty or endorsement of
or by any Person of any type, whether accrued, absolute, contingent, matured or
unmatured.
"LOAN AGREEMENT" shall mean the Amended and Restated Loan Agreement
dated as of April 30, 1993, by and among TBC, as successor in interest to The
Bekins Company, a California corporation, Banque Paribas, Chicago Branch
(individually and as agent), First Bank
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National Association, Bank of Ireland, Grand Cayman Branch, Norwest Bank
Minnesota, N.A., as amended.
"MATERIAL AGENT" shall have the meaning set forth in Section 5.30.
"MATERIAL ADVERSE EFFECT" or "MATERIAL ADVERSE CHANGE" shall mean (a)
any significant and substantial adverse effect or change in (i) the condition
(financial or other), Business, results of operations, Assets, Liabilities or
operations of TBC and the TBC Subsidiaries, taken as a whole OR (ii) the ability
of TBC or IMR to consummate the Transactions (excluding actions of Dissenting
Shareholders exercising rights as such), OR (b) any event or condition which
would, with reasonable certainty upon the passage of time, constitute a
"Material Adverse Effect" or "Material Adverse Change."
"MATERIAL CONTRACT" shall have the meaning set forth in Section 5.19
hereof.
"MATERIAL CUSTOMER" shall have the meaning set forth in Section 5.30
hereof.
"MATERIAL LEASE" shall have the meaning set forth in Section 5.18
hereof.
"MATERIAL PERMITS" shall have the meaning set forth in Section 5.6
hereof.
"MERGER CONSIDERATION" shall have the meaning set forth in Section
2.3(a) hereof and shall be subject to the Purchase Price Adjustment.
"MERGER" shall have the meaning set forth in Recital B.
"MORTGAGES" shall mean all deeds of trust, mortgages or other debt
encumbrances on Owned Real Property.
"MOST RECENT FISCAL QUARTER END FINANCIAL STATEMENTS" shall have the
meaning set forth in Section 5.7 hereof.
"MOST RECENT MONTH END FINANCIAL STATEMENTS" shall have the meaning
set forth in Section 5.7 hereof.
"MULTIEMPLOYER PLAN" shall mean any "multiemployer plan," as defined
in Section 4001(a)(3) or 3(37) of ERISA, (i) which TBC or any ERISA Affiliate
maintains, administers, contributes to or is required to contribute to, or,
after September 25, 1980, maintained, administered, contributed to or was
required to contribute to, or under which TBC or any ERISA Affiliate may incur
any liability and (ii) which covers or has covered any employee or former
employee of TBC or any ERISA Affiliate (with respect to their employment
relationship with such entities). The term "Multiemployer Plan" shall exclude
any "Pension Plan" and, except to the extent provided otherwise by Section
5.12(b)(iii), any "Welfare Plan."
"NON-CORE ASSETS" shall have the meaning set forth in Section 5.24
hereof.
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"ORDINARY COURSE OF BUSINESS" or "ORDINARY COURSE" or any similar
phrase shall mean the ordinary course of the Business and consistent with the
past practice of TBC and the TBC Subsidiaries.
"OSHA" shall mean the Federal Occupational Safety & Health Act.
"OWNED REAL PROPERTY" shall mean all real property owned in fee by TBC
or any of the TBC Subsidiaries, including without limitation all rights,
easements and privileges appertaining or relating thereto, all buildings,
fixtures and improvements located thereon and all Facilities thereon, if any.
"OWNERSHIP PERIOD" shall mean the period commencing on the date of the
IMR Acquisition and continuing through and until the Effective Time.
"PARIBAS OPTION" shall mean that certain Stock Purchase Option
pursuant to which Paribas North America, Inc., or its registered assign, has
been given the right to purchase from TBC an aggregate of 6,192 shares of TBC
Common Stock at the exercise price or prices set forth in such Stock Purchase
Option.
"PARTY" or "PARTIES" shall mean, in the singular, each of the Buyer,
the Transitory Subsidiary, TBC, IMR and IMR General in the plural, collectively,
the Buyer, the Transitory Subsidiary, TBC, IMR and IMR General.
"PATENTS" shall mean all patents and patent applications and
registered design and registered design applications.
"PAYMENT AGENT" shall mean IMR General in its role as the agent of the
TBC Stockholders for the purposes of exchanging Certificates for Merger
Consideration as provided in Section 2.5(g) hereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"PENSION PLAN" shall mean any "employee pension benefit plan" as
defined in Section 3(2) of ERISA (other than a Multiemployer Plan) (i) which TBC
or any ERISA Affiliate maintains, administers, contributes to or is required to
contribute to, or, within the five years prior to the Effective Time,
maintained, administered, contributed to or was required to contribute to, or
under which TBC or any ERISA Affiliate may incur any liability and (ii) which
covers or has covered any employee or former employee of TBC or any ERISA
Affiliate (with respect to their employment relationship with such entities).
"PERMITS" shall mean all licenses, permits, franchises, approvals,
authorizations, consents or orders of, or filings with, any governmental
authority, whether foreign, federal, state or local, or any other Person,
necessary for the conduct of or the operation of the Business.
"PERMITTED ENCUMBRANCE" shall have the meaning set forth in Section
5.16 hereof.
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"PERSON" shall mean an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"PERSONNEL" shall have the meaning set forth in Section 5.14(c)
hereof.
"PRE-CLOSING TAX PERIOD" shall have the meaning set forth in Section
9.2(a)(iii) hereof.
"PROPOSED ACQUISITION TRANSACTION" shall have the meaning set forth in
Section 7.2 hereof.
"PURCHASE PRICE" shall have the meaning set forth in Section 2.3(a)
hereof.
"PURCHASE PRICE ADJUSTMENT" shall mean the Stockholders' Equity
Adjustment.
"PURCHASED INTERESTS" shall have the meaning set forth in Section
2.3(b) hereof.
"RCRA" shall mean the Resource Conservation & Recovery Act (42
U.S.C. Section 6901 ET SEQ.).
"REGULATIONS" shall mean any laws, statutes, ordinances, code,
regulations, rules, court decisions and orders of any foreign, federal, state or
local government and any other governmental department or agency, including
without limitation Environmental Laws, energy, motor vehicle safety, public
utility, zoning, building and health codes, occupational safety and health and
laws respecting employment practices.
"RELEASE" shall mean and include any spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
dumping, migrating within the environment or disposing into the environment or
the work-place of any Hazardous Material, and otherwise as defined in any
Environmental Law.
"RELEASED OBLIGATIONS" shall have the meaning set forth in Section
8.2(l) hereof.
"REPRESENTATIVE" shall mean any officer, director, principal,
attorney, agent, employee or other representative.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"SELLERS' TRANSACTIONAL EXPENSES" shall mean, collectively, the costs
and expenses or other authorized deductions or expenditures incurred by or on
behalf of the Payment Agent, TBC and the TBC Stockholders (in their respective
capacities as such) and arising out of or related to this Agreement, the other
Transaction Documents and the consummation of the Transactions, including,
without limitation, (i) any amounts payable as a Purchase Price Adjustment, (ii)
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attorneys', accounting, consulting and other professional fees incurred by such
Persons in connection with this Agreement, the other Transaction Documents and
the consummation of the Transactions, (iii) fees of financial advisors incurred
in connection therewith, (iv) any charges imposed by accountants, attorneys or
other agents (v) stock transfer taxes payable pursuant to Section 3.2 hereof,
(vi) the unpaid exercise or purchase price of any TBC Stock Option, (vii) any
amounts otherwise incurred, payable, anticipated or compromised by the Payment
Agent in connection with the purchase of equity interests of TBC, (viii)
one-half of any fees and out-of-pocket expenditures incurred in connection with
obtaining the Solvency Opinion, and (ix) all amounts incurred or payable which
arise from, in connection with or pursuant to Section 9.2 hereof. The Sellers'
Transactional Expenses shall not include the following expenses of TBC: (i)
preparation and copying of documents and schedules by TBC in connection with the
Transactions, (ii) travel, lodging and meals of executives and other employees
of TBC related to the Transactions, and (iii) other costs related to the rental
of equipment, the use of TBC facilities and equipment and the time expended by
TBC executives and other employees in connection with the Transactions.
"SOLVENCY OPINION" shall have the meaning set forth in Section 8.1(r)
hereof.
"STOCKHOLDER INDEMNIFIED PARTIES" shall have the meaning set forth in
Section 9.2(b) hereof.
"STOCKHOLDERS' AGREEMENT" shall mean that certain agreement dated as
of the Effective Date by and among the Buyer, an Affiliate of William E. Simon &
Sons, LLC, TCW Special Credits Fund V -- The Principal Fund and certain managers
of TBC and the Buyer.
"STOCKHOLDERS' EQUITY ADJUSTMENT" shall have the meaning set forth in
Section 3.1(b) hereof.
"STOCKHOLDERS' CONSENT" shall have the meaning set forth in Section
2.1 hereof.
"SUBSIDIARY" shall mean (a) any corporation in an unbroken chain of
corporations beginning with TBC if each of the corporations other than the last
corporation in the unbroken chain then owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain, (b) any partnership in which TBC or any of the TBC
Subsidiaries is a general partner, or (c) any partnership in which TBC or any of
the TBC Subsidiaries possesses a 50% or greater interest in the total capital or
total income of such partnership.
"SUPPLEMENT" shall have the meaning set forth in Section 10.16 hereof.
"SURVIVING CORPORATION" shall have the meaning set forth in Section
2.2 hereof.
"TAX" or "TAXES" shall mean, except where the usage or context
otherwise dictates, any federal, state, local, foreign or other tax, levy,
impost, fee, assessment or other government charge, including without limitation
income, estimated income, business, occupation, franchise,
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property, payroll, personal property, sales, transfer, use, employment,
commercial rent, occupancy, franchise or withholding taxes, and any premium,
including without limitation interest, penalties and additions in connection
therewith for which TBC or any of the TBC Subsidiaries may by liable.
"TAX ACCOUNTING FIRM" shall have the meaning set forth in Section 7.7
hereof.
"TAX AUDIT ADJUSTMENT" shall mean any adjustment to establish or
increase a reserve on the Closing Balance Sheet for any audit assessment arising
or resulting from the audit presently being conducted by the IRS and any
resulting state income tax adjustments.
"TAX RETURNS" shall mean and include, unless the usage or context
otherwise dictates, any federal, state, local and foreign tax returns,
declarations, elections, reports and information returns or the refiling of any
such Tax Returns previously filed.
"TBC" shall mean The Bekins Company, a Delaware corporation.
"TBC 1993 STOCK OPTION PLAN" shall mean that certain 1993 Stock Option
Plan of TBC, as the successor in interest to Bekins Holding Company, adopted as
of April 13, 1993.
"TBC COMMON STOCK" shall mean the Common Stock, par value $.01 per
share, of TBC.
"TBC EMPLOYEE STOCK OPTION PLANS" shall mean, collectively, the TBC
1993 Stock Option Plan and the various other employee stock option plans of TBC
and/or any TBC Subsidiary, as in effect from time to time, granting options to
purchase shares of TBC Common Stock.
"TBC OUTSIDE DIRECTORS' RESTRICTED STOCK PLAN" shall mean that certain
Outside Directors' Restricted Stock Plan of TBC adopted as of April 1, 1994.
"TBC PLANS" shall mean all Benefit Arrangements, Multiemployer Plans,
Pension Plans and Welfare Plans.
"TBC SHARES" shall mean all of the shares of TBC Common Stock issued
and outstanding immediately prior to the Effective Time.
"TBC STOCKHOLDER" shall mean any Person who or which holds (without
duplication) shares of TBC Common Stock (including restricted stock awarded
under the TBC Outside Directors' Restricted Stock Plan) or any TBC Stock Option
or Options; a list of the TBC Stockholders and the shares of TBC Common Stock
and TBC Stock Options owned by each is attached as Exhibit B hereto.
"TBC STOCK OPTIONS" shall mean, collectively, (a) the Paribas Option,
(b) the options to purchase shares of TBC Common Stock granted pursuant the TBC
Employee Stock
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Option Plans and (c) any other outstanding options, warrants or rights to
purchase or subscribe for shares of TBC Common Stock.
"TBC SUBSIDIARIES" shall mean, collectively, the Subsidiaries of
TBC, each of which is set forth on Exhibit C hereof.
"TRADEMARKS" shall mean registered trademarks, registered service
marks, trademark and service mark applications and unregistered trademarks
and service marks.
"TRANSACTION DOCUMENTS" shall mean this Agreement and the ancillary
agreements and instruments executed, filed or otherwise prepared, exchanged
or delivered in accordance with this Agreement.
"TRANSACTIONS" shall mean the Merger and the other transactions
contemplated by the Transaction Documents.
"TRANSITORY SUBSIDIARY" shall mean Trasub, Inc., a Delaware
corporation.
"TRANSITORY SUBSIDIARY COMMON STOCK" shall mean the Common Stock,
$.01 par value per share, of the Transitory Subsidiary.
"WELFARE PLAN" shall mean any "employee welfare benefit plan" as
defined in Section 3(1) of ERISA, (i) which TBC or any ERISA Affiliate
maintains, administers, contributes to or is required to contribute to, or
under which TBC or any ERISA Affiliate may incur any Liability and (ii) which
covers or has covered any employee or former employee of TBC or any ERISA
Affiliate (with respect to their employment relationship with such entities),
but excluding any Multiemployer Plan.
"YEAR END BALANCE SHEET" shall mean the consolidated balance sheet
of TBC and the TBC Subsidiaries, dated the Year End Balance Sheet Date,
together with notes thereon, prepared in accordance with GAAP and previously
delivered to the Buyer and attached hereto as SCHEDULE 1.1.
"YEAR END BALANCE SHEET DATE" shall mean March 31, 1995.
"YEAR END FINANCIAL STATEMENTS" shall mean the Year End Balance
Sheets and the audited consolidated statements of operations and income,
changes in stockholders' equity and cash flow of TBC and the TBC Subsidiaries
for the period ended on the Year End Balance Sheet Date, prepared in
accordance with GAAP and previously delivered to the Buyer and attached
hereto as SCHEDULE 1.1.
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ARTICLE II.
THE MERGER
2.1 APPROVAL OF THE TRANSACTIONS. The Transactions and the Transaction
Documents shall be submitted for adoption and approval of the holders of TBC
Shares as set forth in SCHEDULE 5.2 in a manner allowed under the Delaware
law (the "STOCKHOLDERS' CONSENT"). The Buyer, the Transitory Subsidiary, IMR
and TBC shall coordinate and cooperate with respect to the timing of such
Stockholders' Consent. The Board of Directors of TBC shall recommend that
the holders of TBC Shares approve this Agreement, the other Transaction
Documents and the Transactions.
2.2 THE MERGER. As soon as is practicable after the satisfaction or
waiver of the conditions contained herein, the Parties hereto will cause the
Merger to be consummated by filing with the Secretary of State of the State
of Delaware the Certificate of Merger (the time of such filing being the
"EFFECTIVE TIME," and the date upon which the Effective Time occurs, the
"EFFECTIVE DATE"). At the Effective Time, in accordance with this Agreement
and the Delaware Law, the Transitory Subsidiary shall be merged with and into
TBC, the separate existence of the Transitory Subsidiary (except as may be
continued by operation of law) shall cease, and TBC shall continue as the
surviving corporation under the corporate name it possesses immediately prior
to the Effective Time. The Transitory Subsidiary and TBC are sometimes
referred to herein as the "CONSTITUENT CORPORATIONS," and TBC is sometimes
referred to herein as the "SURVIVING CORPORATION."
2.3 EFFECT OF THE MERGER.
(a) Except for Dissenting Shares, each TBC Share shall
automatically be converted into the right to receive an amount in cash equal
to (i) Thirty-Two Million One Hundred and Ninety-Five Thousand Three Hundred
and Four ($32,195,304), less the amount of TBC's tax withholding obligations
with respect to the Purchased Interests (as defined in Section 2.3(b) below)
as set forth in an Exhibit to this Agreement to be completed prior to the
Closing (the "PURCHASE PRICE") divided by (ii) the aggregate number of TBC
Shares described in SCHEDULE 5.2 (the per TBC Share consideration shall be
referred to herein as the "MERGER CONSIDERATION"). The Merger Consideration
shall be subject to the Stockholders' Equity Adjustment, and the Merger
Consideration payable to each holder of TBC Shares will be reduced by such
holder of TBC Shares' pro-rata share of the Sellers' Transactional Expenses
as computed by the Payment Agent.
(b) Prior to the Effective Time, the Payment Agent will purchase
all outstanding TBC Common Stock and TBC Stock Options (with the exception of
TBC Common Stock owned by IMR, Bank of America, Robert Wheaton, Andrew
Estoclet, Gary Holter, Larry Marzullo and the Buyer) (collectively, the
"PURCHASED INTERESTS") at a per share price agreed upon by the Payment Agent
and such TBC Stockholder. Such purchases will be Sellers' Transactional
Expenses. All such Purchased Interests shall then be contributed to TBC and
held in treasury by TBC or cancelled, retired or otherwise extinguished.
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(c) Each TBC Share held in treasury by TBC or owned by the
Transitory Subsidiary, the Buyer or any direct or indirect subsidiary of the
Transitory Subsidiary, the Buyer or TBC, shall be cancelled and retired, and
no payment shall be made with respect thereto.
(d) Each share of Transitory Subsidiary Common Stock issued and
outstanding immediately prior to the Effective Time shall be converted into
and become one validly issued, fully paid and nonassessable share of common
stock of the Surviving Corporation.
(e) At and after the Effective Date, the Surviving Corporation
shall possess all the rights, privileges, powers and franchises of a public
as well as of a private nature, and be subject to all the restrictions,
disabilities and duties of each of the Constituent Corporations; and all
singular rights, privileges, powers and franchises of each of the Constituent
Corporations, and all property, real, personal and mixed, and all debts due
to either the Constituent Corporations on whatever account, as well as for
stock subscriptions and all other things in action or belonging to each of
the Constituent Corporations, shall be vested in the Surviving Corporation,
and all property, rights, privileges, powers and franchises, and all and
every other interest shall be thereafter the property of the Surviving
Corporation as they were of the Constituent Corporations, and the title to
any real estate vested by deed or otherwise, in either of the Constituent
Corporations, shall not revert or be in any way impaired; but all rights of
creditors and all liens upon any property of either of the Constituent
Corporations shall be preserved unimpaired, and all debts, liabilities and
duties of the Constituent Corporations shall thenceforth attach to the
Surviving Corporation, and may be enforced against it to the same extent as
if said debts and liabilities had been incurred by it.
2.4 DISSENTING SHARES. Notwithstanding anything in this Agreement to
the contrary, Dissenting Shares shall not be converted into the right to
receive the Merger Consideration, but holders of such shares shall be
entitled to receive payment of the appraised value of such shares in
accordance with the provisions of Section 262 of the Delaware Law, except
that any Dissenting Shares held by a stockholder who shall thereafter
withdraw such demand for appraisal of such shares, or shall lose the right to
appraisal as provided in such Section 262, shall thereupon be deemed to have
been converted at the Effective Time into the right to receive the Merger
Consideration, without interest thereon. The Payment Agent shall direct, at
its own cost and expense with such cost and expenses considered part of the
Sellers' Transactional Expenses, all negotiations and proceedings with
respect to demands for appraisals under the Delaware Law and shall be
responsible for paying any and all amounts required to be paid to holders of
Dissenting Shares thereunder and any other amounts due to the Dissenting
Stockholders as a result of this Agreement and the consummation of the
Transactions.
2.5 SURRENDER AND PAYMENT.
(a) Prior to the Effective Time, the holders of TBC Shares shall
appoint IMR General to act as the Payment Agent for the purpose of exchanging
certificates representing TBC Shares that are not Dissenting Shares
("CERTIFICATES") for the Merger Consideration. At the Effective Time, the
Buyer shall deposit or cause to be deposited with the Payment Agent funds in
the amount of the Purchase Price (the "FUNDS"). The Payment Agent will send
to each holder
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of TBC Shares a letter of transmittal (or other appropriate notification and
transmittal document) for use in such exchange (which shall specify that the
delivery shall be effected, and risk of loss and title shall pass, only upon
proper delivery of the Certificates to the Payment Agent). The Payment Agent
shall instruct TBC to cancel all such Certificates and shall promptly deliver
them to the Surviving Corporation at the Closing against delivery of the
Funds.
(b) Each holder of TBC Shares that have been converted into the
Merger Consideration, upon surrender to the Payment Agent of a Certificate or
Certificates representing such shares, together with a properly completed
letter of transmittal or other appropriate document covering such shares,
will be entitled, subject to Section 2.5(g) below, to receive the Merger
Consideration payable in respect of such TBC Shares, without interest. Until
so surrendered, each such Certificate shall after the Effective Time
represent for all purposes only the right to receive such Merger
Consideration from the Payment Agent as provided herein.
(c) If any portion of the Merger Consideration is to be paid other
than to the registered holder of the TBC Shares represented by the
Certificate or Certificates surrendered in exchange therefor, it shall be a
condition to such payment that the Certificate or Certificates so surrendered
shall be properly endorsed or otherwise be in proper form for transfer and
that the Person requesting such payment shall pay to the Surviving
Corporation any transfer or other taxes required as a result of such payment
or establish to the satisfaction of the Surviving Corporation that such tax
has been paid or is not payable.
(d) After the Effective Time, there shall be no further
registration or transfers of shares of TBC Common Stock on the stock transfer
books of TBC. If, after the Effective Time, certificates representing shares
of TBC Common Stock are presented to the Surviving Corporation, they shall be
cancelled and exchanged for the Merger Consideration, without interest
thereon, in accordance with the procedures set forth in this Article II.
(e) If, on or after the date of this Agreement and prior to the
Effective Time, the outstanding shares of TBC Common Stock shall have been
changed into a different number of shares or a different class by reason of
any reclassification, recapitalization, split-up, combination, exchange or
shares or readjustment, or a stock dividend or other extraordinary dividend
or distribution thereon shall be declared with a record date within said
period, the amount of the Merger Consideration shall be correspondingly
adjusted.
(f) The right of any TBC Stockholder to receive the Merger
Consideration or, in the case of the Purchased Interests, other
consideration, shall be subject to and reduced by any required tax
withholding obligation.
(g) IMR General, in its capacity as Payment Agent, shall have the
authority, without limitation, to determine the amount of the Sellers'
Transactional Expenses, shall determine, review, negotiate and pay all of
such expenses and other amounts determined, in its sole discretion, to be
necessary or desirable to disburse in connection with the Transactions, to
purchase equity (I.E., stock and option) interests on behalf of the TBC
Stockholders, to pursue or compromise indemnification liability by or on
behalf of one or more of the TBC Stockholders and
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to withhold reserves sufficient for, in its sole discretion, payment of all
other Liabilities related to the Transactions, including, without limitation,
the Purchase Price Adjustment requiring a payment to the Buyer. The Payment
Agent shall for all purposes be deemed the sole authorized agent of each TBC
Stockholder with respect to calculation and distributions of pro-rata amounts
delivered to it by the Buyer under this Article II, and each such TBC
Stockholder, in approving this Agreement, consents and approves such agency
and all actions taken by the Payment Agent pursuant to it. Any action or
failure to act so taken (or not taken) by the Payment Agent shall constitute
a decision of each TBC Stockholder, and shall be final, binding and
conclusive upon each TBC Stockholder. The Buyer, the Transitory Subsidiary
and, after the Effective Time, the Surviving Corporation may rely upon any
decision, act, consent or instruction of the Payment Agent as being the
decision, act, consent or instruction of each and all of the TBC
Stockholders. The Buyer, the Transitory Subsidiary and, after the Effective
Time, the Surviving Corporation are relieved from any Liability to any Person
for any acts done by them in accordance with any such decision, act, consent
or instruction. IMR agrees to indemnify and hold harmless the Buyer, its
Affiliates and, after the Effective Time, the Surviving Corporation from and
against any Liabilities any of them may incur as a result of or connected
with the actions or failures to act by the Payment Agent or its
Representatives or agents.
2.6 CHARTER DOCUMENTS; DIRECTORS; OFFICERS. After the Effective Time,
(i) the Certificate of Incorporation and the Bylaws of the Transitory
Subsidiary shall be the Certificate of Incorporation and Bylaws of the
Surviving Corporation, until thereafter amended as provided therein and under
the Delaware Law, (ii) the directors of the Transitory Subsidiary immediately
prior to the Effective Date will be the initial directors of the Surviving
Corporation, until their successors are elected and qualified, and (iii) the
officers of TBC immediately prior to the Effective Date will be the initial
officers of the Surviving Corporation, until their successors are elected and
qualified.
ARTICLE III.
PURCHASE PRICE ADJUSTMENT
3.1 PURCHASE PRICE ADJUSTMENT.
(a) CLOSING BALANCE SHEET. As promptly as practicable after the
Effective Time (but in no event more than 60 days after the Effective Time),
TBC will prepare and deliver to the Payment Agent and Buyer the fiscal 1996
audited consolidated financial statements for the fiscal year ended March 31,
1996 of TBC and the TBC Subsidiaries (the "CLOSING FINANCIAL STATEMENTS"),
prepared in accordance with GAAP, including notes thereto, and audited by
Arthur Andersen, LLP. The Closing Financial Statements shall be obtained at
the expense of TBC. The balance sheet contained in the Closing Financial
Statements shall be referred to herein as the "CLOSING BALANCE SHEET." The
Payment Agent and Buyer, and their respective firms of independent public
accountants (as designated by the Payment Agent ("IMR'S ACCOUNTANTS") and as
designated by Buyer ("DELOITTE")), if any, will be entitled to reasonable
access during normal business hours to the relevant records and working
papers of TBC and Arthur Andersen, LLP to
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aid in their review of the Closing Financial Statements. The Payment Agent
shall be responsible for all costs of IMR's Accountants. Buyer shall be
responsible for all costs of Deloitte. The Closing Financial Statements
shall be deemed to be accepted by IMR and Buyer and shall be conclusive for
the purposes of the Purchase Price Adjustment, except to the extent, if any,
that the Payment Agent or Buyer shall deliver, within thirty (30) days after
the date on which the Closing Financial Statements are delivered to the
Payment Agent and the Buyer, a written notice to TBC from either or both the
Payment Agent or Buyer, as applicable, with a copy to the other Party stating
each and every item to which the Payment Agent or Buyer takes exception as
not being in accordance with GAAP or as having computational errors,
specifying in detail the nature and extent of any such exception (it being
understood that any amounts not disputed shall be paid promptly). The change
item or items taken exception to by the Payment Agent or Buyer must include
all identified positive and negative improperly recorded or unrecorded
adjustments that individually are in excess of $65,000 and, in the aggregate,
result in a net reduction of stockholders' equity in excess of $65,000. If a
change proposed by IMR or Buyer is disputed by the other Party, then TBC, the
Payment Agent and Buyer shall negotiate in good faith to resolve such
dispute. If, after a period of thirty (30) days following the date on which
the Payment Agent or Buyer gives notice to TBC and the other Party of any
proposed change, any such proposed change still remains disputed, then the
Payment Agent and Buyer shall together choose an independent firm of public
accountants of nationally recognized standing (the "ACCOUNTING FIRM") to
resolve any remaining disputes. The Accounting Firm shall act as an
arbitrator to determine, applying its expertise and knowledge of both general
accounting principles and the industry in question, based on workpapers and
presentations by the Payment Agent and Buyer, and not by independent review
of facts, only those issues still in dispute. In reaching its decisions the
Accounting Firm shall use the lowest amount or amounts asserted by a Party as
a floor and the highest amount or amounts asserted by a Party as a ceiling in
the determination of all disputes. The Accounting Firm's decision shall fall
within the parameters set by those amounts and shall be final and binding and
shall be in accordance with the provisions of this Section 3.1. The fees and
expenses of the Accounting Firm, if any, shall be paid equally by the Payment
Agent and Buyer; PROVIDED, HOWEVER, that, if the Accounting Firm determines
that either Party's position is, in all material respects, correct, then the
other Party shall pay the fees charged by the Accounting Firm in connection
with any such determination. Interest on any unpaid portion of any Purchase
Price Adjustment shall be accrued at an annual rate of 10% from the date of
notice of such dispute through the date of payment of such unpaid amount.
Such interest shall be remitted by the Payment Agent together with the
amount, if any, of the portion of the adjustment described in this Section
3.1 remaining to be paid.
(b) STOCKHOLDERS' EQUITY ADJUSTMENT.
(i) In the event that there is a Stockholders' Equity Deficiency
(as defined below) with respect to TBC as determined solely by the Closing
Balance Sheet, the Payment Agent shall pay to the Buyer an amount equal to
the Stockholders' Equity Deficiency with respect to TBC. Any payments
required to be made by the Payment Agent pursuant to this Section 3.1(b) (a
"STOCKHOLDERS' EQUITY ADJUSTMENT") shall be made (without any contribution
or set-off) within ten days of the date of final determination of
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the Stockholders' Equity Deficiency by wire transfer of immediately
available funds to an account designated by the Buyer.
(ii) The term "STOCKHOLDERS' EQUITY DEFICIENCY" shall mean the
amount, if any, by which the sum of the consolidated stockholders' equity
of TBC and the TBC Subsidiaries on the Closing Balance Sheet plus the
amount of any Tax Audit Adjustment is less than $8,700,000. Any such
Stockholders' Equity Deficiency shall be payable by the Payment Agent to
Buyer on a dollar-for-dollar basis only, with interest thereon as set forth
in Section 3.1(a) above.
3.2 TRANSFER TAXES. The Payment Agent, on behalf of the Former Holders,
shall be responsible for any stock transfer taxes and any sales, use or other
taxes imposed by reason of the transfer of the capital stock of TBC to Buyer
as provided hereunder and any deficiency, interest or penalty asserted with
respect thereto.
ARTICLE IV.
CLOSING
4.1 CLOSING. Upon the terms and subject to the conditions set forth
herein, the Closing shall be held at 10:00 a.m. local time on the Effective
Date (or as soon thereafter on such date as is practicable) at the offices of
Latham & Watkins, 633 West Fifth Street, Suite 4000, Los Angeles, California
90071, unless the Parties hereto otherwise agree.
4.2 DELIVERIES AT CLOSING. At the Closing the following actions shall
be taken:
(a) DELIVERY OF PURCHASE PRICE. The Buyer will deliver to the
Payment Agent the Purchase Price by wire transfer of immediately available
funds to an account directed by the Payment Agent's written instructions
delivered to the Buyer at least two (2) days prior to the Closing Date.
(b) DELIVERY OF CERTIFICATES. The Payment Agent will deliver to
the Buyer all of the Certificates in the possession of the Payment Agent as
contemplated by Section 2.5(a).
(c) CERTIFICATE OF MERGER. The Certificate of Merger will be filed
with the Secretary of State of the State of Delaware.
(d) TBC CERTIFICATES; OPINIONS. TBC, IMR and IMR General will
deliver the certificates, opinions of counsel and other items described in
Section 8.1 or as otherwise reasonably required by the Transitory Subsidiary
and the Buyer and such other evidence of the performance of all the covenants
and the satisfaction of all conditions required of TBC, IMR and IMR General
by this Agreement and as the Transitory Subsidiary and the Buyer shall
reasonably require.
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(e) TRANSITORY SUBSIDIARY AND BUYER CERTIFICATES; OPINIONS. The
Transitory Subsidiary and the Buyer will deliver the certificates, opinions
of counsel and other items described in Section 8.2 or as otherwise
reasonably required by TBC, IMR and IMR General and such other evidence of
the performance of all the covenants and the satisfaction of all conditions
required of the Transitory Subsidiary and the Buyer by this Agreement and as
TBC, IMR and IMR General shall reasonably require.
(f) OTHER TRANSACTION DOCUMENTS. The Parties shall deliver such
other Transaction Documents as shall be reasonably necessary to consummate
the Transactions.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF TBC, IMR AND IMR GENERAL
TBC, IMR and, solely with respect to Section 5.4(b), IMR General
hereby, jointly and severally, represent and warrant to the Transitory
Subsidiary and the Buyer that, except as otherwise set forth on the
Disclosure Schedule (which Disclosure Schedule sets forth the Schedules
referred to in this Article V), the following representations and warranties
are, as of the date hereof, and will be, as of the Effective Date, true and
correct:
5.1 ORGANIZATION, QUALIFICATION AND CORPORATE POWER. Each of TBC and
the TBC Subsidiaries is a corporation duly organized, validly existing, and
in good standing under the laws of its state of incorporation. TBC and each
of the TBC Subsidiaries is duly qualified to conduct business, properly
licensed and is in good standing under the laws of each jurisdiction where
such qualification and licensing is required, except where the failure to be
so qualified, licensed or in good standing would not have a Material Adverse
Effect. SCHEDULE 5.1 contains an accurate and complete list of all
jurisdictions in which TBC and each of the TBC Subsidiaries are qualified to
do business as foreign corporations. TBC and each of the TBC Subsidiaries
has full corporate power and authority to carry on the Business and to own,
lease and use the properties and Assets owned, leased and used by it. TBC
has previously delivered copies of the Articles (or Certificate) of
Incorporation and Bylaws of TBC and each of the TBC Subsidiaries, and all
amendments thereto, which are accurate and complete as of the date hereof.
5.2 CAPITALIZATION. The entire authorized capital stock of TBC consists
of one class of capital stock, which is TBC Common Stock and of which 114,118
shares will be issued and outstanding as of the Closing Date. All of the
issued and outstanding shares of such TBC Common Stock have been duly
authorized and are validly issued, fully paid, and nonassessable. TBC has
title free and clear of all Encumbrances to all of the outstanding shares of
capital stock of each TBC Subsidiary. Each holder of shares of such TBC
Common Stock has, or will have at Closing, title to the shares of such TBC
Common Stock set forth next to the name of such TBC Stockholder on SCHEDULE
5.2 hereto free and clear of all Encumbrances with full right, power and
authority to transfer such shares to the Buyer. As of the Closing Date,
there shall be no outstanding or authorized options, warrants, purchase
rights, subscription rights, conversion rights, exchange rights, or other
contracts or commitments that could require TBC or any of the
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TBC Subsidiaries to issue, sell, or otherwise cause to become outstanding any
of its capital stock, or any other commitments of any kind for the issuance
of additional shares of capital stock or other securities issued by TBC or
any of the TBC Subsidiaries. There are no other outstanding or authorized
stock appreciation, phantom stock, profit participation, or similar rights
payable by TBC or any of the TBC Subsidiaries with respect to TBC or any of
the TBC Subsidiaries.
5.3 AUTHORIZATION OF TBC. TBC has full power and authority (including
full corporate power and authority), and has taken all corporate action
necessary, to own, lease and operate the Assets, to conduct the Business as
it is presently being conducted, to execute and deliver this Agreement and
the other Transaction Documents to which it is a party and to perform its
obligations hereunder and thereunder and consummate the Transactions. This
Agreement and the other Transaction Documents to which it is a party
constitute the valid and legally binding obligations of TBC and, assuming due
execution of this Agreement by the Buyer and the Transitory Subsidiary and of
such other Transaction Documents by the parties thereto, are enforceable
against TBC in accordance with their respective terms and conditions, except
to the extent that enforceability may be subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting the
enforcement of creditors' rights generally and by general equitable
principles, regardless of whether asserted in a proceeding in equity or at
law.
5.4 AUTHORIZATION OF IMR AND IMR GENERAL.
(a) IMR represents and warrants that it has the requisite power and
authority, and has taken all action necessary to execute and deliver this
Agreement and the other Transaction Documents to which it is a party and to
perform its obligations hereunder and thereunder. This Agreement and the
other Transaction Documents to which it is a party constitute the valid and
legally binding obligations of IMR and, assuming due execution of this
Agreement by the Buyer and the Transitory Subsidiary and of such other
Transaction Documents by the parties thereto, are enforceable against IMR in
accordance with their respective terms and conditions, except to the extent
that enforceability may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles, regardless
of whether asserted in a proceeding in equity or at law. IMR has approved
the terms of this Agreement and the Transactions.
(b) IMR General has full power and authority (including full
corporate power and authority), and has taken all corporate action necessary,
to execute and deliver this Agreement and the other Transaction Documents to
which it is a party and to perform its obligations hereunder and thereunder.
This Agreement and the other Transaction Documents to which it is a party
constitute the valid and legally binding obligations of IMR General and,
assuming due execution of this Agreement by the Buyer and the Transitory
Subsidiary and of such other Transaction Documents by the parties thereto,
are enforceable against IMR General in accordance with their respective terms
and conditions, except to the extent that enforceability may be subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar
laws affecting the enforcement of creditors' rights generally and by general
equitable principles, regardless of whether asserted in a proceeding in
equity or at law.
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5.5 NONCONTRAVENTION. Except as set forth in SCHEDULE 5.5 and, except
in the cases of each of clauses (ii), (iii) and (iv) below where the
violation, conflict, breach, Default, acceleration, termination,
modification, cancellation, failure to give notice, or creation of
Encumbrance would not, either individually or in the aggregate, have a
Material Adverse Effect, none of the execution, delivery or performance of
this Agreement or the other Transaction Documents, nor the consummation of
the Transactions, will (i) violate or conflict with any provision of the
Certificate (or Articles) of Incorporation or Bylaws of TBC or any of the TBC
Subsidiaries, (ii) violate any Regulation (excluding notice requirements and
approvals of "change of control") or Court Order to which TBC or any of the
TBC Subsidiaries is subject, (iii) violate, conflict with, result in a breach
of, constitute a Default under, result in the acceleration or termination of,
create in any party the right to accelerate, terminate, modify, or cancel any
Material Contract listed in SCHEDULE 5.19, Material Lease listed in SCHEDULE
5.18, license or Material Permit listed in SCHEDULE 5.6, except to the extent
such Default is set forth in any such Schedule, or (iv) impose any
Encumbrance on the Assets or the Business.
5.6 PERMITS, CONSENTS AND APPROVALS. SCHEDULE 5.6 sets forth a complete
list of all material Permits used in the operation of the Business (or
otherwise held by TBC and any of the TBC Subsidiaries) for the purpose of (i)
inter- or intrastate transportation of goods via motor vehicles used in the
Business, and (ii) operation of the BMS Facilities (collectively (i) and (ii)
referred to as the "MATERIAL PERMITS" or individually as a "MATERIAL
PERMIT"). Except as set forth on SCHEDULE 5.6, each Material Permit is
valid, binding and in full force and effect. Except as set forth in SCHEDULE
5.6, TBC and each TBC Subsidiary has, and at all times during the Ownership
Period has had, all Material Permits required under Regulations pertaining
thereto and owns or possesses such Material Permits free and clear of all
Encumbrances. Except as set forth on SCHEDULE 5.6, to the Knowledge of TBC,
neither TBC nor any of the TBC Subsidiaries is in Default, nor has TBC or any
of the TBC Subsidiaries received any notice of any claim of Default, with
respect to any Material Permit listed on SCHEDULE 5.6. To the Knowledge of
TBC, no present or former stockholder, director, officer or employee of TBC
or any of the TBC Subsidiaries or any Affiliate thereof, or any other Person,
firm, corporation or other entity, owns or has any proprietary, financial or
other interest (direct or indirect) in any Material Permit which TBC or any
of the TBC Subsidiaries owns, possesses or uses. Other than in connection
with the provisions of the HSR Act, the Delaware Law, the Interstate Commerce
Commission (or other similar federal transportation authority, as applicable)
and any state authorities regulating the provision of transportation
services, and except as provided in SCHEDULE 5.6, TBC and the TBC
Subsidiaries need not give any notice to, make any declaration, filing or
registration with, or obtain any Material Permit from any government or
governmental agency in connection with the execution, delivery and
performance of this Agreement and the consummation of the Transactions,
except where the failure to give any notice, to make any filing, or to obtain
any Material Permit would not have a Material Adverse Effect.
5.7 FINANCIAL STATEMENTS. TBC has provided to Buyer (i) monthly
unaudited consolidated financial statements for each of the months beginning
at the Most Recent Fiscal Quarter End (as defined below) through and
including the month ended February 29, 1996 (the "MOST RECENT MONTH END
FINANCIAL STATEMENTS"), (ii) the unaudited consolidated financial statements
for the fiscal quarter ended December 31, 1995 (the "MOST RECENT FISCAL
QUARTER END
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FINANCIAL STATEMENTS"), and (iii) the Year End Financial Statements (clauses
(i), (ii) and (iii) collectively referred to herein as the "FINANCIAL
STATEMENTS"). The Year End Financial Statements have been audited by Arthur
Andersen, LLP whose reports thereon are included therewith. The Year End
Financial Statements (i) are in accordance with the Books and Records of TBC,
(ii) have been prepared in accordance with GAAP applied on a consistent basis
throughout the periods covered thereby and (iii) present fairly the financial
condition, assets, liabilities (including all reserves), stockholders'
equity, cash flow and results of operations of TBC and the TBC Subsidiaries
as of the indicated dates and the results of operations and changes in cash
flows of TBC and the TBC Subsidiaries for the indicated periods. Except as
provided in SCHEDULE 5.7, the Financial Statements (i) are in accordance with
the Books and Records of TBC and (ii) present fairly the financial condition,
assets, liabilities (including all reserves), stockholders' equity, cash flow
and results of operations of TBC and the TBC Subsidiaries as of the indicated
dates and the results of operations and changes in cash flows of TBC and the
TBC Subsidiaries for the indicated periods (except, in the case of the Most
Recent Month End Financial Statements and the Most Recent Fiscal Quarter End
Financial Statements, for the absence of such normal and recurring
adjustments, which were not or are not expected to be material to such
financial statements taken as a whole, AND the absence of notes that, if
presented, would not differ materially from those included in the Year End
Financial Statements). In the event of an adverse determination of the audit
presently being conducted by the IRS, the sole indemnification remedy of
Buyer and the Transitory Subsidiary shall be indemnification as set forth in
Section 9.2(a)(iii) hereof, and any other claim for a breach of
representations or warranties with respect thereto shall be precluded. If a
reserve attributable to a particular category of insurance claims on any
Financial Statement is not adequate to meet the liability to be discharged
subsequent to the date of such Financial Statement, such deficiency shall not
be deemed to be a breach or violation of this representation and warranty to
the extent it is or can be offset by any excess reserve (current or
long-term) attributable to a separate category of insurance claims on such
Financial Statement.
5.8 BROKERS' FEES. TBC and the TBC Subsidiaries have no liability or
obligation to pay any fees or commissions to any broker or finder with
respect to the Transactions. None of Buyer, TBC, any TBC Subsidiary, the
Transitory Subsidiary or the Surviving Corporation will have any liability or
other obligation with respect to any Sellers' Transactional Expenses.
5.9 LITIGATION. Except as set forth in SCHEDULE 5.9, no Actions
(excluding auto or general liability claims for bodily injury, property
damage, product liability and workers' compensation claims described below),
individually or, if related to a single set of circumstances in the
aggregate, involving more than $50,000 are pending or, to the Knowledge of
TBC, threatened (a) against, related to or affecting (i) TBC, any of the TBC
Subsidiaries, their respective properties, the Business or the Assets, (ii)
any TBC Plan or any trust or other funding instrument, fiduciary or
administrator thereof as such, (iii) any officers or directors of TBC or any
of the TBC Subsidiaries as such, (iv) the TBC Stockholders as such, or (v)
the Transactions, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, (b) that seeks to delay, limit or
enjoin the Transactions as contemplated herein, (c) that involve the risk of
criminal liability, or (d) in which TBC or any of the TBC Subsidiaries is a
plaintiff, including any derivative suits brought by or on behalf of TBC or
any of the TBC Subsidiaries. Except as set forth in SCHEDULE 5.9, to the
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Knowledge of TBC neither TBC nor any of the TBC Subsidiaries is in default
with respect to or subject to any Court Order binding on TBC or its
Subsidiaries, and there are no unsatisfied judgments against TBC or any of
the TBC Subsidiaries, the Business or the Assets. Except as disclosed in
SCHEDULE 5.9, there are no Court Orders or agreements with, or to the
Knowledge of TBC liens by, any governmental authority or quasi-governmental
entity relating to any Environmental Law which regulate, obligate, bind or in
any material way affect TBC or any of the TBC Subsidiaries.
The auto or general liability claims for bodily injury, property damage,
product liability and workers' compensation claims against TBC and TBC
Subsidiaries have been or are managed by various third party administrators,
including Crawford & Co., GAB, Alexsis and Hartford Insurance Co., each of
which provides periodic claim runs (the "CLAIM RUNS"). In addition, TBC and
the TBC Subsidiaries are also insured for workers' compensation by certain
insurance companies and state compensation funds that provide periodic claim
runs. TBC and the TBC Subsidiaries have made available to Buyer the most
recent Claim Runs and the workers' compensation insurance company and stock
compensation fund claim runs available as of March 31, 1996 relating to such
claims. As threats of litigation in connection with the Business are normal
and recurring on a day-to-day basis, no schedule of threatened litigation in
connection with such claims in excess of $50,000 will be provided to Buyer
unless such threat has been received in writing by TBC or any of the TBC
Subsidiaries. To TBC's Knowledge, there are no Actions exceeding $50,000
presently threatened in the manner set forth above, or otherwise pending,
which are not set forth on the Claim Runs or set forth on SCHEDULE 5.9 hereto.
5.10 UNDISCLOSED LIABILITIES. Except for Liabilities which are (i)
individually less than $50,000 and in the aggregate less than $1,000,000, or
(ii) reflected and reserved against in the Financial Statements, which have
not been paid or discharged since the date thereof, or (iii) disclosed in
SCHEDULE 5.10, neither TBC nor any of the TBC Subsidiaries has any
Liabilities of any nature, whether absolute, accrued, contingent, fixed or
otherwise, due or to become due.
5.11 TAXES.
(a) INCOME TAX RETURNS AND PAYMENTS. During the Ownership Period
TBC and each of the TBC Subsidiaries (and any affiliated, unitary or combined
group of which TBC or any of the TBC Subsidiaries is now or has been a
member) has duly filed all material federal, state or local income Tax
Returns required to be filed by it through the date hereof. Such income Tax
Returns and other information filed are complete and accurate in all material
respects and properly reflect the Liabilities in respect of income Taxes of
TBC and the TBC Subsidiaries. TBC and each of the TBC Subsidiaries have duly
paid or made adequate provision for payment of all such income Taxes which
are shown to be due and payable pursuant to such income Tax Returns or which
have been shown to have become due and payable pursuant to any assessment
with respect to such income Taxes. TBC and each of the TBC Subsidiaries have
duly paid all material estimated income Taxes required to be paid (for income
Tax Returns to be filed for the fiscal year ending March 31, 1996) prior to
the Effective Time. Except as specified in SCHEDULE 5.11, as of one day
prior to the Closing Date neither TBC or any TBC Subsidiary has requested any
extension of time which is presently in effect within which to file income
Tax Returns for any period within
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the Ownership Period through March 31, 1996. TBC has delivered and Buyer
acknowledges receipt of complete and accurate copies of federal and state
income Tax Returns of TBC and each of the TBC Subsidiaries for the fiscal
years ending 1991, 1992, 1993, 1994 and 1995.
(b) NON-INCOME TAX RETURNS AND PAYMENTS. TBC and each of the TBC
Subsidiaries has duly filed all material non-income Tax Returns required to
be filed by it as of the date hereof, except where TBC or any of the TBC
Subsidiaries does not have Knowledge that such a non-income based Tax has or
may be imposed or where TBC or any TBC Subsidiary has a good faith basis to
believe that such a non-income based Tax is not applicable to its Business.
To the Knowledge of TBC, such non-income based Tax Returns and other
information filed are complete and accurate in all material respects and,
subject to periodic audits of federal, state and local authorities, properly
reflect the Liabilities in respect of such non-income Taxes of TBC and the
TBC Subsidiaries. TBC and each of the TBC Subsidiaries have duly paid
non-income based Taxes occurring in the ordinary course of business or made
adequate provision for payment of such non-income Taxes which are shown to be
due and payable in accordance with the customary accounting practices of TBC
and the TBC Subsidiaries.
(c) AUDITS, INVESTIGATIONS OR CLAIMS. Except as set forth in
SCHEDULE 5.11, the consolidated federal income Tax Returns of TBC and the TBC
Subsidiaries which were due as of the Effective Time have been filed with the
IRS, and except to the extent shown therein and except for the deficiencies
which may result from the audit presently being conducted by the IRS of the
consolidated federal income tax returns of TBC and the TBC Subsidiaries for
the fiscal year ended March 31, 1993 and any resulting federal or state
income Tax liabilities, no material unpaid deficiencies for Taxes have been
claimed, proposed or assessed by any taxing or other governmental authority
against TBC or any of the TBC Subsidiaries. Except as set forth in SCHEDULE
5.11 and excluding non-income Tax audits by state and local authorities
(which cannot be predicted, but are expected in the ordinary course of
business) and the effect of the present IRS audit and any resulting state
income tax effect, there are no pending or, to the Knowledge of TBC,
threatened audits, investigations or claims for or relating to any material
additional Liability in respect of income Taxes, and there are no matters
under discussion with any governmental authorities with respect to Taxes that
in the reasonable judgment of IMR or TBC are likely to result in a material
additional Liability for income Taxes. Except as set forth on SCHEDULE 5.11,
there have been no audits of Tax Returns (other than the present IRS audit)
by the relevant taxing authorities for any period for which an applicable
statute of limitations is open which are anticipated to exceed a present
potential Liability of $25,000 and, to the Knowledge of TBC except for
non-income Tax audits by state and local authorities and except as set forth
in SCHEDULE 5.11, neither TBC nor any of the TBC Subsidiaries has been
notified that any income taxing authority intends to audit a return for any
period. Except as set forth in SCHEDULE 5.11, no extension of a statute of
limitations relating to Taxes is in effect or has been requested by any
taxing authority with respect to TBC or any of the TBC Subsidiaries.
(d) DISCLOSURE OF UNDERSTATEMENT. Except as set forth in SCHEDULE
5.11, all transactions during the Ownership Period that could give rise to an
understatement of the federal income tax liability of TBC or any of the TBC
Subsidiaries within the meaning of Section 6662(d)
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of the Code are adequately disclosed on the Tax Returns in accordance with
Section 6662(d)(2)(B) of the Code.
(e) CHANGE IN ACCOUNTING METHOD. Except as set forth in SCHEDULE
5.11, during the Ownership Period neither TBC nor any of the TBC Subsidiaries
have made any change in accounting methods for tax reporting purposes,
received a ruling from any taxing authority or signed an agreement with any
taxing authority that would have a Material Adverse Effect.
(f) NO TAX SHARING AGREEMENT. Except as set forth in SCHEDULE
5.11, during the Ownership Period neither TBC nor any of the TBC Subsidiaries
are parties to or are bound by or have any obligation under any tax sharing,
allocation or indemnity agreement or other similar contract or agreement.
(g) NO TAX CONSENTS. Except as set forth in SCHEDULE 5.11, during
the Ownership Period neither TBC nor any of the TBC Subsidiaries have with
respect to any Assets or property held, acquired or to be acquired, filed a
consent to the application of Section 341(f) of the Code, or agreed to have
Section 341(f)(2) of the Code apply to any disposition of a subsection (f)
asset (as such term is defined in Section 341(f)(4) of the Code) owned by TBC
or any of the TBC Subsidiaries.
(h) NO LIABILITIES OF ANY OTHER PERSON. Except as set forth in
SCHEDULE 5.11, during the Ownership Period neither TBC nor any of the TBC
Subsidiaries are subject to Liabilities for Taxes of any other Person,
including, without limitation, liability arising from the application of U.S.
Treasury Regulation Section 1.1502-6 or any analogous provision of Tax law.
(i) LIEN. To the Knowledge of TBC and except as set forth in
SCHEDULE 5.11, there are no liens for Taxes (other than for current Taxes not
yet due and payable) on the Assets.
(j) SAFE HARBOR LEASE PROPERTY. Except as set forth in SCHEDULE
5.11, none of the Assets is property that is required to be treated as being
owned by any other Person pursuant to the so-called safe harbor lease
provisions of former Section 168(f)(8) of the Code.
(k) SECURITY FOR TAX-EXEMPT OBLIGATIONS. Except as set forth in
SCHEDULE 5.11, none of the Assets directly or indirectly secures any debt the
interest on which is tax-exempt under Section 103(a) of the Code.
(l) TAX-EXEMPT USE PROPERTY. Except as set forth in SCHEDULE 5.11,
none of the Assets is "tax-exempt use property" within the meaning of Section
168(h) of the Code.
(m) FOREIGN PERSON. Except as set forth in SCHEDULE 5.11, neither
TBC nor any of the TBC Subsidiaries is a Person other than a United States
Person within the meaning of the Code.
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(n) NO WITHHOLDING. Except as set forth in SCHEDULE 5.11, the
transaction contemplated herein is not subject to the federal income tax
withholding provisions of Section 3406 of the Code, or of Subchapter A of
Chapter 3 of the Code or of any other provision of law.
(o) CONSOLIDATED TAX RETURN. Except as set forth in SCHEDULE 5.11,
during the Ownership Period neither TBC nor any of the TBC Subsidiaries has
ever been a member of any other affiliated group of corporations, within the
meaning of Section 1504 of the Code.
(p) PARTNERSHIP. Except as set forth in SCHEDULE 5.11, neither TBC
nor any of the TBC Subsidiaries is a party to any joint venture, partnership,
or other arrangement or contract that could be treated as a partnership for
federal income tax purposes.
(q) PARACHUTE PAYMENTS. Neither TBC nor any of the TBC
Subsidiaries has or will have as a consequence of the Transactions any
liability for the payment of a non-deductible parachute payment as defined in
Section 280G of the Code.
5.12 EMPLOYMENT MATTERS.
(a) DISCLOSURE; DELIVERY OF COPIES OF RELEVANT DOCUMENTS AND OTHER
INFORMATION. SCHEDULE 5.12 contains a complete list of the TBC Plans which
cover any employees or former employees of TBC or any TBC Subsidiary. True
and complete copies of each of the following documents relating to TBC Plans
which cover any employees or former employees of TBC or any TBC Subsidiary
have been delivered by TBC to the Buyer: (i) each Welfare Plan, Pension Plan
(and, if applicable, related trust agreements) and all amendments thereto,
all written interpretations thereof and written descriptions thereof which
have been distributed by TBC or any TBC Subsidiary to employees and all
annuity contracts or other funding instruments, (ii) each Benefit Arrangement
including written interpretations and written descriptions thereof which have
been distributed by TBC or any TBC Subsidiary to employees (including
descriptions of the number and level of current employees covered thereby)
and a complete description of any such Benefit Arrangement which is not in
writing, (iii) the most recent determination letter issued by the Internal
Revenue Service for each Pension Plan, (iv) for the three most recent plan
years, Annual Reports on Form 5500 Series required to be filed with any
governmental agency for each Pension Plan or Welfare Plan, and (v) a
description setting forth the amount of any liability of TBC or any TBC
Subsidiary as of the Effective Time for payments more than thirty days past
due with respect to each Welfare Plan, Pension Plan and Multiemployer Plan
and (vi) the name and address of the Plan Administrator for each
Multiemployer Plan.
(b) REPRESENTATIONS. Except as set forth in SCHEDULE 5.12:
(i) PENSION PLANS.
(A) No Pension Plan is subject to Title IV of ERISA or
Section 412 of the Code. Each Pension Plan and each related trust
agreement, has been determined by the Internal Revenue Service to be
qualified and tax-exempt under the
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provisions of Code Sections 401(a) and 501(a) and, to the Knowledge of TBC,
each Pension Plan has been so qualified during the period from its
adoption to date.
(B) Each Pension Plan and each related trust agreement
presently complies in all material respects and has been maintained in
material compliance with its terms and, both as to form and in operation,
with the requirements prescribed by any and all statutes, orders, rules and
regulations which are applicable to such plans, including but not limited
to ERISA and the Code.
(ii) MULTIEMPLOYER PLANS.
(A) Except as disclosed in SCHEDULE 5.12, TBC and its ERISA
Affiliates have not, at any time, withdrawn from a Multiemployer Plan in
what a Multiemployer Plan might claim to be a "complete withdrawal" or a
"partial withdrawal" as defined in Sections 4203 and 4205 of ERISA,
respectively, so as to result in a liability, contingent or otherwise
(including, but not limited to, the obligations pursuant to an agreement
entered into in accordance with Section 4204 of ERISA), to TBC or any ERISA
Affiliate.
(B) All contributions required under the terms of the
appropriate collective bargaining agreement or by the Plan to be made by
TBC and each TBC Subsidiary to each Multiemployer Plan have been made when
due.
(C) If, as of the Effective Time, TBC or any of its ERISA
Affiliates was to withdraw from all Multiemployer Plans to which it (or any
of them) has contributed or been obligated to contribute, it (and they)
would incur no liabilities to such plans under Title IV of ERISA not
otherwise reserved for on the Closing Balance Sheet in excess of $100,000.
(D) To Knowledge of TBC, with respect to each Multiemployer
Plan: (A) no such Multiemployer Plan has been terminated or has been in
reorganization under ERISA so as to result, directly or indirectly, in any
liability, contingent or otherwise, of TBC under Title IV of ERISA; (B) no
proceeding has been initiated by any Person (including the PBGC) to
terminate any Multiemployer Plan, and (C) TBC has no information which
would lead it to believe that any Multiemployer Plan will be terminated or
will be reorganized under ERISA.
(iii) WELFARE PLANS AND CERTAIN MULTIEMPLOYER PLANS.
(A) Each Welfare Plan which covers employees or former
employees of TBC or any TBC Subsidiary has been maintained in material
compliance with its terms and, both as to form and operation, with the
requirements prescribed by those statutes, orders, rules and regulations
which are applicable to such Welfare Plan, including but not limited to
ERISA and the Code.
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(B) But for the grandfathered retiree medical and group
life insurance plans identified in SCHEDULE 5.12, neither TBC nor any
TBC Subsidiary nor any Welfare Plan has any present or future obligation
to make any payment to or with respect to any present or former employee
of TBC or any TBC Subsidiary pursuant to any retiree medical benefit
plan, or other retiree Welfare Plan, and no condition exists which would
prevent TBC or any TBC Subsidiary from amending or terminating any such
benefit plan or Welfare Plan.
(C) Each Welfare Plan which covers or has covered
employees or former employees of TBC or a Subsidiary and which is a
"group health plan," as defined in Section 607(1) of ERISA, has been
operated in material compliance with the provisions of Part 6 of Title I
of ERISA and Sections 162(k) and 4980B of the Code at all times during
the applicable statute of limitations period.
(iv) TBC and its ERISA Affiliates have not been assessed any
liability with respect to any Multiemployer Plan that is a "welfare
plan", as defined in Section 3(1) of ERISA, under the terms of such
Multiemployer Plan, any collective bargaining agreement or otherwise
resulting from any cessation of contribution, cessation of obligations
to make contributions or other form of withdrawal from such
Multiemployer Plan.
(v) If, as of the Effective Time, TBC or any of its ERISA
Affiliates were to have a cessation of contributions, cessation of
obligations to make contributions or other form of withdrawal from all
Multiemployer Plans that are "welfare plans", as defined in Section 3(1)
of ERISA, it (and they) would incur no liabilities not otherwise
reserved for on the Closing Balance Sheet with respect to any such
Multiemployer Plans under the terms of such Multiemployer Plans, any
collective bargaining agreement or otherwise in excess of $50,000.
(vi) UNRELATED BUSINESS TAXABLE INCOME. No TBC Plan (or
trust or other funding vehicle pursuant thereto), other than a
Multiemployer Plan, is subject to any tax under Code Section 511.
(vii) DEDUCTIBILITY OF PAYMENTS. There is no contract,
agreement, plan or arrangement covering any employee or former employee
of TBC or any TBC Subsidiary that, individually or collectively,
provides for the payment by TBC or any TBC Subsidiary of any amount (i)
that is not deductible under Section 162(a)(1) or 404 of the Code or
(ii) that is an "excess parachute payment" pursuant to Section 280G of
the Code.
(viii) FIDUCIARY DUTIES AND PROHIBITED TRANSACTIONS. Neither
TBC nor any TBC Subsidiary nor, to the Knowledge of TBC, any plan
fiduciary of any Welfare Plan or Pension Plan which covers or has
covered employees or former employees of TBC or any TBC Subsidiary, has
engaged in any transaction in violation of Sections 404 or 406 of ERISA
or any "prohibited transaction," as defined in Section 4975(c)(1) of the
Code, for which no exemption exists under Section 408 of ERISA or
Section 4975(c)(2) or (d) of the Code, or has otherwise violated the
provisions of Part 4 of Title I, Subtitle B of
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ERISA. TBC and the TBC Subsidiaries have not knowingly participated in a
violation of Part 4 of Title I, Subtitle B of ERISA by any plan fiduciary
of any Welfare Plan or Pension Plan (or other employee benefit plan
subject to ERISA) and have not been assessed any civil penalty under
Section 502(l) of ERISA.
(ix) NO AMENDMENTS. TBC and the TBC Subsidiaries have no
announced plan or legally binding commitment to create any additional
TBC Plans which are intended to cover employees or former employees of
TBC or any TBC Subsidiary (with respect to their relationship with such
entities) or to amend or modify any existing TBC Plan which covers or
has covered employees or former employees of TBC or any TBC Subsidiary
(with respect to their employment relationship with such entities) in
any material way.
(x) THIS SECTION INTENTIONALLY OMITTED.
(xi) NO OTHER MATERIAL LIABILITY. No event has occurred in
connection with which TBC or any TBC Subsidiary or any TBC Plan,
directly or indirectly, could be subject to any material liability (A)
under any statute, regulation or governmental order relating to any TBC
Plans or (B) pursuant to any obligation of TBC or any TBC Subsidiary to
indemnify any Person against liability incurred under, any such statute,
regulation or order as they relate to any TBC Plan.
(xii) NO ACCELERATION OR CREATION OF RIGHTS. Neither the
execution and delivery of this Agreement nor the consummation of the
Transactions will result in the acceleration or creation of any rights
of any Person to benefits under any TBC Plan (including, without
limitation, the acceleration of the vesting or exercisability of any
stock options, the acceleration of the vesting of any restricted stock,
the acceleration of the accrual or vesting of any benefits under any
Pension Plan or the acceleration or creation of any rights under any
severance, parachute or change in control agreement).
(xiii) NO ERISA AFFILIATES. Except as set forth in SCHEDULE
5.12, neither TBC nor any of the TBC Subsidiaries is now or has ever
been a member of a "controlled group of corporations" with or under
"common control" with any other entity as defined in Section 414(b) or
(c) of the Code.
5.13 LABOR AGREEMENTS AND ACTIONS. SCHEDULE 5.13 contains a list of all
collective bargaining agreements to which TBC or any of the TBC Subsidiaries
is a party or which relate to TBC or any of the TBC Subsidiaries. During the
Ownership Period, neither TBC nor any of the TBC Subsidiaries has experienced
any new attempt by organized labor or its Representatives to make such party
conform to demands of organized labor relating to its employees or to enter
into a binding agreement with organized labor that would cover the employees
of such party. Except as listed in SCHEDULE 5.13, there is no labor strike
or labor disturbance pending or, to the Knowledge of TBC, threatened against
either TBC or any of the TBC Subsidiaries, there are no disputes or
grievances subject to any grievance procedure, unfair labor practice
proceedings, arbitration or litigation under such agreements, which have not
been finally resolved, settled or
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otherwise disposed of and in the past five years neither TBC nor any of the
TBC Subsidiaries has experienced a work stoppage or other labor difficulty,
nor is there any default under any such agreements by TBC or any of the TBC
Subsidiaries, or, to the Knowledge of TBC, any other party thereto. Except
as set forth in SCHEDULE 5.13, TBC and each of the TBC Subsidiaries is in
compliance with all applicable laws respecting employment practices,
employment documentation, terms and conditions of employment and wages and
hours, except where the failure to be in compliance, individually or in the
aggregate, would not have a Material Adverse Effect and is not and has not
engaged in any unfair labor practice. There is no unfair labor practice
charge or complaint against either TBC or any of the TBC Subsidiaries pending
before the National Labor Relations Board or any other domestic or foreign
governmental agency and, to the Knowledge of TBC, there are no facts or
information which would give rise thereto.
5.14 ABSENCE OF CERTAIN CHANGES. Except as set forth in SCHEDULE 5.14,
since December 31, 1995, there has not been:
(a) any Material Adverse Change;
(b) (i) any declaration, setting aside or payment of any dividend
or other distribution by TBC in respect of the TBC Common Stock, or (ii) any
redemption, purchase or other acquisition of any shares of the capital stock
of TBC, or (iii) any bonus, fee or other payment to or on behalf of any TBC
Stockholder, any Affiliate of TBC or any Affiliate of any TBC Stockholder
(excluding payments to IMR, IMR General, Jacobs Management Corporation,
Jacobs Investors, Inc. or to Irwin L. Jacobs for fees, expenses and debts
owing of less than $140,000 in the aggregate), including, but not limited to,
any payment of principal of or interest on any debt owed to any TBC
Stockholder or Affiliate, or (iv) any payment of a bonus, fee or other
payment to any TBC Stockholder or Affiliate as an employee of TBC or any of
the TBC Subsidiaries of less than $160,000 in the aggregate;
(c) except events occurring in the ordinary course of business
(which shall include normal hiring of personnel, periodic performance reviews
and related compensation and benefit increases) (i) any increase in the rate
or terms of compensation or bonus payable or to become payable or benefits
due or to become due by TBC or any of the TBC Subsidiaries to their
respective current and former directors, officers, employees or agents
(collectively, "PERSONNEL"), (ii) adoption, creation or amendment of any TBC
Plan by TBC or any of the TBC Subsidiaries, (iii) employment agreement
(written or verbal) made by TBC to which TBC is a party, (iv) other change in
employment terms for any of the officers, employees or agents of TBC or any
of the TBC Subsidiaries;
(d) any issuance of or commitment to issue any shares of TBC Common
Stock or other capital stock of TBC, other than pursuant to stock options
outstanding as of December 31, 1995;
(e) any issuance of or commitment to issue any rights, options,
warrants or other securities exercisable into capital stock of TBC;
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(f) any entry into any agreements or commitments of any character
relating to the issued or unissued capital stock or other securities of TBC
or any of the TBC Subsidiaries obligating TBC or any of the TBC Subsidiaries
to issue any securities;
(g) any sale, lease, assignment or transfer of any of the Assets,
other than to Persons that are not Affiliates of TBC, any of the TBC
Subsidiaries or any TBC Stockholders not for fair consideration and in the
ordinary course of business;
(h) any cancellation, compromise, waiver, forgiveness, termination
or release of any rights or claims (or series of related rights or claims) or
any obligation or Liability (i) involving an Affiliate of TBC or any of the
TBC Subsidiaries, (ii) involving more than $50,000, or (iii) outside the
ordinary course of business;
(i) any amendment, modification, acceleration, cancellation,
termination, or, to the Knowledge of TBC, any threatened cancellation or
termination of any Contract, license or other instrument (i) involving an
Affiliate of TBC or any of the TBC Subsidiaries, (ii) involving payments by
TBC or any of the TBC Subsidiaries in excess of $50,000 under any single
contract, license or other instrument, (iii) involving payments to TBC or any
of the TBC Subsidiaries in excess of $250,000 under any single contract,
license or other instrument, or (iv) that is outside of the ordinary course
of business;
(j) any capital expenditure or the execution of any Lease or
Contract (or series of related Contracts or Leases) or any incurring of
liability therefor (i) involving an Affiliate of TBC or any of the TBC
Subsidiaries, (ii) involving payments in excess of $100,000 in the aggregate,
or (iii) outside the ordinary course of business;
(k) any delay or failure to repay when due any obligation in excess
of $50,000 of TBC or any of the TBC Subsidiaries;
(l) any failure to operate the Business in the ordinary course so
as to use reasonable efforts to preserve the Business intact, to keep
available to TBC and the TBC Subsidiaries the services of Personnel, and to
preserve for TBC and the TBC Subsidiaries the goodwill of the suppliers,
customers, agents, distributors and others having business relations with TBC
and the TBC Subsidiaries (it being understood that TBC is in no way
guaranteeing that such Personnel and goodwill will actually be maintained);
(m) any entry into any agreement, commitment or transaction by TBC
or any of the TBC Subsidiaries which is material to TBC and the TBC
Subsidiaries, taken as a whole, or the HVP Business taken as a whole, except
agreements, commitments or transactions in the ordinary course of business;
(n) any change by TBC or any TBC Subsidiary in accounting methods,
principles or practices except as disclosed to Buyer herein, or on a
Disclosure Schedule or Supplement hereto;
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(o) any revaluation by TBC or any TBC Subsidiary of any of the Assets
or Liabilities, including without limitation, writing off notes or accounts
receivable other than in the ordinary course of business;
(p) any material mortgage, pledge or other encumbrance of any of the
Assets, other than in the ordinary course of business;
(q) any indebtedness incurred by TBC or any TBC Subsidiary for
borrowed money or any commitment to borrow money entered into by TBC or any TBC
Subsidiary, or any loans or guarantees made or agreed to be made by TBC or any
TBC Subsidiary other than to non-Affiliates in the ordinary course of business;
(r) any incurrence of Liabilities involving $50,000 or more or
otherwise material to the Business, except for Liabilities arising in the
ordinary course of business, or any increase or change in any assumptions
underlying or methods of calculating any bad debt, contingency or other
reserves;
(s) any payment, discharge or satisfaction of any Liabilities, other
than such payment, discharge or satisfaction in the ordinary course of business;
(t) any capital investment in, loan to, or acquisition of the
securities or assets of any other Person (i) involving an Affiliate of TBC or
any of the TBC Subsidiaries, (ii) involving more than $50,000 in the aggregate,
or (iii) outside the ordinary course of business;
(u) any grant of any license or sublicense of any rights under or
with respect to any Intellectual Property of TBC or any of the TBC Subsidiaries
except in the ordinary course of business;
(v) any loan to, or other agreement with any Personnel outside the
ordinary course of business giving rise to any claim or right on its part
against the Person or on the part of the Person against it;
(w) any charitable or other capital contribution, individually or in
the aggregate in excess of $10,000, made or pledged by TBC or any TBC
Subsidiary;
(x) any payment by TBC or any TBC Subsidiary of any Sellers'
Transactional Expenses;
(y) any written or, to the Knowledge of TBC, oral agreement by TBC or
any TBC Subsidiary or any of their respective Personnel to do any of the
foregoing; or
(z) to the Knowledge of TBC, any other event or condition of any
character that individually or in the aggregate has a Material Adverse Effect.
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5.15 BOOKS AND RECORDS. With respect to and during the Ownership
Period: (a) each of TBC and each of the TBC Subsidiaries has made and kept
Books and Records and accounts, which, in reasonable detail, fairly reflect the
activities of such party, (b) the minute books of TBC and each of the TBC
Subsidiaries, as previously made available to the Buyer and its Representatives,
contain materially accurate and adequate records of all meetings of, and
corporate actions taken by (including action taken by written consent), the
respective stockholders and Board of Directors of TBC and each of the TBC
Subsidiaries, (c) the copies of the stock book records of TBC and each of the
TBC Subsidiaries heretofore delivered to the Buyer properly reflect all material
transactions effected in the stock of TBC and each of the TBC Subsidiaries
during the Ownership Period, and (d) neither TBC nor any of the TBC Subsidiaries
has engaged in any transaction, maintained any bank account or used any
corporate funds except for transactions, bank accounts and funds which have been
and are reflected in the normally maintained Books and Records thereof. At
Closing, the Books and Records of TBC and the TBC Subsidiaries will be in the
possession of TBC, except for those records and reports prepared and retained by
Representatives of IMR and its Affiliates.
5.16 PERSONAL PROPERTY AND ENCUMBRANCES; ASSETS. SCHEDULE 5.16 identifies
all owned items of personal property and all capitalized leases for items of
personal property of TBC or any of the TBC Subsidiaries which individually have
a book value in excess of $50,000. Except as set forth in SCHEDULE 5.16, and
except for personal property which has been sold or otherwise disposed of in the
ordinary course of business, TBC or a TBC Subsidiary owns free and clear from
any Encumbrances (except for (i) Encumbrances reflected in the Financial
Statements, (ii) Encumbrances for current taxes, assessments or governmental
charges or levies on property not yet due and delinquent which, in the
aggregate, are not substantial in amount, do not materially detract from the
value of the assets subject thereto or interfere with the present use and have
not arisen other than in the ordinary course of business, (iii) Encumbrances
arising by operation of law which, in the aggregate, are not substantial in
amount, do not materially detract from the value of the assets subject thereto
or interfere with the present use and have not arisen other than in the ordinary
course of business and (iv) Encumbrances described on the Disclosure Schedule
(collectively, Encumbrances of the type described in clauses (i), (ii), (iii)
and (iv) above are hereinafter sometimes referred to as "PERMITTED
ENCUMBRANCES")) or as set forth on SCHEDULE 5.16, leases or has the right to
use, the personal property set forth on SCHEDULE 5.16. To the Knowledge of TBC,
the personal property listed on SCHEDULE 5.16 has been maintained in accordance
with normal industry practice, is in reasonable operating condition and repair
(except for normal replacement practices and ordinary wear and tear) and is
sufficient for the operation of the Business as currently conducted.
5.17 INTELLECTUAL PROPERTY.
(a) POSSESSION OF INTELLECTUAL PROPERTY. TBC and each of the TBC
Subsidiaries possess all Intellectual Property necessary for the ownership of
its properties and the conduct of the Business as presently conducted. All
Intellectual Property of TBC and each of the TBC Subsidiaries is set forth in
SCHEDULE 5.17. All of the rights of TBC and the TBC Subsidiaries in the
Intellectual Property are valid and enforceable rights of TBC or the applicable
TBC Subsidiary and will not cease to be valid and in full force and effect by
reason of the execution, delivery and
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performance of this Agreement, the other Transaction Documents or the
consummation of the Transactions, except where the failure of such rights to
be valid and enforceable would not have a Material Adverse Effect. TBC and
each of the TBC Subsidiaries own or possess adequate and enforceable licenses
or otherwise have the right to use all of the Intellectual Property, except
where the failure to possess such licenses or have such right to use would
not have a Material Adverse Effect.
(b) NO PROCEEDINGS. Neither TBC nor any of the TBC Subsidiaries has
received any notice of any event, inquiry, investigation or proceeding
threatening the validity of any such Intellectual Property. TBC and the TBC
Subsidiaries have taken all reasonable and prudent steps to protect the
Intellectual Property listed on SCHEDULE 5.17 from infringement by any other
Person. No other Person (i) has, to the Knowledge of TBC, the right to use any
of the Trademarks or other such Intellectual Property on the goods and services
on which they are now being used either in identical form or in such near
resemblance thereto as to be likely, when applied to the goods of any such
Person, to cause confusion with such Trademarks or other Intellectual Property
or to cause a mistake or to deceive, (ii) has notified TBC or any of the TBC
Subsidiaries that it is claiming any ownership of or right to use such
Intellectual Property, or (iii) to the Knowledge of TBC, is infringing upon any
Intellectual Property in any way. The use of the Intellectual Property by TBC
and the TBC Subsidiaries does not conflict with, infringe upon or otherwise
violate the rights of any third party in or to such Intellectual Property, and
no Action has been instituted against or notices received by TBC or any of the
TBC Subsidiaries that are presently outstanding alleging that the use by TBC or
any TBC Subsidiary of the Intellectual Property infringes upon or otherwise
violates any rights of a third party in or to such Intellectual Property.
(c) PROPRIETARY RIGHTS. SCHEDULE 5.17 sets forth: (i) for each
Patent, the number, normal expiration date and subject matter for each country
in which such Patent has been issued, or, if applicable, the application number,
date of filing and subject matter for each country, (ii) for each Trademark, the
application serial number or registration number, the class of goods covered and
the expiration date for each country in which a Trademark has been registered,
(iii) for each Copyright, the number and date of filing for each country in
which a Copyright has been filed, and (iv) for each service mark, the service
mark serial number or the service mark registration number, the service mark
class of goods covered and the service mark expiration date for each country in
which a service mark has been registered. True and correct copies of all
Patents (including and all pending applications) owned, controlled, created or
used by or on behalf of TBC or any of the TBC Subsidiaries or in which TBC or
any of the TBC Subsidiaries has any interest have been provided to the Buyer.
Except for applications pending, all of the Patents, registered designs and
Trademarks listed on SCHEDULE 5.17 have been duly issued and, except as set
forth on SCHEDULE 5.17, all of the other Intellectual Property exist, is
registered and is subsisting. All of the pending Patent applications have been
duly filed.
5.18 FACILITIES AND LEASES.
(a) NO DEFAULT. SCHEDULE 5.18 contains a description of all Owned
Real Property of TBC and each of the TBC Subsidiaries and contains copies of any
preliminary or
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other title reports, if any, covering all of the Owned Real Property.
SCHEDULE 5.18 contains (i) a description of all Leases or sub-leases to which
TBC or any of the TBC Subsidiaries is a party requiring an annual aggregate
payment of at least $50,000 (the "MATERIAL LEASES"), and (ii) specifically,
and by way of limitation, a general description of the leased property or
items, the specific leasing party, the term, the applicable rent, any and all
renewal options, and any requirements for the consent of third parties with
respect to any provisions thereto. Except as otherwise set forth in SCHEDULE
5.18, each Material Lease is valid, binding and enforceable in accordance
with its terms and is in full force and effect; all rents and additional
rents due to date to or from TBC or any of the TBC Subsidiaries on each such
Material Lease have been paid; neither TBC nor any of the TBC Subsidiaries
have received any notice of cancellation or termination under any option or
right reserved to the lessor; neither TBC nor any of the TBC Subsidiaries
have received notice that it is in material Default under any such Material
Lease; and to TBC's Knowledge there exists no event, occurrence, condition or
act (including the consummation of the Transactions) which, with the giving
of notice, the lapse of time or the happening of any further event or
condition, would become a material Default by either TBC or any of the TBC
Subsidiaries under such Material Lease or, to the Knowledge of TBC, by any
other party. TBC shall use best reasonable commercial efforts to obtain the
consent of third parties in accordance with Section 7.1 hereof, where such
consent is necessary to the consummation of the Transactions as they affect a
specific Material Lease (except where the failure to obtain such consent
would not have a Material Adverse Effect).
(b) OWNED REAL PROPERTY. Except as set forth in SCHEDULE 5.18, TBC
and each of the TBC Subsidiaries have good and marketable fee simple title to
all of their Owned Real Property, free and clear of all Encumbrances, except for
minor liens which in the aggregate are not substantial in amount, do not
materially detract from the value or transferability of the property or assets
subject thereto or interfere with the present use and have not arisen other than
in the ordinary course of business. TBC and each of the TBC Subsidiaries enjoys
peaceful and undisturbed possession of all their respective Owned Real Property.
(c) ACTIONS. Except as set forth in SCHEDULE 5.18, there are no
pending or, to the Knowledge of TBC, threatened condemnation proceedings,
administrative proceeding, or other Actions relating to any Leases or other
Facility.
(d) LEASES OR OTHER AGREEMENTS. Except as listed on SCHEDULE 5.18,
there are no leases, subleases, licenses, occupancy agreements, options, rights,
concessions or other agreements or arrangements, written or oral, granting to
any Person the right to purchase, use or occupy any Facility of TBC or any TBC
Subsidiary, or any real property.
(e) FACILITY LEASES AND LEASED REAL PROPERTY. Except as set forth in
SCHEDULE 5.18 or as contemplated by this Agreement and the Transactions, with
respect to each Facility Lease, TBC or the applicable TBC Subsidiary has an
unencumbered interest in the Leasehold Estate. TBC or the applicable TBC
Subsidiary enjoys peaceful and undisturbed possession of all the Leased Real
Property, subject to the rights of the fee owners, and TBC and each of the TBC
Subsidiaries has in all material respects performed all the obligations required
to be performed by it through the date hereof.
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(f) CERTIFICATE OF OCCUPANCY. All Facilities have received all
required material approvals of governmental authorities (including without
limitation Permits and a certificate of occupancy or other similar certificate
permitting lawful occupancy of the Facilities) required in connection with the
operation thereof and have been operated and maintained in all material respects
in accordance with applicable Regulations, except where the failure to obtain
any such approvals or the failure to comply with any such Regulations would not
have a Material Adverse Effect.
(g) UTILITIES. To the Knowledge of TBC, all Facilities are supplied
with utilities (including without limitation water, sewage, disposal,
electricity, gas and telephone) and other services necessary for the operation
of such Facilities as currently operated, and there is no condition which, to
the Knowledge of TBC, would reasonably be expected to result in the termination
of the present access from any Facility to such utility services.
(h) IMPROVEMENTS, FIXTURES AND EQUIPMENT. To the Knowledge of TBC,
the improvements constructed on the Facilities, including without limitation all
Leasehold Improvements, and all Fixtures and Equipment and other tangible assets
owned, leased or used by TBC and each of the TBC Subsidiaries at the Facilities
are (i) structurally sound with no material defects, (ii) in good operating
condition and repair, subject to ordinary wear and tear, (iii) not in need of
maintenance, repair or correction except for ordinary routine maintenance and
repair, the cost of which would not be material, (iv) sufficient for the
operation of the Business as presently conducted, and (v) in conformity, in all
material respects, with all applicable Regulations, except where the failure to
conform with any such Regulation would not have a Material Adverse Effect. None
of the improvements is subject to any commitment or other arrangement for their
sale or use by any Affiliate of TBC or any TBC Subsidiary or any third parties.
(i) SUBLEASES. Except as set forth on SCHEDULE 5.18, there are no
subleases, licenses, options, rights, concessions or other agreements or
arrangements, written or, to the Knowledge of TBC, oral, granting to any Person
the right to use or occupy the property or any portion thereof or interest
therein, to which a Material Lease pertains.
(j) NO SPECIAL ASSESSMENT. None of IMR nor TBC nor any TBC
Subsidiary has received notice of any special assessment relating to any
Facility or any portion thereof and, to the Knowledge of TBC, there is no
pending or threatened special assessment.
5.19 MATERIAL CONTRACTS.
(a) CONTRACTS. Except for Contracts listed on SCHEDULE 5.19 and
except for: (A) Contracts made in the ordinary course of business, (B) Driver
Contracts, (C) customer and agent agreements not subject to disclosure pursuant
to Section 5.30, and (D) other Contracts expressly referenced in the Disclosure
Schedule in response to other disclosure requirements (including without
limitation Employment Matters under Section 5.12, Labor Agreements under Section
5.13, Personal Property under Section 5.16, Leases under Section 5.18, Insurance
under Section 5.20 and the Material Customer and Material Agent Agreements under
Section 5.30)),
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neither TBC nor any TBC Subsidiary is a party to, or bound by, any Contract
of any kind to be performed after the Effective Time (i) pursuant to which
TBC or any TBC Subsidiary is obligated to expend more than $50,000 in any
twelve-month period and that is not subject to cancellation on not more than
30 days' notice by TBC or a TBC Subsidiary without penalty or increased cost,
or (ii) with any Personnel or other Affiliates of TBC or any Subsidiary
(collectively (i) and (ii) above are "MATERIAL CONTRACTS" and individually
each is referred to as a "MATERIAL CONTRACT"). Except as set forth in
SCHEDULE 5.19, neither TBC nor any of the TBC Subsidiaries is bound by any
other material Contract, agreement or other arrangement (and any amendment,
modification or supplement in respect thereof), including, without limitation:
(i) any Contract, guarantee, other contingent liability,
warranty, guaranty or similar undertaking not in the ordinary course of
business;
(ii) any written arrangement (or group of related written
arrangements), Contracts, commitments or other agreements for the purchase
or sale of supplies, trailers, on-board equipment (including, without
limitation, pads, beams and straps) or other equipment, materials or
property or for the furnishing or receipt of services, including, without
limitation, any customer or vendor contracts, or relating to capital
expenditures (including, without limitation, BECOM 2000) pursuant to which
TBC or any TBC Subsidiary is required to provide expenditures in excess of
$50,000;
(iii) license, commission, consulting, agency or advertising
contracts or arrangements related to the Assets or the Business providing
for payments by TBC or any TBC Subsidiary in excess of $50,000 in any
twelve-month period;
(iv) any agreement, indenture or other instrument which contains
restrictions with respect to payment of dividends or any other distribution
in respect of its capital stock;
(v) any agreement, indenture, promissory note, loan, evidence of
indebtedness, letter of credit, guarantee or other instrument relating to
indebtedness, liability for borrowed money or the deferred purchase price
of property (excluding trade payables in the ordinary course of business),
whether TBC or any TBC Subsidiary shall be the borrower, lender or
guarantor thereunder or whereby any Assets are pledged;
(vi) any loan or advance to, or investment in, any Person or any
agreement, contract or commitment relating to the making of any such loan,
advance or investment or any agreement, contract or commitment involving a
sharing of profits, any of which, individually or in the aggregate, is or
involves in excess of $25,000;
(vii) any management service, consulting (other than
employment related consulting arrangements) or any other similar type of
contract;
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(viii) any agreement, contract or commitment limiting the
ability of TBC or any of the TBC Subsidiaries to engage in any line of
business or to compete with any Person;
(ix) any written arrangement (or group of related written
arrangements) concerning a partnership or joint venture with any other
Person;
(x) any oral contract, agreement or other arrangement with
respect to any of the matters referred to in the foregoing clauses (i)
through (ix) and any written proposal to enter into any contract, agreement
or other arrangement with respect to any of the matters referred to in the
foregoing clauses (i) through (ix).
TBC has made available to the Buyer true, correct and complete copies of all of
the Material Contracts listed on SCHEDULE 5.19, including all amendments and
supplements thereto and has included as part of SCHEDULE 5.19 a brief summary of
any such oral contracts, agreements or other arrangements and any written
proposals to enter into any such contracts, agreements or other arrangements.
(b) ABSENCE OF BREACHES AND DEFAULTS. Except as otherwise set
forth in SCHEDULE 5.19, each Contract or agreement set forth thereon is in
full force and effect and there exists no Default or event of default or, to
the Knowledge of TBC, event, occurrence, condition or act (including the
consummation of the Transactions) which, with the giving of notice, the lapse
of time or the happening of any other event or condition, would become a
Default or event of default thereunder, which Default would result, with
reasonable certainty, in a Material Adverse Effect. All of the Contracts set
forth on SCHEDULE 5.19 are valid, binding and enforceable in accordance with
their terms (except as such enforceability may be limited by (i) bankruptcy,
insolvency, moratorium, reorganization and other similar laws affecting
creditor's rights generally and (ii) the general principles of equity,
regardless of whether asserted in a proceeding in equity or at law). All of
the other Contracts and agreements to which TBC or any of the TBC
Subsidiaries is a party or by which it is bound or are valid, binding and
enforceable in accordance with their terms (except as such enforceability may
be limited by (i) bankruptcy, insolvency, moratorium, reorganization and
other similar laws affecting creditor's rights generally and (ii) the general
principles of equity, regardless of whether asserted in a proceeding in
equity or at law), except where the failure of any Contracts or Leases to be
binding, valid and enforceable would not, either individually or in the
aggregate, have a Material Adverse Effect. TBC and each of the TBC
Subsidiaries have fulfilled, or taken all action necessary to enable it to
fulfill when due, all of its obligations under each Contract and agreement by
which it is bound, except where the failure to fulfill or take such action
with respect to any Contracts or Leases, either individually or in the
aggregate, would not have a Material Adverse Effect. TBC and each of the TBC
Subsidiaries have and, to the Knowledge of TBC, all other parties to such
Contracts and agreements have, complied in all material respects with the
provisions thereof and no notice of any claim of Default has been given to
TBC or any of the TBC Subsidiaries. Except as set forth on SCHEDULE 5.19,
assuming the representations and warranties of the Buyer in Sections 6.2 and
6.3 are true in all material respects, none of the rights of TBC or any of
the TBC Subsidiaries in
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the Material Contracts will cease to be enforceable by TBC or such TBC
Subsidiary as a result of the consummation of the Transactions.
(c) SERVICE WARRANTY. Except as set forth in SCHEDULE 5.19, to TBC's
Knowledge, neither TBC nor any of the TBC Subsidiaries has committed any act,
and there has been no omission, which may result in, and there has been no
occurrence which may give rise to, Liability for breach of warranty (whether
covered by insurance or not) on the part of TBC or any of the TBC Subsidiaries,
with respect to services rendered prior to the Effective Time which would have a
Material Adverse Effect.
5.20 INSURANCE. TBC has delivered to Buyer copies of all current
policies (including indemnity agreements disclosed in Section 5.19 hereof) of
property, fire and casualty, product liability, workers compensation and
other forms of insurance owned or held by TBC or any of the TBC Subsidiaries
on the Business, the Assets, or their respective employees. All insurance
coverage applicable to each of TBC, the TBC Subsidiaries, the Business and
the Assets is in full force and effect and, to the Knowledge of TBC, provides
coverage as may be required by applicable Regulation and by any and all
Material Contracts to which TBC and any of the TBC Subsidiaries is a party.
There is no default under any such coverage nor, to the Knowledge of TBC, has
there been any failure to give notice or present any claim under any such
coverage in a due and timely fashion at any time during the Ownership Period.
There are no outstanding unpaid premiums, except in the ordinary course of
business, and no notice of cancellation or non-renewal of any such coverage
has been received. Neither TBC nor any of the TBC Subsidiaries have received
notice of any retrospective premium adjustments which have not been paid or
for which adequate reserves have not been established. During the Ownership
Period, all auto liability, product liability, general liability and workers'
compensation insurance policies maintained by TBC or any of the TBC
Subsidiaries have been occurrence policies and not claims made policies.
Except as set forth in SCHEDULE 5.20 there are no outstanding performance
bonds covering or issued for the benefit of TBC or any of the TBC
Subsidiaries. Except as set forth in SCHEDULE 5.20, neither TBC nor any of
the TBC Subsidiaries have received (i) any notice of cancellation of any
Insurance Policy, refusal of coverage, increase of premiums or failure to
renew thereunder, (ii) any notice that any issuer of such policy has filed
for protection under applicable bankruptcy laws or is otherwise in the
process of liquidating or has been liquidated, or (iii) any other indication
that such policies are no longer in full force or effect or that the issuer
of any such policy is no longer willing or able to perform its obligations
thereunder. To TBC's Knowledge, all policies and binders are in full force
and effect on the date hereof and shall be kept in full force and effect
through the Effective Time.
5.21 INTERESTS IN CUSTOMERS, SUPPLIERS, ETC. Except as set forth in
SCHEDULE 5.21, none of TBC nor any TBC Subsidiary nor IMR nor any officer,
director or, to the Knowledge of TBC, employee of TBC or any of the TBC
Subsidiaries or any Affiliates of any of the foregoing (nor any member of any
such Person's immediate family) (i) possesses, directly or indirectly, any
material ownership interest in, or is a director, officer or employee of, any
Person which is a supplier, agent, customer, lessor, lessee, licensor,
developer, competitor or potential competitor of TBC or any of the TBC
Subsidiaries or (ii) is presently a party to any material transaction with TBC
or any of the TBC Subsidiaries, including without limitation, any contract,
agreement or
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other arrangement otherwise requiring payments to (other than for services as
officers, directors or employees of TBC or any of the TBC Subsidiaries) any
such Person or corporation, partnership, trust or other entity in which any
such Person has an interest as a stockholder, officer, director, trustee or
partner. Notwithstanding the foregoing, the foregoing shall not apply to any
interest or holdings in a publicly registered or traded Person, investment in
stock by a pension, profit sharing or similar plan or the employment by a
Person in a non-key position of any spouse of a director, officer, or
employee.
5.22 ENVIRONMENTAL MATTERS. The representations and warranties made in
this Section 5.22: (i) are limited to the Knowledge of TBC, (ii) apply only to
the Company Property, and (iii) are limited in scope such that if the condition
described does exist, it, along with all such other conditions described, will
not, individually or in the aggregate, have a Material Adverse Effect. Subject
to the foregoing, and, except as set forth on SCHEDULE 5.22:
(a) HAZARDOUS MATERIALS. Hazardous Materials are not being handled,
transported, generated, used, treated or stored on or released or disposed on or
about any Company Property.
(b) FACILITIES. TBC and each of the TBC Subsidiaries and the Company
Property are in compliance with Environmental Laws and the requirements of
Permits issued under such Environmental Laws with respect to any Company
Property.
(c) PENDING ACTIONS. There have not been and are no pending or, to
the Knowledge of TBC, threatened Environmental Claims against TBC or any of the
TBC Subsidiaries or any Company Property.
(d) PERMITS. TBC and each of the TBC Subsidiaries have all Permits
required under any Environmental Law and each Company Property is in compliance
with all such Permits.
(e) PERMITS REQUIRED. The consummation of the Transactions will not
require an application for issuance, renewal, transfer or extension of, or any
other administrative action regarding, any Permit required under any
Environmental Law.
(f) ENVIRONMENTAL CONDITIONS. There are no present Environmental
Conditions in any way relating to the Business of TBC or any of the TBC
Subsidiaries, including the Company Property.
(g) CERCLA OR RCRA. No current use, generation, treatment,
transportation, storage, disposal or handling practice of TBC or any of the TBC
Subsidiaries with respect to any Hazardous Material has or will result in any
liability under CERCLA or RCRA (as in effect as of the date hereof and on the
Effective Date) or any state or local law of similar effect.
(h) STORAGE TANK OR PIPELINE. There is no underground or
above-ground storage tank or pipeline at any Company Property where the
installation, use, maintenance, repair, testing, closure or removal of such
tank or pipeline is not in compliance with all Environmental Laws and
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there has been no Release from or rupture of any such tank or pipeline,
including without limitation any Release from or in connection with the
filling or emptying of such tank.
(i) ENVIRONMENTAL AUDITS OR ASSESSMENTS. True, complete and correct
copies of the written reports, and all parts thereof, including any drafts of
such reports if such drafts are in the possession or control of TBC or any of
the TBC Subsidiaries, of all environmental audits or assessments which have been
conducted at any Company Property within the past five years, either by TBC or
any of the TBC Subsidiaries or any attorney, environmental consultant or
engineer engaged for such purpose, have been delivered to the Buyer and a list
of all such reports, audits and assessments and any other similar report, audit
or assessment of which TBC or any of the TBC Subsidiaries have knowledge is
included on SCHEDULE 5.22.
(j) INDEMNIFICATION AGREEMENTS. Neither TBC nor any of the TBC
Subsidiaries are, singularly or collectively, a party, whether as a direct
signatory or as successor, assign or third party beneficiary, or otherwise
bound, to any lease or other contract under which TBC or any of the TBC
Subsidiaries are obligated by or entitled to the benefits of, directly or
indirectly, any representation, warranty, indemnification, covenant, restriction
or other undertaking concerning Environmental Conditions.
(k) RELEASES OR WAIVERS. During the Ownership Period, neither TBC
nor any of the TBC Subsidiaries have released any other Person from any claim
under any Environmental Law or waived any rights concerning any Environmental
Condition.
(l) NOTICES, WARNINGS AND RECORDS. During the Ownership Period, TBC
and each of the TBC Subsidiaries have given all notices and warnings, made all
reports, and have kept and maintained all records required by and in compliance
with all Environmental Laws.
5.23 COMPLIANCE WITH LAW. Except as otherwise disclosed on SCHEDULE 5.23,
neither TBC nor any of the TBC Subsidiaries nor the conduct of the Business has
violated or has failed or is failing to be in compliance with all Regulations
and Court Orders relating to the Assets or the Business or operations of TBC or
any of the TBC Subsidiaries, except where the violations or failure to comply,
individually or in the aggregate, would not have a Material Adverse Effect.
Each of TBC and the TBC Subsidiaries, in the conduct of the Business, is in
conformity with all energy, public utility, zoning, building and health codes,
regulations and ordinances, OSHA and Environmental Laws and all other foreign,
federal, state, and local governmental and regulatory requirements applicable to
the conduct of the Business, except where the failure to be in conformity,
either individually or in the aggregate, would not have a Material Adverse
Effect. To the Knowledge of TBC, neither TBC nor any of the TBC Subsidiaries
nor IMR has received any notice to the effect that, or otherwise been advised
that, such party is not in compliance with any such Regulations or Court Orders.
5.24 NO OTHER AGREEMENTS TO SELL ASSETS OR CAPITAL STOCK OF TBC OR THE TBC
SUBSIDIARIES. SCHEDULE 5.24 sets forth all of the non-core locations of BMS
(the "NON-CORE ASSETS"). Except for sales of Non-Core Assets, none of TBC, any
of the TBC Subsidiaries, any of the TBC Stockholders or any of their respective
officers, directors, stockholders or Affiliates
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has any commitment or legal obligation, absolute or contingent, to any other
Person or firm, other than as contemplated by this Agreement, to sell,
assign, transfer or effect a sale of all or a material portion of the Assets,
to sell or effect a sale of any of the capital stock of TBC or any of the TBC
Subsidiaries, to effect any merger, consolidation, liquidation, dissolution
or other reorganization of TBC or any of the TBC Subsidiaries, or to enter
into any agreement or cause the entering into of an agreement with respect to
any of the foregoing.
5.25 ACCOUNTS RECEIVABLE. The accounts receivable reflected on the Year
End Balance Sheets, and all accounts receivable arising since the Year End
Balance Sheet Date, represent bona fide claims of TBC and the TBC Subsidiaries
against debtors for sales, services performed or other charges arising on or
before the date hereof, and, to the Knowledge of TBC, all the goods delivered
and services performed which gave rise to said accounts were delivered or
performed in accordance with the applicable orders, Contracts or customer
requirements.
5.26 PURCHASE COMMITMENTS AND OUTSTANDING BIDS. Except as set forth in
SCHEDULE 5.26, there is no outstanding bid, proposal, Contract or unfilled order
made by TBC or any of the TBC Subsidiaries, or, to the Knowledge of TBC, made by
BMS which relates to the Business which will or would, if accepted, have a
Material Adverse Effect.
5.27 PAYMENTS. TBC and the TBC Subsidiaries have not (i) directly or
indirectly, paid or delivered any fee, commission or other sum of money or item
or property, however characterized, to any finder, agent, client, customer,
supplier, government official or other party, in the United States or any other
country, which is in any manner related to the Business, Assets or operations of
TBC or any of the TBC Subsidiaries, which is, or may be with the passage of time
(excluding changes in law) or discovery, illegal under any present federal,
state or local laws of the United States (including without limitation the U.S.
Foreign Corrupt Practices Act) or any other country having jurisdiction, (ii)
participated, directly or indirectly, in any boycotts or other similar practices
affecting any of its actual or potential customers, or (iii) established or
maintained any unrecorded fund or asset for any purpose or made any false
entries on the Books and Records of TBC or any of the TBC Subsidiaries for any
reason.
5.28 BANK ACCOUNTS, POWERS OF ATTORNEY. Set forth in SCHEDULE 5.28 is an
accurate and complete list showing (i) the name and address of each bank in
which TBC or any of the TBC Subsidiaries has any account, safe deposit box,
borrowing arrangement or certificate of deposit, the number of any such account
or any such box and the names of all Persons authorized to draw thereon or to
have access thereto and (ii) the names of all Persons, if any, holding powers of
attorney from TBC.
5.29 COMPENSATION OF EMPLOYEES. Set forth in SCHEDULE 5.29 is an accurate
and complete list as of December 31, 1995 showing the names of all Persons
employed by TBC or any of the TBC Subsidiaries who are expected to receive more
than $90,000 annualized cash compensation in the calendar year 1996 from TBC or
any of the TBC Subsidiaries (including, without limitation, salary, commission
and bonus) and who are expected to be employed by TBC or any of TBC Subsidiaries
on the Effective Date.
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5.30 CUSTOMER AND AGENT RELATIONS. SCHEDULE 5.30 sets forth a complete and
accurate list as of December 31, 1995 of (a) the names and addresses of the
fifteen largest (i) Household Goods Business customers and (ii) HVP Business
customers (collectively, clauses (i) and (ii) above, the "MATERIAL CUSTOMERS"),
showing as to each such Material Customer the approximate total sales in dollars
during calendar year 1995 and (b) the names of the fifteen largest (i) Household
Goods Business agents and (ii) HVP Business agents (collectively, clauses (i)
and (ii) above, the "MATERIAL AGENTS"), showing as to each such Material Agent
the approximate total revenue received in dollars by TBC or the applicable TBC
Subsidiary during calendar year 1995. Except as otherwise set forth in SCHEDULE
5.30, each Contract or agreement between TBC or any of the TBC Subsidiaries and
the Material Customers and Material Agents is in full force and effect and there
exists no Default or event of default or, to the Knowledge of TBC, event,
occurrence, condition or act (including the consummation of the Transactions)
which, with the giving of notice, the lapse of time or the happening of any
other event or condition, would become a Default or event or default thereunder,
which Default would, with reasonable certainty, have a Material Adverse Effect.
All of the Contracts between TBC or any of the TBC Subsidiaries and the Material
Customers and Material Agents are valid, binding and enforceable in accordance
with their terms (except as such enforceability may be limited by (i)
bankruptcy, insolvency, moratorium, reorganization and other similar laws
affecting creditor's rights generally and (ii) the general principles of equity,
regardless of whether asserted in a proceeding in equity or at law). Except as
set forth in SCHEDULE 5.30, to the Knowledge of TBC there has not been any
change in relations with customers or agents of TBC or any TBC Subsidiary as a
result of the Transactions which has resulted in a Material Adverse Change. To
TBC's Knowledge, neither TBC nor any of the TBC Subsidiaries has received any
communication from any Material Customer or Material Agent named on SCHEDULE
5.30 of any intention to terminate or materially reduce the business done with
TBC or any of the TBC Subsidiaries. Except as set forth on SCHEDULE 5.30,
neither TBC nor any of the TBC Subsidiaries has received any notice (oral or
written) that any relationship between TBC or any of the TBC Subsidiaries and
any agent of any such party is not a bona-fide independent contractor
relationship under applicable law. TBC has provided to, and Buyer acknowledges
receipt of, a complete listing of all Household Goods Business agents and HVP
Business agents prior to the execution of this Agreement.
5.31 INFORMATION PROVIDED. TBC and IMR represent and warrant that the
Agreement and Disclosure Schedule and all exhibits hereof and certificates
delivered pursuant hereto do not and will not contain any untrue statement of a
material fact or omit to state any material fact required to be provided or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. Between the date hereof and the
Effective Time, TBC and IMR agrees promptly to correct any information provided
by it to the extent that it shall have become false or misleading in any
material respect and to supplement such information for use by the Buyer in
order to make the information given to the Buyer, in light of the circumstances
under which they were made, not misleading.
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ARTICLE VI.
REPRESENTATIONS AND WARRANTIES OF THE BUYER AND THE
TRANSITORY SUBSIDIARY
The Transitory Subsidiary and the Buyer jointly and severally hereby
represent and warrant to TBC, IMR and IMR General that the following
representations and warranties are, as of the date hereof, and will be, as of
the Effective Date, true and correct:
6.1 ORGANIZATION. Each of the Buyer and the Transitory Subsidiary is (a)
a corporation duly organized, validly existing and in good standing under the
laws of its state of incorporation, and (b) is duly qualified to conduct
business, properly licensed and in good standing under the laws of each
jurisdiction where such qualification and licensing is required, except where
the failure to be so qualified, licensed or in good standing would not have a
Material Adverse Effect.
6.2 AUTHORIZATION. Each of the Buyer and the Transitory Subsidiary has
full power and authority (including full corporate power and authority) to
execute and deliver this Agreement and the other Transaction Documents to which
it is a party and to perform its obligations hereunder and thereunder and
consummate the Transactions. This Agreement and the other Transaction Documents
to which the Buyer and the Transitory Subsidiary is a party constitute the valid
and legally binding obligations of the Buyer and the Transitory Subsidiary,
enforceable against the Buyer and the Transitory Subsidiary in accordance with
their respective terms and conditions and, assuming due execution of this
Agreement by TBC and IMR and of such other Transaction Documents by the other
parties thereto, are enforceable in accordance with their respective terms and
conditions, except to the extent that its enforceability may be subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles, regardless of whether asserted in a proceeding in equity
or at law.
6.3 NONCONTRAVENTION. None of the execution, delivery or performance of
this Agreement and the other Transaction Documents, nor the consummation of the
Transactions, will (i) violate or conflict with any provision of the Certificate
of Incorporation or Bylaws of either the Buyer or the Transitory Subsidiary,
(ii) violate any Regulation (excluding notice requirements and approvals of
"change of control") or Court Order to which either the Buyer or the Transitory
Subsidiary is subject, (iii) violate, conflict with, result in a breach of,
constitute a default under, result in the acceleration or termination of, create
in any party the right to accelerate, terminate, modify, or cancel, or require
any notice under any agreement, contract, lease, license, Permit, indebtedness,
note, bond, indenture, security or pledge agreement, commitment, franchise,
instrument or other arrangement to which the Buyer or the Transitory Subsidiary
is a party or by which it is bound or to which any of its assets is subject,
except in the cases of each of clauses (ii) and (iii) above, where the
violation, conflict, breach, default, acceleration, termination, modification,
cancellation or failure to give notice would not, either individually or in the
aggregate, have a Material Adverse Effect. Other than in connection with the
provisions of the HSR Act, the Delaware Law, the Interstate Commerce Commission
(or other similar federal transportation authority, as applicable) and any state
authorities regulating the provision of
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transportation services, neither the Buyer nor the Transitory Subsidiary must
give any notice to, make any declaration, filing or registration with, or
obtain any Permit from any government or governmental agency in connection
with the execution, delivery and performance of this Agreement and the other
Transaction Documents and the consummation of the Transactions, except where
the failure to give notice, to file, or to obtain any Permit would not have a
Material Adverse Effect.
6.4 BROKERS' FEES. Except for fees payable to William E. Simon & Sons,
L.L.C., and William E. Myers & Co., neither the Buyer nor the Transitory
Subsidiary has any liability or obligation to pay any fees or commissions to any
broker or finder with respect to the Transactions. None of TBC, IMR or IMR
General will have any liability or other obligation with respect to any fees or
costs of either the Buyer or the Transitory Subsidiary in respect of this
Agreement or the Transactions.
6.5 LITIGATION. There are no Actions in progress, pending or in effect
against or relating to Buyer or the Transitory Subsidiary arising from or in
connection with the Transactions and neither Buyer nor the Transitory Subsidiary
has knowledge of or has any reason to be aware of any basis for the same.
6.6 CAPITALIZATION OF BUYER AND TBC AND FRAUDULENT CONVEYANCE. On the
Closing Date, after giving effect to the Closing and the Transactions
contemplated hereby to occur on the Closing Date, Buyer and TBC will have the
long-term debt and equity capitalization within the range set forth on
Schedule 6.6. Buyer and the Transitory Subsidiary represent and warrant that
the Transactions will not be construed as a fraudulent conveyance or transfer
which may or could result in any liability on the part of IMR or the TBC
Stockholders. Notwithstanding any contrary provision contained in this
Agreement or any Transaction Document, this representation shall survive for
the statute of limitations period applicable to fraudulent transfers and
conveyances applicable under the Delaware Law, the law of the State of
Illinois or any applicable law of the jurisdiction in which such claim is or
may be brought, whichever last expires. Buyer and the Transitory Subsidiary
further represent and warrant that (i) they are entering into the
Transactions without the actual intent to hinder, delay or defraud any
creditor of TBC or the TBC Subsidiaries, (ii) IMR and the other TBC
Stockholders have, to Buyer's best knowledge, received reasonably equivalent
value for the TBC Shares, and (iii) the Surviving Corporation and its
Subsidiaries (a) are not about to engage in a business or transaction for
which the Assets of the Surviving Corporation or its Subsidiaries are
unreasonably small in relation to such business or transaction, (b) will not
incur debts beyond the ability of the Surviving Corporation or its
Subsidiaries to pay as they become due, and (c) will not be rendered
insolvent by the consummation of the Transactions contemplated by this
Agreement.
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ARTICLE VII.
ADDITIONAL AGREEMENTS AND COVENANTS OF TBC,
THE TRANSITORY SUBSIDIARY AND THE BUYER
7.1 FURTHER ASSURANCES. Upon the terms and subject to the conditions
contained herein, each of the Parties hereto agrees (subject to the limitations
on IMR's authority and ability under law to do so), that both before and after
the Closing: (a) each of the Parties will use its best reasonable commercial
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper or advisable in order to consummate and make
effective the Transactions (including satisfaction, but not waiver, of the
Closing conditions set forth in Article VIII below); (b) each of the Parties
will execute any documents, instruments or conveyances of any kind which may be
reasonably necessary or advisable to carry out the Transactions; and (c) each of
the Parties will cooperate with each other Party connection with the foregoing
clauses 7.1(a) and (b), including using their respective best reasonable
commercial efforts to: (i) give any notices (and cause any of the TBC
Subsidiaries to give any notices) to third parties and undertake to obtain (and
cause any of the TBC Subsidiaries to undertake to obtain) any required waivers,
consents and approvals from other parties to the Material Contracts,
Intellectual Property instruments and Material Leases; (ii) defend all Actions
challenging this Agreement or the consummation of the Transactions; (iii) lift
or rescind any injunction or restraining order or other Court Order adversely
affecting the ability of the Parties to consummate the Transactions; and (iv)
give any notices to, make any filings or registrations with (including, without
limitation, submission of information requested by governmental authorities),
and use its best reasonable commercial efforts to obtain any Material Permits
required under the Regulations. Without limiting the generality of the
foregoing: (A) TBC will undertake to obtain Stockholders' Consent as soon as
reasonably practicable in order that the TBC Stockholders may consider the
adoption of this Agreement in accordance with Delaware Law; (B) each of the
Parties will file any Notification and Report Forms and related material that it
may be required to file with the Federal Trade Commission and the Antitrust
Division of the United States Department of Justice under the HSR Act (and Buyer
or the Surviving Corporation shall be obligated to remit all fees and costs to
third parties and authorities in connection therewith), will use its best
reasonable commercial efforts to obtain an early termination of the applicable
waiting period, and will make any further filings pursuant thereto that may be
necessary; (C) each of the Parties will make best reasonable commercial efforts
to file any notices, reports, forms and related materials that it may be
required to file with the Interstate Commerce Commission or other similar
federal transportation authority, as applicable, and the state transportation
regulatory authorities (and Buyer or the Surviving Corporation shall be
obligated to remit all fees and costs to third parties and authorities in
connection with any proceeding or filing required due to the Transactions). All
action required under clauses 7.1(c)(iii)(A) through (D) above shall be
commenced immediately upon execution of this Agreement; provided, however, that
the Parties acknowledge and agree that certain approvals, other than under the
HSR Act, may not be obtained prior to the Effective Date, and, except to the
extent that TBC or IMR has breached a specific representation or warranty as set
forth in Article V or this covenant pertaining to such an approval, no liability
to IMR shall accrue therefrom.
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7.2 NO SOLICITATION. From the date hereof through the Closing or the
earlier termination of this Agreement, none of IMR, IMR General, TBC, any TBC
Subsidiary, or any of their respective Affiliates shall, directly or indirectly
(whether on its own or through its Representatives), enter into, solicit,
initiate or continue any discussions or negotiations with, or encourage or
respond to any inquiries or proposals by, or participate in any negotiations
with, or provide any information to, or otherwise cooperate in any other way
with, any corporation, partnership, Person or other entity or group, other than
the Transitory Subsidiary, the Buyer and their respective Representatives,
concerning any sale of all or a material portion of the Assets or the Business
(other than in the ordinary course of business), or of any shares of capital
stock of TBC, or any merger, consolidation, liquidation, dissolution or similar
transaction involving TBC (each such transaction being referred to herein as a
"PROPOSED ACQUISITION TRANSACTION"). None of IMR, IMR General, TBC, any TBC
Subsidiary or any of their respective Affiliates shall, directly or indirectly,
through any Representative or otherwise, solicit, initiate or encourage the
submission of any proposal or offer from any Person (including, without
limitation, a "Person" as defined in Section 13(d)(3) of the Exchange Act) or
entity relating to any Proposed Acquisition Transaction or participate in any
negotiations regarding, or furnish to any other Person any information with
respect to TBC or any of the TBC Subsidiaries for the purposes of, or otherwise
cooperate in any way with, or assist or participate in, facilitate or encourage,
any effort or attempt by any other Person to seek or effect a Proposed
Acquisition Transaction. Each of TBC and IMR hereby represents that neither it
nor any of its Affiliates is now engaged in negotiations with any party other
than the Transitory Subsidiary and the Buyer with respect to any of the
foregoing. Each of TBC and IMR shall notify the Transitory Subsidiary and the
Buyer promptly (orally and in writing) if any written offer, or any inquiry or
contact with any Person with respect to any Proposed Acquisition Transaction, is
made and shall provide the Transitory Subsidiary and the Buyer with a copy of
such offer and with the identity of the Person making such inquiry or contact.
TBC and the TBC Subsidiaries agree not to release any third party from, or waive
any provision of, any confidentiality or standstill agreement to which TBC or
any of the TBC Subsidiaries is a party.
7.3 NOTICE OF DEVELOPMENTS. From the date hereof through the Closing,
each Party will give prompt written notice to each other Party of (i) the
occurrence, or failure to occur, of any event which occurrence or failure would
be likely to cause any representation or warranty contained in this Agreement or
in any exhibit or schedule hereto or in the other Transaction Documents to be
untrue or inaccurate in any material respect and (ii) any material failure of
TBC, the Buyer, the Transitory Subsidiary, IMR or IMR General or any of their
respective Affiliates, or of any of their respective stockholders or
Representatives, to comply with or satisfy any covenant, condition or agreement
to be complied with or satisfied by it under this Agreement or any exhibit or
schedule hereto or in the other Transaction Documents. Except as set forth in
Section 10.16 hereof, no disclosure by any party pursuant to this Section 7.3,
however, shall be deemed to prevent or cure any misrepresentation, breach of
warranty or breach of covenant or to satisfy any condition. Each of TBC, IMR
and the Buyer shall promptly notify the other Parties of any Default, the threat
or commencement of any Action, or any development that occurs before the Closing
that could in any way materially affect TBC or any of the TBC Subsidiaries, the
Assets or the Business.
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7.4 FULL ACCESS. From the date hereof through the Effective Time the
Buyer intends to continue to conduct a review of the business and financial
condition of TBC and the TBC Subsidiaries. In connection with such review:
(a) TBC and its Representatives will (and will cause each of the TBC
Subsidiaries and their respective Representatives to) permit Representatives of
the Buyer to have full access at all reasonable times, and in a manner so as not
to interfere with the normal business operations of TBC and the TBC
Subsidiaries, to all the officers, employees, agents, attorneys, accountants,
properties, Books and Records and Contracts and other documents of or pertaining
to each of TBC and the TBC Subsidiaries, and shall furnish the Buyer and its
Representatives all financial, operating and other data and information as the
Buyer or its Affiliates, through their respective Representatives, may
reasonably request, including an unaudited balance sheet and the related
statements of income, retained earnings and cash flow for each month from the
date hereof through the Effective Time within 30 calendar days after the end of
each month, which financial statements shall meet the standards set forth in
Section 5.7 hereof.
(b) The Buyer will treat and hold as Confidential Information any
such information it receives from TBC or any of the TBC Subsidiaries in the
course of the reviews contemplated by this Section 7.4, will not use any such
information except in connection with the Transactions, and, if this Agreement
is terminated for any reason whatsoever, agrees to return to TBC all tangible
embodiments (and all copies) thereof which are in its or any of its Affiliates'
or Representatives' possession.
7.5 OPERATION OF BUSINESS. Except as contemplated by this Agreement, from
the date hereof through the Closing, TBC and IMR will not (and will not cause or
permit any of the TBC Subsidiaries to) engage in any practice, take any action,
operate the Business or enter into any transaction outside the ordinary course
or inconsistent with this Agreement without the written consent of Buyer.
Without limiting the generality of the foregoing, without such written consent:
(a) neither TBC nor any of the TBC Subsidiaries will authorize or
effect any change in their respective charters, articles of incorporation, or
bylaws;
(b) neither TBC nor any of the TBC Subsidiaries will fail to use its
best reasonable commercial efforts in the ordinary course of business to
(i) retain the employees of TBC or any of the TBC Subsidiaries, (ii) maintain
the Business so that such employees will remain available to the Surviving
Corporation and its Subsidiaries at and after the Effective Time, (iii) maintain
existing relationships with suppliers, agents, customers and others having
business dealings with TBC and the TBC Subsidiaries, and (iv) otherwise preserve
the goodwill of the Business so that such relationships and goodwill will be
preserved for the Surviving Corporation and its Subsidiaries at and after the
Effective Time;
(c) neither TBC nor any of the TBC Subsidiaries will enter into,
extend, materially modify, terminate or renew any Contract or Lease, except in
the ordinary course of business;
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(d) neither TBC nor any of the TBC Subsidiaries will grant any
options, warrants, or other rights to purchase or obtain any of its respective
capital stock, except for those options previously scheduled to be granted in
connection with the TBC 1993 Employee Stock Option Plan, or issue, sell, or
otherwise dispose of any of its respective capital stock (except upon the
conversion or exercise of options, warrants, and other rights currently
outstanding);
(e) neither TBC nor any of the TBC Subsidiaries will declare, set
aside, make or pay any dividend or other distribution with respect to its
capital stock (whether in cash or in kind) or redeem, repurchase, or otherwise
acquire any of its respective capital stock, in either case outside the ordinary
course of business;
(f) neither TBC nor any of the TBC Subsidiaries will issue any note,
bond, or other debt security or create, incur, assume or guarantee any
indebtedness for borrowed money or capitalized lease obligation, incur any other
Liability, or indemnify others outside the ordinary course of business;
(g) except as to sales of Non-Core Assets, of which Buyer will be
advised prior to any such action, neither TBC nor any of the TBC Subsidiaries
will sell, assign, transfer, convey, lease, impose any Encumbrance upon or
otherwise dispose of or encumber any of the Assets, which sale, assignment,
transfer, conveyance, lease, imposition of Encumbrance or other disposition is,
individually or in the aggregate, in excess of $50,000;
(h) within the exercise of reasonable business judgment, neither TBC
nor any of the TBC Subsidiaries will fail to expend funds for budgeted capital
expenditures or commitments, including, without limitation, with respect to
BECOM 2000;
(i) neither TBC nor any of the TBC Subsidiaries will willingly allow
or permit to be done any act by which any of the Insurance Policies may be
suspended, impaired or canceled;
(j) neither TBC nor any of the TBC Subsidiaries will fail to pay its
accounts payable, or pay or discharge when due any Liabilities, or fail to
collect its accounts receivable in the ordinary course of business;
(k) neither TBC nor any of the TBC Subsidiaries will enter into,
renew, modify or revise any agreement or transaction with any of its Affiliates
other than for the transfer of cash in accordance with such Affiliates' ordinary
course cash management practices;
(l) neither TBC nor any of the TBC Subsidiaries will fail to
maintain the Assets in substantially their current state of repair, excepting
normal wear and tear, or fail to replace, consistent with past practice,
inoperable, worn-out or obsolete or destroyed Assets, except where the
failure to so maintain or replace the Assets would not, individually or in
the aggregate, have a Material Adverse Effect;
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(m) neither TBC nor any of the TBC Subsidiaries will make any loans
or advances to any individual, partnership, firm or corporation, except for
expenses incurred in the ordinary course of business;
(n) neither TBC nor any of the TBC Subsidiaries will make any income
tax election or settlement or compromise with tax authorities that would
materially affect or impair the Business or the Assets, PROVIDED, HOWEVER, that
Buyer's consent shall not be unreasonably withheld, conditioned or delayed;
(o) neither TBC nor any of the TBC Subsidiaries will fail to comply
in any material respect with any material Regulations applicable to such Person,
the Assets (taken as a whole) or the Business;
(p) neither TBC nor any of the TBC Subsidiaries will intentionally do
any other act which would cause any representation or warranty of IMR or TBC in
this Agreement to be or become untrue in any material respect;
(q) neither TBC nor any of the TBC Subsidiaries will acquire by
merger or consolidation with, or merge or consolidate with, or make any capital
investment in, make any loan to, or acquire the securities or assets of any
other Person or division of any Person or otherwise acquire any material assets
or business of any Person outside the ordinary course of business;
(r) neither TBC nor any of the TBC Subsidiaries will take any action
with respect to the grant of any bonus, severance or termination pay (other than
pursuant to policies or agreements of TBC or such TBC Subsidiary in effect on
the date hereof that are described in the Disclosure Schedule) or with respect
to any increase of benefits payable under its severance or termination pay
policies or agreements in effect on the date hereof or increase in any manner
the compensation or fringe benefits of any employee or pay any benefit not
required by any existing TBC Plan or policy or otherwise make any change in
employment terms for any of its respective directors, officers, and employees
outside the ordinary course of business including, without limitation:
(i) making any change in the key management structure of TBC,
including, without limitation, the hiring of additional officers or the
termination of existing officers;
(ii) except in the ordinary course of business, adopting,
entering into or amending any TBC Plan, agreement (including without
limitation any collective bargaining or employment agreement), trust, fund
or other arrangement for the benefit or welfare of any employee, except for
any such amendment as may be required to comply with applicable
Regulations; or
(iii) failing to maintain all TBC Plans in accordance with
applicable Regulations;
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(s) neither TBC nor any of the TBC Subsidiaries will make any payment
of any kind to or on behalf of any Affiliate or any officer or director of such
Affiliate, pursuant to any agreement between TBC or any of the TBC Subsidiaries
and such Affiliate or otherwise other than in the ordinary course of business;
and
(t) neither TBC nor any of the TBC Subsidiaries will commit, or
otherwise become obligated, to do any action prohibited hereunder.
7.6 VOTING OF TBC COMMON STOCK. IMR acknowledges that IMR is the record
and beneficial owner of at least 90,000 shares of TBC Common Stock (the "IMR
SHARES"). IMR hereby agrees that during the period commencing on the date
hereof and continuing through the Effective Time that: (i) IMR will use its
best reasonable commercial efforts to obtain the Stockholders' Consent and the
consent of the board of directors of TBC, (ii) at any meeting of TBC
Stockholders or directors (whether annual or special and whether or not an
adjourned or postponed meeting), however called, or in connection with any
written consent of the TBC Stockholders, and, assuming no material breach hereof
by the Buyer or the Transitory Subsidiary, IMR shall vote (or cause to be voted)
the IMR Shares (a) in favor of the Transactions, the execution and delivery by
TBC of this Agreement and the other Transaction Documents and the approval and
adoption of the terms thereof and each of the other actions contemplated by the
Transaction Documents and any action required in furtherance thereof, and (b)
against any action or agreement that would result in a breach in any respect of
any covenant, representation or warranty or any other obligation or agreement of
TBC under the Transaction Documents, and (iii) IMR will not enter into any
agreement or understanding with any person or entity the effect of which would
be inconsistent or violative of the provisions and agreements contained in this
Section 7.6. In the event Buyer holds TBC Shares prior to the Effective Date,
Buyer agrees that it shall vote in favor of the consummation of the
Transactions.
7.7 FILING OF TAX RETURNS. The parties agree and acknowledge that the
Payment Agent shall have the right and obligation to prepare (and shall have the
power to file when due, after giving effect to any applicable extensions), the
federal and state income Tax Returns of TBC and the TBC Subsidiaries for the
fiscal year ended March 31, 1996 (the "1996 TAX RETURNS"), together with any
amendments to Tax Returns for prior years as a result thereof, and any
amendments of income Tax Returns filed prior to March 31, 1996. The reasonable
costs of such preparation shall be paid to the Payment Agent by the Surviving
Corporation. The Payment Agent agrees and acknowledges that in the preparation
of the 1996 Tax Returns, there shall be no changes to tax accounting methods or
in the tax elections from the methods and elections used in the preparation of
the respective Tax Returns for prior years except as may be required as a result
of federal or state audits of prior Tax Returns. In furtherance of the
foregoing, Buyer or the Surviving Corporation will engage, at its own expense,
an accounting firm to review the federal and state 1996 Tax Returns and any
amended income Tax Return prior to March 31, 1996 (the "TAX ACCOUNTING FIRM").
The level of such review shall be sufficient to allow the Tax Accounting Firm to
sign such Tax Returns as preparer. Assuming the Payment Agent's due delivery,
such Tax Returns shall be provided to the Tax Accounting Firm no later than 30
days prior to the applicable due date and the Tax Accounting Firm shall complete
its review and provide its comments to IMR not later than 15 days prior to the
due date and an appropriate officer of the
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Surviving Corporation shall sign the Tax Returns prepared at the request of
the Payment Agent; PROVIDED, HOWEVER, that in no event shall IMR's liability
for Damages as a result of Taxes be limited in any way as a result of the
signing by the Tax Accounting Firm or the Surviving Corporation of the Tax
Returns prepared by the Payment Agent pursuant to this Section 7.7.
7.8 ESTABLISHMENT OF RESERVE FOR CENTRAL STATES PENSION FUND LIABILITIES.
Prior to the Closing, TBC shall reserve, and the Closing Balance Sheet shall
reflect, an aggregate of $89,000 for liabilities and expenses incurred prior to
or to be incurred after the Closing in connection with any "partial withdrawal"
or "complete withdrawal" (as defined in Sections 4203 and 4205, respectively, of
ERISA) of TBC, any TBC Subsidiary or any ERISA Affiliate from the Central
States, Southeast and Southwest Areas Pension Fund.
7.9 ESTABLISHMENT OF RESERVE FOR NON-CORE ASSETS. Prior to the Closing,
TBC shall reserve, and the Closing Balance Sheet shall reflect, any and all
amounts required under GAAP to account for liabilities and expenses incurred
prior to or to be incurred after the Closing in connection with any sale by TBC
or any TBC Subsidiary of any Non-Core Assets completed prior to the Closing.
ARTICLE VIII.
CONDITIONS TO THE OBLIGATIONS OF TBC, IMR, IMR GENERAL,
THE BUYER AND THE TRANSITORY SUBSIDIARY
8.1 CONDITIONS TO THE OBLIGATION OF THE BUYER AND THE TRANSITORY
SUBSIDIARY. The respective obligations of the Buyer and the Transitory
Subsidiary to consummate the Transactions are subject to satisfaction of the
following conditions:
(a) TBC STOCKHOLDER APPROVAL. This Agreement, the other Transaction
Documents and the Merger and the other Transactions shall have received the
approval of the TBC Stockholders;
(b) REPRESENTATIONS AND WARRANTIES. The representations and
warranties set forth in Article V above shall be true and correct in all
material respects on and as of the date of this Agreement and at and as of the
Effective Time, except and to the extent that the facts and conditions upon
which such representations and warranties are based are expressly required or
permitted to be changed by the terms hereof and except and to the extent Buyer
has waived inaccuracies pursuant to the procedure set forth in Section 10.16
hereof;
(c) PERFORMANCE. TBC, IMR and IMR General shall have performed and
complied with all of their respective agreements, covenants and obligations
hereunder in all material respects through the Closing;
(d) NO REGULATION OR COURT ORDER. There shall not be any Regulation
or Court Order in effect preventing or enjoining the consummation of any of the
Transactions;
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(e) NO PROCEEDINGS OR LITIGATION. No Action by any governmental
authority or other Person shall have been instituted or threatened which
questions the validity or legality of the Transactions and which could
reasonably be expected to materially damage any Party hereto if the
Transactions are consummated, except to the extent that the institution or
threat of such Action is based solely on the act of the Party (or its
Affiliates or Representatives) seeking to avoid the Transactions;
(f) CERTIFICATES. TBC, IMR and IMR General shall have delivered to
the Buyer certificates of their respective officers and others to the effect
that each of the conditions specified in Sections 8.1(a)-(c) is satisfied in all
respects;
(g) FINANCING. The Buyer shall have (i) secured the financing
required to consummate the Merger and the other Transactions (including amounts
required to repay any and all amounts due under the Loan Agreement), upon terms
and subject to conditions reasonably satisfactory to it, and (ii) received
confirmation that the Jacobs Debt shall have been repaid by TBC;
(h) REGULATORY COMPLIANCE AND APPROVAL. All applicable waiting
periods (and any extensions thereof) under the HSR Act shall have expired or
otherwise been terminated and the Parties shall have in good faith undertaken or
have agreed to undertake to obtain all Permits, consents, waivers and approvals
of governmental authorities and shall have obtained all consents, waivers and
approvals of other Persons under the Material Contracts and Material Leases.
Each Party hereto shall be satisfied that all approvals required to be obtained
by any other Party hereto under any Regulations to carry out the Transactions
shall have been subject to a good faith undertaking to obtain by such other
Party and that each other Party hereto shall have complied with or undertaken to
comply with all Regulations applicable to the Transactions;
(i) OPINION. The Buyer and the Transitory Subsidiary shall have
received from the respective counsel to TBC, IMR and IMR General an opinion in
form and substance mutually satisfactory to the Parties and customary in
transactions of the type contemplated by this Agreement and the other
Transaction Documents, addressed to the Buyer and the Transitory Subsidiary, and
dated as of the Effective Date;
(j) OTHER AGREEMENTS. The following agreements shall have been
executed (or, if executed concurrently herewith, shall remain in full force and
effect) and delivered by each of the parties thereto in form reasonably
satisfactory to the Buyer and the Transitory Subsidiary in their sole
discretion: (i) the Stockholders' Agreement, and (ii) the employment agreement
dated as of the Effective Date between Andrew Estoclet and TBC (the "ESTOCLET
AGREEMENT");
(k) NO NEW ELECTIONS. No new elections by TBC with respect to income
Taxes, or changes in current elections with respect to income Taxes, affecting
the Buyer shall have been made after the date of this Agreement without the
prior written consent of the Buyer;
(l) NO MATERIAL ADVERSE CHANGE. Since the date of the Most Recent
Fiscal Quarter End Financial Statements, there shall not have been any Material
Adverse Change;
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(m) REVIEW OF AGENCY AND CUSTOMER RELATIONSHIPS. The Parties shall
jointly cooperate in the notification of the Material Customers and Material
Agents concerning the Transactions contemplated herein. The manner, means and
method of communication with such Material Agents and Material Customers shall
be mutually determined by the Parties. Buyer shall have determined in good
faith but within its sole discretion that the responses to such communications
have been satisfactory;
(n) RESOLUTIONS. The Buyer and the Transitory Subsidiary shall have
received from each of TBC, IMR and IMR General resolutions adopted by the board
of directors and stockholders, as the case may be, of such Parties, approving
this Agreement, the other Transaction Documents and the Transactions, certified
by the corporate secretary of such other Parties, as applicable;
(o) SATISFACTORY TO BUYER. All actions to be taken by TBC, IMR and
IMR General in connection with consummation of the Transactions and all
certificates, opinions, instruments, and other documents required to effect the
Transactions shall have been reasonably satisfactory in form and substance to
the Buyer and the Transitory Subsidiary;
(p) REVIEW OF FORMERLY OWNED PROPERTIES. The Buyer shall have
completed a review of the Owned Real Property formerly owned by TBC and the TBC
Subsidiaries, which review shall be satisfactory to Buyer in its sole
discretion;
(q) PURCHASE OF PURCHASED INTERESTS. The Payment Agent shall have
purchased the Purchased Interests as described in Section 2.3(b) hereof and
prior to or at the Effective Time all such Purchased Interests shall have been
contributed to TBC, and held in treasury or cancelled, retired or otherwise
extinguished; and
(r) SOLVENCY OPINION. The Buyer and the Transitory Subsidiary shall
have received, from Houlihan Lokey Howard & Zukin, Inc. (or other nationally
recognized firm mutually acceptable to the Parties), a customary "solvency"
opinion in form and substance mutually satisfactory to the Parties (the
"SOLVENCY OPINION"). The Solvency Opinion shall be addressed to the Parties,
shall be dated as of the Effective Date, and shall include the rendering firm's
opinion as to whether (among such other matters as the Parties may establish by
mutual agreement) (i) the Surviving Corporation would be rendered insolvent by
the consummation of the transactions contemplated by the Agreement, (ii)
following the consummation of such Transactions, the Surviving Corporation's
assets would be unreasonably small in relation to its business or such
transactions, and (iii) following such consummation, the Surviving Corporation
would be able to pay its debts as they mature.
The Buyer may waive any condition specified in this Section 8.1 if it
executes a writing so stating at or prior to the Closing (except with respect to
Section 8.1(a) which shall apply according to its terms) or shall be deemed to
have waived any condition if, to the Knowledge of Buyer, a particular condition
is not met and Buyer elects, nonetheless, to proceed to Closing.
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8.2 CONDITIONS TO OBLIGATION OF TBC, IMR AND IMR GENERAL. The respective
obligations of TBC, IMR and IMR General to consummate the Transactions are
subject to satisfaction of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties set forth in Article VI above shall be true and correct in all
material respects on and as of the date of this Agreement and at and as of the
Effective Time, except and to the extent that the facts and conditions upon
which such representations and warranties are based are expressly required or
permitted to be changed by the terms hereof and except and to the extent TBC and
IMR have waived inaccuracies pursuant to the procedures set forth in
Section 10.16 hereof;
(b) PERFORMANCE. The Buyer and the Transitory Subsidiary shall have
performed and complied with all of their respective agreements, covenants and
obligations hereunder in all material respects through the Closing;
(c) NO REGULATION OR COURT ORDER. There shall not be any Regulation
or Court Order in effect preventing or enjoining the consummation of any of the
Transactions are consummated;
(d) NO PROCEEDINGS OR LITIGATION. No Action by any governmental
authority or other Person shall have been instituted or threatened which
questions the validity or legality of the Transactions and which could
reasonably be expected to materially damage any Party hereto if the Transactions
are consummated, except to the extent that the institution or threat of such
Action is based solely on the act of the Party (or its Affiliates or
Representatives) seeking to avoid the Transactions;
(e) CERTIFICATES. The Buyer and the Transitory Subsidiary shall have
delivered to TBC, IMR and IMR General certificates of their respective officers
and others to the effect that each of the conditions specified in Section 8.2(a)
and (b) is satisfied in all respects;
(f) REGULATORY COMPLIANCE AND APPROVAL. All applicable waiting
periods (and any extensions thereof) under the HSR Act shall have expired or
otherwise been terminated and the Parties shall have in good faith undertaken or
have agreed to undertake to obtain all Permits, consents, waivers and approvals
of governmental authorities and shall have obtained all consents, waivers and
approvals of other Persons under the Material Contracts and Material Leases.
Each Party hereto shall be satisfied that all approvals required to be obtained
by any other Party hereto under any Regulations to carry out the Transactions
shall have been subject to a good faith undertaking to obtain by such other
Party and that each other Party hereto shall have complied with or undertaken to
comply with all Regulations applicable to the Transactions;
(g) OPINIONS. TBC, IMR and IMR General shall have received from
counsel to the Buyer and the Transitory Subsidiary an opinion in form and
substance mutually agreeable to the Parties and customary in transactions of the
type contemplated by this Agreement and the other Transaction Documents,
addressed to TBC, IMR and IMR General, and dated as of the Effective Date;
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(h) RESOLUTIONS. TBC shall have received from the Buyer and the
Transitory Subsidiary resolutions adopted by the board of directors and
stockholders, as the case may be, of such Parties, approving this Agreement, the
other Transaction Documents and the Transactions, certified by the corporate
secretary of such other Parties, as applicable;
(i) SATISFACTORY TO TBC, IMR AND IMR GENERAL. All actions to be
taken by the Buyer and the Transitory Subsidiary in connection with consummation
of the Transactions and all certificates, opinions, instruments, and other
documents required to effect the Transactions shall have been reasonably
satisfactory in form and substance to TBC, IMR and IMR General;
(j) OTHER AGREEMENTS. The Estoclet Agreement and the Stockholders
Agreement shall have been executed (or, if executed concurrently herewith, shall
remain in full force and effect) and delivered by each of the parties thereto;
(k) PAYMENT OF IRWIN L. JACOBS. Payment of the Jacobs Debt shall
have been remitted by TBC to Mr. Jacobs.
(l) RELEASE OF GUARANTEES AND OTHER OBLIGATIONS. Prior to Closing
any and all guarantees, letters of credit, contingent obligations and all other
obligations given to third parties which arise from or are associated with the
Business or financing of TBC or any of the TBC Subsidiaries, by IMR, Irwin L.
Jacobs or any Affiliate thereof (the "RELEASED OBLIGATIONS") shall have been
unconditionally released and extinguished, unless IMR has elected to waive such
condition, in which case the Surviving Corporation shall continue to diligently
pursue the release and extinguishment of the Released Obligations after the
Effective Date. To the extent the Released Obligations are not unconditionally
released and extinguished prior to or on the Effective Date, Buyer and the
Transitory Subsidiary shall defend, indemnify and hold harmless IMR, Irwin L.
Jacobs and any Affiliates thereof from and against any Damages (as hereinafter
defined) in respect of Released Obligations to the extent that such Damages
first arise after the Effective Date as a result of actions or inactions by
Buyer; and
(m) SOLVENCY OPINION. TBC, IMR and IMR General shall have received
the Solvency Opinion.
TBC, IMR and IMR General may waive any condition specified in this Section 8.2
if it executes a writing so stating at or prior to the Closing or shall be
deemed to have waived any condition if Roger Cloutier, II, Gary Holter or Andrew
Estoclet has actual knowledge that such condition is not met and TBC, IMR and
IMR General elect, nonetheless, to proceed to Closing.
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ARTICLE IX.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATIONS
9.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. All
statements contained in the Disclosure Schedule, any Supplement or in any
certificate, schedule, exhibit or instrument of conveyance delivered by or on
behalf of the Parties pursuant to this Agreement or in connection with the
Transactions shall be deemed to be representations and warranties of such
Parties. Subject to the provisions of Section 10.1 of this Agreement, the
representations, warranties and agreements of the Parties hereto shall survive
the Closing as follows: (a) except as set forth in Section 9.1(c) below, the
representations and warranties (other than those set forth in Section 6.6) and
the agreements of Buyer and the Transitory Subsidiary shall survive the
Effective Time indefinitely, and the representations and warranties of the Buyer
and the Transitory Subsidiary set forth in Section 6.6 shall terminate when the
applicable statute of limitations with respect to the Liabilities in question
expire (giving effect to any extensions and waivers thereof), and (b) the
representations, warranties and agreements of IMR, IMR General and TBC shall
survive the Closing and shall terminate May 31, 1998; PROVIDED, HOWEVER, that
the representations and warranties of IMR and TBC contained in Sections 5.11 and
5.12 of this Agreement shall terminate when the applicable statute of
limitations with respect to the Liabilities in question expire (giving effect to
any extensions or waivers thereof), and (c) the agreements of the Parties set
forth in Articles II, III and X and, subject to Section 9.2(g), in this Article
IX shall survive the Effective Time indefinitely and those set forth in
Sections 10.9 and 10.11 shall survive termination pursuant to Section 10.1
indefinitely.
9.2 AGREEMENT TO DEFEND AND INDEMNIFY.
(a) BY IMR. IMR shall indemnify, save and hold harmless the Buyer,
the Transitory Subsidiary, the Surviving Corporation and their respective
Affiliates and Representatives (collectively, the "BUYER INDEMNIFIED PARTIES"),
from and against any and all costs, losses, Taxes, liabilities, obligations,
damages, lawsuits, deficiencies, claims, demands, and expenses (whether or not
arising out of third-party claims), including without limitation interest,
penalties, costs of mitigation, losses in connection with any Environmental Law
(including, without limitation, costs for any clean-up, remedial, corrective or
response action, costs of compliance activities, fines and penalties), and other
losses resulting from any shutdown or curtailment of operations (although each
Party hereto who is an indemnified party shall, and shall cause its Affiliates
and Representatives to, use commercially reasonable efforts to mitigate any such
losses), damages to the environment, reasonable attorneys' fees and all
reasonable amounts paid in investigation, defense or settlement (incurred solely
in accordance with the terms, conditions and agreements hereof, including
without limitation the provisions of Section 9.2(e)) of any of the foregoing
(herein, "DAMAGES"), incurred in connection with, arising out of, resulting from
or incident to (i) any breach or inaccuracy of any representation or warranty
made by IMR, IMR General or TBC in or pursuant to this Agreement or any of the
other Transaction Documents; (ii) any breach of any covenant or agreement made
by IMR, IMR General or TBC in or pursuant to this Agreement or any of the other
Transaction Documents; (iii) any Damages for Taxes of TBC or any of the TBC
Subsidiaries for any taxable periods ending at or before
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March 31, 1996 (the "PRE-CLOSING TAX PERIOD") whether or not paid or payable
at any time prior to or after the Pre-Closing Tax Period, except (a) to the
extent of any reserves for such Taxes (other than a Tax Audit Adjustment, as
to which indemnification shall be available) reserved on the Closing Balance
Sheet, and (b) Damages for disallowed deductions for TBC costs and expenses
incurred in connection with the Transactions; (iv) any Damages (as a result
of Treasury Regulation Section 1.1502-6(a) or otherwise) for Taxes of any
Person (other than TBC or any of the TBC Subsidiaries) with which TBC or any
of the TBC Subsidiaries is or has been Affiliated or has filed or has been
required to file a consolidated, combined or unitary Tax Return prior to the
Closing; (v) any Damages of any nature (absolute, accrued, contingent or
otherwise) of TBC or any of the TBC Subsidiaries or any ERISA Affiliate not
otherwise reserved for on the Closing Balance Sheet (A) arising under or
relating to any TBC Plan other than any Multiemployer Plan with respect to
any event, action, failure to act or period prior to the Closing, or (B)
arising under or relating to any Multiemployer Plan with respect to any
event, action, failure to act or period prior to or up to the end of the
fifth calendar year beginning after the Closing, including in connection with
any "complete withdrawal" or "partial withdrawal" from such Multiemployer
Plan as defined in Sections 4203 and 4205, respectively, of ERISA, but
excluding any damages or liabilities under any collective bargaining
agreements for breach of contract or unfair labor practice which occurs after
the Closing; PROVIDED, HOWEVER, that the Buyer Indemnified Parties shall be
indemnified for Damages pursuant to this Section 9.2(a)(v) only when the
aggregate amount of such Damages exceeds $100,000 and, thereafter, only to
the extent of such excess; (vi) any Damages in respect of Dissenting Shares
(including, without limitation, any costs of establishing fair value of such
Dissenting Shares under the Delaware Law, and all amounts payable as a result
of such valuation proceedings); (vii) any Damages in respect of Sellers'
Transactional Expenses; (viii) any Damages in respect of actions or failures
to act by IMR General or its Representatives or agents in it capacity as
Payment Agent for the TBC Stockholders; (ix) any Damages or obligations
arising out of CERCLA, any equivalent state statute or any other
Environmental Law or Environmental Claims not otherwise reserved for on the
Closing Balance Sheet, except to the extent that such Liability or obligation
is caused primarily by actions of Buyer or the Surviving Corporation
occurring after the Effective Time; and (x) any Damages in respect of the
Loan Agreement not otherwise reserved for on the Closing Balance Sheet.
(b) BY THE BUYER. The Buyer shall indemnify, save and hold harmless
the TBC Stockholders, IMR, IMR General, the Former Holders and their respective
Representatives and Affiliates (collectively, the "STOCKHOLDER INDEMNIFIED
PARTIES") from and against any and all Damages incurred in connection with,
arising out of, resulting from or incident to (i) any breach or inaccuracy of
any representation or warranty made by the Buyer or the Transitory Subsidiary in
or pursuant to this Agreement or any of the other Transaction Documents; or (ii)
any breach of any covenant or agreement made by the Buyer or the Transitory
Subsidiary in or pursuant to this Agreement or any of the other Transaction
Documents; or (iii) any Damages in respect of Released Obligations to the extent
that such Damages first arise after the Effective Date as a result of actions or
inactions by Buyer; and (iv) any Damages resulting from any assertion,
investigation, prosecution or judicial determination that the Transactions
constituted a fraudulent conveyance or fraudulent transfer or otherwise operated
to hinder or defraud creditors of TBC.
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(c) DAMAGES. The term "DAMAGES" as used in this Section 9.2 is not
limited to matters asserted by third parties against any indemnified party, but
includes Damages incurred or sustained by any indemnified party in the absence
of third party claims. Payments by any indemnified party of amounts for which
such indemnified party is indemnified hereunder shall not be a condition
precedent to recovery. Any indemnifying party's obligation to indemnify any
indemnified party shall not limit any other rights, including without limitation
rights of contribution, which either party may have under statute or common law.
(d) COOPERATION. Each indemnified party shall cooperate in good
faith and in all reasonable respects with each indemnifying party and its
Representatives (including without limitation its attorneys) in the
investigation, trial and defense of any lawsuit or action and any appeal arising
therefrom; PROVIDED, HOWEVER, that such indemnified party may, at its own cost,
participate (by observation and suggestion only) in negotiations, arbitrations
and the investigation, trial and defense of such lawsuit or action and any
appeal arising therefrom. The Parties shall cooperate with each other in any
notifications to insurers, and in the provision of information and
documentation, at no cost to the indemnifying party, including without
limitation, copies of documents, availability and cooperation of executives and
employees, use of the indemnified party's facilities and access to any and all
books and records. In furtherance of the foregoing, the indemnified party shall
fully cooperate with the indemnifying party and, at the request of the
indemnifying party, provide any required waivers, consents, powers of attorney
and approvals reasonably necessary, desirable or required for the indemnifying
party to properly, without limitation, investigate, review, negotiate, defend,
compromise or settle any matter the indemnified party has undertaken pursuant to
this Agreement, including those matters set forth in Section 9.2(e) hereof.
(e) DEFENSE OF CLAIMS.
(i) If a claim for Damages (a "CLAIM") is to be made by a party
entitled to indemnification hereunder against the indemnifying party, the party
claiming such indemnification shall, subject to Section 9.1, give written notice
(a "CLAIM NOTICE") to the indemnifying party as soon as practicable after the
party entitled to indemnification becomes aware of any fact, condition or event
which may give rise to Damages for which indemnification may be sought under
this Section 9.2. If any lawsuit or enforcement action is filed against any
party entitled to the benefit of indemnity hereunder, written notice thereof
shall be given to the indemnifying party as promptly as practicable (and in any
event within fifteen (15) calendar days after the service of the citation or
summons). The failure of any indemnified party to give timely notice hereunder
shall not affect rights to indemnification hereunder, except to the extent that
the indemnifying party demonstrates actual damage caused by such failure. After
such notice, if the indemnifying party shall acknowledge in writing to the
indemnified party that the indemnifying party shall be obligated under the terms
of its indemnity hereunder in connection with such lawsuit or enforcement
action, then the indemnifying party shall be entitled, if it so elects at its
own cost, risk and expense, (a) to take control of the defense and investigation
of such lawsuit or enforcement action, (b) to employ and engage attorneys of its
own choice to handle and defend the same unless the named parties to such action
or proceeding (including any impleaded parties) include both the indemnifying
party and the indemnified party, and, in the good faith
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determination of counsel to the indemnifying party, notice of which shall be
promptly delivered to the indemnified party, there is an actual conflict of
interest between the indemnified party and the indemnifying party recognized
under applicable Rules of Professional Responsibility (such determination not
to consider the Claim for Damages the indemnified party has asserted or may
ultimately assert against the indemnifying party), in which event the
indemnified party shall be entitled, at the indemnifying party's reasonable
cost, risk and expense, to separate counsel of its own choosing, and (c) to
compromise or settle such lawsuit or enforcement action, which compromise or
settlement shall be made only with the written consent of the indemnified
party, such consent not to be unreasonably withheld, delayed or conditioned.
If the indemnifying party fails to assume the defense of such lawsuit or
enforcement action within fifteen (15) calendar days after receipt of the
Claim Notice, the indemnified party against which such lawsuit or enforcement
action has been asserted will (upon delivering notice to such effect to the
indemnifying party) have the right to undertake, at the indemnifying party's
cost and expense, the defense, compromise or settlement of such lawsuit or
enforcement action on behalf of and for the account and risk of the
indemnifying party; PROVIDED, HOWEVER, that such lawsuit or enforcement
action shall not be compromised or settled without the written consent of the
indemnifying party, which consent shall not be unreasonably withheld, delayed
or conditioned. In the event the indemnified party assumes the defense of
the lawsuit or enforcement action, the indemnified party will keep the
indemnifying party reasonably informed of the progress of any such defense,
compromise or settlement; PROVIDED, HOWEVER, that the indemnifying party may,
at its own cost, participate (by observation and suggestion only) in
negotiations, arbitrations and the investigation, trial and defense of any
such lawsuit or enforcement action and any appeal arising therefrom. The
indemnifying party shall be liable for any settlement of any lawsuit or
enforcement action effected pursuant to and in accordance with this Section
9.2 and for any final judgment (subject to any right of appeal), and the
indemnifying party agrees to indemnify and hold harmless an indemnified party
from and against any Damages by reason of such settlement or judgment.
(ii) In furtherance of the foregoing paragraph (i) above and
except for any lawsuits or enforcement actions (which are covered in paragraph
(e)(i) above), Buyer and the Surviving Corporation agree and acknowledge that
they shall make their respective best reasonable commercial efforts to advise
IMR as soon as practicable upon becoming aware of any fact, condition or event
or upon the receipt of notice of any Action, claim or other notice (whether
formal or otherwise) of any investigation, claim, audit, examination, review or
other matter (including without limitation all matters or issues pertaining to
Taxes, ERISA, Benefit Arrangements, or Environmental Matters) which may give
rise to a Claim under this Agreement or any Transaction Document. The failure
of the Buyer and/or the Surviving Corporation to give timely notice hereunder
shall not affect their rights to indemnification, except to the extent IMR
demonstrates actual damage caused by such failure. If, after the receipt of
such notice and prior to the expiration of the Examination Period (as defined
below), IMR acknowledges in writing to the Buyer Indemnified Parties that IMR
shall be obligated under the terms of its indemnity with respect to the matter
in question, IMR shall have the right under the terms hereof (a) to undertake,
at its own cost, risk and expense, the investigation, review and defense of any
existing or potential claim, audit, examination, review or other such event, (b)
to employ and engage attorneys, accountants and other professionals and
consultants of its own choice to review, investigate, negotiate and defend the
same unless the parties to such matter include both IMR and/or one of
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its Affiliates and TBC and/or one of its Affiliates, and, in the good faith
determination of counsel to IMR, notice of which shall be promptly delivered
to TBC, there is an actual conflict of interest between such Persons
recognized under applicable Rules of Professional Responsibility (such
determination not to consider the Claim for Damages TBC and/or one of its
Affiliates has asserted or may ultimately assert against IMR and/or one of
its Affiliates), in which event TBC and/or such Affiliate shall be entitled,
at IMR's reasonable cost, risk and expense, to separate counsel of its own
choosing, and (c) to compromise or settle such claim, audit, examination,
review or other such matter, which compromise or settlement shall be made
only with the written consent of TBC, which consent shall not be unreasonably
withheld, delayed or conditioned. If IMR fails to so acknowledge such an
indemnification obligation with respect to such matter prior to the
expiration of the Examination Period, TBC shall have the right to undertake,
at IMR's expense, the investigation, review and defense of the existing or
potential claim, audit, examination, review or other such event (including
compromise and settlement) on behalf of and for the account and risk of IMR;
PROVIDED, HOWEVER, that the matter shall not be compromised or settled
without the written consent of IMR, which consent shall not be unreasonably
withheld, delayed or conditioned. In the event TBC assumes the defense of
the matter, TBC will keep IMR reasonably informed of the progress of any such
defense, compromise or settlement; PROVIDED, HOWEVER, that IMR may, at its
own cost, participate (by observation and suggestion only) in negotiations,
arbitrations and the investigation, trial and defense of any such matter and
any appeal arising therefrom. IMR shall be liable for any settlement of any
matter effected pursuant to and in accordance with this Section 9.2 and for
any final judgment (subject to any right of appeal), and IMR agrees to
indemnify and hold harmless TBC from and against any Damages by reason of
such settlement or judgment. The foregoing shall specifically apply to any
and all federal or state income or other Tax audit examinations, including
the present IRS audit (which shall continue to be undertaken by IMR, and,
further, is specifically subject to the provisions of 9.2(d) hereof). For
the purposes of this Agreement, "EXAMINATION PERIOD" shall mean the lesser of
(a) one-half of the remaining period of time in which TBC is required to
respond to any third party in respect of the circumstances contemplated by
this Section 9.2(e)(ii), giving effect to any extensions or waivers of such
period secured by IMR, and (b) 30 days following the date upon which IMR
receives the notice contemplated by the first sentence of this paragraph.
(f) REPRESENTATIVES. No individual Representative of any Party, or
their respective Affiliates, shall be personally liable for any Damages under
the provisions contained in this Section 9.2. Nothing herein shall relieve any
party of any Liability to make any payment expressly required to be made by such
party pursuant to this Agreement.
(g) OTHER MATTERS. Notwithstanding anything to the contrary
contained in this Agreement:
(i) IMR's liability under the indemnification provisions of
Section 9.2(a) hereof or otherwise under this Agreement shall be subject to
reduction in an amount equal to the value of any net tax benefit (giving effect
to the time value of money at a discounting rate of 10%) realized (by reason of
a tax deduction, basis adjustment, shifting of income, credits and/or deductions
or otherwise from one or more fiscal periods to another) or insurance benefit
realized
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by Buyer in connection with the loss or damage suffered by Buyer which forms
the basis of IMR's liability hereunder;
(ii) in no event shall the Buyer Indemnified Parties seek
indemnification from IMR pursuant to Sections 9.2(a)(i) and 9.2(a)(ix) hereof
until the aggregate amount of Damages under Sections 9.2(a)(i) and 9.2(a)(ix)
for which the Buyer Indemnified Parties are seeking indemnification exceeds
$600,000 (the "DEDUCTIBLE");
(iii) the aggregate amount of liability for Damages of IMR
in respect of Section 9.2(a) (including but not limited to any and all
liabilities of IMR for costs, expenses and attorneys' fees paid or incurred in
connection therewith or in connection with the curing of any and all
misrepresentations or breaches of representations, warranties or covenants under
this Agreement) is limited to an amount which does not exceed the Purchase Price
actually paid to and received by the Payment Agent;
(iv) the indemnification obligations of IMR pursuant to Section
9.2(a)(i) (except with respect to the representations and warranties made in
Section 5.11 and 5.12 of this Agreement), 9.2(a)(vi) and 9.2(a)(ix) shall
survive until May 31, 1998. The indemnification obligations of IMR under
Section 9.2(a)(i) (solely with respect to the representations and warranties
made in Sections 5.11 and 5.12 of this Agreement), 9.2(a)(ii), 9.2(a)(iii),
9.2(a)(iv), 9.2(a)(v), 9.2(a)(vii), 9.2(a)(viii) and 9.2(a)(x) shall extend
until the termination of the applicable statute of limitations; PROVIDED,
HOWEVER, that, subject to the provisions of Section 9.2(g)(vii) below, (A) the
Buyer Indemnified Parties shall have the right to make a Claim hereunder prior
to the time at which the Deductible (if any) that is applicable to such Claim
has been surpassed for the purpose of asserting such Claim within the relevant
survival period of the applicable indemnification obligation, and (B) any such
Claim made within such period shall, to the extent such Deductible ultimately is
met, survive until its final resolution;
(v) it is specifically understood and agreed that in the event
a misrepresentation made herein or pursuant hereto or a breach of any
representation, warranty or covenant contained herein is discovered by Buyer and
asserted by it after the Closing, the remedy of Buyer shall be limited to
indemnification as set forth in Section 9.2(a) hereof (as limited by the
provisions set forth in this Section or elsewhere in this Agreement), and Buyer
shall not be entitled to the rescission of this Agreement, nor shall a
multiplier be used in the computation of Damages as the amount of a Claim;
(vi) neither (A) the termination of the representations,
warranties, covenants or agreements contained herein, nor (B) the expiration of
the indemnification obligations described above, will affect the rights of a
Party in respect of any Claim made by such Party in a writing conforming to the
provisions of Section 9.2(g)(vii) below received by an indemnifying Party prior
to the expiration of the applicable survival period provided herein; and
(vii) to the extent any Claim is made hereunder by any
indemnified party, such Claim shall include a written explanation of the nature
of and reason for the Claim,
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the dollar amount thereof and such other supporting detail as can be
reasonably provided by the indemnified party.
ARTICLE X.
MISCELLANEOUS
10.1 TERMINATION.
(a) TERMINATION OF AGREEMENT. This Agreement may be terminated any
time prior to the Closing:
(i) By the mutual written consent of the Buyer, the Transitory
Subsidiary, TBC, IMR and IMR General;
(ii) By the Buyer or the Transitory Subsidiary at any time prior
to the Effective Time (A) if TBC, IMR or IMR General has breached any
representation, warranty, or covenant contained in this Agreement or in any of
the other Transaction Documents in any material respect, or (B) if the Closing
shall not have occurred on or before April 30, 1996 by reason of the failure of
any condition set forth in Section 8.1 hereof (unless the failure results
primarily from the Buyer or the Transitory Subsidiary breaching any
representation, warranty, or covenant contained in this Agreement or any of the
other Transaction Documents);
(iii) By TBC, IMR or IMR General at any time prior to the
Effective Time (A) if the Buyer or the Transitory Subsidiary has breached any
representation, warranty, or covenant contained in this Agreement or in any
of the other Transaction Documents in any material respect, or (B) if the
Closing shall not have occurred on or before April 30, 1996 by reason of the
failure of any condition set forth in Section 8.2 hereof (unless the failure
results primarily from TBC, IMR or IMR General breaching any representation,
warranty, or covenant contained in this Agreement or any of the other
Transaction Documents); and
(iv) By any Party through the delivery or receipt of written
notice of objection to a Supplement to or from the other Party or Parties
pursuant to the procedures described in Section 10.16 hereof. In order to
terminate this Agreement, such Supplement shall be material (in the receiving
Party's sole and reasonable discretion) to the representation or warranty so
modified. No inadvertence or mistake on the part of a Party, which results in a
Supplement, will be deemed "willful."
(b) EFFECT OF TERMINATION. If any Party terminates this Agreement
pursuant to Section 10.1(a) above: (i) all rights and obligations of the
Parties hereunder shall terminate without any liability of any Party to any
other Party (except for any liability of any Party for wilful, as opposed to
inadvertent or mistaken, breach prior to the termination of this Agreement);
(ii) each Party will redeliver all documents, work papers and other material of
any other Party relating to the Transactions, whether so obtained before or
after the execution hereof, to the Party furnishing the same; and (iii) the
provisions of Section 10.9 shall continue in full force and effect.
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The foregoing provisions shall not limit or restrict the availability of
specific performance or other injunctive relief to the extent that specific
performance or such other relief would otherwise be available to a Party
hereunder.
10.2 ASSIGNMENT. Neither this Agreement nor any of the rights or
obligations hereunder may be assigned by any Party without the prior written
consent of the other Parties; except that the Transitory Subsidiary or the Buyer
may, without such consent, assign all such rights and obligations to a
wholly-owned subsidiary (or a partnership controlled by the Transitory
Subsidiary or the Buyer) or Subsidiaries of the Transitory Subsidiary or the
Buyer or to a successor in interest to the Transitory Subsidiary or the Buyer
which shall assume all obligations of the Transitory Subsidiary or the Buyer, as
the case may be, under this Agreement. Subject to the foregoing, this Agreement
shall be binding upon and inure to the benefit of the Parties hereto and their
respective successors and permitted assigns, and, except as otherwise provided
in Section 10.14 hereof, no other Person shall have any right, benefit or
obligation under this Agreement as a third party beneficiary or otherwise.
10.3 NOTICES. All notices, requests, demands and other communications
which are required or may be given under this Agreement shall be in writing
and shall be deemed to have been duly given when received if personally
delivered; when transmitted if transmitted by telecopy, electronic or digital
transmission method; the day after it is sent, if sent for next day delivery
to a domestic address by recognized overnight delivery service (E.G., Federal
Express); and upon receipt, if sent by certified or registered mail, return
receipt requested. In each case notice shall be sent to:
If to TBC or IMR, addressed to:
Roger R. Cloutier, II
Jacobs Investors, Inc.
Suite 2500
100 South Fifth Street
Minneapolis, MN 55402
Telecopy No.: (612) 337-1931
With a copy to:
Stephen Winnick, Esq.
Michael Grimes, Esq.
Briggs and Morgan, P.A.
2400 IDS Center
80 South Eighth Street
Minneapolis, MN 55402
Telecopy No.: (612) 334-8650
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If to the Transitory Subsidiary or the Buyer, addressed to:
William E. Simon, Jr.
William E. Simon & Sons, LLC
Suite 1750
10990 Wilshire Boulevard
Los Angeles, California 90024
Telecopy No.: (310) 575-3174
With a copy to:
Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, California 90071
Attention: Paul D. Tosetti, Esq.
Telecopy No.: (213) 891-8763
or to such other place and with such other copies as either party may designate
as to itself by written notice to the others.
10.4 ENTIRE AGREEMENT; AMENDMENTS; EXTENSIONS AND WAIVERS. This Agreement
(including the other Transaction Documents and other documents referred to
herein) constitutes the entire agreement between the Parties and supersedes any
prior understandings, agreements, or representations by or between the Parties,
written or oral, to the extent they related in any way to the subject matter
hereof. The Parties may mutually amend any provision of this Agreement at any
time prior to the Effective Time; PROVIDED, HOWEVER, that any amendment effected
subsequent to the approval of the TBC Stockholders at the Stockholders Meeting
will be subject to the restrictions contained in Delaware Law. No amendment of
any provision of this Agreement shall be valid unless the same shall be in
writing and signed by all of the Parties. Without limitation of the provisions
of Section 10.16 hereof, no waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
10.5 MULTIPLE COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.6 INVALIDITY. In the event that any one or more of the provisions
contained in this Agreement or in any other instrument referred to herein,
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, then to the maximum extent permitted by law, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other instrument referred to herein.
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10.7 TITLES. The titles, captions or headings of the Articles and Sections
herein are for convenience of reference only and are not intended to be a part
of or to affect the meaning or interpretation of this Agreement.
10.8 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party (or any Affiliate
thereof) shall issue any press release or make any public announcement (which
shall include making any announcements to, or conducting any discussions with,
the agents of any Party, except that any Party may conduct confidential
discussions with its own agents) relating to the subject matter of this
Agreement without the prior written approval of the other Parties; PROVIDED,
HOWEVER, that in the case of announcements, statements, acknowledgments or
revelations which any such Party is required by law to make, issue or release,
the making, issuing or releasing of any such announcement, statement,
acknowledgment or revelation by the Party so required to do so by law shall not
constitute a breach of this Agreement if such Party shall have given, to the
extent reasonably possible, not less than two (2) business days prior notice to
the other Parties, and shall have attempted, to the extent reasonably possible,
to clear such announcement, statement, acknowledgment or revelation with the
other Parties. Each Party hereto agrees that it will not unreasonably withhold
any such consent or clearance.
10.9 CONFIDENTIALITY.
(a) CONFIDENTIALITY AGREEMENT. Each Party hereto acknowledges that
the execution and delivery of that certain Confidentiality and Non-Disclosure
Agreement dated November 6, 1995, and the letter agreement dated December 21,
1995, binds the Parties with each of their respective terms and shall survive
the termination of any discussions or negotiations which are the subject of this
Agreement. Additionally, the Parties acknowledge that this Agreement and the
Transactions are of a confidential nature and will not be disclosed, except to
consultants, advisors and Affiliates, or as required by law.
(b) PRESERVATION OF CONFIDENTIALITY. In connection with the
negotiation of this Agreement, the preparation for the consummation of the
Transactions, and the performance of obligations hereunder, each of the
Parties acknowledges that it will have access to confidential information
relating to each of the other Parties hereto, including technical or
marketing information, ideas, methods, developments, inventions,
improvements, business plans, trade secrets, scientific or statistical data,
diagrams, drawings, specifications, customer, agent and supplier lists,
know-how or other proprietary information relating thereto, together with all
analyses, compilations, studies or other documents, records or data prepared
by such Party or their respective Representatives which contain or otherwise
reflect or are generated from such information ("CONFIDENTIAL INFORMATION").
The term "CONFIDENTIAL INFORMATION" does not include information received by
a Party in connection with the Transactions which (i) is or becomes generally
available to the public other than as a result of a disclosure by such Party
or its Representatives, (ii) was within such Party's possession prior to its
being furnished to such Party by or on behalf of the other Party in
connection with the Transactions; PROVIDED that the source of such
information was not known by such Party to be bound by a confidentiality
agreement with or other contractual, legal or fiduciary obligation of
confidentiality to the other Party or any other Person with respect to such
information or (iii) becomes available to such Party on a non-
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confidential basis from a source other than the other Party or any of their
respective Representatives; PROVIDED that such source is not bound by a
confidentiality agreement with or other contractual, legal or fiduciary
obligation of confidentiality to the other Party or any other Person with
respect to such information.
(c) NON-DISCLOSURE. Each Party shall treat all Confidential
Information of the other Parties as confidential, preserve the confidentiality
thereof and not disclose any such Confidential Information, except to its
Representatives and Affiliates who need to know such Confidential Information in
connection with the Transactions. Each Party shall use all reasonable efforts
to cause its Representatives to treat all such Confidential Information of the
other Parties as confidential, preserve the confidentiality thereof and not
disclose any such Confidential Information. Each Party shall be responsible for
any breach of this Agreement by any of its Representatives. If, however,
Confidential Information is disclosed, the Party responsible for such disclosure
shall immediately notify the other Parties in writing and take all reasonable
steps required to prevent further disclosure.
(d) LEGAL REQUEST FOR CONFIDENTIAL INFORMATION. If one Party or any
of its Representatives or Affiliates is requested or required (by oral
questions, interrogatories, requests for information or documents in legal
proceedings, subpoena, civil investigative demand or other similar process) or
is required by operation of law to disclose any Confidential Information, such
Party shall provide the other Parties with prompt written notice of such request
or requirement, which notice shall, if practicable, be at least 48 hours prior
to making such disclosure, so that the other Parties may seek a protective order
or other appropriate remedy and/or waive compliance with the provisions of this
Agreement. If, in the absence of a protective order or other remedy or the
receipt of such a waiver, such Party or any of its Representatives are
nonetheless, in the opinion of counsel, legally compelled to disclose
Confidential Information, then such Party may disclose that portion of the
Confidential Information which such counsel advises is legally required to be
disclosed; PROVIDED that such Party uses its reasonable efforts to preserve the
confidentiality of the Confidential Information, whereupon such disclosure shall
not constitute a breach of this Agreement.
(e) RETURN OF CONFIDENTIAL INFORMATION. Until the Closing or the
termination of this Agreement, all Confidential Information will remain the
property of the Party who originally possessed such information. In the event
of the termination of this Agreement, each of the Parties shall, and shall cause
its Affiliates to, return promptly every document furnished to them by any other
Party in connection with the Transactions and any copies thereof which have been
made, and shall cause its Representatives to whom such documents were furnished
promptly to return such documents and any copies thereof any of them may have
made, other than documents which are otherwise publicly available.
10.10 CUMULATIVE REMEDIES. All rights and remedies of any Party hereto
are cumulative of each other and of every other right or remedy such party
may otherwise have at law or in equity, and the exercise of one or more
rights or remedies shall not prejudice or impair the concurrent or subsequent
exercise of other rights or remedies.
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10.11 FEES AND EXPENSES. Each Party shall bear its own fees and expenses
in connection with the Transactions, except in connection with fees and
out-of-pocket expenditures incurred in connection with obtaining the Solvency
Opinion, of which each of Buyer and IMR shall be responsible for one-half.
As noted in the definition of Sellers' Transactional Expenses, professional
fees and expenses incurred by or on behalf of TBC and the TBC Subsidiaries in
seeking to consummate the Transactions shall be considered "Sellers'
Transactional Expenses" and borne by the Former Holders.
10.12 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the domestic laws of the State of Delaware without giving
effect to any choice or conflict of law provision or rule (whether of the
State of Delaware or any other jurisdiction) that would cause the application
of the laws of any jurisdiction other than the State of Delaware.
10.13 NO SOLICITATION OF EMPLOYEES OR AGENTS. For a period of two years
from the date hereof, neither any Party hereto nor any of their respective
Affiliates shall, directly or indirectly, solicit to employ any of the
current officers or employees of the other Parties (or the respective
Affiliates thereof) or solicit to engage any of the agents of the other
Parties, so long as they remain employed by or subject to an agency agreement
with the other Parties, without the other Party's written permission.
10.14 NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns; PROVIDED, HOWEVER, that the
provisions in Section 9.2 above concerning insurance and indemnification are
intended for the benefit of the individuals specified therein and their
respective legal representatives.
10.15 CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the Parties and no presumption or burden
of proof shall arise favoring or disfavoring any Party by virtue of the
authorship of any of the provisions of this Agreement. Any reference to any
federal, state, local, or foreign statute or law shall be deemed also to
refer to all rules and regulations promulgated thereunder, unless the context
otherwise requires. The word "including" shall mean including without
limitation.
10.16 SUPPLEMENTATION OF SCHEDULES. Any Party hereto may elect to
deliver a supplement (a "SUPPLEMENT") to one or more of the Disclosure
Schedules (or other disclosure schedules in the case of the Buyer and the
Transitory Subsidiary), contemplated by this Agreement and previously
delivered to the other Parties in accordance with the procedures set forth in
this Section 10.16. Any and all Supplements must be in writing and must be
delivered to the other Parties hereto before the date that is two (2) days
prior to the scheduled Effective Date (such date of delivery, the "DELIVERY
DATE"). The other Parties hereto shall be given the opportunity during the
two (2) business days following the Delivery Date to consider a proposed
Supplement, and if such Parties do not object to the contents thereof within
such period, the Schedules in question will be deemed amended by the
Supplement. If the other Party or Parties object to a proposed Supplement,
the
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sole remedy of such objecting Party or Parties shall be the termination of
this Agreement in accordance with Section 10.1(a)(iv) hereof.
10.17 ACTIONS AND OBLIGATIONS OF THE PAYMENT AGENT. Any actions or
obligations of the Payment Agent (in its capacity as such) or its Affiliates and
Representatives hereunder shall be conclusively deemed to be undertaken solely
for the benefit of the Former Holders and not for its personal account.
10.18 INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference
and made a part hereof.
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first written above.
"TBC"
THE BEKINS COMPANY,
a Delaware corporation
By /s/ Roger R. Cloutier, II
-----------------------------------
Name: Roger R. Cloutier, II
Title: Executive Vice President
"IMR"
IMR FUND, L.P.,
a Delaware limited partnership
By: IMR Management Partners, L.P.,
its general partner
By: IMR General, Inc.
By /s/ Roger R. Cloutier, II
------------------------------
Name: Roger R. Cloutier, II
Title: Vice President
"IMR GENERAL"
IMR GENERAL, INC.,
a Delaware corporation
By /s/ Roger R. Cloutier, II
------------------------------
Name: Roger R. Cloutier, II
Title: Vice President
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"TRANSITORY SUBSIDIARY"
TRASUB, INC.
a Delaware corporation
By /s/ Michael B. Lenard
---------------------------------
Name: Michael B. Lenard
Title: President
"BUYER"
INTERNATIONAL LOGISTICS LIMITED,
a Delaware corporation
By /s/ Michael B. Lenard
---------------------------------
Name: Michael B. Lenard
Title: President
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- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
______________________________________________________
STOCK PURCHASE AGREEMENT
________________________
by and among
LEP INTERNATIONAL WORLDWIDE LIMITED
as "LIW,"
LEP INTERNATIONAL HOLDINGS LIMITED
as "Holdings One,"
LEP HOLDINGS (NORTH AMERICA) LIMITED
as "Holdings Two,"
LEP HOLDINGS (USA) INC.
as "Stockholder,"
and
INTERNATIONAL LOGISTICS LIMITED
as "Buyer"
Dated: October 31, 1996
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<PAGE>
STOCK PURCHASE AGREEMENT
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . 2
1.1 DEFINED TERMS . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
PURCHASE AND SALE OF STOCK. . . . . . . . . . . 14
2.1 TRANSFER OF STOCK . . . . . . . . . . . . . . . . . . . . . . 14
2.2 PURCHASE PRICE. . . . . . . . . . . . . . . . . . . . . . . . 14
2.3 POST-CLOSING ADJUSTMENT.. . . . . . . . . . . . . . . . . . . 15
2.4 INTERCOMPANY RECEIVABLES AND PAYABLES . . . . . . . . . . . . 16
ARTICLE III
CLOSING . . . . . . . . . . . . . . . 17
3.1 CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.2 DELIVERIES AT CLOSING . . . . . . . . . . . . . . . . . . . . 17
3.3 OTHER CLOSING TRANSACTIONS. . . . . . . . . . . . . . . . . . 18
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLERS WITH RESPECT
TO THE TARGET AND ITS SUBSIDIARIES. . . . . . . . . 19
4.1 ORGANIZATION OF THE TARGET AND EACH OF ITS SUBSIDIARIES . . . 20
4.2 SUBSIDIARIES. . . . . . . . . . . . . . . . . . . . . . . . . 20
4.3 AUTHORIZATION . . . . . . . . . . . . . . . . . . . . . . . . 20
4.4 ABSENCE OF CERTAIN CHANGES OR EVENTS. . . . . . . . . . . . . 21
4.5 TITLE TO ASSETS . . . . . . . . . . . . . . . . . . . . . . . 23
4.6 FACILITIES. . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.7 CONTRACTS AND COMMITMENTS . . . . . . . . . . . . . . . . . . 24
4.8 PERMITS, CONSENTS AND APPROVALS . . . . . . . . . . . . . . . 27
4.9 NO CONFLICT OR VIOLATION. . . . . . . . . . . . . . . . . . . 27
4.10 FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . 27
4.11 BOOKS AND RECORDS . . . . . . . . . . . . . . . . . . . . . . 28
4.12 LITIGATION. . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.13 LABOR MATTERS . . . . . . . . . . . . . . . . . . . . . . . . 28
4.14 LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.15 COMPLIANCE WITH LAW . . . . . . . . . . . . . . . . . . . . . 29
4.16 NO BROKERS. . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.17 NO OTHER AGREEMENTS TO SELL THE ASSETS. . . . . . . . . . . . 30
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4.18 PROPRIETARY RIGHTS. . . . . . . . . . . . . . . . . . . . . . 30
4.19 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . 31
4.20 THIS SECTION INTENTIONALLY OMITTED. . . . . . . . . . . . . . 35
4.21 TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.22 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . 38
4.23 ACCOUNTS RECEIVABLE . . . . . . . . . . . . . . . . . . . . . 39
4.24 PAYMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 39
4.25 CURRENT INACTIVE SUBSIDIARIES OF THE TARGET . . . . . . . . . 40
4.26 CUSTOMERS, DISTRIBUTORS AND SUPPLIERS . . . . . . . . . . . . 40
4.27 COMPLIANCE WITH ENVIRONMENTAL LAWS. . . . . . . . . . . . . . 40
4.28 BANKING RELATIONSHIPS . . . . . . . . . . . . . . . . . . . . 41
4.29 INTERCOMPANY LOANS. . . . . . . . . . . . . . . . . . . . . . 41
4.30 MATERIAL MISSTATEMENTS OR OMISSIONS . . . . . . . . . . . . . 42
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE SELLERS WITH
RESPECT TO THE SELLERS AND THE SELLERS' SUBSIDIARIES . . . . 42
5.1 ORGANIZATION OF THE SELLERS . . . . . . . . . . . . . . . . . 42
5.2 SUBSIDIARIES. . . . . . . . . . . . . . . . . . . . . . . . . 42
5.3 AUTHORIZATION . . . . . . . . . . . . . . . . . . . . . . . . 43
5.4 ABSENCE OF CERTAIN CHANGES OR EVENTS. . . . . . . . . . . . . 43
5.5 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.6 NO CONFLICT OR VIOLATION. . . . . . . . . . . . . . . . . . . 44
5.7 FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . 44
5.8 LITIGATION. . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.9 LABOR MATTERS . . . . . . . . . . . . . . . . . . . . . . . . 44
5.10 LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.11 COMPLIANCE WITH LAW . . . . . . . . . . . . . . . . . . . . . 45
5.12 NO OTHER AGREEMENTS TO SELL THE ASSETS. . . . . . . . . . . . 45
5.13 TRANSACTIONS WITH CERTAIN PERSONS . . . . . . . . . . . . . . 45
5.14 PAYMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 45
5.15 PROJECTIONS . . . . . . . . . . . . . . . . . . . . . . . . . 45
5.16 SOLVENCY. . . . . . . . . . . . . . . . . . . . . . . . . . . 46
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . 46
6.1 ORGANIZATION OF BUYER . . . . . . . . . . . . . . . . . . . . .46
6.2 AUTHORIZATION . . . . . . . . . . . . . . . . . . . . . . . . 46
6.3 NO BROKERS. . . . . . . . . . . . . . . . . . . . . . . . . . 46
6.4 NO CONFLICT OR VIOLATION. . . . . . . . . . . . . . . . . . . 47
6.5 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . 47
6.6 LITIGATION. . . . . . . . . . . . . . . . . . . . . . . . . . 47
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6.7 INVESTMENT INTENT . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE VII
COVENANTS OF SELLERS, THE TARGET AND BUYER. . . . . . . 48
7.1 FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . 48
7.2 BUYER'S RIGHT OF FIRST REFUSAL IN ACQUISITION TRANSACTION
INVOLVING THE SELLERS OR THE SELLERS' SUBSIDIARIES. . . . . . 48
7.3 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . 50
7.4 USE OF PURCHASE PRICE AMOUNT. . . . . . . . . . . . . . . . . 50
7.5 1995 YEAR END FINANCIAL STATEMENTS. . . . . . . . . . . . . . 50
7.6 DISSOLUTION OF THE STOCKHOLDER. . . . . . . . . . . . . . . . 50
7.7 PAYMENT OF FLEET OBLIGATION . . . . . . . . . . . . . . . . . 51
7.8 FRANCHISE MATTERS . . . . . . . . . . . . . . . . . . . . . . 51
7.9 NAME CHANGES. . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE VIII
ACTIONS BY SELLERS AND BUYER AFTER CLOSING. . . . . . . .51
8.1 BOOKS AND RECORDS . . . . . . . . . . . . . . . . . . . . . . 51
8.2 SURVIVAL OF REPRESENTATIONS, ETC. . . . . . . . . . . . . . . 52
8.3 INDEMNIFICATIONS. . . . . . . . . . . . . . . . . . . . . . . 52
8.4 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE IX
TAX MATTERS . . . . . . . . . . . . . . 55
9.1 RETURNS . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
9.2 CONTESTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 56
9.3 PAYMENT OF TAXES. . . . . . . . . . . . . . . . . . . . . . . 56
9.4 NOTICE OF CONTESTS. . . . . . . . . . . . . . . . . . . . . . 57
9.5 COOPERATION . . . . . . . . . . . . . . . . . . . . . . . . . 58
9.6 ELECTION UNDER SECTION 338(h)(10) . . . . . . . . . . . . . . 58
9.7 PURCHASE PRICE ADJUSTMENT . . . . . . . . . . . . . . . . . . 58
ARTICLE X
MISCELLANEOUS. . . . . . . . . . . . . . 59
10.1 ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . . . 59
10.2 NOTICES.. . . . . . . . . . . . . . . . . . . . . . . . . . . .59
10.3 CHOICE OF LAW . . . . . . . . . . . . . . . . . . . . . . . . 60
10.4 SERVICE OF PROCESS, CONSENT TO JURISDICTION . . . . . . . . . 60
10.5 ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS. . . . . . . . . . . 60
10.6 MULTIPLE COUNTERPARTS . . . . . . . . . . . . . . . . . . . . 61
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10.7 EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . . 61
10.8 INVALIDITY. . . . . . . . . . . . . . . . . . . . . . . . . . 61
10.9 TITLES; GENDER. . . . . . . . . . . . . . . . . . . . . . . . 61
10.10 PUBLICITY . . . . . . . . . . . . . . . . . . . . . . . . . . 61
10.11 CUMULATIVE REMEDIES.. . . . . . . . . . . . . . . . . . . . . 61
10.12 CONFIDENTIAL INFORMATION. . . . . . . . . . . . . . . . . . . 61
10.13 ATTORNEYS' FEES . . . . . . . . . . . . . . . . . . . . . . . 62
10.14 LIMITATION OF LIABILITY . . . . . . . . . . . . . . . . . . . 63
10.15 KNOWLEDGE . . . . . . . . . . . . . . . . . . . . . . . . . . 63
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement, dated as of October 31, 1996 (this
"AGREEMENT"), is by and among International Logistics Limited, a Delaware
corporation ("BUYER"), LEP International Worldwide Limited, a company organized
under the laws of England ("LIW"), LEP International Holdings Limited, a company
organized under the laws of England ("HOLDINGS ONE"), LEP Holdings (North
America) Limited, a company organized under the laws of England ("HOLDINGS TWO"
and, together with LIW and Holdings One, the "PARENT COMPANIES") and LEP
Holdings (USA) Inc., a Georgia corporation (the "STOCKHOLDER" and together with
the Parent Companies, the "SELLERS").
RECITALS
A. LIW desires to sell its United States and Puerto Rico business
operations, which operations in the United States and Puerto Rico are comprised
entirely of LEP Profit International, Inc., a Delaware corporation (the
"TARGET") and its Subsidiaries.
B. The Stockholder, an indirect subsidiary of LIW, is the owner of all
of the issued and outstanding shares of capital stock of the Target and the
Target is the owner of all of the issued and outstanding shares of capital stock
of each of its Subsidiaries.
C. Buyer desires to purchase from the Stockholder, and the Stockholder
desires to sell to Buyer, all of the issued and outstanding capital stock of the
Target upon the terms and subject to the conditions of this Agreement (the
"ACQUISITION").
D. In connection with the Acquisition, the parties desire to set forth
certain representations, warranties and covenants made each to the other as an
inducement to the consummation of the Acquisition, upon the terms and subject to
the conditions contained herein.
E. In connection with the Acquisition, the Sellers are willing to
indemnify Buyer, and Buyer is willing to indemnify the Sellers, against certain
liabilities they may incur in connection with the Acquisition, upon the terms
and subject to the conditions contained herein.
AGREEMENT
NOW, THEREFORE, in consideration of the respective covenants and promises
contained herein and for other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereto agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS
1.1 DEFINED TERMS. As used herein, the terms set forth below shall have
the following meanings. Any of such terms, unless the context otherwise
requires, may be used in the singular or plural, depending upon the reference.
"1995 YEAR END BALANCE SHEET" shall mean the audited consolidated
balance sheet of the Target and its Subsidiaries for the period ended December
31, 1995, together with the notes thereon, prepared in accordance with GAAP and
previously delivered to Buyer.
"1995 YEAR END FINANCIAL STATEMENTS" shall mean the audited
consolidated balance sheets of the Target and its Subsidiaries and related
audited consolidated statements of operations and income, changes in
stockholders' equity and cash flow of the Target and its Subsidiaries for the
twelve month period ended December 31, 1995, together with notes thereon,
prepared in accordance with GAAP and previously delivered to Buyer.
"ACCOUNTING FIRM" shall have the meaning set forth in Section 2.3(a)
of this Agreement.
"ACQUISITION PROPOSAL" shall have the meaning set forth in Section
7.2(a) of this Agreement.
"ACQUISITION TRANSACTION" shall have the meaning set forth in Section
7.2(a) of this Agreement.
"ACTION" shall mean any action, claim, suit, litigation, proceeding,
labor dispute, arbitral action, governmental audit, inquiry, criminal
prosecution, investigation or unfair labor practice charge or complaint.
"AFFILIATE" shall have the meaning set forth in the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder.
Without limiting the foregoing, all directors and officers of a Person that is a
corporation and all managing members of a Person that is a limited liability
company, shall be deemed affiliates of such Person for all purposes hereunder.
"ANCILLARY AGREEMENTS" shall mean the License Agreement, the Escrow
Agreement, the InterCompany Agreement, the Option Deed, the LIW Promissory Note
Release, the Warrant Instrument, the Trademark Assignment, the Software License
and Technical Support Agreement, the Source Code Deposit Agreement and the
Shareholders Agreement.
"ASSETS" shall mean, with respect to the Target and each of its
Subsidiaries, all of the right, title and interest in and to all of the
business, properties, assets and rights of any kind, whether tangible or
intangible, real or personal owned by the Target or any of its Subsidiaries or
in which the Target or any of its Subsidiaries has any interest, including
without limitation all of the right, title and interest of the Target and each
of its Subsidiaries in the following:
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(i) all accounts and notes receivable (whether current or
noncurrent), refunds, deposits, prepayments or prepaid expenses (including
without limitation any prepaid insurance premiums);
(ii) all Contract Rights;
(iii) all shares of common stock and any other ownership
interests owned by the Target or such Subsidiary;
(iv) all tangible personal property;
(v) all Owned Real Property;
(vi) all Leases and Leasehold Estates;
(vii) all Leasehold Improvements;
(viii) all Fixtures and Equipment;
(ix) all Books and Records;
(x) all Proprietary Rights;
(xi) all Insurance Policies;
(xii) all Permits;
(xiii) all computers and software;
(xiv) all available supplies, sales literature, promotional
literature, customer, supplier and distributor lists, art work, employee
uniforms, wrapping, supply and packaging items, display units, telephone and fax
numbers, purchasing records and any other items related to the Business;
(xv) all rights under or pursuant to all warranties,
representations and guarantees made by suppliers in connection with the Assets
or services furnished to the Target or any of its Subsidiaries pertaining to the
Business or affecting the Assets;
(xvi) all claims, causes of action, choses in action, rights of
recovery and rights of set-off of any kind, against any person or entity,
including without limitation any liens, security interests, pledges or other
rights to payment or to enforce payment in connection with products delivered by
the Target or any of its Subsidiaries on or prior to the Closing Date; and
(xvii) all goodwill related to the Business.
"BENEFIT ARRANGEMENT" shall mean any employment, consulting,
severance or other similar contract, arrangement or policy and each plan,
arrangement (written or oral), program, agreement or commitment providing for
insurance coverage (including without limitation any self-insured
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arrangements), workers' compensation, disability benefits, supplemental
unemployment benefits, vacation benefits, retirement benefits, life, health,
disability or accident benefits (including without limitation any "voluntary
employees' beneficiary association" as defined in Section 501(c)(9) of the
Code providing for the same or other benefits) or for deferred compensation,
profit-sharing bonuses, stock options, stock appreciation rights, stock
purchases or other forms of incentive compensation or post-retirement
insurance, compensation or benefits which (A) is not a Welfare Plan, Pension
Plan or Multiemployer Plan, (B) is entered into, maintained, contributed to
or required to be contributed to, as the case may be, by the Target or any of
its Subsidiaries or an ERISA Affiliate or under which the Target or any of
its Subsidiaries or any ERISA Affiliate may incur any Liability, and (C)
covers any employee or former employee of the Target or any of its
Subsidiaries or any ERISA Affiliate (with respect to their relationship with
such entities).
"BOOKS AND RECORDS" shall mean (a) all records and lists of the
Target and each of its Subsidiaries pertaining to the Assets, (b) all records
and lists of the Target and its Subsidiaries pertaining to the Business,
customers, suppliers or personnel of each of the Target and each of its
Subsidiaries, (c) all product, business and marketing plans of the Target and
each of its Subsidiaries, and (d) all books, ledgers, files, reports, plans,
drawings and operating records of every kind maintained by the Target and each
of its Subsidiaries.
"BUSINESS" shall mean the business conducted by the Target and its
Subsidiaries of providing origin and destination services, freight forwarding,
logistics, supply chain management, customs clearing services, transportation
and distribution services in the United States and Puerto Rico, together with
any ancillary services provided therewith.
"BUSINESS DAY" shall mean any day other than a Saturday, a Sunday, or
a day on which banking institutions in the cities of New York, New York or
Atlanta, Georgia are authorized or obligated by law, regulation or executive
order to remain closed.
"BUYER" shall mean International Logistics Limited, a Delaware
corporation.
"BUYER INDEMNIFIED PARTIES" shall have the meaning set forth in
Section 8.3(a) of this Agreement.
"CLAIM" shall have the meaning set forth in Section 8.3(d) of this
Agreement.
"CLAIM NOTICE" shall have the meaning set forth in Section 8.3(d) of
this Agreement.
"CLOSING" shall have the meaning set forth in Section 3.1 of this
Agreement.
"CLOSING BALANCE SHEET" shall have the meaning set forth in Section
2.3(a) of this Agreement.
"CLOSING DATE" shall mean (a) October 31, 1996; or (b) such other
date as Buyer and the Stockholder shall mutually agree upon.
"CLOSING FINANCIAL STATEMENTS" shall have the meaning set forth in
Section 2.3(a) of this Agreement.
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"CLOSING FINANCIAL STATEMENTS DELIVERY DATE" shall have the meaning
set forth in Section 2.3(g) of this Agreement.
"CODE" shall mean the Internal Revenue Code of 1986, as amended, and
the rules and regulations thereunder.
"CONFIDENTIAL INFORMATION" shall have the meaning set forth in
Section 10.12(b) of this Agreement.
"CONTRACT" shall mean any agreement, contract, Lease, note, loan,
evidence of indebtedness, purchase order, letter of credit, indenture, security
or pledge agreement, franchise agreement, covenant not to compete, employment
agreement, license, instrument, obligation, commitment, purchase and sales
order, quotation or other executory commitment to which the Target or any of its
Subsidiaries is a party or is bound, or to which any Assets of the Target or any
of its Subsidiaries are subject, whether oral or written, express or implied.
"CONTRACT RIGHTS" shall mean all of the rights and obligations of the
Target and each of its Subsidiaries under the Contracts.
"CORPORATION" shall mean (i) the Target and each of its Subsidiaries,
(ii) all partnerships, joint ventures, limited liability companies,
associations, joint-stock companies or trusts in which the Target or any of its
Subsidiaries was at any time or is a partner, joint venturer, participant or
member and (iii) all predecessor or former corporations, partnerships, joint
ventures, limited liability companies, associations, joint-stock companies or
trusts, whether in existence as of the date hereof or at any time prior to the
date hereof, the assets or obligations of which have been acquired or assumed by
the Target or any of its Subsidiaries or to which the Target or any of its
Subsidiaries has succeeded.
"COPYRIGHTS" shall mean registered copyrights, copyright applications
and unregistered copyrights.
"COURT ORDER" shall mean any judgment, decision, consent decree,
injunction, ruling or order of any federal, state or local court or governmental
agency, department or authority that is binding on any person or its property
under applicable law.
"DAMAGES" shall have the meaning set forth in Section 8.3(a) of this
Agreement.
"DEFAULT" shall mean (a) a breach of or default under any Contract or
Permit, (b) the occurrence of an event that with the passage of time or the
giving of notice or both would constitute a breach of or default under any
Contract or Permit, or (c) the occurrence of an event that with or without the
passage of time or the giving of notice or both would give rise to a right of
termination, renegotiation or acceleration under any Contract or Permit.
"DISCLOSURE SCHEDULE" shall mean a schedule executed and delivered by
the Sellers to Buyer as of the date hereof which sets forth the exceptions to
(i) the representations and warranties of the Sellers with respect to the Target
and its Subsidiaries contained in Article IV hereof, (ii) the representations
and warranties of the Sellers with respect to the Sellers contained in Article V
hereof
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and (iii) certain other information called for by this Agreement. Unless
otherwise specified, each reference in this Agreement to any numbered schedule
is a reference to that numbered schedule which is included in the Disclosure
Schedule.
"DISCONTINUED OPERATIONS" shall mean any businesses or operations,
previously sold or otherwise disposed of by any of the Sellers or by the Target
or any of its Subsidiaries, including but not limited to (i) the discontinued
subsidiaries set forth in Schedule 1.1 hereto and (ii) the "current inactive
subsidiaries of the Target" set forth in Schedule 4.2 hereto, and any ongoing
indemnification obligations in connection therewith.
"DOCUMENTARY LETTER OF CREDIT" shall mean that certain Documentary
Letter of Credit No. ASL-21033 issued by Shawmut Bank for the benefit of RFG Co.
Ltd. in the face amount of $33,334.34.
"DOWNWARD ADJUSTMENT" shall have the meaning set forth in Section
2.3(b) of this Agreement.
"EMPLOYEE PLANS" shall mean all Benefit Arrangements, Multiemployer
Plans, Pension Plans and Welfare Plans.
"ENCUMBRANCE" shall mean any claim, lien, pledge, option, charge,
easement, security interest, deed of trust, mortgage, right-of-way,
encroachment, conditional sales agreement, encumbrance or other similar right of
any third party, whether voluntarily incurred or arising by operation of law,
and includes, without limitation, any agreement to give any of the foregoing in
the future, and any contingent sale or other title retention agreement or lease
in the nature thereof.
"ENVIRONMENTAL LAWS" shall mean all Regulations which regulate or
relate to the protection or clean-up of the environment, the use, treatment,
storage, transportation, generation, manufacture, processing, distribution,
handling or disposal of, or emission, discharge or other release or threatened
release of, Hazardous Substances, the preservation or protection of waterways,
groundwater, drinking water, air, wildlife, plants or other natural resources,
or the health and safety of persons or property, including without limitation
protection of the health and safety of employees. Environmental Laws shall
include, without limitation, the Federal Insecticide, Fungicide, Rodenticide
Act, Resource Conservation & Recovery Act, Clean Water Act, Safe Drinking Water
Act, Occupational Safety and Health Act, Toxic Substances Control Act, Clean Air
Act, Comprehensive Environmental Response, Compensation and Liability Act,
Emergency Planning and Community Right-to-Know Act, Hazardous Materials
Transportation Act and all analogous or related federal, state or local laws,
each as amended.
"ENVIRONMENTAL CONDITIONS" shall mean the introduction into the
environment of any Hazardous Substance (whether or not upon any Facility or
Former Facility or other property and whether or not such pollution constituted
at the time thereof a violation of any Environmental Law as a result of any
Release of any kind whatsoever of any Hazardous Substance) during and in
connection with the ownership, operation or occupancy of any Corporation as a
result of which any Corporation has become or becomes liable to any person, or
has become or becomes responsible for any environmental remediation under
current Environmental Laws, or by reason of which any Facility, Former Facility
or any of the Assets suffers or becomes subject to any lien under current
Environmental Laws.
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"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA AFFILIATE" shall mean any entity which is (or at any relevant
time was) a member of a "controlled group of corporations" with, or under
"common control" with, or a member of an "affiliated service group" with, the
Target or any of its Subsidiaries, as defined in Section 414(b), (c), (m), (n)
or (o) of the Code.
"ESCROW AGREEMENT" shall have the meaning set forth in Section 2.2(b)
of this Agreement.
"ESCROW AMOUNT" shall have the meaning set forth in Section 2.2(b) of
this Agreement.
"FACILITIES" shall mean all plants, offices, manufacturing
facilities, stores, warehouses, improvements, administration buildings, and all
real property and related facilities which are used or held for use in
connection with the Business.
"FACILITY LEASES" shall mean all of the leases of Facilities, all of
which are listed in Schedule 4.6(a) hereto.
"FINANCIAL STATEMENTS" shall mean, with respect to the Target and its
Subsidiaries, (i) the monthly unaudited consolidated financial statements for
each of the months beginning after the Most Recent Fiscal Quarter End through
and including the month ended August 30, 1996 (the "MOST RECENT MONTH END
FINANCIAL STATEMENTS"), (ii) the unaudited consolidated financial statements for
the fiscal quarter ended June 30, 1996 (the "MOST RECENT FISCAL QUARTER END
FINANCIAL STATEMENTS"), and (iii) the Year End Financial Statements.
"FINANCING OBLIGATIONS" shall mean (a) any indebtedness of the Target
or any of its Subsidiaries for borrowed money, including without limitation the
Fleet Obligation, (b) any obligations of the Target or any of its Subsidiaries
evidenced by bonds, notes, debentures, letters of credit or similar instruments,
(c) obligations of the Target or any of its Subsidiaries under capitalized
leases, (d) obligations under conditional sale, title retention or similar
agreements or arrangements creating an obligation of the Target or any of its
Subsidiaries with respect to the deferred purchase price of property (other than
customary trade credit), (e) interest rate and currency obligation swaps, hedges
and similar arrangements of the Target and any of its Subsidiaries and (f) all
obligations of the Target or any of its Subsidiaries to guarantee any of the
foregoing types of obligations on behalf of others.
"FIXTURES AND EQUIPMENT" shall mean all of the furniture, fixtures,
furnishings, machinery, automobiles, trucks, spare parts, supplies, equipment,
tooling, molds, patterns, dies and other tangible personal property owned by the
Target or any of its Subsidiaries and used, held for use or useful in connection
with the Business, wherever located, and including any such Fixtures and
Equipment in the possession of any suppliers of the Target or any of its
Subsidiaries, together with all warranty rights with respect thereto.
"FLEET OBLIGATION" shall mean the credit facility (including any
accrued interest thereon and any and all prepayment penalties and liquidated
damages that would arise as a result of the prepayment or other early
termination of the credit facility) from Fleet Capital Corporation, as successor
to
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Shawmut Capital Corporation, to LEP Profit International, Inc. secured in
part by a letter of credit in the amount of $1,000,000 provided by TBC, in favor
of Fleet Capital Corporation.
"FOREIGN SUBSIDIARY" shall mean any Subsidiary organized under the
laws of or with a principal place of business in any country other than the
United States. For purposes of this Agreement, LEP Profit International, Inc.
(Puerto Rico) shall not be deemed to be a "Foreign Subsidiary."
"FORMER FACILITY" shall mean, with respect to each Corporation, each
plant, office, manufacturing facility, store, warehouse, improvement,
administrative building and all real property and related facilities which was
owned, leased or operated by such Corporation at any time prior to the date
hereof, but excluding any Facilities.
"GAAP" shall mean generally accepted accounting principles in the
United States of America, as in effect from time to time, consistently applied.
"HAZARDOUS SUBSTANCE" shall mean any pollutant, contaminant,
chemical, waste and any toxic, infectious, carcinogenic, reactive, corrosive,
ignitible or flammable chemical or chemical compound or hazardous substance,
material or waste, whether solid, liquid or gas, that is subject to regulation,
control or remediation under any Environmental Laws including, without
limitation, any quantity of asbestos in any form, urea formaldehyde, PCB's,
radon gas, crude oil or any fraction thereof, all forms of natural gas,
petroleum products or by-products or derivatives.
"HOLDINGS ONE" shall mean LEP International Holdings Limited, a
company organized under the laws of England.
"HOLDINGS TWO" shall mean LEP Holdings (North America) Limited, a
company organized under the laws of England.
"HSR ACT" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"INCLUDED SUBSIDIARIES" shall have the meaning set forth in Section
9.6 of this Agreement.
"INSURANCE POLICIES" shall mean the insurance policies related to the
Assets or the Business.
"INTERCOMPANY AGREEMENT" shall mean the operations agreement by and
between LIW, LIM, Buyer and the Target and each of its Subsidiaries,
substantially in the form of Appendix A attached hereto.
"INTERCOMPANY DEFICIT" shall mean the amount, if any, as of the
Closing Date, by which all sums owed by the Target or any of its Subsidiaries,
to the Sellers or any of the Sellers' Subsidiaries, exceeds all sums owed by the
Sellers or any of the Sellers' Subsidiaries, to the Target or any of its
Subsidiaries, as of such date (i.e., net payable that is payable by the Target
and its Subsidiaries).
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"INTERCOMPANY SURPLUS" shall mean the amount, if any, as of the
Closing Date, by which all sums owed by the Sellers or any of the Sellers'
Subsidiaries, to the Target or any of its Subsidiaries, exceeds all sums owed by
the Target or any of its Subsidiaries, to the Sellers or any of the Sellers'
Subsidiaries, as of such date (i.e., net receivable owed to the Target and its
Subsidiaries).
"LEASED REAL PROPERTY" shall mean all leased property described in
the Facility Leases.
"LEASEHOLD ESTATES" shall mean all rights and obligations of the
Target and each of its Subsidiaries as lessee under the Leases.
"LEASEHOLD IMPROVEMENTS" shall mean all leasehold improvements
situated in or on the Leased Real Property and owned by the Target or any of its
Subsidiaries.
"LEASES" shall mean all of the existing leases with respect to the
personal or real property of the Target or any of its Subsidiaries used or held
for use in connection with the Business.
"LIABILITIES" shall mean any direct or indirect liability,
indebtedness, obligation, commitment, expense, claim, deficiency, guaranty or
endorsement of or by any person of any type, whether accrued, absolute,
contingent, matured, unmatured, known, unknown or other. "LIABILITY" shall have
the correlative meaning.
"LICENSE AGREEMENT" shall mean the trademark license agreement by and
between Holdings One and the Target, substantially in the form of Appendix B
attached hereto.
"LIW" shall mean LEP International Worldwide Limited, a company
organized under the laws of England.
"LIW PROMISSORY NOTE" shall mean that certain Promissory Note, dated
August 16, 1996, by LIW in favor of TBC in the principal sum of one million
dollars ($1,000,000).
"LIW PROMISSORY NOTE RELEASE" shall mean that certain Deed of Release
by and between LIW and TBC pursuant to which TBC releases the obligations of LIW
under the LIW Promissory Note in exchange for LIW's grant to Buyer of the
Warrant Instrument, substantially in the form of Appendix C attached hereto.
"MATERIAL ADVERSE EFFECT" shall mean with respect to the Target or
any of its Subsidiaries, after giving effect to the transactions contemplated by
this Agreement (except with respect to (i)(C) below), (i) a significant or
substantial adverse effect or adverse change in (A) the condition (financial or
otherwise) of or in the Assets of the Target and its Subsidiaries, collectively,
or (B) the Business or properties, Liabilities, reserves, working capital,
earnings, technology or relations with customers, public image or employees of
the Target and its Subsidiaries, collectively, or (C) the right or ability of
the Sellers or the Target to consummate the transactions contemplated hereby, or
(ii) any event or condition, singly or in the aggregate, which would, with the
passage of time, constitute a "Material Adverse Effect."
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"MORTGAGES" shall mean with respect to the Target and each of its
Subsidiaries, all deeds of trust, mortgages or other Encumbrances securing
indebtedness and relating to any of the Owned Real Property of the Target or
such Subsidiaries.
"MOST RECENT FISCAL QUARTER END" shall mean June 30, 1996.
"MOST RECENT FISCAL QUARTER END FINANCIAL STATEMENTS" shall have the
meaning ascribed to it in the definition of "Financial Statements."
"MOST RECENT MONTH END FINANCIAL STATEMENTS" shall have the meaning
ascribed to it in the definition of "Financial Statements."
"MULTIEMPLOYER PLAN" shall mean any Multiemployer Plan, as defined in
Section 3(37) or 4001(a)(3) of ERISA, (A) which the Target or any of its
Subsidiaries or any ERISA Affiliate maintains, administers, contributes to or is
required to contribute to, or, after September 25, 1980, maintained,
administered, contributed to or was required to contribute to, or under which
the Target or any of its Subsidiaries or any ERISA Affiliate may incur any
Liability and (B) which covers any employee or former employee of the Target or
any of its Subsidiaries or any ERISA Affiliate (with respect to their
relationship with such entities).
"NET WORTH DEFICIENCY" shall have the meaning set forth in Section
2.3(d) of this Agreement.
"NET WORTH SURPLUS" shall have the meaning set forth in Section
2.3(e) of this Agreement.
"NET WORTH VALUE" shall have the meaning set forth in Section 2.3(f)
of this Agreement.
"NOTICE OF EXERCISE" shall have the meaning set forth in Section
7.2(b) of this Agreement.
"NOTICE OF INTENT" shall have the meaning set forth in Section 7.2(a)
of this Agreement.
"OFFERED ITEMS" shall have the meaning set forth in Section 7.2(a) of
this Agreement.
"OFFER PRICE" shall have the meaning set forth in Section 7.2(a) of
this Agreement.
"OPTION DEED" shall mean, collectively, the Option Deed and the
Warrant Instrument, substantially in the form of Appendix D attached hereto,
entered into by and among Buyer, LIW and certain managers of LIW and others
pursuant to which: (a) Buyer is granted the Default Option, the Warrant Option,
the First Call Option, the Second Call Option and the Third Call Option (each as
defined in the Option Deed, and (b) certain managers of LIW receive the Put
Option (as defined in the Option Deed).
"ORDINARY COURSE OF BUSINESS" or "ORDINARY COURSE" or any similar
phrase when used with respect to the Target or any of its Subsidiaries shall
mean with respect to the Target and each such Subsidiary the ordinary course of
the Business and consistent with the past practices of the Target and each such
Subsidiary.
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"OVERLAP PERIOD" shall have the meaning set forth in Section 9.1 of
this Agreement.
"OWNED REAL PROPERTY" shall mean all real property owned in fee by
the Target and any of its Subsidiaries, including without limitation all rights,
easements and privileges appertaining or relating thereto, all buildings,
fixtures, and improvements located thereon and all Facilities thereon, if any.
"PARENT COMPANIES" shall mean, collectively, LIW, Holdings One and
Holdings Two.
"PATENTS" shall mean all patents and patent applications and
registered designs and registered design applications.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"PENSION PLAN" shall mean any "employee pension benefit plan" as
defined in Section 3(2) of ERISA (other than a Multiemployer Plan) (A) which the
Target or any of its Subsidiaries or any ERISA Affiliate maintains, administers,
contributes to or is required to contribute to, or, within the five years prior
to the Closing Date, maintained, administered, contributed to or was required to
contribute to, or under which the Target or any of its Subsidiaries or any ERISA
Affiliate may incur any Liability and (B) which covers any employee or former
employee of the Target or any of its Subsidiaries or any ERISA Affiliate (with
respect to their relationship with such entities).
"PERMITTED ENCUMBRANCES" shall mean the Encumbrances listed on
Schedule 1.3 hereto and other Encumbrances which, individually and in the
aggregate, do not materially detract from the value or transferability of the
property or Assets subject thereto, or interfere in any material respect with
the present use of the properties or Assets subject thereto.
"PERMITS" shall mean all licenses, permits, franchises,
authorizations, consents or orders of, or filings with, any governmental
authority, whether foreign, federal, state or local, or any other person,
necessary for the conduct or operations of the Business.
"PERSON" shall mean an individual, partnership, corporation, limited
liability company, joint venture, trust, association or unincorporated
organization or a government or agency or political subdivision thereof.
"PERSONNEL" shall have the meaning set forth in Section 4.4(b)(i) of
this Agreement.
"POST-CLOSING PERIOD" shall have the meaning set forth in Section 9.2
of this Agreement.
"PRE-CLOSING ENVIRONMENTAL MATTERS" shall mean (a) the production,
use, generation, storage, treatment, recycling, disposal, discharge, release, or
other handling or disposition at any time on or prior to the Closing Date
(collectively "HANDLING") of any Hazardous Substance, either in, on, under or
from any Facility or Former Facility during and in connection with the
ownership, operation or occupancy of any Corporation, including, without
limitation, the effects of such Handling of Hazardous Substances which result in
an Environmental Condition, and (b) the failure on or prior to the Closing Date
of any Facility or Former Facility during the ownership, operation or occupancy
of any Corporation to be in compliance with any applicable Environmental Law or
the failure on or prior to
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the Closing Date of any operation of any Corporation to be in compliance with
any applicable Environmental Laws or to have discharged liability for any
past non-compliance.
"PRE-CLOSING PERIODS" shall have the meaning set forth in Section 9.1
of this Agreement.
"PROPRIETARY RIGHTS" shall mean all of the Copyrights, Patents,
Trademarks, technology rights and licenses, computer software (including without
limitation any source or object codes therefor or documentation relating
thereto), trade secrets, franchises, know-how, inventions, designs,
specifications, plans, drawings and intellectual property rights of the Target
and each of its Subsidiaries.
"PURCHASE PRICE" shall have the meaning set forth in Section 2.2(a)
of this Agreement.
"REGULATIONS" shall mean any laws, statutes, ordinances, regulations,
rules, court decisions and orders of any foreign, federal, state or local
government and any other governmental department or agency, including without
limitation Environmental Laws, energy, motor vehicle safety, public utility,
zoning, building and health codes, occupational safety and health and laws
respecting employment practices, employee documentation, terms and conditions of
employment and wages and hours.
"RELEASE" shall mean and include any spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, leaching, dumping or
disposing into the environment or the workplace of any Hazardous Substance.
"RELEVANT TERMS" shall have the meaning set forth in Section 7.2(a)
of this Agreement.
"REPRESENTATIVE" shall mean any officer, director, principal,
attorney, agent, employee or other representative.
"S AGENT" shall mean any sales agent of the Target or any of its
Subsidiaries.
"SELLER MATERIAL ADVERSE EFFECT" shall mean with respect to the
Sellers and each of the Sellers' Subsidiaries, after giving effect to the
transactions contemplated hereby (except with respect to (i)(C) below), (i) a
significant or substantial adverse effect or adverse change in (A) the condition
(financial or otherwise) of or in the assets of (a) the Sellers and the Sellers'
Subsidiaries, collectively, or (b) the Target and its Subsidiaries,
collectively, or (B) the business or properties, Liabilities, reserves, working
capital, earnings, technology or relations with customers, public image or
employees of (a) the Sellers and the Sellers' Subsidiaries, collectively, or (b)
the Target and its Subsidiaries, collectively, or (C) the right or ability of
the Sellers or the Target to consummate the transactions contemplated hereby, or
(ii) any event or condition, singly or in the aggregate, which would, with the
passage of time, constitute a "Seller Material Adverse Effect."
"SELLERS" shall mean, collectively, the Stockholder and the Parent
Companies.
"SELLERS INDEMNIFIED PARTIES" shall have the meaning set forth in
section 8.3(b) of this Agreement.
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"SELLERS' SUBSIDIARY" shall mean (a) any corporation in an unbroken
chain of corporations beginning with LIW if each of the corporations other than
the last corporation in the unbroken chain then owns stock possessing more than
50% of the total combined voting power of all classes of stock in one of the
other corporations in such chain, (b) any partnership in which LIW or any of the
Sellers' Subsidiaries is a general partner and any limited liability company in
which LIW or any of the Sellers' Subsidiaries is a managing member, or (c) any
partnership or limited liability company in which LIW or any of the Sellers'
Subsidiaries possesses more than a 50% interest in the total capital or total
income of such partnership or limited liability company. For the purposes of
this Agreement, "Sellers' Subsidiaries" shall be deemed to exclude the Target
and its Subsidiaries.
"SELLERS' ACCOUNTANT" shall have the meaning set forth in Section
2.3(a) of this Agreement.
"SHAREHOLDERS AGREEMENT" shall mean that Shareholders' Agreement by
and among Buyer, certain managers of LIW and others, substantially in the form
of Appendix I, attached hereto.
"SOFTWARE LICENSE AND TECHNICAL SUPPORT AGREEMENT" shall mean that
agreement by and between LEP International Management Limited, an English
company ("LIM") and the Target, substantially in the form of Appendix G,
attached hereto.
"SOURCE CODE DEPOSIT AGREEMENT" shall mean that agreement by and
between LIM and the Target, substantially in the form of Appendix H, attached
hereto.
"STOCKHOLDER" shall mean LEP Holdings (USA) Inc., a Georgia
corporation.
"SUBSIDIARY" shall mean (a) any corporation in an unbroken chain of
corporations beginning with the Target if each of the corporations other than
the last corporation in the unbroken chain then owns stock possessing more than
50% of the total combined voting power of all classes of stock in one of the
other corporations in such chain, (b) any partnership in which the Target or any
of its Subsidiaries is a general partner and any limited liability company in
which the Target or any of its Subsidiaries is a managing member, or (c) any
partnership or limited liability company in which the Target or any of its
Subsidiaries possesses more than a 50% interest in the total capital or total
income of such partnership or limited liability company.
"TAX" shall mean any federal, state, local or foreign net or gross
income, gross receipts, license, payroll, employment, excise, severance, stamp,
business, occupation, premium (including taxes under Code Section 59A), customs
duties, capital stock, franchise, profits, withholding, payroll, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax, levy, impost, governmental fee or like assessment or
charge of any kind whatsoever, including any interest, penalty or addition
thereto, whether disputed or not, imposed by any governmental authority or
arising under any tax law or agreement, including, without limitation, any joint
venture or partnership agreement.
"TBC" shall mean The Bekins Company, a Delaware corporation.
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"TRADEMARKS" shall mean registered trademarks, registered service
marks, trademark and service mark applications and unregistered trademarks and
service marks.
"TRADEMARK ASSIGNMENT" shall mean the trademark assignment by the
Target to Holdings One with respect to the "LEP" trademark, substantially in the
form of Appendix E attached hereto.
"UPWARD ADJUSTMENT" shall have the meaning set forth in Section
2.3(c) of this Agreement.
"WARRANT INSTRUMENT" shall mean that certain warrant issued by LIW to
the Buyer granting the right to exercise such warrant and receive 419,900 shares
of ordinary stock of LIW at no additional cost, substantially in the form of
Appendix J attached hereto.
"WARRANTS" shall mean (a) agreements, rights to subscribe (including
any preemptive rights), options, warrants, calls, commitments or rights of any
character to purchase or otherwise acquire any common stock or other securities
of LIW, and (b) outstanding securities of LIW that are convertible into or
exchangeable for capital stock or other securities of LIW.
"WELFARE PLAN" shall mean any "employee welfare benefit plan" as
defined in Section 3(1) of ERISA, (A) which the Target or any of its
Subsidiaries or any ERISA Affiliate maintains, administers, contributes to or is
required to contribute to, or under which the Target or any of its Subsidiaries
or any ERISA Affiliate may incur any Liability and (B) which covers any employee
or former employee of the Target or any of its Subsidiaries or any ERISA
Affiliate (with respect to their relationship with such entities).
ARTICLE II
PURCHASE AND SALE OF STOCK
2.1 TRANSFER OF STOCK. Upon the terms and subject to the conditions
contained herein, at the Closing, the Stockholder shall sell, convey, transfer,
assign and deliver to Buyer, and Buyer shall purchase from the Stockholder, all
of the outstanding shares of capital stock of the Target as set forth in
Schedule 2.1 of this Agreement.
2.2 PURCHASE PRICE.
(a) PURCHASE PRICE. At the Closing, upon the terms and subject
to the conditions set forth herein, in consideration for the transfer of all the
shares of capital stock of the Target pursuant to Section 2.1 of this Agreement,
the Stockholder shall be entitled to receive and the Buyer shall be obligated to
pay four million five hundred thousand dollars ($4,500,000) in cash (the
"PURCHASE PRICE"). Buyer shall pay the Purchase Price, less the Escrow Amount
(as defined below), by wire transfer of immediately available funds to an
account designated by the Stockholder.
(b) ESCROW AGREEMENT. In order to establish a procedure for the
satisfaction of any claims by any Buyer Indemnified Party for indemnification
pursuant to Section 8.3 or Article IX hereof, the Sellers shall enter into an
escrow agreement with Buyer and the Escrow Agent, substantially in the
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form of Appendix F attached hereto (the "ESCROW AGREEMENT"), pursuant to
which seven-hundred and fifty thousand dollars ($750,000) of the Purchase
Price shall be held in escrow until the first anniversary of the Closing
Date, subject to the terms of the Escrow Agreement. Pursuant to the Escrow
Agreement, the Sellers hereby direct Buyer to deliver to the Escrow Agent (as
such term is defined in the Escrow Agreement), and at the Closing Buyer shall
wire to the Escrow Agent in immediately available funds, an aggregate of
seven-hundred and fifty thousand dollars ($750,000) in cash out of the
aggregate amount of the Purchase Price (the "ESCROW AMOUNT"). The respective
indemnification obligations of the Sellers hereunder shall not be limited to
the Escrow Amount.
2.3 POST-CLOSING ADJUSTMENT.
(a) CLOSING BALANCE SHEET. Schedule 2.3 of the Disclosure Schedule
sets forth a calculation of the actual cash paid to the Sellers at Closing and
the estimated Net Worth Value. As promptly as practicable after the Closing
Date (but in no event more than ninety (90) days after the Closing Date), Buyer
will cause the Target to prepare and deliver to the Sellers consolidated
combined financial statements of the Target and its Subsidiaries as of the close
of business on the day immediately preceding the Closing Date (the "CLOSING
FINANCIAL STATEMENTS"). The Closing Financial Statements shall be accompanied
by a certificate of the Chief Financial Officer of the Target to the effect that
the Closing Financial Statements present fairly, in accordance with GAAP and the
accounting practices of the Target and its Subsidiaries applied on a basis
consistent with the Financial Statements except with respect to those changes
set forth on Schedule 4.10, the financial condition of the Target and its
Subsidiaries as of the close of business on the day immediately preceding the
Closing Date. The balance sheet contained in the Closing Financial Statements
shall be referred to herein as the "CLOSING BALANCE SHEET." The Closing
Financial Statements will be prepared in accordance with GAAP, applied on a
basis consistent with the 1995 Year End Financial Statements, except with
respect to certain agreed changes in accounting policies as set forth in
Schedule 4.10 attached hereto and incorporated herein by this reference. The
Closing Balance Sheet shall be accompanied by reasonably detailed schedules,
including a calculation of the Net Worth Value. The Sellers and a firm of
independent public accountants designated by the Sellers (the "SELLERS'
ACCOUNTANT") will be entitled to reasonable access during normal business hours
to the relevant records and working papers of the Target and its Subsidiaries to
aid in their review of the Closing Financial Statements. The Closing Financial
Statements shall be deemed to be accepted by the Sellers and shall be conclusive
for the purposes of the adjustment described in Sections 2.3(b) and 2.3(c)
hereof except to the extent, if any, that the Sellers or the Sellers' Accountant
shall have delivered, within thirty (30) days after the date on which the
Closing Financial Statements are delivered to the Sellers, a written notice to
Buyer stating each and every item to which the Sellers take exception,
specifying in reasonable detail the nature and extent of any such exception (it
being understood that any amounts not disputed as provided herein shall be paid
promptly). If a change proposed by the Sellers is disputed by Buyer, then Buyer
and the Sellers shall negotiate in good faith to resolve such dispute. If,
after a period of twenty (20) days following the date on which the Sellers give
Buyer notice of any such proposed change, any such proposed change still remains
disputed, then Buyer and the Sellers hereby agree that Ernst & Young, LLP (the
"ACCOUNTING FIRM") shall resolve any remaining disputes. The Accounting Firm
shall act as an arbitrator to determine, based solely on presentations by the
Sellers and Buyer, and not by independent review, only those issues still in
dispute. The decision of the Accounting Firm shall be final and binding and
shall be in accordance with the provisions of this Section 2.3(a). The fees and
expenses of the Accounting Firm, if any, shall be paid equally by Buyer and the
Stockholder; PROVIDED, HOWEVER, that, if the
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Accounting Firm determines that either party's position is totally correct,
then the other party shall pay one hundred percent (100%) of the costs and
expenses incurred by the Accounting Firm in connection with any such
determination.
(b) In the event that there is a Net Worth Deficiency (as defined
below) with respect to the Target and its Subsidiaries, the Sellers shall pay to
Buyer, as an adjustment to the Purchase Price, an amount equal to (i) the Net
Worth Deficiency, (ii) plus the amount of the InterCompany Surplus, if any,
(iii) minus the amount of the InterCompany Deficit, if any (the "DOWNWARD
ADJUSTMENT"); PROVIDED, HOWEVER, if the Downward Adjustment is a negative
number, then Buyer shall pay to the Stockholder an amount equal to (i) the
InterCompany Deficit minus (ii) the Net Worth Deficiency. Any payments required
to be made by the Sellers pursuant to this Section 2.3(b) or pursuant to Section
2.3(c) shall be made within ten (10) days of the Closing Financial Statements
Delivery Date (as defined below) by wire transfer of immediately available funds
to an account designated by Buyer.
(c) In the event that there is a Net Worth Surplus (as defined
below) with respect to the Target and its Subsidiaries, Buyer shall pay to the
Stockholder, as an adjustment to the Purchase Price, an amount equal to (i) the
Net Worth Surplus, (ii) plus the amount of the InterCompany Deficit, if any,
(iii) minus the amount of the InterCompany Surplus, if any (the "UPWARD
ADJUSTMENT"); PROVIDED, HOWEVER, that If the Upward Adjustment is a negative
number, then the Sellers shall pay to Buyer an amount equal to (i) the
InterCompany Surplus minus (ii) the Net Worth Surplus. Any payments required to
be made by Buyer pursuant to this Section 2.3(c) or pursuant to Section 2.3(b)
shall be made within ten (10) days of the Closing Financial Statements Delivery
Date by wire transfer of immediately available funds to an account designated by
the Stockholder.
(d) The term "NET WORTH DEFICIENCY" shall mean, with respect to the
Target and its Subsidiaries, the amount, if any, by which the Net Worth Value is
a deficit greater than three million five hundred thousand dollars
(- $3,500,000).
(e) The term "NET WORTH SURPLUS" shall mean, with respect to the
Target and its Subsidiaries, the amount, if any, by which the Net Worth Value is
greater than a deficit of three million five hundred thousand dollars
(- $3,500,000).
(f) The term "NET WORTH VALUE" shall mean, with respect to the
Target and its Subsidiaries, the (i) net amount of the Assets, (ii) less the
value of the Liabilities (including but not limited to the Financing Obligations
exclusive of the face amount of the Documentary Letter of Credit) as set forth
on the Closing Balance Sheet; PROVIDED, HOWEVER, that if any change to the
Closing Financial Statements is agreed to by the Target and the Stockholder in
accordance with Section 2.3(a), or any dispute between the Target and the
Stockholder with respect to the Closing Financial Statements is resolved in
accordance with Section 2.3(a), then "NET WORTH VALUE" shall be calculated after
giving effect to any such change or resolution.
(g) The term "CLOSING FINANCIAL STATEMENTS DELIVERY DATE" shall mean
the date on which the Closing Financial Statements are delivered pursuant to
Section 2.3(a); PROVIDED, HOWEVER, that if the Sellers take exception to any
item in the Closing Financial Statements, the Closing Financial Statements
Delivery Date shall be the date on which the Target and the Stockholder agree in
writing to any change
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as provided in Section 2.3(a) or the date on which the Accounting Firm
delivers its decision with respect to such dispute as provided in Section
2.3(a).
2.4 INTERCOMPANY RECEIVABLES AND PAYABLES. On the Closing Financial
Statements Delivery Date, all intercompany payables and receivables, between the
Target and its Subsidiaries on the one hand, and the Sellers and the Sellers'
Subsidiaries on the other hand, shall be settled and liquidated in the manner
set forth in Sections 2.3(b) and 2.3(c) of this Agreement.
ARTICLE III
CLOSING
3.1 CLOSING. Upon the terms and subject to the conditions set forth
herein, the closing of the transactions contemplated herein (the "CLOSING")
shall be held at 9:00 a.m. local time on the Closing Date at the offices
of Latham & Watkins, Sears Tower, Suite 5800, 233 South Wacker Drive, Chicago,
IL 60606, unless the parties hereto otherwise agree.
3.2 DELIVERIES AT CLOSING.
(a) STOCK CERTIFICATES. To effect the Acquisition, the Stockholder
shall, on the Closing Date, deliver to Buyer certificates(s) evidencing all of
the capital stock of the Target, free and clear of any Encumbrances of any
nature whatsoever, duly endorsed in blank for transfer or accompanied by stock
powers duly executed in blank.
(b) BUYER CERTIFICATES. To effect the Acquisition, Buyer will
furnish the Sellers with such certificates of its officers and others as may be
reasonably requested by the Sellers, which certificates shall include, but not
be limited to:
(i) a certificate executed by the Secretary or an Assistant
Secretary of Buyer certifying as of the Closing Date (A) a true and complete
copy of the Certificate of Incorporation of Buyer, (B) a true and complete copy
of the Bylaws of Buyer, (C) a true and complete copy of the resolutions of the
board of directors of Buyer authorizing the execution, delivery and performance
of this Agreement by Buyer and the consummation of the transactions contemplated
hereby and thereby, and (iv) incumbency matters;
(ii) a copy of the Certificate of Incorporation of Buyer and
all amendments thereto, certified as of a recent date by the Secretary of State
of Delaware; and
(iii) a certificate of the Secretary of State of Delaware
certifying the good standing of Buyer in its state of incorporation.
(c) OPINION OF BUYER'S COUNSEL. At the Closing, Buyer shall deliver
to the Stockholder an opinion of Latham & Watkins, counsel to Buyer, dated as of
the Closing Date, in form and substance reasonably satisfactory to the parties
and customary in transactions of the type contemplated by this Agreement.
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(d) SELLER CERTIFICATES. To effect the Acquisition, the Sellers
shall and shall cause the Target to furnish the Buyer with such certificates of
its officers and others as may be reasonably requested by the Buyer, which
certificates shall include, but not be limited to:
(i) a certificate executed by the Secretary or an Assistant
Secretary of each of the Sellers and of the Target and each of its Subsidiaries
certifying as of the Closing Date (A) a true and complete copy of the Articles
or Certificate of Incorporation (or such other comparable organizational
documents) of each of the Sellers and of the Target and each such Subsidiary,
(B) a true and complete copy of the Bylaws of each of the Sellers and of the
Target and each such Subsidiary, (C) incumbency matters and (D) with respect to
each of the Sellers, (1) a true and correct copy of the resolutions of the board
of directors of such Seller authorizing the execution, delivery and performance
of this Agreement by such Seller and the consummation of the transactions
contemplated hereby, and (2) approval and adoption of this Agreement by any
requisite vote or consent of the shareholders of such Seller;
(ii) a copy of the Articles or Certificate of Incorporation
(or such other comparable organizational documents) of each of the Sellers and
of the Target and each of its Subsidiaries and all amendments thereto, certified
as of a recent date by the appropriate Secretary of State or such other
appropriate authority; and
(iii) a certificate of the appropriate Secretary of State
certifying the good standing of the Target and each of its Subsidiaries in its
state of incorporation and all states in which it is qualified to do business.
(e) OPINION OF SELLERS' COUNSEL. The Sellers shall deliver to Buyer
an opinion of Troutman Sanders LLP, special counsel to the Sellers, and, to the
extent reasonably requested by Buyer, local counsel (including but not limited
to New York counsel with respect to enforceability), dated as of the Closing
Date, in form and substance reasonably satisfactory to the parties and customary
in transactions of the type contemplated by this Agreement.
3.3 OTHER CLOSING TRANSACTIONS.
(a) PAYMENT OF PURCHASE PRICE. At the Closing, Buyer shall deliver
to the Stockholder the Purchase Price as provided in Section 2.2.
(b) INTERCOMPANY AGREEMENT. At the Closing, the Buyer, LIW, LIM and
the Target and its Subsidiaries shall enter into the Intercompany Agreement
substantially in the form of Appendix A attached hereto.
(c) LICENSE AGREEMENT. At the Closing, the Target and Holdings One
shall enter into the License Agreement substantially in the form of Appendix B
attached hereto.
(d) LIW PROMISSORY NOTE RELEASE. At the Closing, TBC and LIW shall
enter into the LIW Promissory Note Release substantially in the form of Appendix
C attached hereto.
(e) OPTION DEED. At the Closing, the Buyer and certain managers of
LIW and others shall enter into the Option Deed substantially in the form of
Appendix D attached hereto.
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(f) TRADEMARK ASSIGNMENT. At the Closing, the Target shall deliver
the Trademark Assignment, substantially in the form of Appendix E attached
hereto, to Holdings One.
(g) ESCROW AGREEMENT. At the Closing, the Sellers shall enter into
the Escrow Agreement with Buyer and the Escrow Agent substantially in the form
of Appendix F attached hereto and Buyer shall deposit the Escrow Amount into
escrow thereunder contemplated by Section 2.2(b).
(h) SOFTWARE LICENSE AND TECHNICAL SUPPORT AGREEMENT. At the
Closing, the Target and LIM shall enter into the Software License and Technical
Support Agreement, substantially in the form of Appendix G attached hereto.
(i) SOURCE CODE DEPOSIT AGREEMENT. At the Closing, the Target and
LIM shall enter into the Source Code Deposit Agreement, substantially in the
form of Appendix H hereto.
(j) SHAREHOLDERS AGREEMENT. At the Closing, Buyer and certain
managers of LIW and others shall enter into the Shareholders Agreement,
substantially in the form of Appendix I attached hereto.
(k) WARRANT INSTRUMENT. At the Closing, LIW shall execute the
Warrant Instrument, substantially in the form of Appendix J hereto.
(l) PAYMENT OF FLEET OBLIGATION. Concurrently with the Closing,
Buyer shall cause the Target to retire the aggregate amount of the Fleet
Obligation.
(m) NONFOREIGN AFFIDAVIT. At the Closing, the Stockholder shall
furnish Buyer an affidavit, stating, under penalty of perjury, such transferor's
United States taxpayer identification number and that such transferor is not a
foreign person, pursuant to Section 1445(b)(2) of the Code.
(n) HOULIHAN LOKEY OPINION. At the Closing, LIW and Buyer shall be
furnished with an opinion from Houlihan, Lokey, Howard & Zukin, Inc. stating
that the Purchase Price (plus the amount of the Financing Obligations being
assumed or retired by Buyer as set forth herein) is at least equal to the fair
value of the aggregate assets of the Target and its Subsidiaries, with fair
value being defined as the amount at which the aggregate assets of the Target
and its Subsidiaries would change hands between a willing Buyer and a willing
Seller, each having reasonable knowledge of the relevant facts, neither being
under any compulsion to act, with equity to both. The costs of such opinion
shall be paid by Buyer.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLERS WITH RESPECT TO THE
TARGET AND ITS SUBSIDIARIES
The Sellers hereby, jointly and severally, represent and warrant to
Buyer as follows (except as otherwise set forth in the numbered section of the
Disclosure Schedule corresponding to the Sections of
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this Article to which such exception pertains), which representations and
warranties are, as of the date hereof, true and correct:
4.1 ORGANIZATION OF THE TARGET AND EACH OF ITS SUBSIDIARIES. (a) The
Target and each of its active Subsidiaries is duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation or
formation with full power and authority to conduct the Business as it is
presently being conducted and to own and lease its properties and Assets. The
Target and each of its Subsidiaries is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction in which such
qualification is necessary under the applicable law as a result of the conduct
of the Business or ownership (or leasing) of its properties, except where the
failure to be so qualified or in good standing would not have a Material Adverse
Effect. Copies of the Certificates or Articles of Incorporation and Bylaws of
the Target and each of its Subsidiaries, and all amendments thereto, heretofore
delivered to Buyer are accurate and complete as of the date hereof.
Schedule 4.1(a) contains a true, correct and complete list of all jurisdictions
in which the Target and each of its Subsidiaries is qualified to do business as
a foreign corporation.
(b) The authorized, issued and outstanding shares of capital stock
of the Target and each of its Subsidiaries are set forth in Schedule 4.1(b)
hereto. All of the outstanding shares of capital stock of the Target and each
of its Subsidiaries are duly authorized, validly issued, fully paid and non-
assessable. Except as set forth in Schedule 4.1(b), the Stockholder has good
and valid title to all of the issued and outstanding shares of capital stock of
the Target free and clear of all Encumbrances with full right, power and
authority to transfer such shares to Buyer subject to securing the consents set
forth in Schedule 4.1(b) hereof. Except as set forth in Schedule 4.1(b), the
Target owns all of the issued and outstanding shares of capital stock of each of
its Subsidiaries. Except as set forth in Schedule 4.1(b), there are no
outstanding subscriptions, calls, commitments, warrants or options for the
purchase of shares of any capital stock or other securities of (or other
ownership interests in) the Target or any of its Subsidiaries or any securities
convertible into or exchangeable for shares of capital stock or other securities
issued by (or other ownership interests in) the Target or any of its
Subsidiaries or any other commitments of any kind for the issuance of additional
shares of capital stock or other securities issued by (or other ownership
interests in) the Target or any of its Subsidiaries. Upon delivery to Buyer and
the payment in full of the Fleet Obligation, the capital stock of the Target and
its Subsidiaries will be free and clear of all Encumbrances and shall be duly
authorized, validly issued, fully paid and non-assessable.
4.2 SUBSIDIARIES. Except as set forth in Schedule 4.2, the Target (a)
does not have any Subsidiaries nor (b) any direct or indirect stock or other
ownership interest (whether controlling or not) in any Person.
4.3 AUTHORIZATION. The Target and each of its Subsidiaries have all
requisite corporate power and authority, and have taken all corporate action
necessary, to own, lease and operate their respective Assets and to conduct the
Business as it is presently being conducted. The Target has all requisite power
and authority, and has taken all action necessary, to execute and deliver the
Ancillary Agreements to which it is a party, to consummate the transactions
contemplated thereby and to perform its obligations thereunder. The execution
and delivery by the Target of the Ancillary Agreements to which it is a party
and the consummation by the Target of the transactions contemplated thereby have
been duly approved by the board of directors and, to the extent required under
applicable corporate
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laws, shareholders of the Target. No other proceedings or actions on the
part of the Target are necessary to authorize the Ancillary Agreements to
which it is a party and the transactions contemplated hereby and thereby.
Each of the Ancillary Agreements to which it is a party have been duly
executed and delivered by the Target, and each such agreement is a legal,
valid and binding obligation of the Target, enforceable against the Target in
accordance with its terms, except as such enforceability may be limited by
(i) bankruptcy, insolvency, moratorium, reorganization and other similar laws
affecting creditors' rights generally and (ii) general principles of equity,
regardless of whether asserted in a proceeding in equity or at law.
4.4 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
Schedule 4.4:
(a) since June 30, 1996, there has not been any actual or, to
the knowledge of the Sellers, threatened change in the Assets or the Business,
or the Liabilities, earnings, results of operations or financial condition of
the Target or any of its Subsidiaries that would have a Material Adverse Effect;
(b) since June 30, 1996, there has not been (i) except for
normal periodic increases in the ordinary course of business or pursuant to the
collective bargaining agreements to which the Target or any of its Subsidiaries
are a party as set forth in Schedule 4.13, any increase in the compensation
payable or to become payable by the Target or any of its Subsidiaries to any of
its current or former officers, employees, or agents (collectively,
"PERSONNEL"), (ii) any grant, payment or accrual, contingent or otherwise, for
or to the credit of any of the Personnel with respect to any bonus, incentive
compensation, service award or other like benefit other than in the ordinary
course of business, (iii) any adoption, creation or amendment of any Employee
Plan of the Target or any of its Subsidiaries, (iv) any written employment
agreement made by the Target or any of its Subsidiaries to which the Target or
any of its Subsidiaries is a party or (v) any other material change in
employment terms for any officers, employees or agents of the Target or any of
its Subsidiaries other than in the ordinary course of business;
(c) since December 31, 1995, there has not been any sale,
lease, assignment or transfer of any of the Assets, other than to persons that
are not affiliates for fair consideration and in the ordinary course of
business;
(d) since June 30, 1996, there has not been any cancellation of
any indebtedness or waiver or release of any right or claim of the Target or any
of its Subsidiaries relating to its activities or properties in connection with
the Assets or the Business, except where such cancellation, release or waiver
would not, individually or in the aggregate, have a Material Adverse Effect;
(e) since June 30, 1996, there has not been any amendment,
cancellation or termination of any Contract, commitment, agreement, transaction
or Permit relating to the Assets or the Business or entry into any Contract,
commitment, agreement, Lease, transaction or Permit which, in each case, is not
in the ordinary course of business;
(f) since June 30, 1996, there has not been any damage,
destruction or loss of Assets (whether or not covered by insurance) which would
have a Material Adverse Effect.
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(g) since June 30, 1996, there has not been any change in
employee relations which has or would have a Material Adverse Effect;
(h) since December 31, 1995, there has not been any change in
accounting methods, principles or practices by the Target or any of its
Subsidiaries;
(i) since June 30, 1996, there has not been any revaluation of
any of the Assets of the Target or any of its Subsidiaries, including without
limitation writing down the value of inventory or writing off notes or accounts
receivable except in the ordinary course of business, except for such
revaluation of Assets which would not have, either individually or in the
aggregate, a Material Adverse Effect;
(j) since June 30, 1996, except for certain pledges to TBC,
there has not been any mortgage, pledge or other Encumbrance of any Assets,
except Permitted Encumbrances;
(k) since December 31, 1995, except for the Fleet Obligation
and certain indebtedness to TBC, there has not been any incurrence of
indebtedness by the Target or any of its Subsidiaries for borrowed money or
commitment to borrow money entered into by the Target or any of its
Subsidiaries, or any loans made or agreed to be made by the Target or any of its
Subsidiaries, or indebtedness guaranteed by the Target or any of its
Subsidiaries, in excess of $100,000 (exclusive of freight costs and customs
duties) for any single item (or series of similar items with the same party or
parties);
(l) since December 31, 1995, there has not been any incurrence,
payment, discharge or satisfaction by the Target or any of its Subsidiaries of
Liabilities, except Liabilities incurred, paid, discharged or satisfied in the
ordinary course of business and not in excess of $100,000 (exclusive of freight
costs and customs duties) for any single item (or series of similar items with
the same party or parties);
(m) since December 31, 1995, there has not been any capital
expenditure or the execution of any Lease or Contract (or series of related
Leases or Contracts) or any incurring of liability therefor, in each case by the
Target and its Subsidiaries (i) involving affiliates of the Target or any of its
Subsidiaries, (ii) involving payments, individually or, for a series of related
Contracts involving payments to or from the same party or parties, in the
aggregate, in excess of $100,000, or (iii) outside of the ordinary course of
business;
(n) since June 30, 1996, there has not been any failure to pay
or satisfy when due any Liability of the Target and its Subsidiaries, except
where the failure would not have a Material Adverse Effect;
(o) since June 30, 1996, there has not been any failure of the
Target or any of its Subsidiaries to carry on diligently (given the financial
condition of the Target and its Subsidiaries) the Business in the ordinary
course;
(p) since December 31, 1995, other than pursuant to this
Agreement, there has not been any issuance of any shares of capital stock of the
Target or any of its Subsidiaries or any rights or
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options to purchase any such shares, payment of dividends in cash or
otherwise or any other distribution on account of the capital stock of the
Target and any of its Subsidiaries;
(q) since June 30, 1996, there has not been any acceleration of
the payment by the Target or any of its Subsidiaries of any accounts payable to
LIW and/or any affiliate of LIW outside of the normal MCS terms (as such terms
are defined in the Intercompany Agreement);
(r) to the knowledge of the Sellers, since June 30, 1996, there
has not occurred any other event or condition which in any one case or in the
aggregate would have a Material Adverse Effect;
(s) agreement by any Seller or the Target or any of its
Subsidiaries to do any of the things described in the preceding clauses (a)
through (r) other than as expressly provided for herein.
4.5 TITLE TO ASSETS. Schedule 4.5 contains accurate lists or summary
descriptions of categories of all tangible Assets owned or leased by the Target
and any of its Subsidiaries where the value of an individual item exceeds
$50,000 at current book value or where an aggregate of similar items exceeds
$100,000 at current book value. Except as set forth in Schedule 4.5, the Target
and each of its Subsidiaries owns or has the right to use its respective Assets
free and clear of any Encumbrances, except for Encumbrances specifically
identified in Schedule 4.5 and Permitted Encumbrances. The Assets include
without limitation all assets necessary for the conduct of the Business. All
tangible assets and properties which are part of the Assets conform in all
respects to all applicable Regulations (including Environmental Laws) relating
to their construction, use and operation except where the failure to conform
would not have a Material Adverse Effect.
4.6 FACILITIES.
(a) FACILITIES. Neither the Target nor any of its Subsidiaries owns
any Owned Real Property. Schedule 4.6(a) also contains a complete and accurate
description of the following terms of all Facility Leases of the Target and any
of its Subsidiaries: (i) a general description of the leased property or items,
(ii) the term, (iii) the applicable rent and (iv) any requirements for the
consent of third parties to assignments thereof or to the change of control or
ownership of The Target. To the knowledge of the Sellers, all Facility Leases
of the Target and any of its Subsidiaries are valid, binding and enforceable in
accordance with their terms and, to the knowledge of the Sellers, are in full
force and effect; except as set forth in Schedule 4.6, no event exists which
(whether with or without notice, lapse of time or both or the happening or
occurrence of any other event) would constitute a Default thereunder on the part
of the Target or any of its Subsidiaries which would terminate or cause a
material Liability under any Facility Leases; and, to the knowledge of the
Sellers, there exists no occurrence of any event which (whether with or without
notice, lapse of time or both or the happening or occurrence of any other event)
would constitute a Default thereunder by any other party.
(b) ACTIONS. There are no pending condemnation proceedings,
administrative proceeding or other Actions against the Target or any of its
Subsidiaries with respect to any of the Facility Leases, or to the knowledge of
the Sellers, pending or threatened condemnation proceedings, administrative
proceedings or other Actions otherwise with respect to any of the Facility
Leases.
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(c) LEASES OR OTHER AGREEMENTS. Except for Facility Leases listed
in Schedule 4.6, there are no leases, subleases, licenses, occupancy agreements,
options, rights, concessions or other agreements or arrangements with respect to
real property, written or oral, involving, individually or in the aggregate, the
payment of $50,000 or more to or by the Target or any of its Subsidiaries during
any twelve-month period and granting to any Person the right to purchase, use or
occupy any Facility or any real property.
(d) FACILITY LEASES AND LEASED REAL PROPERTY. With respect to each
Facility Lease, the Target and each of its Subsidiaries that is a party to such
Facility Lease has an interest in the Leasehold Estate, subject only to
Permitted Encumbrances and those Encumbrances set forth in Schedule 4.6(d).
Except as set forth in Schedule 4.6, the Target and each of its Subsidiaries
enjoys peaceful and undisturbed possession of all the Leased Real Property it
leases, subject to the rights of the fee owners and the terms of the Facility
Leases, and the Target and each of its Subsidiaries has performed all the
obligations required to be performed by it through the date hereof, except where
the failure to perform would not, either individually or in the aggregate, have
a Material Adverse Effect.
(e) CERTIFICATE OF OCCUPANCY. To the knowledge of the Sellers, all
Facilities have received all required approvals of governmental authorities
(including without limitation Permits and a certificate of occupancy or other
similar certificate permitting lawful occupancy of the Facilities) required in
connection with the operation thereof and have been operated and maintained in
all respects in accordance with applicable Regulations, except where the failure
to receive such approvals or comply with any such Regulation would not have a
Material Adverse Effect.
(f) UTILITIES. All Facilities are supplied with utilities
(including without limitation water, sewage, disposal, electricity, gas and
telephone) and other services necessary for the operation of such Facilities as
currently operated, and, to the knowledge of the Sellers, there is no condition
which would result in the termination of the present access from any Facility to
such utility services.
(g) IMPROVEMENTS, FIXTURES AND EQUIPMENT. The improvements
constructed on the Facilities, including without limitation all Leasehold
Improvements are (i) insured to the extent and in a manner customary in the
industry, (ii) to the knowledge of the Sellers, structurally sound with no
material defects, (iii) in good operating condition and repair, subject to
ordinary wear and tear, (iv) to the knowledge of the Sellers, sufficient for the
operation of the Business as presently conducted and (v) in conformity with all
applicable Regulations, except where the failure to be insured, structurally
sound, in good operating condition and repair or to conform with any such
Regulation would not have a Material Adverse Effect. None of the improvements
is subject to any commitment or other arrangement for their sale or use by any
affiliate of the Target or any of its Subsidiaries or, to the knowledge of the
Sellers, any third party that would materially interfere with the use thereof.
(h) NO SPECIAL ASSESSMENT. Neither the Target nor any of its
Subsidiaries has received notice of any special assessment relating to any
Facility or any portion thereof and, to the knowledge of the Sellers, there is
no pending or threatened special assessment.
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4.7 CONTRACTS AND COMMITMENTS.
(a) CONTRACTS. Schedule 4.7(a) lists the following Contracts,
agreements and other written arrangements to which the Target and any of its
Subsidiaries is a party, or by which the Assets of the Target or any such
Subsidiary are bound, including without limitation:
(i) Contracts not made in the ordinary course of business;
(ii) written employment and severance agreements, including
without limitation Contracts (A) to employ or terminate officers or other
Personnel and other Contracts with present or former officers, directors or
shareholders or other Personnel of the Target or any of its Subsidiaries or (B)
that will result in the payment by, or the creation of any Liability to pay on
behalf of Buyer or the Target or any of its Subsidiaries any severance,
termination, "golden parachute," or other similar payments to any present or
former Personnel following termination of employment or otherwise as a result of
the consummation of the transactions contemplated by this Agreement;
(iii) labor or union contracts;
(iv) excluding Contracts with S-Agents and employees,
written sales, commission, consulting or agency Contracts related to the Assets
or the Business requiring payments by the Target or its Subsidiaries in excess
of $50,000 during any twelve-month period;
(v) options with respect to any property, real or personal,
whether the Target or any of its Subsidiaries shall be the grantor or grantee
thereunder, providing for payments in excess of $50,000;
(vi) excluding Contracts that are cancelable by the Target
(in the case of Contracts entered into by the Target) and its Subsidiaries (in
the case of contracts that are entered into by the Target's Subsidiaries)
without penalty or increased cost, written Contracts for the performance of
services or delivery of goods by the Target or any of its Subsidiaries involving
receipts in excess of $500,000 (exclusive of freight charges and customs duties)
or expenditures in excess of $50,000 (exclusive of freight charges and customs
duties) in any twelve-month period;
(vii) excluding Contracts that are cancelable by the Target
(in the case of Contracts entered into by the Target) and its Subsidiaries (in
the case of contracts that are entered into by the Target's Subsidiaries)
without penalty or increased cost, Contracts involving expenditures or
Liabilities, actual or potential, which individually involve in excess of
$50,000 (exclusive of freight charges and customs duties) in any twelve-month
period;
(viii) promissory notes, loans, indentures, evidences of
indebtedness, letters of credit, guarantees, or other similar instruments
relating to an obligation to repay borrowed money, individually or in the
aggregate in excess of $25,000, whether the Target or any of its Subsidiaries
shall be the borrower, lender or guarantor thereunder or whereby any Assets are
pledged (excluding credit provided by the Target or any such Subsidiary in the
ordinary course of business to purchasers of its products or services);
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(ix) Contracts containing covenants materially limiting the
freedom of the Target or any of its Subsidiaries or any officer, director,
shareholder or affiliate of the Target or any of its Subsidiaries, (i) to engage
in any line of business which is competitive with the Business, or (ii) except
for covenants running in favor of the Target or any of its Subsidiaries, to
compete with any Person with respect to the Business;
(x) except for agreements with S Agents, written
arrangements (or group of related written arrangements) constituting a
partnership or joint venture between the Target or any of its Subsidiaries and
any other Person;
(xi) written arrangements between the Target or any of its
Subsidiaries and any of their respective directors, officers, shareholders or
employees, any affiliate thereof or any member of any such person's immediate
family (x) providing for the furnishing of material services by, (y) providing
for the rental of material real or personal property from, or (z) otherwise
requiring material payments to (other than for services as officers, directors
or employees of the Target or any such Subsidiary), any such Person or any
corporation, partnership, trust or other entity in which any such Person has a
substantial interest as a shareholder, officer, director, trustee or partner;
(xii) Contracts that materially limit or contain material
restrictions on the ability of the Target or any of its Subsidiaries to purchase
or sell any Assets;
(xiii) Contracts with the United States, any state or local
government or any agency or department thereof;
(xiv) Leases of real property; and
(xv) Leases of personal property providing for lease
payments in excess of $50,000 and not cancelable (without Liability) within 30
calendar days.
The Target and its Subsidiaries have made available to Buyer true, correct and
complete copies of all of the Contracts listed in Schedule 4.7(a), including all
amendments and supplements thereto.
(b) ABSENCE OF BREACHES AND DEFAULTS. All of the Contracts to which
the Target or any of its Subsidiaries is party or by which it or any of the
Assets is bound or affected are valid, binding and enforceable in accordance
with their terms, except where any such failure to be enforceable would not,
either individually or in the aggregate, have a Material Adverse Effect. Except
as set forth in Schedule 4.7(b), the Target and each of its Subsidiaries has
fulfilled, or taken all action necessary to enable it to fulfill when due, all
of its material obligations under each such Contract, except where the failure
to fulfill its obligations thereunder, or the failure to take any such action to
enable it to fulfill its obligations thereunder, either individually or in the
aggregate, would not have a Material Adverse Effect. Except as set forth in
Schedule 4.7(b), the Target and each of its Subsidiaries which is a party to
such Contracts and, to the knowledge of the Sellers, each other party to such
Contracts has complied in all material respects with the provisions thereof and
is not in Default thereunder, except where such Default would not, either
individually or in the aggregate, have a Material Adverse Effect, and no notice
of any claim of Default has been given to the Target or any of its Subsidiaries.
Neither the Target nor any of its Subsidiaries has reason to believe that any
outstanding bid, proposal or any
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unfinished Contract will upon performance by the Target or any of its
Subsidiaries result in a loss to the Target or such Subsidiary, except where
such loss would not have a Material Adverse Effect.
(c) SERVICE WARRANTY. Except as set forth in Schedule 4.7(c),
neither the Target nor any of its Subsidiaries has committed any act, and there
has been no omission, which will result in, and there has been no occurrence
which will give rise to, Liability for breach of warranty (whether covered by
insurance or not) on the part of the Target or any of its Subsidiaries, with
respect to products maintained, delivered or installed or services rendered
prior to or on the Closing Date, except for such Liabilities which would not,
either individually or in the aggregate, have a Material Adverse Effect.
4.8 PERMITS, CONSENTS AND APPROVALS.
(a) Schedule 4.8(a) sets forth a complete list of all material
Permits used in the operation of the Business or otherwise held by the Target or
any of its Subsidiaries with respect to the Business. The Target and each of
its Subsidiaries has all Permits required to be maintained by the Target or any
of its Subsidiaries under any Regulation (including applicable Environmental
Laws) in the operation of its Business or in the ownership of the Assets, and
possesses such Permits free and clear of all Encumbrances, other than Permitted
Encumbrances and Encumbrances identified in Schedule 4.8(a), except Permits the
failure of which to obtain would not have a Material Adverse Effect. To the
knowledge of the Sellers neither the Target nor any of its Subsidiaries is in
Default, nor has the Target or any of its Subsidiaries received any notice of
any claim of Default, with respect to any such Permit. Except as set forth in
Schedule 4.8(a), none of the rights of the Target or any of its Subsidiaries in
any Permit will be adversely affected by the completion of the transactions
contemplated by this Agreement. Except for Permits set forth in Schedule
4.8(a), no present or former shareholder, director, officer or employee of the
Target or any of its Subsidiaries or any affiliate thereof, or any other Person
owns or has any proprietary, financial or other interest (direct or indirect) in
any Permit which any Seller owns, possesses or uses.
(b) Other than in connection with or in compliance with the
provisions of the HSR Act, and except as disclosed in Schedule 4.8(b) hereto, no
notice to, declaration, filing or registration with, or Permit from, any
domestic or foreign governmental or regulatory body or authority, or any other
Person, is required to be made or obtained by the Target or any of its
Subsidiaries in connection with the execution, delivery or performance of this
Agreement and the consummation of the transactions contemplated hereby.
Schedule 4.8(b) sets forth all Contracts which require the consent of the other
parties thereto to any "change of control" or similar event with respect to the
Target or any of its Subsidiaries.
4.9 NO CONFLICT OR VIOLATION. Except as set forth in Schedule 4.9,
neither the execution, delivery or performance of this Agreement or the
Ancillary Agreements nor the consummation of the transactions contemplated
hereby or thereby, nor compliance by the Target or any of its Subsidiaries with
any of the provisions hereof, will (a) violate any provision of the Articles of
Incorporation or Bylaws of the Target or any of its Subsidiaries, (b) violate or
result in or constitute a Default under, or result in the termination of, or
accelerate the performance required by, or result in a right of termination or
acceleration under, or result in the creation of any Encumbrance upon any of the
Assets under, any of the terms, conditions or provisions of any Contract or
Permit (i) to which the Target or any of its Subsidiaries is a party or (ii) by
which the Assets are bound, (c) violate any Regulation or
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Court Order or (d) impose any Encumbrance on any of the Assets or the
Business, other than Permitted Encumbrances, except in the cases of each of
clauses (b), (c) and (d) above, for such violations, Defaults, terminations,
accelerations or creations of Encumbrances which, individually and in the
aggregate, would have a Material Adverse Effect.
4.10 FINANCIAL STATEMENTS. The Target and each of its Subsidiaries have
heretofore delivered to Buyer true and complete copies of the Financial
Statements. The Financial Statements (a) are in accordance with the Books and
Records of the Target and its Subsidiaries in all material respects, (b) except
as set forth in Schedule 4.10 have been prepared in accordance with GAAP
consistently applied (except such changes as may have been required by GAAP)
throughout the period covered thereby (subject, in the case of the Interim
Financial Statements, which have been prepared in accordance with the historical
accounting procedures of the Target and its Subsidiaries for the preparation of
interim financial statements, to normal year-end adjustments and the absence of
footnotes) and (c) after giving effect to the adjustments specified therein,
fairly and accurately present in all material respects (i) the combined assets,
liabilities (including all reserves) and financial position of the Target and
its Subsidiaries on the date or for the period covered thereby, (ii) the
combined results and operations of the Target and its Subsidiaries for the
period presented and (iii) the combined cash flows of the Target and its
Subsidiaries for the period presented.
4.11 BOOKS AND RECORDS. The Target and each of its Subsidiaries has made
and kept (and given Buyer access to) Books and Records and accounts, which, in
reasonable detail, accurately reflect in all material respects the activities of
the Target and each such Subsidiary. The minute books of the Target and each of
its Subsidiaries previously delivered to Buyer accurately reflect all material
action previously taken by the shareholders, board of directors and committees
of the board of directors of the Target and each such Subsidiary. The copies of
the stock ledgers of the Target and each of its Subsidiaries previously
delivered to Buyer are true, correct and complete in all material respects, and
accurately reflect all transactions effected in the stock of the Target and each
of its Subsidiaries through and including the date hereof.
4.12 LITIGATION. Except as set forth in Schedule 4.12, there are no
Actions, individually or, if related to a single set of circumstances, in the
aggregate, involving more than $50,000 pending, or to the knowledge of the
Sellers, threatened (a) against, or to the knowledge of the Sellers, relating to
or affecting (i) the Target or any of its Subsidiaries, the Business or the
Assets (including with respect to Environmental Laws), (ii) any Employee Plan of
the Target or any of its Subsidiaries or any trust or other funding instrument
or any fiduciary or administrator thereof in their capacity as such, (iii) any
officers or directors of the Target or any of its Subsidiaries in such capacity,
(iv) any shareholder of the Target or any of its Subsidiaries in
such shareholder's capacity as a shareholder of the Target or such Subsidiary or
(v) the transactions contemplated by this Agreement or before or by any federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, any of which would have a
Material Adverse Effect, (b) which, if determined adversely to the Target or any
of its Subsidiaries, could reasonably be expected to delay, limit or enjoin the
transactions contemplated by this Agreement, (c) that involve the probability of
criminal liability on the part of the Target or any of its Subsidiaries, or (d)
in which the Target or any of its Subsidiaries is a plaintiff, including any
derivative suits brought by or on behalf of the Target or any of its
Subsidiaries. Except as set forth in Schedule 4.12, neither the Target nor any
of its Subsidiaries is in Default with respect to or subject to any judgment,
order, writ, injunction or decree of any court or governmental
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agency and there are no unsatisfied judgments against the Target or any of
its Subsidiaries, the Business or the Assets, any of which would,
individually or in the aggregate, have a Material Adverse Effect. To the
knowledge of the Sellers, there is not a reasonable likelihood of an adverse
determination of any pending Actions that could, individually or in the
aggregate, have a Material Adverse Effect. There are no Court Orders or
agreements with, or liens of, any governmental authority pursuant to or under
any Environmental Law which regulate, obligate or bind the Target or any of
its Subsidiaries or, to the knowledge of the Sellers, any Facility or Former
Facility.
4.13 LABOR MATTERS. Except as set forth in Schedule 4.13, neither the
Target nor any of its Subsidiaries is a party to any labor agreement with
respect to its employees with any labor organization, union or similar group or
association and there are no employee unions (nor any other similar labor or
employee organizations) which represent employees of the Target and its
Subsidiaries. Other than pursuant to the labor agreements set forth in Schedule
4.13 and the activities of the unions which are parties thereto with respect to
the employees covered thereby, neither the Target nor any of its Subsidiaries is
experiencing any attempt by organized labor or its representatives to make the
Target or any of its Subsidiaries conform to demands of organized labor relating
to its employees or to enter into a binding agreement with organized labor that
would cover the employees of the Target or any of its Subsidiaries. There is no
labor strike or labor disturbance pending or, to the knowledge of the Sellers,
threatened against the Target or any of its Subsidiaries nor is any grievance
currently being asserted. The Business is in compliance with all applicable
laws respecting employment practices, employment documentation, terms and
conditions of employment and wages and hours, except where any failure to comply
with any such applicable law would not have a Material Adverse Effect, and is
not and has not engaged in any unfair labor practice which would, individually
or in the aggregate, have a Material Adverse Effect. Without limiting the
foregoing, the Target and each of its Subsidiaries is in compliance with the
Immigration Reform and Control Act of 1986 and maintains a current Form I-9, to
the extent required by such Act, in the personnel file of each employee hired
after November 9, 1986, except where any failure to comply would not have a
Material Adverse Effect. Schedule 4.13 sets forth the names and current annual
salary rates or current hourly wages of all present employees of the Target or
any of its Subsidiaries whose annual cash compensation for the 1996 fiscal year
exceeds $75,000, and also sets forth the earnings for each of such employees as
reflected on Form W-2 for the 1995 calendar year. Except as set forth in
Schedule 4.13, there is no unfair labor practice charge or complaint against the
Target or any of its Subsidiaries pending before the National Labor Relations
Board or any other domestic or foreign governmental agency arising out of
conduct of the Business, and to the knowledge of the Sellers there are no facts
or information which would give rise thereto.
4.14 LIABILITIES. Except as set forth in Schedule 4.14 hereto, neither
the Target nor any of its Subsidiaries has any Liabilities due or to become due,
except (a) Liabilities which are reflected and reserved against on the 1995 Year
End Financial Statements, which have not been paid or discharged since the date
thereof, (b), Liabilities hereunder and under the Ancillary Agreements or
(c) Liabilities arising in the ordinary course of business (including the
payment of amounts due in the ordinary course under Contracts) and none of
which, individually or in the aggregate, has or would have a Material Adverse
Effect.
4.15 COMPLIANCE WITH LAW. Except as set forth in Schedule 4.15, the
Target and each of its Subsidiaries and the conduct of the Business have not
violated and are in compliance with all applicable Regulations and Court Orders
relating to the Assets or the Business or operations of the Target and
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each such Subsidiary, except where the violation or failure to comply,
individually or in the aggregate, would not have a Material Adverse Effect.
Neither the Target nor any of its Subsidiaries has received any notice to the
effect that, or otherwise been advised that, the Target or any of its
Subsidiaries is not in compliance with any such Regulations or Court Orders,
and no Seller has reason to believe that any existing circumstances are
likely to result in violations of any of the foregoing, which failure to
comply or violation would, in any one case or in the aggregate, have a
Material Adverse Effect.
4.16 NO BROKERS. Neither the Target nor any of its Subsidiaries nor any
of their respective officers, directors, employees, shareholders or affiliates
has employed or made any agreement with any broker, finder or similar agent or
any person or firm which will result in the obligation of Buyer or any of its
affiliates to pay any finder's fee, brokerage fees or commission or similar
payment in connection with the transactions contemplated hereby.
4.17 NO OTHER AGREEMENTS TO SELL THE ASSETS. Neither the Target nor any
of its Subsidiaries nor any of their respective officers, directors,
shareholders or affiliates has any outstanding commitment or legal obligation,
absolute or contingent, to any other Person other than Buyer to sell, assign,
transfer or effect a sale of all or a material portion of the Assets (other than
inventory in the ordinary course of business), to sell or effect a sale of the
capital stock of the Target or any of its Subsidiaries, to effect any merger,
consolidation, liquidation, dissolution or other reorganization of the Target or
any of its Subsidiaries, or to enter into any agreement or cause the entering
into of an agreement with respect to any of the foregoing.
4.18 PROPRIETARY RIGHTS.
(a) PROPRIETARY RIGHTS. Schedule 4.18(a) sets forth with respect to
the Target and each of its Subsidiaries: (i) for each Patent owned by the
Target or any of its Subsidiaries, the number, expiration date and subject
matter for each country in which such Patent has been issued, or, if applicable,
the application number, date of filing and subject matter for each country, (ii)
for each Trademark owned by the Target or any of its Subsidiaries, the
application serial number or registration number, the class of goods covered and
the issuance date for each country in which a Trademark has been registered and
(iii) for each Copyright owned by the Target or any of its Subsidiaries, the
number and date of filing for each country in which a Copyright application has
been filed. The Proprietary Rights listed in the Disclosure Schedule are all of
the material Proprietary Rights used by the Target or any of its Subsidiaries in
connection with the Business. True and correct copies of all Patents (including
any and all pending applications) owned, controlled or created by or on behalf
of the Target or any of its Subsidiaries or in which the Target or any of its
Subsidiaries have any ownership interest whatsoever have been provided to Buyer.
(b) OWNERSHIP AND PROTECTION OF PROPRIETARY RIGHTS. The Target and
its Subsidiaries own or have a valid right to use each of the Proprietary
Rights, and assuming the consents described in Schedule 4.18(b) have been
obtained, no such Proprietary Rights will cease to be valid rights of the Target
or any of its Subsidiaries solely by reason of the execution, delivery and
performance of this Agreement or the consummation of the transactions
contemplated hereby. Except for applications pending, all of the material
Patents, registered designs and registered Trademarks listed in the Disclosure
Schedule have been duly issued to the Target or its Subsidiaries and all of the
other Proprietary Rights exist and if possible, are registered and are
subsisting. All of the pending Patent
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applications have been duly filed. None of the Proprietary Rights owned by
the Target or any of its Subsidiaries is involved in any pending or, to the
knowledge of the Sellers, threatened litigation. Neither the Target nor any
of its Subsidiaries has received any notice of invalidity of its right or
infringement of any rights of others with respect to such Proprietary Rights.
Except as set forth in Schedule 4.18(b), no Person (i) has notified the
Target or any of its Subsidiaries that it is claiming any ownership of or
right to use such Proprietary Rights, or (ii) to the knowledge of the
Sellers, is infringing upon any such Proprietary Rights in any way. To the
knowledge of the Sellers, the use of by the Target or any of its Subsidiaries
of the Proprietary Rights owned by the Target and its Subsidiaries does not
and will not infringe upon the rights of any third party and no Action has
been instituted against or notices received by the Target or any of its
Subsidiaries that are presently outstanding alleging that any use by the
Target and its Subsidiaries of the Proprietary Rights infringes upon or
otherwise violates any rights of a third party.
4.19 EMPLOYEE BENEFIT PLANS.
(a) DISCLOSURE; DELIVERY OF COPIES OF RELEVANT DOCUMENTS AND OTHER
INFORMATION. Schedule 4.19 contains a complete list of Employee Plans. Except
as set forth in Schedule 4.19, true and complete copies of each of the following
documents have been made available by the Target and its Subsidiaries to Buyer:
(i) each Welfare Plan, Pension Plan, Multiemployer Plan and Benefit Arrangement
(and, if applicable, related trust agreements) which covers or has covered
employees of the Target or any of its Subsidiaries (with respect to their
relationship with such entities) and all amendments thereto, all Summary Plan
Descriptions (as such term is defined in ERISA) thereof which have been
distributed to any employees of the Target or any of its Subsidiaries, (ii) each
Employee Plan which covers or has covered employees of the Target or any of its
Subsidiaries (with respect to their relationship with such entities) including
Summary Plan Descriptions thereof which have been distributed to any employees
of the Target or any of its Subsidiaries (including descriptions of the number
and level of employees covered thereby) and a complete description of any
Employee Plan which is not in writing, (iii) the most recent determination or
opinion letter issued by the Internal Revenue Service with respect to each
Pension Plan and each Welfare Plan (other than a Multiemployer Plan, as defined
in Section 3(37) of ERISA) which covers or has covered employees of the Target
or any of its Subsidiaries (with respect to its relationship with such
entities), (iv) for the three most recent plan years, Annual Reports on Form
5500 Series required to be filed with any governmental agency for each Pension
Plan which covers or has covered employees of the Target or any of its
Subsidiaries (with respect to its relationship with such entities), (v) all
actuarial reports prepared for the last three plan years for each Pension Plan
which covers or has covered employees of the Target or any of its Subsidiaries
(with respect to its relationship with such entities) and (vi) a description
setting forth the amount of any Liability of the company as of the Closing Date
for payments more than thirty (30) calendar days past due with respect to each
Welfare Plan which covers or has covered employees or former employees of the
Target or any of its Subsidiaries.
(b) REPRESENTATIONS. Except as set forth in Schedule 4.19:
(i) PENSION PLANS
(A) The funding method used in connection with each Pension
Plan which is subject to the minimum funding requirements of ERISA is acceptable
under ERISA and the actuarial
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assumptions used in connection with funding each such plan are reasonable
under ERISA. As of the last day of the last plan year of each Pension Plan
and as of the Closing Date, the "amount of unfunded benefit liabilities" as
defined in Section 4001(a)(18) of ERISA (but excluding from the definition of
"current value" of "assets" of such Pension Plan, accrued but unpaid
contributions) did not exceed zero. No "accumulated funding deficiency" as
defined in Section 412 of the Code or as defined in Section 302(a)(2) of
ERISA, whichever may apply, for which an excise tax is due or would be due in
the absence of a waiver, has been incurred with respect to any Pension Plan
with respect to any plan year, whether or not waived. Neither the Target nor
any of its Subsidiaries nor any ERISA Affiliate has failed to pay when due
any "required installment", within the meaning of Section 412(m) of the Code
and Section 302(e) of ERISA, whichever may apply, with respect to any Pension
Plan. Neither the Target nor any of its Subsidiaries nor any ERISA Affiliate
is subject to any lien imposed under Section 412(n) of the Code or Section
302(f) of ERISA, whichever may apply, with respect to any Pension Plan.
Neither the Target nor any of its Subsidiaries nor any ERISA Affiliate has
any Liability for unpaid contributions with respect to any Pension Plan or
employee benefit plan of any foreign government.
(B) Neither the Target nor any of its Subsidiaries nor any
ERISA Affiliate is required to provide security to a Pension Plan which covers
or has covered employees or former employees of the Target or any of its
Subsidiaries under Section 401(a)(29) of the Code.
(C) Each Pension Plan and each related trust agreement,
annuity contract or other funding instrument which covers or has covered
employees or former employees of the Target or any of its Subsidiaries (with
respect to their relationship with such entities) is intended to be and has been
operated as qualified and tax-exempt under the provisions of Code Sections
401(a) (or 403(a), as appropriate) and 501(a) and has been so qualified during
the period from its adoption to date.
(D) Each Pension Plan, each related trust agreement,
annuity contract or other funding instrument which covers or has covered
employees or former employees of the Target or any of its Subsidiaries (with
respect to their relationship with such entities) presently complies and has
been maintained in all material respects in compliance with its terms and, both
as to form and in operation, with the requirements prescribed by any and all
Regulations and Court Orders which are applicable to such plans, including
without limitation ERISA and the Code.
(E) The Target and each of its Subsidiaries paid all
premiums (and interest charges and penalties for late payment, if applicable)
due the PBGC with respect to each Pension Plan for each plan year thereof for
which such premiums are required. Neither the Target or any of its Subsidiaries
nor any ERISA Affiliate has engaged in, or is a successor or parent corporation
to an entity that has engaged in, a transaction described in Section 4069 of
ERISA. There has been no "reportable event" (as defined in Section 4043(b) of
ERISA and the PBGC regulations under such Section) with respect to any Pension
Plan. No filing has been made by the Target or any of its Subsidiaries or any
ERISA Affiliate with the PBGC, and no proceeding has been commenced by the PBGC,
to terminate any Pension Plan. No condition exists and no event has occurred
that would constitute grounds for the termination of any Pension Plan by the
PBGC. Neither the Target or any of its Subsidiaries nor any ERISA Affiliate
has, at any time, (1) ceased operations at a facility so as to become subject to
the provisions of Section 4062(e) of ERISA, (2) withdrawn as a substantial
employer so as to become subject to the provisions of Section 4063 of ERISA, or
(3) ceased making contributions on or before
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the Closing Date to any Pension Plan subject to Section 4064(a) of ERISA to
which the Target or any ERISA Affiliate made contributions during the six
years prior to the Closing Date.
(ii) MULTIEMPLOYER PLANS
(A) Neither the Target or any of its Subsidiaries nor any
ERISA Affiliate has, at any time, withdrawn from a Multiemployer Plan in a
"complete withdrawal" or a "partial withdrawal" as defined in Sections 4203 and
4205 of ERISA, respectively, so as to result in a Liability, contingent or
otherwise (including without limitation the obligations pursuant to an agreement
entered into in accordance with Section 4204 of ERISA), of the Target or any of
its Subsidiaries or any ERISA Affiliate. Neither the Target nor any of its
Subsidiaries nor any ERISA Affiliate has engaged in, or is a successor or parent
corporation to an entity that has engaged in, a transaction described in Section
4212(c) of ERISA.
(B) All contributions required to be made by the Target or
any of its Subsidiaries or any ERISA Affiliate to each Multiemployer Plan have
been made when due.
(C) If, as of the Closing Date, the Target or any of its
Subsidiaries (and all ERISA Affiliates) were to withdraw from all Multiemployer
Plans to which it (or any of them) has contributed or been obligated to
contribute, it (and they) would incur no Liabilities to such plans under Title
IV of ERISA.
(D) To the knowledge of the Sellers, with respect to each
Multiemployer Plan: (1) no such Multiemployer Plan has been terminated or has
been in reorganization under ERISA so as to result, directly or indirectly, in
any Liability, contingent or otherwise, of any Sellers or any ERISA Affiliate
under Title IV of ERISA; (2) no proceeding has been initiated by any person
(including the PBGC) to terminate any Multiemployer Plan; (3) Neither the Target
nor any of its Subsidiaries nor any ERISA Affiliate has reason to believe that
any Multiemployer Plan will be terminated or will be reorganized under ERISA;
and (4) neither the Target nor any of its Subsidiaries nor any ERISA Affiliate
expects to withdraw from any Multiemployer Plan.
(iii) WELFARE PLANS
(A) Each Welfare Plan which covers or has covered employees
or former employees of the Target or any of its Subsidiaries (with respect to
their relationship with such entities) has been maintained in all material
respects in compliance with its terms and, both as to form and operation, with
the requirements prescribed by any and all Regulations and Courts Orders which
are applicable to such Welfare Plan, including without limitation ERISA and the
Code.
(B) None of the Targets, any of its Subsidiaries, any ERISA
Affiliate or any Welfare Plan has any present or future obligation to make any
payment to, or with respect to any present or former employee of the Target or
any of its Subsidiaries or any ERISA Affiliate pursuant to, any retiree medical
benefit plan, or other retiree Welfare Plan. No condition (other than those
evident on the face of the documents that constitute such plans) exists which
would prevent any Sellers from amending or terminating any such benefit plan or
Welfare Plan.
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(C) Each Welfare Plan which covers or has covered employees
or former employees of the Target or any of its Subsidiaries and which is a
"group health plan," as defined in Section 607(1) of ERISA, has been operated in
all material respects in compliance with provisions of Part 6 of Title I,
Subtitle B of ERISA and Sections 162(k) and 4980B of the Code at all times.
(D) Neither the Target nor any of its Subsidiaries nor any
ERISA Affiliate has incurred any Liability with respect to any Welfare Plan that
is a "multiemployer plan", as defined in Section 3(37) of ERISA, under the terms
of such Welfare Plan, any collective bargaining agreement or otherwise resulting
from any cessation of contributions, cessation of obligation to make
contributions or other form of withdrawal from such Welfare Plan.
(E) If, as of the Closing Date, the Target or any of its
Subsidiaries (and all ERISA Affiliates) were to have a cessation of
contributions, cessation of obligations to make contribution or other form of
withdrawal from all Welfare Plans that are "multiemployer plans", as defined in
Section 3(37) of ERISA, it (and they) would incur no Liabilities with respect to
any such Welfare Plans under the terms of such Welfare Plans, any collective
bargaining agreement or otherwise.
(iv) BENEFIT ARRANGEMENTS. Each Benefit Arrangement which
covers or has covered employees or former employees of the Target or any of its
Subsidiaries (with respect to their relationship with such entities) has been
maintained in substantial compliance with its terms and with the requirements
prescribed by any and all Regulations and Court Orders which are applicable to
such Benefit Arrangement, including without limitation the Code. Except as set
forth in the Disclosure Schedule, and except as provided by law, the employment
of all persons presently employed or retained by the Target or any of its
Subsidiaries (other than those employees with whom the Target or any of its
Subsidiaries has an employment agreement) is terminable at will.
(v) UNRELATED BUSINESS TAXABLE INCOME. To the knowledge of the
Sellers, no Employee Plan (or trust or other funding vehicle pursuant thereto)
is subject to any tax under Code Section 511.
(vi) DEDUCTIBILITY OF PAYMENTS. There is no contract,
agreement, plan or arrangement covering any employee or former employee of the
Target or any of its Subsidiaries (with respect to its relationship with such
entities) that, individually or collectively, provides for the payment by such
Sellers of any amount (i) that is not deductible under Section 162(a)(1) or 404
of the Code or (ii) that is an "excess parachute payment" pursuant to Section
280G of the Code.
(vii) FOREIGN PLANS. None of the Foreign Subsidiaries has any
employees and there are no plans that cover any employee or former employee of
any Foreign Subsidiary that would constitute Employee Plans or that would be
subject to ERISA if they were to cover employees subject to the laws of the
United States.
(viii) FIDUCIARY DUTIES AND PROHIBITED TRANSACTIONS. To the
knowledge of the Sellers, none of the Target nor any of its Subsidiaries nor any
other plan fiduciary of any Welfare Plan or Pension Plan which covers or has
covered employees or former employees of the Target or any of its Subsidiaries
or any ERISA Affiliate, has engaged in any transaction in violation of Sections
404 or 406 of ERISA or any "prohibited transaction," as defined in Section
4975(c)(1) of the Code, for which no exemption exists under Section 408 of ERISA
or Section 4975(c)(2) or (d) of the Code, or has
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otherwise violated the provisions of Part 4 of Title I, Subtitle B of ERISA.
Neither the Target nor any of its Subsidiaries has knowingly participated in
a violation of Part 4 of Title I, Subtitle B of ERISA by any plan fiduciary
of any Welfare Plan or Pension Plan and has not been assessed any civil
penalty under Section 502(l) of ERISA.
(ix) VALIDITY AND ENFORCEABILITY. Each Welfare Plan, Pension
Plan, related trust agreement, annuity contract or other funding instrument and
Benefit Arrangement which covers or has covered employees or former employees of
the Target or any of its Subsidiaries (with respect to their relationship with
such entities) is legally binding in all material respects and in full force and
effect.
(x) LITIGATION. There is no Action or Court Order outstanding,
relating to or seeking benefits under any Employee Plan that is pending or, to
the knowledge of the Sellers, threatened against the Target or any of its
Subsidiaries, any ERISA Affiliate or any Employee Plan.
(xi) NO AMENDMENTS. Neither the Target nor any of its
Subsidiaries nor any ERISA Affiliate has any announced plan or legally binding
commitment to create any additional Employee Plans which are intended to cover
employees or former employees of the Target or such Subsidiary (with respect to
their relationship with such entities) or to amend or modify any existing
Employee Plan which covers or has covered employees or former employees of the
Target or such Subsidiary (with respect to their relationship with such
entities).
(xii) NO OTHER MATERIAL LIABILITY. No event has occurred in
connection with which any Sellers or any ERISA Affiliate or any Employee Plan,
directly or indirectly, would be subject to any material Liability (A) under any
Regulation or Court Order relating to any Employee Plans or (B) pursuant to any
obligation of the Target or such Subsidiary to indemnify any person against
Liability incurred under any such Regulation or Court Order as they relate to
the Employee Plans.
(xiii) UNPAID CONTRIBUTIONS. Neither the Target nor any of
its Subsidiaries of the Sellers nor any ERISA Affiliate has any Liability for
unpaid contributions under Section 515 of ERISA with respect to any Pension
Plan, Multiemployer Plan or Welfare Plan.
(xiv) INSURANCE CONTRACTS. Neither the Target nor any of its
Subsidiaries nor any Employee Plan (other than a "multiemployer plan", as
defined in Section 3(37) of ERISA) holds as an asset of any Employee Plan any
interest in any annuity contract, guaranteed investment contract or any other
investment or insurance contract issued by an insurance company that is the
subject of bankruptcy, conservatorship or rehabilitation proceedings.
(xv) NO ACCELERATION OR CREATION OF RIGHTS. Neither the
execution and delivery of this Agreement or other related agreements by the
Target or any of its Subsidiaries nor the consummation of the transactions
contemplated hereby or the related transactions will result in the acceleration
or creation of any rights of any person to benefits under any Employee Plan
(including, without limitation, the acceleration of the vesting or
exercisability of any stock options, the acceleration of the vesting of any
restricted stock, the acceleration of the accrual or vesting of any benefits
under any Pension Plan or the acceleration or creation of any rights under any
severance, parachute or change in control agreement).
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4.20 THIS SECTION INTENTIONALLY OMITTED.
4.21 TAX MATTERS.
(a) FILING OF TAX RETURNS. Each of the Target and each of its
Subsidiaries (and any affiliated group of which the Target or such Subsidiary is
now or has been a member) has timely filed with the appropriate taxing
authorities all returns (including without limitation information returns and
other material information) in respect of Taxes required to be filed through the
date hereof and will timely file any such returns required to be filed on or
prior to the Closing Date, other than those returns, the failure of which to
file would not, individually or in the aggregate, have a Material Adverse
Effect. The returns and other information filed are complete and accurate in
all material respects. Except as specified in Schedule 4.21(a), neither the
Target nor any of its Subsidiaries, nor any group of which the Target or such
Subsidiary is now or was a member, has requested any extension of time within
which to file returns (including without limitation information returns) in
respect of any Taxes. Each of the Target and each of its Subsidiaries has made
available to Buyer complete and accurate copies of the Target's or such
Subsidiary's foreign, federal, state and local tax returns for the years 1993,
1994 and 1995.
(b) PAYMENT OF TAXES. All material amounts of Taxes payable by the
Target or any of its Subsidiaries or any affiliated group with which the Target
or any of its Subsidiaries files a consolidated or combined Tax return (whether
or not shown on any Tax return) in respect of periods beginning before the
Closing Date have been timely paid, or will be timely paid, or an adequate
reserve has been established therefor, as set forth in Schedule 4.21(b) and the
Financial Statements, and neither the Target nor any of its Subsidiaries has any
material Liability for Taxes in excess of the amounts so paid or reserves so
established.
(c) AUDITS, INVESTIGATIONS OR CLAIMS. Except as set forth in
Schedule 4.21(c), no material deficiencies for Taxes have been claimed, proposed
or assessed by any taxing or other governmental authority against the Target or
any of its Subsidiaries. Except as set forth in Schedule 4.21(c), there are no
pending or, to the knowledge of the Target or the Sellers, threatened audits,
investigations or claims for or relating to any material additional Liability in
respect of Taxes, and there are no matters under discussion with any
governmental authorities with respect to Taxes that in the reasonable judgment
of any Seller, is likely to result in a material additional Liability for Taxes.
Audits, if any, of foreign, federal, state, and local returns for Taxes by the
relevant taxing authorities have been completed for each period set forth in
Schedule 4.21(c) and, except as set forth in Schedule 4.21(c), neither the
Target nor any of its Subsidiaries has been notified that any taxing authority
intends to audit a return for any period. Except as set forth in Schedule
4.21(c), no extension of a statute of limitations relating to Taxes is in effect
with respect to the Target or any of its Subsidiaries.
(d) LIEN. There are no liens for Taxes (other than for current
Taxes not yet due and payable) on the Assets.
(e) SAFE HARBOR LEASE PROPERTY. None of the Assets is property that
is required to be treated as being owned by any other Person pursuant to the so-
called safe harbor lease provisions of former Section 168(f)(8) of the Code.
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(f) SECURITY FOR TAX-EXEMPT OBLIGATIONS. None of the Assets
directly or indirectly secures any debt the interest on which is tax-exempt
under Section 103(a) of the Code.
(g) TAX-EXEMPT USE PROPERTY. None of the Assets is "tax-exempt use
property" within the meaning of Section 168(h) of the Code.
(h) FOREIGN PERSON. The Stockholder is not a Person other than a
United States Person within the meaning of the Code.
(i) NO WITHHOLDING. The transaction contemplated herein is not
subject to the tax withholding provisions of Section 3406 of the Code, or of
Subchapter A of Chapter 3 of the Code or of any other provision of law.
(j) PARTNERSHIP. Except as set forth in Schedule 4.21(j), neither
the Target nor any of its Subsidiaries is a party to any joint venture,
partnership, or other arrangement or contract that could be treated as a
partnership for federal income tax purposes.
(k) WITHHOLDING. Each of the Target and its Subsidiaries has
withheld all material amounts of Taxes required to have been withheld by it in
connection with amounts paid or owing to any employee, independent contractor,
creditor, stockholder, or other third party, and such withheld Taxes have either
been duly paid to the proper governmental authority or set aside in accounts for
such purpose.
(l) COLLAPSIBLE CORPORATIONS. Neither the Target nor any of its
Subsidiaries has filed a consent under Code Section 341(f) concerning
collapsible corporations.
(m) GOLDEN PARACHUTE PAYMENTS. Neither the Target nor any of its
Subsidiaries has made any payments, nor is the Target or any of its Subsidiaries
obligated to make any payments, and neither the Target nor any of its
Subsidiaries is a party to any agreement that could obligate it to make any
payments that would not be deductible under Code Section 280G.
(n) DISCLOSURE STATEMENT. Neither the Target nor any of its
Subsidiaries has filed with respect to any item a disclosure statement pursuant
to Code Section 6662 or any comparable disclosure with respect to foreign, state
or local statutes.
(o) TAX ALLOCATION AGREEMENTS. Except as set forth in Schedule
4.21(o), neither the Target nor any of its Subsidiaries is a party to any Tax
allocation or sharing agreement.
(p) JOINT AND SEVERAL LIABILITY. Neither the Target nor any of its
Subsidiaries (A) within the last five (5) years has been a member of any
affiliated group filing a consolidated federal income Tax Return (other than a
group the common parent of which is the Stockholder or its predecessor) and (B)
has any liability for the Taxes of any person as defined in Section 7701(a)(1)
of the Code (other than the Target and its Subsidiaries) under Treasury
Regulation Section 1.1502-6 (or any similar provision of state, local, or
foreign law), as a transferee or successor, by contract, or otherwise.
(q) ADEQUATE RESERVES. The charges, accruals and reserves for Taxes
(including deferred Taxes) currently reflected on the Financial Statements in
accordance with GAAP are adequate in all
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material respects to cover all unpaid Taxes accruing or payable by the Target
or any of its Subsidiaries in respect of taxable periods that end on or
before the Closing Date and for any taxable periods that begin before the
Closing Date and end thereafter to the extent such Taxes are attributable to
the portion of such period ending on the Closing Date (determined under the
closing of the books method of allocation).
(r) NO SECTION 338 AND 336 ELECTIONS. Other than as contemplated by
this Agreement, there are no elections in effect made by the Stockholder, Target
or any of its Subsidiaries pursuant to Code Sections 338 or 336(e) or the
regulations thereunder and neither the Target nor any of its Subsidiaries is
subject to any constructive elections under Code Section 338 or the regulations
thereunder.
(s) CHANGE IN ACCOUNTING METHOD. Neither the Target nor any of its
Subsidiaries has agreed to or is required to make any adjustment pursuant to
Code Section 481(a) by reason of a change in accounting method initiated by any
such company and neither the Seller nor the Target has knowledge that the
Internal Revenue Service has proposed any such adjustment or change in
accounting method.
(t) CERTAIN ACTIONS. Neither the Target nor any of its Subsidiaries
has taken, and none will take prior to Closing, any action not in accordance
with past practice that would have the effect of deferring any Tax liability of
the Target or any of its Subsidiaries from any taxable period ending on or
before the Closing Date to any subsequent taxable period.
(u) NO EXCESS LOSS ACCOUNTS. There currently are no excess loss
accounts, deferred intercompany gains or losses, or other like items pertaining
to the Target or any of its Subsidiaries.
(v) NO TRANSFER PRICING AGREEMENTS. Neither the Target nor any of
its Subsidiaries has entered into transfer pricing agreements or other like
arrangements with respect to any foreign jurisdiction.
(w) INFORMATION REGARDING FOREIGN SUBSIDIARIES. None of the Foreign
Subsidiaries is (i) engaged in a United States trade or business for federal
income tax purposes; (ii) a passive foreign investment company within the
meaning of the Code; or (iii) a foreign investment company within the meaning of
the Code; Schedule 5.14(w) sets forth for each of the Foreign Subsidiaries: (i)
(the amount of current and accumulated earnings and profits as of the date
hereof and the amount expected as of the Closing Date; and (ii) the amount of
previously taxed income within the meaning of section 959 of the Code as of the
date hereof and the amount expected as of the Closing Date (taking into account
the amount of any dividend income to stockholders under section 1248 of the Code
from the transactions contemplated by this Agreement).
(x) INTERNATIONAL BOYCOTT. Neither the Target nor any of its
Subsidiaries has participated in or cooperated with an international boycott or
has been requested to do so in connection with any transaction or proposed
transaction.
(y) SUBPART F INCOME. Buyer would not be required to include any
amount in gross income with respect to any of the Foreign Subsidiaries pursuant
to section 951 of the Code if the taxable year of any such Foreign Subsidiaries
were deemed to end on the Closing Date after the Closing.
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(z) SECTION 338(h)(10) ELECTION. The Stockholder is the common
parent of the affiliated group (within the meaning of Section 1504(a) of the
Code) that includes the Target, and the Stockholder will not be a target
corporation within the meaning of Section 338 of the Code for the taxable year
that includes the Closing Date.
4.22 INSURANCE. Schedule 4.22 contains a complete and accurate (in all
material respects) list of all policies or binders of fire, liability, title,
worker's compensation, product liability (which list shall be for three (3)
years) and other forms of insurance (showing as to each policy or binder the
carrier, policy number, coverage limits, expiration dates, annual premiums, a
general description of the type of coverage provided and loss experience history
by line of coverage) maintained by the Target or any of its Subsidiaries in
connection with the Business, the Assets or their respective employees. To the
knowledge of the Sellers, all insurance coverage currently maintained by the
Target and its Subsidiaries applicable to the Target or any of its Subsidiaries,
its employees, the Business or the Assets is in full force and effect, and
provides coverage as may be required by applicable Regulation and by any and all
Contracts to which the Target or any of its Subsidiaries is a party, except
where the failure to provide such coverage would not, individually or in the
aggregate, have a Material Adverse Effect. To the knowledge of the Sellers,
there is no Default under any such coverage nor, to the knowledge of the
Sellers, has there been any failure to give notice or present any material claim
under any such coverage in a due and timely fashion. There are no outstanding
unpaid material amounts of premiums (other than those not yet due and payable)
except in the ordinary course of business and no notice of cancellation or
nonrenewal of the Target or any such coverage has been received. Except as set
forth in Schedule 4.22, there are no provisions in such insurance policies for
retroactive or retrospective premium adjustments that have not been fully
provided in the Closing Financial Statements. Except as set forth in Schedule
4.22, all products liability, general liability and workers' compensation
insurance policies maintained by the Target or any of its Subsidiaries during
the three (3) year period prior to the Closing have been occurrence policies and
not claims made policies. Except for performance bonds obtained in the ordinary
course of the Business, there are no outstanding performance bonds in any
material amounts covering or issued for the benefit of the Target or any of its
Subsidiaries. To the knowledge of the Sellers, there are no facts particular to
the Target and its Subsidiaries upon which an insurer would be justified in
reducing coverage or increasing premiums in any material amounts on existing
policies or binders. Except as set forth in Schedule 4.22, no insurer has
advised the Target or any of its Subsidiaries that it intends to reduce
coverage, increase premiums in any material amounts or fail to renew any
existing policy or binder, with respect to which such insurer has not acted.
4.23 ACCOUNTS RECEIVABLE. The accounts receivable reflected on the
balance sheet contained in the Most Recent Month End Financial Statements, and
all accounts receivable arising since June 30, 1996, represent bona fide claims
of the Target and its Subsidiaries against debtors for sales, services performed
or other charges arising on or before the date hereof, and, to the knowledge of
the Sellers, all the goods delivered and services performed which gave rise to
said accounts were delivered or performed in all material respects in accordance
with the applicable orders, Contracts or customer requirements. To the
knowledge of the Sellers, all accounts receivable in excess of $100,000 shall be
subject to no defenses, counterclaims or rights of setoff, except to the extent
of the appropriate reserves for bad debts on accounts receivable as set forth on
the Closing Balance Sheet.
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4.24 PAYMENTS. To the knowledge of the Sellers, neither the Target nor
any of its Subsidiaries has, (i) directly or indirectly, paid or delivered any
fee, commission or other sum of money or item or property, however
characterized, to any finder, agent, client, customer, supplier, government
official or other party, in the United States or any other country, which is in
any manner related to the Business, Assets or operations of the Target or any of
its Subsidiaries, which is, or may be with the passage of time or discovery,
illegal under any federal, state or local laws of the United States (including
without limitation the U.S. Foreign Corrupt Practices Act) or any other country
having jurisdiction; (ii) illegally participated in any boycotts or other
similar practices affecting any of its actual or potential customers, or
(iii) established or maintained any unrecorded fund or asset for any purpose or
made any false entries on the Books and Records of the Target or such Subsidiary
for any reason. In addition, the Target or any of its Subsidiaries (a) has
complied with all applicable laws relating to employee and civil rights and
relating to employment opportunities, (b) filed in a timely manner all reports
or documents it was required to file (and the information contained therein was
correct and complete in all respects) under all applicable laws, (c) has
possession of all records and documents it was required to retain under all
applicable laws and (d) has not violated in any respect or received a notice or
charge asserting any violation of the Sherman Act, the Clayton Act, the
Robinson-Patman Act, the Federal Trade Commission Act, the Securities Act or the
Securities Exchange Act of 1934, each as amended, except in the case of each of
clauses (a), (b), (c) and (d) above, when such failure would not have a Material
Adverse Effect.
4.25 CURRENT INACTIVE SUBSIDIARIES OF THE TARGET. None of the "current
inactive subsidiaries of the Target" set forth in Schedule 4.2(a) hereto have
any assets, any Liabilities or any creditors.
4.26 CUSTOMERS, DISTRIBUTORS AND SUPPLIERS. Schedule 4.26 sets forth a
complete and accurate list of the names and addresses of (i) the ten largest
customers of the Target and each of its Subsidiaries, showing the approximate
total sales in dollars by the Target and each such Subsidiary to each such
customer during the fiscal year most recently ended; (ii) ten largest suppliers
of the Target or any of its Subsidiaries, showing the approximate total
purchases in dollars by the Target and each such Subsidiary from each such
supplier during such fiscal year; and (iii) all S Agents of the Target and each
of its Subsidiaries. Except as set forth in Schedule 4.26, since June 30, 1996,
there has been no adverse change in the business relationship of the Target or
any of its Subsidiaries with any customer, supplier or S Agent named in
Schedule 4.26 which, individually or in the aggregate, would have a Material
Adverse Effect and neither the Target nor any of its Subsidiaries has received
any communication from any customer, supplier or S Agent named in Schedule 4.26
of any intention to terminate or materially reduce purchases from or supplies or
services to the Target or any of its Subsidiaries.
4.27 COMPLIANCE WITH ENVIRONMENTAL LAWS. Except as set forth in Schedule
4.27:
(a) FACILITIES. The Facilities are, and at all times during the
ownership, operation or occupancy of any Corporation have been, and all Former
Facilities were at all times when owned, leased or operated by any Corporation,
owned, leased and operated in compliance with all applicable Environmental Laws
and in a manner which would not cause an Environmental Condition, where such
non-compliance or Environmental Condition would have a Material Adverse Effect.
Without limiting the foregoing, (i) there is not and has not been any Hazardous
Substance used, generated, treated, stored, transported, disposed of, handled or
otherwise existing on, under, about or emanating from any
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Facility or any Former Facility as a result of any act or omission of any
Corporation, except for quantities of any such Hazardous Substances used,
generated, treated, stored, transported, disposed of, handled, or otherwise
held on, under or about any such Facility by any Corporation in full
compliance with all applicable Environmental Laws, where such non-compliance
would have a Material Adverse Effect, (ii) each Corporation has at all times
used, generated, treated, stored, transported, disposed of or otherwise
handled its Hazardous Substances in compliance with all applicable
Environmental Laws and in a manner which would not cause an Environmental
Condition, where such non-compliance or Environmental Condition would have a
Material Adverse Effect; and (iii) there is not now and has not been at any
time during the ownership, operation or occupancy of any Corporation any
underground or above-ground storage tank or pipeline at any Facility or
Former Facility where the installation, use, maintenance, repair, testing,
closure or removal of such tank or pipeline by any Corporation was not in
compliance with all applicable Environmental Laws, where such non-compliance
would have a Material Adverse Effect, and there has been no Release from any
such tank or pipeline during the ownership, operation, or occupancy of any
Corporation, where such Release would have a Material Adverse Effect.
(b) NOTICE OF VIOLATION. To the knowledge of the Sellers, no
Corporation has received any notice of alleged, actual or potential
responsibility for, or any inquiry or investigation regarding, (i) any
Release or threatened Release of any Hazardous Substance at any location, or
(ii) any Environmental Conditions, or (iii) an alleged violation of, or
non-compliance with, any Environmental Law.
(c) PRE-CLOSING ENVIRONMENTAL MATTERS. There are no Pre-Closing
Environmental Matters which would have a Material Adverse Effect.
(d) ENVIRONMENTAL AUDITS OR ASSESSMENTS. True, complete and
correct copies of the written reports, and all parts thereof, of all
environmental audits or assessments which have been conducted at any Facility
or Former Facility within the past five years by or on behalf of the Target
or any of its Subsidiaries or of which any Seller otherwise has known, have
been made available to Buyer and a list of all such reports, audits and
assessments and any other similar report, audit or assessment of which any
Seller has knowledge is included in Schedule 4.27(d).
(e) INDEMNIFICATION AGREEMENTS. Other than agreements (including
without limitation, leases) entered into in the ordinary course of business,
to the knowledge of the Sellers, no Corporation is a party, whether as a
direct signatory or as successor, assign or third party beneficiary, or
otherwise bound, to any Contract (excluding insurance policies disclosed on
the Disclosure Schedule) under which such Corporation is obligated by or
entitled to the benefits of, directly or indirectly, any representation,
warranty, indemnification, covenant, restriction or other undertaking
concerning Environmental Conditions known to any Corporation.
(f) RELEASES OR WAIVERS. To the knowledge of the Sellers, other
than agreements entered into in the ordinary course of business (including,
without limitation, leases), no Corporation is a party to an agreement under
which such Corporation has released any other Person from any Liability to
the Corporation under any Environmental Laws for any Environmental Condition.
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(g) NOTICES, WARNINGS AND RECORDS. Each Corporation has given all
notices and warnings, made all reports, and has kept and maintained all records
required by and in compliance with all applicable Environmental Laws where such
non-compliance would have a Material Adverse Effect.
4.28 BANKING RELATIONSHIPS. Schedule 4.28 sets forth a complete and
accurate description of all arrangements that the Target or any of its
Subsidiaries has with any banks, savings and loan associations or other
financial institutions providing for checking accounts, safe deposit boxes,
and certificates of deposit, indicating in each case account numbers, if
applicable, and the person or persons authorized to act or sign on behalf of
the Target and each such Subsidiary in respect of any of the foregoing.
4.29 INTERCOMPANY LOANS. Other than MCS (as defined in the InterCompany
Agreement) related intracompany trading and except as set forth in Schedule
4.29, since June 30, 1996, neither the Target nor any of its Subsidiaries has
entered into any Contract relating to intercompany indebtedness between or
among the Target and its Subsidiaries and/or LIW and/or any affiliate of LIW
(other than the Target or its Subsidiaries).
4.30 MATERIAL MISSTATEMENTS OR OMISSIONS. No representations or
warranties by any of the Sellers in this Agreement, nor any exhibit,
appendix, certificate or schedule heretofore or hereinafter furnished to
Buyer pursuant hereto, or in connection with the transactions contemplated
hereby, including without limitation the Disclosure Schedule, contains any
untrue statement of a material fact, or omits to state any material fact
necessary to make the statements or facts contained therein not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE SELLERS WITH RESPECT TO THE
SELLERS AND THE SELLERS' SUBSIDIARIES
The Sellers hereby, jointly and severally, represent and warrant to
Buyer as follows (except as otherwise set forth in the numbered section of
the Disclosure Schedule corresponding to the Sections of this Article to
which such exception pertains), which representations and warranties are, as
of the date hereof, true and correct:
5.1 ORGANIZATION OF THE SELLERS. (a) Each Seller is duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation or formation with full power and authority to conduct its
business as it is presently being conducted and to own and lease its
properties and assets. Copies of the Certificates or Articles of
Incorporation and Bylaws or other organizational documents of each of the
Sellers, and all amendments thereto, heretofore delivered to Buyer are
accurate and complete as of the date hereof.
(b) Schedule 5.1(b) hereof sets forth a complete and accurate list
of the all of the holders of capital stock of each Seller and the number of
share of such capital stock held by such holder. All of
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the outstanding shares of capital stock of each Seller are duly authorized,
validly issued, fully paid and non-assessable. Except as set forth in
Schedule 5.1(b), there are no outstanding subscriptions, calls, commitments,
warrants or options for the purchase of shares of any capital stock or other
securities of (or other ownership interests in) any Seller or any securities
convertible into or exchangeable for shares of capital stock or other
securities issued by (or other ownership interests in) any Seller or any
other commitments of any kind for the issuance of additional shares of
capital stock or other securities issued by (or other ownership interests in)
any Seller. None of the Sellers have granted any rights or options to
purchase any such shares, made any payment of dividends in cash or otherwise
or any other distribution on account of the capital stock of any Seller.
Except as set forth in Schedule 5.1(b) there are no pledges for any purpose
of the capital stock of any of the Sellers or any of the Sellers'
Subsidiaries.
5.2 SUBSIDIARIES. Except as set forth in Schedule 5.2, there are no
Sellers' Subsidiaries which are operating companies or which have assets in
excess of $500,000.
5.3 AUTHORIZATION. Each of the Sellers has all requisite corporate
power and authority to own, lease and operate its assets and to conduct its
business as it is presently being conducted. Each Seller has all requisite
power and authority, and has taken all action necessary, to execute and
deliver this Agreement and the Ancillary Agreements to which it is a party,
to consummate the transactions contemplated hereby and thereby and to perform
its obligations hereunder and thereunder. The execution and delivery by each
Seller of this Agreement and the Ancillary Agreements to which it is a party
and the consummation by each Seller of the transactions contemplated hereby
and thereby have been duly approved by the board of directors and, to the
extent required under applicable corporate laws, shareholders of such Seller.
No other proceedings or actions on the part of any Seller is necessary to
authorize this Agreement and the Ancillary Agreements to which it is a party
and the transactions contemplated hereby and thereby. This Agreement and
each of the Ancillary Agreements to which any Seller is a party have been
duly executed and delivered by such Seller and each such agreement is a
legal, valid and binding obligation of such Seller, enforceable against such
Seller in accordance with its terms, except as such enforceability may be
limited by (i) bankruptcy, insolvency, moratorium, reorganization and other
similar laws affecting creditors' rights generally and (ii) general
principles of equity, regardless of whether asserted in a proceeding in
equity or at law.
5.4 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
Schedule 5.4:
(a) since June 30, 1996, there has not been any increase in
any credit facility or other bank or similar debt instrument of any of the
Sellers or any of the Sellers' Subsidiaries;
(b) since December 31, 1995, except for the LIW Promissory
Note, there has not been any incurrence of indebtedness by any Seller for
borrowed money or commitment to borrow money entered into by any Seller, or
any loans made or agreed to be made by any of the Sellers, or indebtedness
guaranteed by any of the Sellers, in excess of $100,000 for any single item
(or series of similar items with the same party);
(c) since December 31, 1995, except Liabilities incurred in
connection with the consummation of the transactions contemplated hereby,
there has not been any incurrence by any Seller of Liabilities, except
Liabilities incurred in the ordinary course of business of such Seller and
not in
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excess of $250,000 for any single item (or series of similar items), or
increase or change in any assumptions underlying or methods of calculating,
any doubtful account contingency or other reserves of any Seller;
(d) since December 31, 1995, there has not been any failure
to pay or satisfy when due any Liability of any Seller, except where the
failure would not have a Seller Material Adverse Effect;
(e) agreement by any Seller to do any of the things described
in the preceding clauses (a) through (d) other than as expressly provided for
herein.
5.5 CONSENTS. Except as disclosed in Schedule 5.5 hereto, no notice
to, declaration, filing or registration with, or Permit from, any domestic or
foreign governmental or regulatory body or authority, or any other Person, is
required to be made or obtained by any Seller in connection with the
execution, delivery or performance of this Agreement and the consummation of
the transactions contemplated hereby, the failure of which would,
individually or in the aggregate, have a Seller Material Adverse Effect.
Except as set forth on Schedule 5.5, none of the rights of any Seller in its
contracts or permits will be impaired by reason of the consummation of the
transactions contemplated by this Agreement.
5.6 NO CONFLICT OR VIOLATION. Except as set forth in Schedule 5.6,
neither the execution, delivery or performance of this Agreement or the
Ancillary Agreements nor the consummation of the transactions contemplated
hereby or thereby, nor compliance by any Seller or any of the Sellers'
Subsidiaries with any of the provisions hereof, will (a) violate any
provision of the Articles of Incorporation or Bylaws or other organizational
documents of any Seller or any of the Sellers' Subsidiaries, (b) violate or
result in or constitute a Default under, or result in the termination of, or
accelerate the performance required by, or result in a right of termination
or acceleration under, or result in the creation of any encumbrance upon any
of the assets under, any of the terms, conditions or provisions of any
contract or permit (i) to which any Seller or any of the Sellers'
Subsidiaries is a party or (ii) by which its assets are bound, (c) violate
any Regulation or Court Order, except in the cases of each of clauses (b) and
(c) above, for such violations, Defaults, terminations, accelerations or
creations of encumbrances which, individually and in the aggregate, would not
have a Seller Material Adverse Effect.
5.7 FINANCIAL STATEMENTS. The Sellers have heretofore delivered to
Buyer true and complete copies of the pro-forma financial statements for
Holdings One and its subsidiaries for the year ended December 31, 1995. Such
financial statements (a) are in accordance in all material respects with the
books and records of Holdings One and its subsidiaries, (b) have been
prepared in accordance with generally accepted accounting principles in the
United Kingdom consistently applied throughout the period covered thereby and
(c) after giving effect to the adjustments specified therein, fairly and
accurately present in all material respects (i) the combined assets,
liabilities (including all reserves) and financial position of Holdings One
and its subsidiaries, (ii) the combined results and operations of Holdings
One and its subsidiaries for the period presented and (iii) the combined cash
flows of Holdings One and its subsidiaries for the period presented.
5.8 LITIGATION. Except as set forth in Schedule 5.8, there are no
Actions, individually or in the aggregate, involving more than $250,000
pending, or to the knowledge of the Sellers, threatened
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which, if determined adversely to any Seller, could reasonably be expected to
delay, limit or enjoin the transactions contemplated by this Agreement or
which would otherwise, individually or in the aggregate, have a Seller
Material Adverse Effect. To the knowledge of the Sellers, no Seller is in
Default with respect to or subject to any judgment, order, writ, injunction
or decree of any court or governmental agency and there are no unsatisfied
judgments against any Seller, its business or its assets. To the knowledge
of the Sellers, no Person has served any Seller with a written demand (that
has not been satisfied) for an indebtedness exceeding seven hundred and fifty
pounds (U.K.). To the knowledge of Sellers, there is not a reasonable
likelihood of an adverse determination of any pending Actions that could,
individually or in the aggregate, have a Seller Material Adverse Effect.
5.9 LABOR MATTERS. Schedule 5.9 sets forth the names and current
annual salary rates or current hourly wages of all present employees of any
Seller or any of the Seller Subsidiaries whose annual salary (exclusive of
bonus and benefits) for the 1995 calendar year exceeded $200,000.
5.10 LIABILITIES. Except as set forth in Schedule 5.10, the Sellers,
taken on a consolidated basis, including all of the Sellers' Subsidiaries
have no Liabilities due or to become due, except (a) Liabilities which are
reflected and reserved against on the pro-forma financial statements of LIW
and the Sellers' Subsidiaries dated December 31, 1995 , which have not been
paid or discharged since the date thereof, (b) Liabilities hereunder and
under the Ancillary Agreements and (c) Liabilities arising in the ordinary
course of business, none of which, individually or in the aggregate, would
have a Seller Material Adverse Effect.
5.11 COMPLIANCE WITH LAW. Each Seller and the conduct of such Seller's
business have not violated and are in compliance with all Regulations and
Court Orders relating to the assets or the business or operations of each
such Seller, except where the violation or failure to comply, individually or
in the aggregate, would not have a Seller Material Adverse Effect.
5.12 NO OTHER AGREEMENTS TO SELL THE ASSETS. Except as set forth in
Schedule 5.12, none of the Sellers has any outstanding commitment or legal
obligation, absolute or contingent, or is bound in any way, to any other
Person other than Buyer to sell, assign, transfer or effect a sale of a
material portion of its assets (other than inventory in the ordinary course
of business), to sell or effect a sale of the capital stock of any Seller or
any of the Sellers' Subsidiaries, to effect any merger, consolidation,
liquidation, dissolution or other reorganization of any Seller or any of the
Sellers' Subsidiaries, or to enter into any agreement or cause the entering
into of an agreement with respect to any of the foregoing, except in each
case with respect to non-operating Sellers' Subsidiaries.
5.13 TRANSACTIONS WITH CERTAIN PERSONS. No officer, director or
employee of any Seller nor any member of any such person's immediate family
is presently, or has been at any time since January 1, 1996, a party to any
transaction with any Seller relating to any Seller's business, including
without limitation, any contract, agreement or other arrangement (a)
providing for the furnishing of services by, (b) providing for the rental of
real or personal property from, or (c) otherwise requiring payments to (other
than for services as officers, directors or employees of such Seller) any
such person or corporation, partnership, trust or other entity in which any
such person has an interest as a shareholder, officer, director, trustee or
partner, other than contracts, agreements and arrangements for fair
consideration upon arms-length terms.
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5.14 PAYMENTS. To the knowledge of the Sellers, no Seller has, (i)
directly or indirectly, paid or delivered any fee, commission or other sum of
money or item or property, however characterized, to any finder, agent,
client, customer, supplier, government official or other party, in the United
States or any other country, which is in any manner related to the business,
assets or operations of any Seller, which is, or may be with the passage of
time (under currently existing Regulations) or discovery, illegal under any
federal, state or local laws of the United States (including without
limitation the U.S. Foreign Corrupt Practices Act) or any other country
having jurisdiction; (ii) illegally participated in any boycotts or other
similar practices affecting any of its actual or potential customers, or
(iii) established or maintained any unrecorded fund or asset for any purpose
or made any false entries on the books and records of such Seller for any
reason.
5.15 PROJECTIONS. To the knowledge of the Sellers, the financial
projections, business plans and budgets prepared and previously delivered to
Buyer, and attached hereto as Exhibit A, with respect to the restructuring of
LIW and certain of the Sellers' Subsidiaries were prepared in good faith
based upon assumptions which Sellers reasonably believed at the time of
preparation thereof to be reasonable and which Sellers have no reason to
believe have become, with the passage of time, no longer reasonable.
5.16 SOLVENCY. No Seller is after giving effect to the transactions
contemplated by this Agreement (x) insolvent or (y) left with unreasonably
small capital with which to engage in its business as contemplated pursuant
to the transactions hereby, and no Seller has, or will after giving effect to
the transactions contemplated by this Agreement, incurred debts beyond its
ability to pay such debts as they mature. The total value of the Sellers'
assets (both individually and taken as a whole, including for such purpose,
their subsidiaries) is and will be after giving effect to the transactions
contemplated hereby, greater than the total Liabilities of such Sellers.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to the Sellers as follows,
which representations and warranties are, as of the date hereof, and will be,
as of the Closing Date, true and correct:
6.1 ORGANIZATION OF BUYER. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware. Buyer is duly qualified to do business as a foreign corporation and
is in good standing in each jurisdiction in which such qualification is
necessary under the applicable law as a result of the conduct of its business
or the ownership (or leasing) of its properties, except where the failure to
be so qualified or in good standing would not have a material adverse effect
on Buyer or its ability to perform its obligations hereunder or under any of
the Ancillary Agreements to which it is a party.
6.2 AUTHORIZATION. Buyer has all requisite corporate power and
authority, and has taken all corporate action necessary, to execute and
deliver this Agreement and the Ancillary Agreements to which it is a party,
to consummate the transactions contemplated hereby and thereby and to perform
its
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obligations hereunder and thereunder. The execution and delivery by Buyer of
this Agreement and the Ancillary Agreements to which it is a party and the
consummation by Buyer of the transactions contemplated hereby and thereby
have been duly approved by the board of directors and stockholder of Buyer.
No other corporate proceedings or actions on the part of Buyer are necessary
to authorize this Agreement and the Ancillary Agreements to which it is a
party and the transactions contemplated hereby and thereby. This Agreement
and the Ancillary Agreements to which Buyer is a party have been duly
executed and delivered by Buyer, and are legal, valid and binding obligations
of Buyer, enforceable against Buyer in accordance with their terms, except as
such enforceability may be limited by (i) bankruptcy, insolvency, moratorium,
reorganization and other similar laws affecting creditors' rights generally
and (ii) the general principles of equity, regardless of whether asserted in
a proceeding in equity or at law.
6.3 NO BROKERS. Neither Buyer nor any of its subsidiaries nor any of
their respective officers, directors, employees, shareholders or affiliates
has employed any broker, finder, advisor or intermediary in connection with
the transactions contemplated by this Agreement which would be entitled to a
broker's, finder's, or similar fee or commission in connection therewith or
upon the consummation thereof, other than William E. Myers & Company, the
fees of which will be paid by Buyer.
6.4 NO CONFLICT OR VIOLATION. Neither the execution, delivery or
performance of this Agreement or the Ancillary Agreements, nor the
consummation of the transactions contemplated hereby or thereby, nor
compliance by the Buyer with any of the provisions hereof, will (a) violate
any provision of the Certificate of Incorporation or Bylaws of the Buyer, (b)
violate or result in or constitute a default under, or result in the
termination of, or accelerate the performance required by, or result in a
right of termination or acceleration under, or result in the creation or any
Encumbrance upon any of the assets under, any of the terms, conditions or
provisions of any contracts or permit (i) to which the Buyer is a party or
(ii) by which its assets are bound, (c) violate any Regulation or Court Order
or (d) impose any Encumbrance on any of the assets or the business of Buyer,
except for permitted encumbrances, except in the cases of each of clauses
(b), (c) and (d) above, for such violations, defaults, terminations,
accelerations, or creations of Encumbrances which, individually or in the
aggregate, would not have a material adverse effect on Buyer or its ability
to perform its obligations hereunder or under any of the Ancillary Agreements
to which it is a party.
6.5 CONSENTS AND APPROVALS. Other than in connection with or in
compliance with the provisions of the HSR Act, no notice to, declaration,
filing or registration with, or permit from, any domestic or foreign
governmental or regulatory body or authority, or any other Person, is
required to be made or obtained by Buyer in connection with the execution,
delivery or performance of this Agreement and the consummation of the
transactions contemplated hereby.
6.6 LITIGATION. There are no Actions, individually or, if relating to
a single set of circumstances, in the aggregate, involving in excess of
$50,000, pending or, to Buyer's knowledge, threatened or anticipated, which,
if determined adversely to Buyer could reasonably be expected to delay, limit
or enjoin the transactions contemplated by this Agreement or the Ancillary
Agreements to which it is a party or which would otherwise, individually or
in the aggregate, have a material adverse effect on the Buyer or its ability
to perform its obligations hereunder or under any of the Ancillary Agreements
to which it is a party.
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6.7 INVESTMENT INTENT. Buyer is an "accredited investor" within the
meaning of Regulation D under the Securities Act of 1933, as amended (the
"SECURITIES ACT") and is acquiring all of the issued and outstanding capital
stock of the Target solely for its own account for purposes of investment and
not with a view to any resale or distribution thereof in violation of
applicable securities laws. Buyer acknowledges that the issued and
outstanding capital stock of the Target has not been registered under the
Securities Act or any applicable state securities law. Buyer is experienced
and capable of analyzing and evaluating the merits and results of investments
in the Target, or has been and will be advised as to such investment by
persons who have such knowledge and experience and are independent of the
Sellers. Buyer acknowledges that it has been furnished with or provided
access to such information regarding the Business, the Target and the
Target's Subsidiaries as Buyer has requested; PROVIDED, HOWEVER, that
notwithstanding anything to the contrary contained herein, Buyer shall not be
deemed in any way to have waived its ability to rely on the representations
and warranties of the Sellers contained herein through its acknowledgement of
the foregoing.
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ARTICLE VII
COVENANTS OF SELLERS, THE TARGET AND BUYER
The Sellers and Buyer each covenant with each other as follows:
7.1 FURTHER ASSURANCES. Upon the terms and subject to the conditions
contained herein, the parties agree (i) to use all reasonable efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make effective the
transactions contemplated by this Agreement, (ii) to execute any documents,
instruments or conveyances of any kind which may be reasonably necessary or
advisable to carry out any of the transactions contemplated hereunder, and
(iii) to cooperate with each other in connection with the foregoing. Without
limiting the foregoing, the parties agree to use their respective reasonable
efforts (A) to obtain all necessary waivers, consents and approvals from
other parties to the Contracts and Permits; PROVIDED, HOWEVER, that none of
the Sellers, the Target or Buyer shall be required to make any payments,
commence litigation or agree to modifications of the terms thereof in order
to obtain any such waivers, consents or approvals, (B) to obtain all
necessary Permits as are required to be obtained under any Regulations, (C)
to give all notices to, and make all registrations and filings with, third
parties, including without limitation submissions of information requested by
governmental authorities, (D) to defend all Actions challenging this
Agreement or the consummation of the transactions contemplated hereby, (E) to
lift or rescind any injunction or restraining order or other Court Order
adversely affecting the ability of the parties to consummate the transactions
contemplated hereby and (F) to fulfill all conditions to this Agreement.
7.2 BUYER'S RIGHT OF FIRST REFUSAL IN ACQUISITION TRANSACTION INVOLVING
THE SELLERS OR THE SELLERS' SUBSIDIARIES.
(a) NOTICE OF INTENT. If at any time from the Closing Date until
the seventh anniversary of the Closing Date, the Sellers or any of the
Sellers' Subsidiaries or any of their respective officers, directors,
employees or Representatives (including, without limitation investment
bankers, attorneys and accountants) proposes to enter into an agreement to
(i) sell, assign or otherwise transfer all or substantially all of (A) the
assets of any of the Sellers or any of the Sellers' Subsidiaries or (B) the
shares of capital stock of any of the Sellers (other than LIW) or any of the
Sellers' Subsidiaries, or (ii) merge, consolidate, liquidate, dissolve or
consummate any other similar transaction with respect to any of the Sellers
or any of the Sellers' Subsidiaries except, in each case with respect to the
liquidation or dissolution of any non-operating Seller Subsidiary (each of
the transactions set forth in clauses (i) and (ii) above being referred to
herein as an "ACQUISITION TRANSACTION"), then the Sellers shall deliver
written notice of the Acquisition Transaction (a "NOTICE OF INTENT"),
accompanied by a copy of the proposal relating to such Acquisition
Transaction (the "ACQUISITION PROPOSAL"), to Buyer, setting forth which of
the Sellers or the Sellers' Subsidiaries will be subject to such Acquisition
Transaction, the number of shares of capital stock or the particular assets
to be sold or otherwise transferred in such Acquisition Transaction (the
"OFFERED ITEMS"), the price at which the Offered Items will be sold or
otherwise transferred pursuant to the Acquisition Transaction (the "OFFER
PRICE") and any other terms and conditions material to the Acquisition
Transaction (the "RELEVANT TERMS").
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(b) NOTICE OF EXERCISE. Upon receipt of the Notice of Intent,
Buyer shall have the right to purchase at the Offer Price all, but not less
than all, of the Offered Items upon terms substantially similar to the
Relevant Terms (it being understood that if any terms would be impossible or
commercially impracticable for Buyer to match, Buyer shall be given the
opportunity to exercise its option as set forth herein on other terms so long
as the benefit to the applicable selling party is substantially the same,
when taken as a whole, as the Relevant Terms), exercisable by the delivery of
notice to LIW (the "NOTICE OF EXERCISE"), within forty-five (45) calendar
days from the date of receipt of the Notice of Intent. The right of Buyer
pursuant to this Section 7.2 shall terminate if not exercised within
forty-five (45) calendar days after receipt by Buyer of the Notice of Intent.
If the Offer Price, or a portion of the Offer Price, involves consideration
other than cash, Buyer shall (subject to agreement by Buyer and the Sellers
with respect to reasonable registration rights for the Sellers if securities
are issued to the Sellers as provided below) have the right to purchase the
Offered Items for (A) a cash amount equal to the sum of the portion of such
consideration which is cash plus (B) at Buyer's election, either (i) the
amount of ILL stock the fair market value of which (as determined by
Houlihan, Lokey, Howard & Zukin, Inc. or another independent appraiser
mutually agreed upon by Buyer and LIW) at such time is equal to the "Cash
Value" of the non-cash consideration, (ii) an amount in cash equal to the
"Cash Value" of the non-cash consideration or (iii) any combination of the
compensation set forth in clauses (i) or (ii) above. For purposes of this
Section 7.2, "Cash Value" shall mean, in the case of securities which are
quoted on NASDAQ or any securities exchange, an amount equal to the last
reported sales price on such exchange for such securities on the date of the
Notice of Intent and, in the case of securities or other property for which
there is no such readily available market price, an amount equal to the fair
market value of such securities or other property as determined in good faith
by an investment bank or other entity mutually agreeable to Buyer and LIW in
their reasonable discretion.
(c) OBLIGATION TO SELL. In the event that Buyer exercises its
rights to purchase the Offered Items in accordance with Section 7.2(b), then
Buyer shall have an irrevocable obligation to purchase, and Sellers shall
sell the Offered Items after not less than sixty (60) and not more than
ninety (90) calendar days from the date of the delivery of the Notice of
Exercise, or by such other date as shall be mutually agreeable to Buyer and
the Sellers.
(d) COMPLETION OF ACQUISITION TRANSACTION. If (a) all notices
required to be given pursuant to Section 7.2(a) have been duly given and (b)
Buyer has not delivered the Notice of Exercise within the applicable time
period, then the selling party shall have the right, for a period of ninety
(90) calendar days from the earlier of (i) the expiration of the period
pursuant to Section 7.2(b) in which Buyer can deliver the Notice of Exercise
with respect to such Acquisition Transaction, or (ii) the date on which Buyer
notifies LIW that it will not exercise the right of first refusal granted
pursuant to Section 7.2(b), to sell to a third party the Offered Items upon
the Relevant Terms and otherwise in full compliance with any other applicable
provisions of this Agreement; provided that any material deviation from the
Relevant Terms must be disclosed to Buyer no less than fifteen (15) days
prior to the closing of the Acquisition Transaction and Buyer shall,
thereafter, be granted ten (10) days to deliver a Notice of Exercise and
purchase at the Offer Price all, but not less than all, of the Offered Items
upon terms substantially similar to the revised Relevant Terms.
(e) PERMITTED NEGOTIATIONS AND TRANSACTIONS. Notwithstanding
anything to the contrary contained in this section 7.2, the Sellers shall be
allowed (i) to negotiate and enter into agreements with
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third parties with respect to strategic alliances, without any actions
required hereunder, in any of the following countries: Australia, Germany,
Italy, Denmark, Sweden, Holland and New Zealand and (ii) to sell its assets
and businesses to any third party without first offering to sell such assets
and business to Buyer, to the extent such assets and businesses are located
in Australia or New Zealand.
7.3 EMPLOYEE MATTERS.
(a) Nothing contained in this Agreement shall confer upon any
employee of the Target or any of its Subsidiaries any right with respect to
continuance of employment after the consummation of the transaction
contemplated hereby, nor shall anything herein interfere with the right of
Buyer to terminate the employment of any of the employees of the Target or
any of its Subsidiaries at any time, with or without cause, or restrict Buyer
in the exercise of its independent business judgment in modifying any of the
terms and conditions of the employment of any such employees.
Notwithstanding the foregoing, Buyer acknowledges that Sellers have advised
Buyer of the collective bargaining agreements set forth in Schedule 4.13 and
that Target and its Subsidiaries shall continue to be bound by such
collective bargaining agreements.
(b) No provision of this Agreement shall create any third party
beneficiary rights in any employee of the Target or any of its Subsidiaries,
any beneficiary or dependents thereof, or any collective bargaining
representative thereof, with respect to the compensation, terms and
conditions of employment and benefits that may be provided to any employee of
the Target or any of its Subsidiaries by Buyer or under any benefit plan
which Buyer may maintain.
(c) Prior to the second anniversary of the Closing Date, no Seller
nor any affiliate of any Seller nor any Sellers Subsidiary shall, directly or
indirectly, solicit for employment any key employee of the Target or any of
its Subsidiaries whose employment is continued by Buyer after the Closing
Date, unless Buyer first terminates the employment of such employee or gives
its written consent to such employment or offer of employment.
7.4 USE OF PURCHASE PRICE AMOUNT. Each of the Sellers hereby agrees
that it will use commercially reasonable efforts to use the amount of the
Purchase Price (plus any further amounts received by the Stockholder pursuant
to Section 2.3(b) or 2.3(c) of this Agreement) in the manner set forth in the
plan of restructuring, attached hereto as Exhibit B. Any use of the amount
of the Purchase Price (and any further amounts received by the Sellers
pursuant to Section 2.3(b) or 2.3(c) of this Agreement) in a manner
inconsistent with Exhibit B shall require the prior approval of all of the
Buyer's nominees to the board of directors of LIW.
7.5 1995 YEAR END FINANCIAL STATEMENTS. Prior to the date hereof, the
Sellers shall have delivered to Buyer the 1995 Year End Financial Statements.
The 1995 Year End Financial Statements shall have been audited, with an
explanatory paragraph, by Price Waterhouse at Sellers' expense and shall have
been accompanied by an unqualified report to the effect that the 1995 Year
End Financial Statements present fairly, in accordance with GAAP, the
financial condition of the Target and its Subsidiaries for such period.
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7.6 DISSOLUTION OF THE STOCKHOLDER. Within ninety (90) days after the
Closing Date, the Sellers shall cause the Stockholder to be wound up and
liquidated and any and all of its remaining assets to be distributed to its
stockholders. Upon consummation of the transactions contemplated hereby, the
Stockholder will have no assets (other than the proceeds of this transaction,
which will be distributed to its shareholders). The Stockholder shall
conduct no further business until its dissolution, winding up and liquidation
and shall have sufficient assets to pay its creditors as such payments become
due.
7.7 PAYMENT OF FLEET OBLIGATION. Concurrently with the Closing, Buyer
shall cause the Target to retire the aggregate amount of the Fleet Obligation.
7.8 FRANCHISE MATTERS. Buyer acknowledges that it does not become a
"franchisee" as such term is defined by the Federal Trade Commission and by
applicable state franchise laws by virtue of the provisions of this Agreement
or any of the Ancillary Agreements. Buyer hereby waives, to the extent
permitted by applicable law, any protections to "franchisees" and rights to
sue for damages as a "franchisee" that may be provided by any of the
regulations promulgated by the Federal Trade Commission or under any
applicable state franchise laws.
7.9 NAME CHANGES. Within sixty (60) days after the Closing Date, Buyer
shall cause each of LEP Air, Inc., LEP Transport, Inc. and LEP Bloodstock,
Inc. to change its name so as to no longer contain the word "LEP" in such
name.
ARTICLE VIII
ACTIONS BY SELLERS AND BUYER AFTER THE CLOSING
8.1 BOOKS AND RECORDS.
(a) The Sellers and Buyer agree that each will cooperate with
and make available to the other party, during normal business hours, all
Books and Records, information and Personnel (without substantial disruption
of employment) retained and remaining in existence after the Closing Date
that are necessary or useful in connection with any tax inquiry, audit,
investigation or dispute, any litigation or investigation or any other matter
requiring any such Books and Records, information or employees for any
reasonable business purpose. The party requesting any such Books and
Records, information or employees shall bear all of the out-of-pocket costs
and expenses (including without limitation, attorneys' fees, but excluding
reimbursement for salaries and employee benefits) reasonably incurred in
connection with providing such Books and Records, information or employees.
(b) COOPERATION AND RECORDS RETENTION. The Sellers and Buyer
shall (and Buyer shall cause Target and its Subsidiaries to) (i) each provide
the other with such assistance as may reasonably be requested by any of them
in connection with the preparation of any return, audit, or other examination
by any taxing authority or judicial or administrative proceedings relating to
Liability for Taxes, (ii) each retain and provide the other with any records
or other information that may be relevant to such return, audit or
examination, proceeding or determination, and (iii) each provide the other
with any final determination of any such audit or examination, proceeding, or
determination that affects any amount required to be shown on any tax return
of the other for any period. Without limiting the generality of the
foregoing, Buyer and the Sellers shall each retain, until the applicable
statutes of
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limitations (including any extensions) have expired, copies of all tax
returns, supporting work schedules, and other records or information that may
be relevant to such returns for all tax periods or portions thereof ending on
or before the Closing Date and shall not destroy or otherwise dispose of any
such records without first providing the other party with a reasonable
opportunity to review and copy the same.
8.2 SURVIVAL OF REPRESENTATIONS, ETC. All statements contained in the
Disclosure Schedule or in any certificate, schedule, exhibit or instrument or
conveyance delivered by or on behalf of the parties pursuant to this
Agreement or in connection with the transactions contemplated hereby shall be
deemed to be representations and warranties by the parties hereunder. The
representations and warranties of the Sellers on the one hand and Buyer on
the other hand contained herein and as provided in the preceding sentence
shall survive the Closing Date until sixty days after the completion of the
fiscal-year audit of the Target and its Subsidiaries for the second full year
after the Closing Date (but shall in no event survive to a date later than
April 15, 1998), PROVIDED, HOWEVER, that the representations and warranties
contained in Section 4.19 and 4.21 shall continue to survive until sixty days
after the expiration of the applicable statute of limitations period (giving
effect to any waiver, tolling or extension thereof) and that the
representations and warranties contained in Section 4.27 shall continue to
survive until four (4) years after the Closing Date. The termination of the
representations and warranties provided herein shall not affect the rights of
a party in respect of any Claim made by such party in a writing received by
the other party prior to the expiration of the applicable survival period
provided herein.
8.3 INDEMNIFICATIONS.
(a) BY THE SELLERS. The Sellers shall jointly and severally
indemnify, save and hold harmless Buyer, its affiliates and subsidiaries, and
each of their respective Representatives (collectively, the "BUYER
INDEMNIFIED PARTIES"), from and against any and all costs, losses,
Liabilities, obligations, damages, lawsuits, deficiencies, claims, demands,
and expenses (whether or not arising out of third-party claims), including
without limitation interest, penalties, costs of mitigation, any clean-up,
remedial correction or responsive action, damages to the environment,
attorneys' fees and all amounts paid in investigation, defense or settlement
of any of the foregoing (herein, "DAMAGES"), incurred in connection with,
arising out of or resulting from (i) any breach of any representation or
warranty or the inaccuracy of any representation made by the Sellers in or
pursuant to this Agreement; (ii) any breach of any covenant or agreement made
by the Sellers in or pursuant to this Agreement; (iii) any Liabilities or
contingent Liabilities, whether arising prior to or after the Closing Date,
related to, in connection with or arising out of the activities of the
Sellers or any of the Sellers' Subsidiaries; (iv) any Liability with respect
to the Discontinued Operations (except for Liabilities arising out of the
operation of the Discontinued Operations after the Closing Date by the
Buyer); (v) any Liabilities arising under any Environmental Law or concerning
any Environmental Condition, occurring after the Closing Date and resulting
from (A) any release or waiver by any Corporation of any other Person with
respect thereto which is not disclosed in the Disclosure Schedule or (B) any
representation, warranty, indemnification, covenant, restriction or other
undertaking of any Corporation with respect thereto which is not disclosed in
the Disclosure Schedule (except with respect to representations and
warranties set forth in Section 4.27 of this Agreement, the Liabilities with
respect to which will be indemnified against pursuant to the terms of Section
8.3(a)(i) above); (vi) any Liabilities arising out of any treatment of The
National Guardian Corporation or any of its affiliates (other than the Target
and its Subsidiaries) as an
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ERISA Affiliate or the Target or any of its Subsidiaries; or (vii) any breach
of any of the Ancillary Agreements by any of the Sellers or any of the
Sellers' Subsidiaries.
The term "DAMAGES" as used in this Section 8.3 is not limited to
matters asserted by third parties against any indemnified party, but includes
Damages incurred or sustained by an indemnified party in the absence of third
party claims. Payments by any indemnified party of amounts for which such
indemnified party is indemnified hereunder shall not be a condition precedent
to recovery. The rights and remedies provided in this Article VIII shall be
exclusive as to any Damages incurred by a party under this Agreement;
PROVIDED, HOWEVER, that nothing herein shall preclude a party from exercising
its rights under this Agreement and applicable law to seek equitable
remedies, including without limitation, specific performance and injunctions.
(b) BY BUYER. Buyer shall indemnify and save and hold harmless
the Sellers and their respective affiliates and Representatives
(collectively, the "SELLERS INDEMNIFIED PARTIES") from and against any and
all Damages incurred in connection with, arising out of or resulting from (i)
any breach of any representation or warranty or the inaccuracy of any
representation made by Buyer in or pursuant to this Agreement; (ii) any
breach of any covenant or agreement made by Buyer in or pursuant to this
Agreement; (iii) any payments required to be made by any of the Sellers to
Jeffrey A. Maddow pursuant to the guarantee by LIW of his severance agreement
or (iv) any payments required to be made by any of the Sellers pursuant to
the guarantee to Cargo Net Services Corporation of obligations of the Target
and/or its Subsidiaries.
(c) COOPERATION. The indemnified party shall cooperate in all
reasonable respects with the indemnifying party and its representatives
(including without limitation its attorneys) in the investigation, trial and
defense of such lawsuit or action and any appeal arising therefrom; PROVIDED,
HOWEVER, that the indemnified party may, at its own cost, participate in
negotiations, arbitrations and the investigation, trial and defense of such
lawsuit or action and any appeal arising therefrom. The parties shall
cooperate with each other in any notifications to insurers.
(d) DEFENSE OF CLAIMS. If a claim for Damages (a "CLAIM") is to
be made by a party entitled to indemnification hereunder against the
indemnifying party, the party claiming such indemnification shall, subject to
Section 8.2 hereof, give written notice (a "CLAIM NOTICE") to the
indemnifying party as soon as practicable after the party entitled to
indemnification becomes aware of any fact, condition or event which may give
rise to Damages for which indemnification may be sought under this Section
8.3. If any lawsuit or enforcement action is filed against any party
entitled to the benefit of indemnity hereunder, written notice thereof shall
be given to the indemnifying party as promptly as practicable (and in any
event within five (5) calendar days after the service of the citation or
summons). The failure of any indemnified party to give timely notice
hereunder shall not affect rights to indemnification hereunder, except to the
extent that the indemnifying party demonstrates actual damage caused by such
failure. After such notice, if the indemnifying party shall acknowledge in
writing to the indemnified party that the indemnifying party shall be
obligated under the terms of its indemnity hereunder in connection with such
lawsuit or action, then the indemnifying party shall be entitled, if it so
elects at its own cost, risk and expense, (i) to take control of the defense
and investigation of such lawsuit or action, (ii) to employ and engage
attorneys of its own choice to handle and defend the same unless the named
parties to such action or proceeding (including any impleaded parties)
include both the indemnifying party and the indemnified party and the
indemnified party has been advised in writing
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by counsel that there may be one or more legal defenses available to such
indemnified party that are different from or additional to those available to
the indemnifying party, in which event the indemnified party shall be
entitled, at the indemnifying party's cost, risk and expense, to separate
counsel of its own choosing, and (iii) to compromise or settle such lawsuit
or action, which compromise or settlement shall be made only with the written
consent of the indemnified party, such consent not to be unreasonably
withheld. If the indemnifying party fails to assume the defense of such
lawsuit or action within fifteen (15) calendar days after receipt of the
Claim Notice, the indemnified party against which such lawsuit or action has
been asserted will (upon delivering notice to such effect to the indemnifying
party) have the right to undertake, at the indemnifying party's cost and
expense, the defense, compromise or settlement of such lawsuit or action on
behalf of and for the account and risk of the indemnifying party; PROVIDED,
HOWEVER, that such lawsuit or action shall not be compromised or settled
without the written consent of the indemnifying party, which consent shall
not be unreasonably withheld. If the indemnified party settles or
compromises such lawsuit or action without the written consent of the
indemnifying party, the indemnifying party shall not have any liability
hereunder for or with respect to such lawsuit or action. In the event the
indemnified party assumes the defense of the lawsuit or action, the
indemnified party will keep the indemnifying party reasonably informed of the
progress of any such defense, compromise or settlement. The indemnifying
party shall be liable for any settlement of any action effected pursuant to
and in accordance with this Section 8.3 and for any final judgment (subject
to any right of appeal), and the indemnifying party agrees to indemnify and
hold harmless an indemnified party from and against any Damages by reason of
such settlement or judgment.
(e) BROKERS AND FINDERS. No agent, broker, investment banker,
financial advisor or other Person is or will be entitled to any broker's or
finder's fee or any other commission or similar fee in connection with any of
the transactions contemplated hereby other than William E. Myers & Company
(the fees of which will be paid by Buyer). Each party hereto agrees to hold
the other parties hereto harmless from and against any and all claims,
liabilities or obligations with respect to any such fee or commission or
expenses related thereto asserted by any Person (i) with respect to any such
fee or commission or expenses related thereto or (ii) on the basis of any act
or statement alleged to have been made by any party hereto or any of their
respective representatives or affiliates.
(f) REPRESENTATIVES. No individual Representative of any party
shall be personally liable for any Damages under the provisions contained in
this Section 8.3. Nothing herein shall relieve either party of any Liability
to make any payment expressly required to be made by such party pursuant to
this Agreement.
(g) LIMITATION ON INDEMNITY/COMMITMENTS.
(i) The indemnification obligation of the parties hereto
with respect to any breach of any representation or warranty pursuant to
Sections 8.3(a) or (b) shall be limited to Claims for Damages made prior to
last date of survival thereof referred to in Section 8.2. The
indemnification obligation of the parties hereto with respect to any breach
of any covenant or agreement pursuant to Sections 8.3(a) or (b) shall
survive indefinitely subject to the terms of this Agreement.
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(ii) Buyer may not recover Damages from the Sellers pursuant
to Section 8.3(a)(i) until the aggregate amount of Damages relating to such
Claims for which Buyer is seeking indemnification exceeds two hundred and
fifty thousand dollars ($250,000); PROVIDED, HOWEVER, in the event that the
aggregate amount of Damages for which Buyer is seeking indemnification
exceeds such amount, Buyer may recover the full amount of such Damages less
$250,000. Notwithstanding the foregoing, the maximum amount of damages for
which the Sellers shall be liable pursuant to this Section 8.3 shall be
twenty-eight million dollars ($28,000,000), plus or minus the amount of any
post-Closing adjustment as set forth in Section 2.3 hereof.
(iii) No Seller may recover Damages from Buyer pursuant to
Section 8.3(b)(i) until the aggregate amount of Damages for which such
Seller is seeking indemnification exceeds two hundred and fifty thousand
dollars ($250,000); PROVIDED, HOWEVER, in the event that the aggregate
amount of Damages for which such Seller is seeking indemnification exceeds
such amount, such Seller may recover the full amount of such Damages less
$250,000. Notwithstanding the foregoing, the maximum amount of damages for
which Buyer shall be liable pursuant to this Section 8.3 shall be twenty-
eight million dollars ($28,000,000), plus or minus the amount of any post-
Closing adjustment as set forth in Section 2.3 hereof.
(iv) Neither (a) the termination of the representations or
warranties contained herein, nor (b) the expiration of the indemnification
obligations described above, will affect the rights of a Person in respect
of any Claim made by such Person received by the indemnifying party prior
to the expiration of the applicable survival period provided herein.
(e) ESCROW AGREEMENT. Notwithstanding the foregoing, subject to the
terms and conditions of the Escrow Agreement, Claims for indemnification against
any Seller pursuant to this Section 8.3 shall first be satisfied from the Escrow
Amount and, after the Escrow Amount has been exhausted, shall be recovered
directly from the Sellers.
8.4 INSURANCE. Buyer shall cause the Target to purchase for three (3)
years after the Closing Date insurance covering all of North America, issued by
one or more insurance carriers, evidencing fully paid and non-cancelable
Directors & Officers liability insurance coverage with respect to claims arising
out of events or occurrences on or prior to the Closing Date (whether or not
reported), in the amount of five million dollars ($5,000,000) and at a cost of
$67,500 (which amount will be reflected as a Liability on the Closing Balance
Sheet).
ARTICLE IX
TAX MATTERS
9.1 RETURNS. The Sellers and the Target shall have the exclusive
obligation and authority to file or cause to be filed all Tax returns that are
required to be filed by or with respect to the income, assets (including,
without limitation, real, personal and intangible property) or operations of the
Target or its Subsidiaries for all taxable years or other taxable periods ending
on or prior to the Closing Date (the "PRE-CLOSING PERIODS"). Except as provided
in the preceding sentence, Buyer shall have the exclusive obligation and
authority to file or cause to be filed all Tax returns that are required to be
filed by or with respect to the income, assets (including, without limitation,
real, personal and intangible
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property) or operations of the Target or any of its Subsidiaries or any
successor thereto. No later than 30 days prior to the due date (or any later
date to which such due date has been legally extended) for the filing of any
Tax return with respect to any taxable year or other taxable period of the
Target and its Subsidiaries beginning on or before the Closing Date and
ending after the Closing Date (an "OVERLAP PERIOD"), Buyer shall (a) provide
the Sellers with written notice, which notice shall set forth Buyer's
calculations regarding the amount of Taxes for which Buyer determines the
Sellers are obligated to reimburse Buyer pursuant to Section 9.3(a) in
sufficient detail and particularity to enable the Sellers to verify the
amount of such Taxes for which the Sellers are obligated to reimburse Buyer,
(b) provide the Sellers with a draft of such Tax return, and (c) provide the
Sellers access to all records of the Target and its Subsidiaries reasonably
necessary to enable the Sellers and their representatives to evaluate the
draft Tax returns provided with such notice. No later than 10 days prior to
the due date (or any later date to which such due date has been legally
extended) for the filing of such Tax return, the Sellers shall notify Buyer
of any objections the Sellers may have to Buyer's calculations regarding the
amount of such Taxes and to any items set forth in such draft Tax return.
Buyer and the Sellers agree to consult and resolve in good faith any such
objection. In the event that Buyer and the Sellers are not able to resolve
such dispute within seven days of the filing date of such Tax return, the
parties shall appoint Ernst & Young, LLP to resolve such dispute as soon as
shall be practicable after such appointment. The fees and expenses of Ernst &
Young, LLP, if any, shall be payed equally by Buyer and LIW.
9.2 CONTESTS. The Sellers and their duly appointed representatives shall
have the exclusive authority to control any audit or examination by any taxing
authority, to initiate any claim for refund, to amend any Tax return and to
contest, resolve and defend against any assessment for additional Taxes, notice
of Tax deficiency or other adjustment of Taxes of or relating to any liability
of the Target or its Subsidiaries for Taxes reflected on any Tax returns
covering any Pre-Closing Periods; PROVIDED, HOWEVER, that (a) neither the
Sellers nor any of their duly appointed representatives shall, without the prior
written consent of the Buyer, which consent shall not be unreasonably withheld,
file any claim for refund, amend any Tax return or enter into any settlement of
any contest or otherwise compromise any issue that affects or may affect the Tax
liability of the Buyer or any of its Affiliates for any Tax period beginning
after the Closing Date (a "POST-CLOSING PERIOD") or any portion of an Overlap
Period beginning after the Closing Date, and (b) neither the Sellers nor any of
their duly appointed representatives shall, without the prior consent of the
Buyer, which consent shall not unreasonably be withheld, enter into any
settlement of any contest or otherwise compromise any issue that would increase
any liability accruals for Taxes as of the Closing Date or would otherwise
require payment by the Buyer of any amount under Section 9.3 unless the Sellers
shall have agreed to indemnify the Buyer for payment of such Taxes. Buyer and
its duly appointed representatives shall have the exclusive authority to control
any audit or other proceeding relating to Taxes for any taxable year or other
taxable period ending after the Closing Date; PROVIDED, HOWEVER, that (a)
neither Buyer, the Target nor any of their duly appointed representatives shall,
without the prior written consent of the Sellers, which consent shall not be
unreasonably withheld, enter into any settlement of any contest or otherwise
compromise any issue that affects or may affect the Tax liability of the Sellers
or any of their affiliates for any Pre-Closing Period or any portion of the
Overlap Period ending on the Closing Date, and (b) neither Buyer, the Target nor
any of their duly appointed representatives shall, without the prior consent of
the Sellers, which consent shall not unreasonably be withheld, enter into any
settlement of any contest or otherwise compromise any issue that would reduce
any liability accruals for Taxes as of the Closing Date or would otherwise
require payment by the Sellers of any amount under Section 9.3
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unless Buyer shall have waived or caused to be waived for itself and the
Target any right to indemnification for Taxes from the Sellers. The Sellers
shall be entitled to any Tax refund relating to the Target and its
Subsidiaries to the extent such Tax refund relates to any Pre-Closing Period
or any portion of the Overlap Period ending on the Closing Date, unless such
refund has been recorded as an Asset on the Closing Balance Sheet in which
case Buyer shall be entitled thereto.
9.3 PAYMENT OF TAXES. (a) Taxes of the Target and its Subsidiaries that
relate to an Overlap Period shall be apportioned between the portion of such
period ending on the Closing Date and the portion of such period beginning after
the Closing Date on the basis of an interim closing of the books, and based on
accounting methods, elections and conventions that do not have the effect of
distorting income or expenses. Notwithstanding the foregoing, real and personal
property Taxes of the Target and its Subsidiaries for any Overlap Period shall
be apportioned on a per diem basis. The Sellers shall pay to Buyer or the
appropriate taxing authority the Taxes calculated with respect to the portion of
the Overlap Period ending on the Closing Date (as determined by the Sellers and
Buyer using the procedure set forth under Section 9.1), but any such payment
required by the Sellers shall be reduced by the amount of such Taxes already
paid by the Target or the Sellers or any affiliate of the Sellers on or prior to
the Closing Date or accrued or otherwise reflected as a Tax liability for such
period on the Closing Balance Sheet.
(b) except as otherwise provided in this Section 9.3(b) the Sellers shall
indemnify the Buyer Indemnified Parties and hold them harmless from (i) all
Liability for Taxes of the Target and its Subsidiaries (except Taxes accrued and
accounted for) for all Pre-Closing Tax Periods and the portion ending on the
Closing Date, including, without limitation, Liability for the election under
Section 338(h)(10) for any actual or deemed election under Section 338 of the
Code or any corresponding provision of state, local or foreign law (except with
respect to Liabilities for Puerto Rican Taxes, if any, resulting from an actual
or deemed liquidation of LEP Profit International, Inc. (Puerto Rico), for which
Buyer shall be responsible and indemnify the Sellers), (ii) all Liability (as a
result of Treasury Regulation Section 1.1502-6(a) or otherwise) for Taxes of any
Person (other than the Target or its Subsidiaries) with which any of the Sellers
or the Target or any of their respective Subsidiaries is or has been affiliated
or has filed or has been required to file a consolidated, combined or unitary
Tax Return and (iii) all Taxes arising out of a breach of the Sellers'
representations and warranties contained in Section 4.21 hereof.
Notwithstanding the foregoing provisions of this Section 9.3(b), the Sellers
shall not indemnify and hold harmless Buyer for the amount of recorded liability
accruals for Taxes reflected on the Closing Balance Sheet.
(c) Buyer agrees to pay or cause the Target to pay the Sellers an amount
equal to all payments made by the Sellers or their affiliates after the Closing
Date to any governmental authority for or with respect to Taxes imposed on or
with respect to the income, assets and operation of or with respect to the
Target or any of its Subsidiaries for periods ending on or prior to the Closing
Date, to the extent that the aggregate amount of such payments does not exceed
the amount of liability accruals for such Taxes reflected on the Closing Balance
Sheet.
(d) except as otherwise provided in this Section 9.3, Buyer hereby
indemnifies and agrees to hold harmless the Sellers and their affiliates from
and against all Taxes of or with respect to the Target and each of its
Subsidiaries for all taxable years or other taxable periods beginning after the
Closing Date
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and, with respect to the Overlap Period, the portion of such period
commencing after the Closing Date.
9.4 NOTICE OF CONTESTS. The Buyer shall promptly notify the Seller, in
connection with any inquiry, examination, or proceeding, any government
authority proposes in writing to make or any assessment or adjustment with
respect to Tax items of the Target and its Subsidiaries, which assessments or
adjustments could affect the Sellers following the Closing Date, and shall
consult with the Sellers with respect to any such proposed assessment or
adjustment. Buyer shall notify the Sellers in writing promptly upon learning of
any such inquiry, examination, or proceeding and shall consult with the Sellers
with respect to any such proposed assessment or adjustment relating to periods
ending on or prior to the Closing Date.
9.5 COOPERATION. The Buyer shall cause the Target and its Subsidiaries
to provide the Sellers or their designee with such assistance as may reasonably
be requested by the Sellers or their designee in connection with the preparation
of any Tax return, audit or judicial or administrative proceeding or
determination relating to liability for Taxes of or with respect to the Target
or any of its Subsidiaries, including but not limited to, access to the books
and records, and the assistance of the officers and employees, of the Target and
its Subsidiaries. Buyer and the Sellers acknowledge that any and all
information obtained in connection with the preparation of any Tax return, audit
or judicial or administrative proceeding or determination pursuant to this
Section 9.5 is of a confidential nature and that all such information shall be
used only for the purposes set forth in the immediately preceding sentence.
9.6 ELECTION UNDER SECTION 338(h)(10). At the election of Buyer, the
Parent Companies shall cause the Stockholder to join Buyer in making an election
under Section 338(h)(10) of the Code and any corresponding elections permitted
under state, local, or foreign law with respect to the acquisition of the Target
and each of its corporate Subsidiaries (other than its Subsidiaries that are
organized under the laws of a country other than the United States) (such
Subsidiaries, the "INCLUDED SUBSIDIARIES") and if no election may be made
pursuant to such state, local or foreign law, to the extent available, under an
election corresponding to Section 338(a) and Section 338(g) of the Code for
purposes of such state, local or foreign law or to treat the Code Section
338(h)(10) election as making an election corresponding to Section 338(a) and
Section 338(g) of the Code. Buyer and the Stockholder shall exchange completed
and executed copies of Internal Revenue Service Form 8023-A, required schedules
thereto, and any similar state, local, and foreign forms as soon as practicable
after the Closing. The Stockholder and Buyer agree that Buyer, in its sole
reasonable discretion, shall allocate the Purchase Price and all other
capitalized costs among the Target's assets for income tax purposes. Buyer
agrees to give the Stockholder sufficient notice of such allocation to allow the
Stockholder, to the extent necessary, to take account of such allocation in its
tax filings. The Stockholder and Buyer acknowledge that for United States
federal income tax purposes (and for purposes of state, local or foreign taxes
in jurisdictions which permit elections analogous to the election permitted
under Section 338(h)(10) of the Code) the acquisition of the stock of Target
will be treated by the parties as a sale of the Assets of the Target (other than
stock of the Included Subsidiaries) and a sale of the assets of each of the
Included Subsidiaries to new corporations owned by Buyer, followed by a complete
liquidation of Target and the Included Subsidiaries into the Stockholder. The
parties agree to report the transactions in a manner consistent with this
treatment.
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9.7 PURCHASE PRICE ADJUSTMENT. To the extent permitted by law, any payment
made pursuant to Article VIII or Article IX hereunder by Buyer to the
Stockholder or by the Stockholder to Buyer shall be treated by all parties for
all purposes as an adjustment to the purchase price of the stock of the Target
and shall be allocated pursuant to the provisions of Section 9.6 hereof.
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ARTICLE X
MISCELLANEOUS
10.1 ASSIGNMENT. Neither this Agreement nor any of the rights or
obligations hereunder may be assigned by any party without the prior written
consent of the other parties; PROVIDED, HOWEVER, without the consent of any
other party, the Buyer may, (i) assign all such rights to any lender as
collateral security in connection with the financing of the Purchase Price so
long as Buyer is not in any way released from its obligations hereunder and (ii)
assign all such rights and obligations to any subsidiary or affiliate of Buyer
or to a successor in interest to Buyer which shall assume all obligations and
Liabilities of Buyer under this Agreement; PROVIDED, FURTHER, that LIW will not
unreasonably withhold its consent to the assignment by Buyer of this Agreement
or any of its rights and obligations hereunder in any sale by Buyer of all or a
significant portion of the assets of the Target and its Subsidiaries, taken as a
whole; and PROVIDED, FURTHER, that the Stockholder may, without the consent of
Buyer, assign its rights hereunder in connection with the dissolution of the
Stockholder. Subject to the foregoing, this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors-in-
interest, personal representatives, heirs, legatees and permitted assigns, and
no other person shall have any right, benefit or obligation under this Agreement
as a third party beneficiary or otherwise.
10.2 NOTICES. All notices, requests, demands and other communications
which are required or may be given under this Agreement shall be in writing and
shall be deemed to have been duly given when received if personally delivered;
when transmitted if transmitted by telecopy, electronic or digital transmission
method; the day after it is sent, if sent for next day delivery to a domestic
address by recognized overnight delivery service (E.G., Federal Express); and
upon receipt, if sent by certified or registered mail, return receipt requested.
In each case notice shall be sent to:
If to the Sellers, addressed to:
LEP International Worldwide Limited
28 Church Street, Epsom
Surrey KT174QP, London
England
Attention: Ron Jackson
Fax Number: 011-44-137-281-3181
With a copy to:
Troutman Sanders LLP
600 Peachtree Street, N.E., Suite 5200
Atlanta, GA 30308-2216
Attention: John C. Beane
Fax Number: (404) 885-3900
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If to Buyer, addressed to:
International Logistics Limited
310 South Street, P.O. Box 1913
Morristown, NJ 07962-1913
Attention: Roger Payton
Fax Number: (708) 547-2124
With a copy to:
Latham & Watkins
633 W. 5th Street, Suite 4000
Los Angeles, CA 90071-2007
Attention: Paul D. Tosetti
Fax Number: (213) 891-8763
or to such other place and with such other copies as either party may designate
as to itself by written notice to the others.
10.3 CHOICE OF LAW. This Agreement shall be construed, interpreted and
the rights of the parties determined in accordance with the laws of the State of
New York (without reference to the choice of law provisions of New York law),
except with respect to matters of law concerning the internal corporate affairs
of any corporate entity which is a party to or the subject of this Agreement,
and as to those matters the law of the jurisdiction under which the respective
entity derives its powers shall govern.
10.4 SERVICE OF PROCESS, CONSENT TO JURISDICTION.
(a) SERVICE OF PROCESS. Each of the parties hereto irrevocably
consents to the service of any process, pleading, notices or other papers by the
mailing of copies thereof by registered, certified or first class mail, postage
prepaid, to such party at such party's address set forth herein, or by any other
method provided or permitted under New York law.
(b) CONSENT TO JURISDICTION. Each party hereto irrevocably and
unconditionally (1) agrees that any suit, action or other legal proceeding
arising out of this Agreement may be brought in the United States District Court
for the Southern District of New York or, if such court does not have
jurisdiction or will not accept jurisdiction, in any court of general
jurisdiction in the County of New York, New York; (2) consents to the
jurisdiction of any such court in any such suit, action or proceeding; and (3)
waives any objection which such party may have to the laying of venue of any
such suit, action or proceeding in any such court.
10.5 ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS. This Agreement, the
Ancillary Agreements, together with all exhibits and schedules hereto and
thereto (including the Disclosure Schedule), constitutes the entire agreement
among the parties pertaining to the subject matter hereof and supersedes all
prior agreements, understandings, negotiations and discussions, whether oral or
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written, of the parties. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto. No
amendment, supplement, modification or waiver of this Agreement shall be binding
unless executed in writing by the party to be bound thereby. No waiver of any
of the provisions of this Agreement shall be deemed or shall constitute a waiver
of any other provision hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.
10.6 MULTIPLE COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.7 EXPENSES. Except as otherwise specified in this Agreement, each
party hereto shall pay its own legal, accounting, out-of-pocket and other
expenses incident to this Agreement and to any action taken by such party in
preparation for carrying this Agreement into effect.
10.8 INVALIDITY. In the event that any one or more of the provisions
contained in this Agreement or in any other instrument referred to herein,
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, then to the maximum extent permitted by law, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument.
10.9 TITLES; GENDER. The titles, captions or headings of the Articles and
Sections herein, and the use of a particular gender, are for convenience of
reference only and are not intended to be a part of or to affect or restrict the
meaning or interpretation of this Agreement.
10.10 PUBLICITY. Neither Buyer, on the one hand, nor the Sellers, the
Target or any of their respective subsidiaries, on the other hand, shall
issue any press release or make any public statement regarding the
transactions contemplated hereby, without prior written approval of the other
parties.
10.11 CUMULATIVE REMEDIES. All rights and remedies of either party
hereto are cumulative of each other and of every other right or remedy such
party may otherwise have at law or in equity, and the exercise of one or more
rights or remedies shall not prejudice or impair the concurrent or subsequent
exercise of other rights or remedies.
10.12 CONFIDENTIAL INFORMATION.
(a) NO DISCLOSURE. The parties acknowledge that the transaction
described herein is of a confidential nature and shall not be disclosed except
to consultants, advisors and affiliates, or as required by law, until such time
as the parties make a public announcement regarding the transaction as provided
in Section 10.10.
(b) PRESERVATION OF CONFIDENTIALITY. In connection with the
negotiation of this Agreement, the preparation for the consummation of the
transactions contemplated hereby, and the performance of obligations hereunder,
Buyer acknowledges that it will have access to confidential information relating
to the Sellers and the Target and its Subsidiaries and the Sellers acknowledge
that they will have access to confidential information relating to the Buyer and
its affiliates, in each case, including technical,
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manufacturing or marketing information, ideas, methods, developments,
inventions, improvements, business plans, trade secrets, scientific or
statistical data, diagrams, drawings, specifications or other proprietary
information relating thereto, together with all analyses, compilations,
studies or other documents, records or data prepared by the Sellers and the
Target and its Subsidiaries or Buyer, as the case may be, or their respective
Representatives or affiliates, which contain or otherwise reflect or are
generated from such information ("CONFIDENTIAL INFORMATION"). The term
"CONFIDENTIAL INFORMATION" does not include information received by one party
in connection with the transactions contemplated hereby which (i) is or
becomes generally available to the public other than as a result of a
disclosure by such party or its Representatives, (ii) was within such party's
possession prior to its being furnished to such party by or on behalf of the
other party in connection with the transactions contemplated hereby, provided
that the source of such information was not known by such party to be bound
by a confidentiality agreement with or other contractual, legal or fiduciary
obligation of confidentiality to the other party or any other Person with
respect to such information or (iii) becomes available to such party on a
non-confidential basis from a source other than the other party or any of
their respective Representatives, provided that such source is not bound by a
confidentiality agreement with or other contractual, legal or fiduciary
obligation of confidentiality to the other party or any other Person with
respect to such information.
(c) Each party shall treat all Confidential Information of the other
party as confidential, preserve the confidentiality thereof and not disclose any
such Confidential Information, except to its representatives and affiliates who
need to know such Confidential Information in connection with the transactions
contemplated hereby. Each party shall use all reasonable efforts to cause its
Representatives to treat all such Confidential Information of the other party as
confidential, preserve the confidentiality thereof and not disclose any such
Confidential Information. Each party shall be responsible for any breach of
this Agreement by any of its Representatives. If, however, Confidential
Information is disclosed, the party responsible for such disclosure shall
immediately notify the other party in writing and take all reasonable steps
required to prevent further disclosure.
(d) All Confidential Information shall remain the property of the
party who originally possessed such information. In the event of the
termination of this Agreement for any reason whatsoever, each party shall, and
shall cause its representatives to, return to the other party all Confidential
Information (including all copies, summaries and extracts thereof) furnished to
such party by the other party in connection with the transactions contemplated
hereby.
(e) If one party or any of its representatives or affiliates is
requested or required (by oral questions, interrogatories, requests for
information or documents in legal proceedings, subpoena, civil investigative
demand or other similar process) or is required by operation of law to disclose
any Confidential Information, such party shall provide the other party with
prompt written notice of such request or requirement, which notice shall, if
practicable, be at least 48 hours prior to making such disclosure, so that the
other party may seek a protective order or other appropriate remedy and/or waive
compliance with the provisions of this Agreement. If, in the absence of a
protective order or other remedy or the receipt of such a waiver, such party or
any of its representatives are nonetheless, in the opinion of counsel, legally
compelled to disclose Confidential Information, then such party may disclose
that portion of the Confidential Information which such counsel advises is
legally required to be disclosed, provided that such party uses its reasonable
efforts to preserve the confidentiality of the Confidential Information,
whereupon such disclosure shall not constitute a breach of this Agreement.
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10.13 ATTORNEYS' FEES. If any party to this Agreement brings an action
to enforce its rights under this Agreement, the prevailing party shall be
entitled to recover its costs and expenses, including without limitation
reasonable attorneys' fees, incurred in connection with such action,
including any appeal of such action.
10.14 LIMITATION OF LIABILITY. Notwithstanding anything to the contrary
in this Agreement, in no event shall any party hereto be liable for any
incidental or consequential damages occasioned by any failure to perform or
the breach of any obligation (including, without limitation, the breach of
any representation or warranty) under this Agreement.
10.15 KNOWLEDGE. Whenever a phrase herein is qualified by "to the
knowledge of the Seller" or a similar phrase, it is intended to refer to the
knowledge, after the exercise of reasonable diligence, of Jack Wasp, Ron
Series, Digby Davies, Ron Jackson, Andrew Bernard, Peter Brown, Wolfgang
Hollermann, Louis Mitchell and Martin McDonell.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed on their respective behalf, by their respective officers
thereunto duly authorized, all as of the day and year first above written.
LEP INTERNATIONAL INTERNATIONAL LOGISTICS
WORLDWIDE LIMITED LIMITED
By: /s/ Digby J. Davies By: /s/ Roger E. Payton
------------------------------- --------------------------------------
Name: Digby J. Davies Name: Roger E. Payton
------------------------------ -------------------------------------
Its: Director Its: President & Chief Executive Officer
------------------------------- --------------------------------------
LEP INTERNATIONAL HOLDINGS LIMITED
By: /s/ Digby J. Davies
-------------------------------
Name: Digby J. Davies
------------------------------
Its: Director
-------------------------------
LEP HOLDINGS (USA) INC.
By: /s/ Digby J. Davies
-------------------------------
Name: Digby J. Davies
------------------------------
Its: President
-------------------------------
LEP HOLDINGS (NORTH AMERICA) LIMITED
By: /s/ Digby J. Davies
-------------------------------
Name: Digby J. Davies
------------------------------
Its: Director
-------------------------------
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- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
STOCK PURCHASE AGREEMENT
Dated as of November 7, 1996
among
--------------
BUYER:
INTERNATIONAL LOGISTICS LIMITED
--------------
AND
--------------
SELLERS:
Douglas Cruikshank
Ronald S. Cruse
Steve Hitchcock
Paul D. Smith
--------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I - DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II - PURCHASE AND SALE OF STOCK. . . . . . . . . . . . . . . . . . . 11
2.1 Purchase and Sale of Stock. . . . . . . . . . . . . . . . . . . 11
ARTICLE III - POST-CLOSING MATTERS . . . . . . . . . . . . . . . . . . . . . 12
3.1 Post-Closing Adjustment . . . . . . . . . . . . . . . . . . . . 12
3.2 Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE IV - CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.1 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.2 Deliveries at Closing . . . . . . . . . . . . . . . . . . . . . 14
4.3 Other Closing Transactions. . . . . . . . . . . . . . . . . . . 15
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF THE SELLERS. . . . . . . . . . 16
5.1 Organization; Capitalization; Subsidiaries. . . . . . . . . . . 16
5.2 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.3 Title to Assets . . . . . . . . . . . . . . . . . . . . . . . . 17
5.4 Intellectual Property Rights. . . . . . . . . . . . . . . . . . 17
5.5 Facilities. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.6 Contracts and Commitments . . . . . . . . . . . . . . . . . . . 19
5.7 No Conflict or Violation. . . . . . . . . . . . . . . . . . . . 21
5.8 Financial Statements. . . . . . . . . . . . . . . . . . . . . . 22
5.9 Absence of Certain Changes or Events. . . . . . . . . . . . . . 22
5.10 THIS SECTION INTENTIONALLY OMITTED. . . . . . . . . . . . . . . 24
5.11 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . 24
5.12 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.13 Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.14 Permits, Consents and Approvals; Compliance with Law . . . . . 24
5.15 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.16 Severance Arrangements. . . . . . . . . . . . . . . . . . . . . 28
5.17 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.18 THIS SECTION INTENTIONALLY OMITTED. . . . . . . . . . . . . . . 28
5.19 Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.20 Customers and Suppliers . . . . . . . . . . . . . . . . . . . . 29
5.21 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.22 Environmental Matters . . . . . . . . . . . . . . . . . . . . . 29
5.23 Employee Benefit Plans. . . . . . . . . . . . . . . . . . . . . 30
i
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Page
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5.24 No Brokers or Advisors. . . . . . . . . . . . . . . . . . . . . 32
5.25 No Other Agreements to Sell the Assets or
Capital Stock of any Subject Company. . . . . . . . . . . . . . 32
5.26 Acquisition of Buyer Common Stock . . . . . . . . . . . . . . . 32
5.27 No SEC Disclosure . . . . . . . . . . . . . . . . . . . . . . . 33
5.28 Books and Records . . . . . . . . . . . . . . . . . . . . . . . 33
5.29 No Powers of Attorney . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE VI - REPRESENTATIONS AND WARRANTIES OF THE SELLERS WITH RESPECT TO
THE RUSSIAN VENTURES . . . . . . . . . . . . . . . . . . . . . . . 34
6.1 Organization and Capitalization . . . . . . . . . . . . . . . . 34
6.2 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.3 Contracts and Commitments . . . . . . . . . . . . . . . . . . . 35
6.4 No Conflict or Violation. . . . . . . . . . . . . . . . . . . . 36
6.5 Absence of Certain Changes or Events. . . . . . . . . . . . . . 36
6.6 Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.7 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.8 Permits, Consents and Approvals; Compliance with Law . . . . . 36
6.9 Tax Matters.. . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.10 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . 38
6.11 Environmental Matters . . . . . . . . . . . . . . . . . . . . . 38
6.12 No Other Agreements to Sell the Assets or Capital Stock
of such Subject Company . . . . . . . . . . . . . . . . . . . . 39
6.13 No Powers of Attorney . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE VII - REPRESENTATIONS AND WARRANTIES OF BUYER. . . . . . . . . . . . 39
7.1 Organization of Buyer . . . . . . . . . . . . . . . . . . . . . 39
7.2 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.3 No Conflict or Violation. . . . . . . . . . . . . . . . . . . . 39
7.4 Consents and Approvals. . . . . . . . . . . . . . . . . . . . . 40
7.5 Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . 40
7.6 Issuance of Common Stock. . . . . . . . . . . . . . . . . . . . 40
7.7 Financial Statements. . . . . . . . . . . . . . . . . . . . . . 40
7.8 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.9 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.10 Investment. . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.11 Equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.12 Solvency. . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE VIII - ACTIONS OF THE SELLERS AND BUYER BEFORE
AND AFTER THE CLOSING . . . . . . . . . . . . . . . . . . . . 42
8.1 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . 42
8.2 Employee Matters. . . . . . . . . . . . . . . . . . . . . . . . 42
ii
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Page
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8.3 THIS SECTION INTENTIONALLY OMITTED. . . . . . . . . . . . . . . 42
8.4 Excluded Assets and Excluded Liabilities. . . . . . . . . . . . 42
8.5 Contribution of Sea Bridge Assets . . . . . . . . . . . . . . . 42
8.6 Dividends and Other Distributions . . . . . . . . . . . . . . . 43
8.7 Amendment to Charter and Bylaws . . . . . . . . . . . . . . . . 43
ARTICLE IX - ACTIONS BY THE SELLERS AND BUYER AFTER THE CLOSING. . . . . . . 43
9.1 Books and Records . . . . . . . . . . . . . . . . . . . . . . . 43
9.2 Survival of Representations, Etc. . . . . . . . . . . . . . . . 44
9.3 Indemnifications. . . . . . . . . . . . . . . . . . . . . . . . 44
9.4 Further Actions . . . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE X - TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . 48
10.1 Tax Indemnification . . . . . . . . . . . . . . . . . . . . . . 48
10.2 Apportionment . . . . . . . . . . . . . . . . . . . . . . . . . 48
10.3 Refunds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
10.4 Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
10.5 Other Matters . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE XI - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . 50
11.1 Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . 50
11.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
11.3 Choice of Law . . . . . . . . . . . . . . . . . . . . . . . . . 51
11.4 Entire Agreement; Amendments and Waivers. . . . . . . . . . . . 51
11.5 Multiple Counterparts . . . . . . . . . . . . . . . . . . . . . 52
11.6 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
11.7 Invalidity. . . . . . . . . . . . . . . . . . . . . . . . . . . 52
11.8 Titles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
11.9 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
11.10 Confidential Information. . . . . . . . . . . . . . . . . . . . 52
11.11 Burden and Benefit. . . . . . . . . . . . . . . . . . . . . . . 54
11.12 Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
11.13 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . 54
11.14 Reliance on Representations and Warranties. . . . . . . . . . . 54
11.15 THIS SECTION INTENTIONALLY OMITTED. . . . . . . . . . . . . . . 54
11.16 Limitation of Liability . . . . . . . . . . . . . . . . . . . . 54
11.17 Additional Survival . . . . . . . . . . . . . . . . . . . . . . 54
iii
<PAGE>
EXHIBITS
Exhibit
A Registration Rights Agreement . . . . . . . . . . . . . . . . . . . A-1
B Stockholders Agreement . . . . . . . . . . . . . . . . . . . . . . . B-1
C Form of Employment Agreement . . . . . . . . . . . . . . . . . . . . C-1
iv
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT dated as of November 7, 1996 (this
"AGREEMENT"), is by and among International Logistics Limited, a Delaware
corporation ("BUYER"), and Douglas Cruikshank, Ronald S. Cruse, Steve
Hitchcock and Paul D. Smith (each of whom, individually, is a "SELLER," and
collectively, are the "SELLERS"). Each of the Target (as defined below) and
its Subsidiaries (as defined below) are sometimes referred to herein
individually as a "SUBJECT COMPANY" and collectively as the "SUBJECT
COMPANIES."
RECITALS
A. Buyer desires to purchase from the Sellers, and the Sellers
desire to sell to Buyer, all of the issued and outstanding capital stock of the
Target, upon the terms and subject to the conditions contained herein (the
"ACQUISITION").
B. In connection with the Acquisition, the parties desire to set
forth certain representations, warranties and covenants made by each to the
other or others as an inducement to the consummation of the Acquisition, upon
the terms and subject to the conditions contained herein.
C. In connection with the Acquisition, the Sellers are willing to
indemnify Buyer, and Buyer is willing to indemnify the Sellers, against certain
losses and liabilities they may incur as a result of the Acquisition, upon the
terms and subject to the conditions contained herein.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINED TERMS. As used herein, the terms below shall have the
following meanings. Any of these terms, unless the context otherwise requires,
may be used in the singular or plural depending upon the reference.
"ACCOUNTING FIRM" shall have the meaning set forth in Section 3.1(a)
of this Agreement.
"ACQUISITION" shall have the meaning set forth in the Recitals to this
Agreement.
"ACTION" shall mean any action, suit, litigation, proceeding, arbitral
action or criminal prosecution.
"AFFILIATE" shall have the meaning set forth in Rule 12(b)(ii) of the
Securities Exchange Act of 1934, as amended.
<PAGE>
"ASSETS" shall mean, with respect to any Person, all of such
Person's right, title and interest in and to all properties, assets and
rights of any kind, whether tangible or intangible, real or personal, owned
by such Person or in which such Person has any interest whatsoever, other
than the Excluded Assets, including without limitation, any right, title and
interest of such Person to the following:
(a) accounts and notes receivable (whether current or non-current),
refunds, deposits, prepayments and prepaid expenses (including,
without limitation, any prepaid insurance premiums);
(b) cash and cash equivalents;
(c) all shares of common stock and any other ownership interests of
such Person in any of the Subject Companies, the Russian Ventures
or Smit-Matrix;
(d) all tangible personal property;
(e) all Contracts;
(f) all Owned Real Property;
(g) all Leases;
(h) all Leasehold Estates;
(i) all Leasehold Improvements;
(j) all Fixtures and Equipment;
(k) all Books and Records;
(l) all Intellectual Property Rights;
(m) the Insurance Policies;
(n) all sales literature and promotional literature;
(o) all claims, causes of action, choses in action, rights of
recovery and rights of set-off of any kind, against any Person,
including without limitation any liens, security interests,
pledges or other rights to payment or to enforce payment in
connection with products delivered by such Person on or prior to
the Closing Date;
(p) all goodwill related to the Business;
(q) all Permits; and
(r) the Sea Bridge Assets.
2
<PAGE>
"BOOKS AND RECORDS" shall mean with respect to each Subject Company
(a) all records and lists of such Subject Company pertaining to the Assets,
(b) all records and lists of such Subject Company pertaining to the Business
of the Subject Company or customers, suppliers or personnel of the Subject
Company, (c) all product, Business and marketing plans of the Subject
Company, and (d) all books, ledgers, files, reports, plans, drawings and
operating records of every kind maintained by such Subject Company.
"BUSINESS" shall mean the business conducted by the Subject Companies
of providing origin and destination services, freight forwarding, logistics,
supply chain management, customs clearing services, transportation and
distribution services, together with any ancillary services provided therewith.
"BUYER" shall mean International Logistics Limited, a Delaware
Corporation.
"BUYER COMMON STOCK" shall have the meaning set forth in Section
2.1(b) of this Agreement.
"BUYER FINANCIAL STATEMENTS" shall have the meaning set forth in
Section 7.7 of this Agreement.
"BUYER INDEMNIFIED PARTIES" shall have the meaning set forth in
Section 9.3(a) of this Agreement.
"CASH PORTION" shall have the meaning set forth in Section 2.1(b) of
this Agreement.
"CLAIM" shall have the meaning set forth in Section 9.3(d) of this
Agreement.
"CLAIM NOTICE" shall have the meaning set forth in Section 9.3(d) of
this Agreement.
"CLASS A DIRECTORS" shall have the meaning set forth in Section 8.7 of
this Agreement.
"CLASS B DIRECTORS" shall have the meaning set forth in Section 8.7 of
this Agreement.
"CLOSING" shall have the meaning set forth in Section 4.1 of this
Agreement.
"CLOSING DATE" shall mean (i) November 7, 1996 or (ii) such other date
as Buyer and the Sellers shall mutually agree upon.
"CLOSING BALANCE SHEET" shall have the meaning set forth in Section
3.1(a) of this Agreement.
"CLOSING FINANCIAL STATEMENTS" shall have the meaning set forth in
Section 3.1(a) of this Agreement.
"CLOSING NET WORTH" shall have the meaning set forth in Section 3.1(f)
of this Agreement.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
3
<PAGE>
"CONFIDENTIAL INFORMATION" shall have the meaning set forth in Section
11.10(b) of this Agreement.
"CONTRACT" shall mean with respect to any Person any agreement,
contract, note, evidence of indebtedness, letter of credit, indenture, security
or pledge agreement, guarantee, franchise agreement, covenant not to compete,
employment agreement, license agreement, instrument or obligation to which such
Person is a party or to which any of its Assets are subject, whether oral or
written.
"CORPORATION" shall be used solely for the purpose of Section 5.22
hereof and shall mean (i) the Target and each of its Subsidiaries,
(ii) all partnerships, joint ventures and other entities or organizations in
which the Target or any such Subsidiary was at any time or is a partner, joint
venturer, member or participant, (iii) all predecessor or former corporations,
partnerships, joint ventures, organizations, businesses or other entities,
whether in existence as of the date hereof or at any time prior to the date
hereof, the assets or obligations of which have been acquired or assumed by the
Target or any such Subsidiary or to which the Target or any such Subsidiary has
succeeded.
"COURT ORDER" shall mean any judgment, award, decision, consent
decree, injunction, ruling, writ or order of any foreign, federal, state or
local court that is binding on any of the Subject Companies or any Seller or the
Assets or properties of the Subject Companies.
"DAMAGES" shall have the meaning set forth in Section 9.3(a) of this
Agreement.
"DEDUCTIBLE" shall have the meaning set forth in Section 9.3(g) of
this Agreement.
"DEFAULT" shall mean (i) a breach of or default under any Contract,
(ii) the occurrence of an event that with the passage of time or the giving of
notice or both would constitute a breach of or default under any Contract, or
(iii) the occurrence of an event that with or without the passage of time or the
giving of notice or both would give rise to a right of termination,
renegotiation or acceleration under any Contract.
"DISCLOSURE SCHEDULE" shall mean a schedule executed and delivered by
the Sellers to Buyer as of the date hereof which sets forth the exceptions to
the representations and warranties contained in Articles V and VI hereof and
certain other information called for by Articles V and VI hereof and other
provisions of this Agreement. Unless otherwise specified, each reference in
Articles V and VI to any numbered schedule is a reference to that numbered
schedule which is included in the Disclosure Schedule.
"EMPLOYMENT AGREEMENTS" shall have the meaning set forth in Section
4.3(d) of this Agreement.
"ENCUMBRANCES" shall mean any valid claim, lien, pledge, option,
charge, easement, security interest, deed of trust, mortgage, right of way,
encroachment, building or use restriction, conditional sales agreement,
encumbrance or other right of third parties, whether voluntarily incurred or
arising by operation of law, and includes, without limitation, any agreement to
give any of the foregoing in the future, and any contingent sale or other title
retention agreement or lease in the nature thereof. For the purposes of this
Agreement, Encumbrances shall be deemed to exclude restrictions on transfers of
stock pursuant to the Securities Act and applicable state securities laws.
4
<PAGE>
"ENVIRONMENTAL ASSESSMENTS" shall mean all written reports, and all
parts thereof, including any drafts of such reports if such drafts are in the
possession or control of any Corporation, of all environmental audits or
assessments in the possession of any Subject Company or any Seller, or any of
their respective professional consultants or advisors, which have been conducted
at any Facility or Former Facility within the past five years, either by any
such Corporation or any attorney, environmental consultant or engineer engaged
for such purpose.
"ENVIRONMENTAL CONDITIONS" shall mean the introduction into the
environment of any pollution, including without limitation any contaminant,
irritant or pollutant or other Hazardous Substance (whether or not upon the
Owned Real Property, the Leased Real Property, or other property of the Business
and whether or not such pollution constituted at the time thereof a violation of
any Environmental Law) as a result of any Release as a result of which any
Corporation is or, to the knowledge of Sellers, may become liable to any Person
or by reason of which the Owned Real Property, the Leased Real Property or any
of the Assets may suffer or be subjected to any lien, to the extent it would
have a Material Adverse Effect.
"ENVIRONMENTAL LAWS" shall mean all federal, state, local or foreign
laws, statutes, ordinances, regulations, rules, judgments, orders, notice
requirements, court decisions, agency guidelines or principles of law, Permits,
restrictions and licenses, which (i) regulate or relate to the protection or
clean-up of the environment; the use, treatment, storage, transportation,
handling, disposal or Release of Hazardous Substances, the preservation or
protection of waterways, groundwater, drinking water, air, wildlife, plants or
other natural resources; or the health and safety of persons or property,
including without limitation protection of the health and safety of employees;
or (ii) impose liability with respect to any of the foregoing, including without
limitation the Federal Water Pollution Control Act (33 U.S.C. Section 1251 ET
SEQ.), Resource Conservation & Recovery Act (42 U.S.C. Section 6901 ET SEQ.)
("RCRA"), Safe Drinking Water Act (21 U.S.C. Section 349, 42 U.S.C. Sections
201, 300f), Toxic Substances Control Act (15 U.S.C. Section 2601 ET SEQ.), Clean
Air Act (42 U.S.C. Section 7401 ET SEQ.), Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. Section 9601 ET SEQ.) ("CERCLA"),
California Health & Safety Code (Section 25100 ET SEQ., Section 39000 ET SEQ.),
and California Water Code (Section 13000 ET SEQ.), or any other similar foreign,
federal, state or local law of similar effect, each as amended.
"EXCLUDED ASSETS" shall mean the following assets of the Subject
Companies which are not to be acquired by Buyer hereunder:
(a) the vehicles listed in Schedule 1.3 hereto, including any
leasehold interest or ownership interest with respect thereto; and
(b) the Florida Condominium.
"EXCLUDED LIABILITIES" shall mean any Liability relating to or arising
out of the Excluded Assets, together with accrued interest thereon, including
without limitation:
(a) any loans and Lease obligations (whether capital or operating)
associated with or relating to the vehicles listed in Schedule 1.3 hereto; and
(b) the Mortgage relating to the Florida Condominium.
5
<PAGE>
"FACILITIES" shall mean with respect to each Subject Company all of
the plants, offices, manufacturing facilities, stores, warehouses, improvements,
administration buildings, and all real property of such Subject Company, that
are identified or listed under such Subject Company's name in Schedule 5.5
attached hereto.
"FACILITY LEASES" shall mean, with respect to each Subject Company,
all of the Leases of Facilities listed under such Subject Company's name in
Schedule 5.5.
"FINANCIAL STATEMENTS" shall mean (i) the monthly unaudited
consolidated Financial Statements of the Target beginning on the Interim Balance
Sheet Date through and including the month ended August 31, 1996, (ii) the
Interim Financial Statements and (iii) the Year-End Financial Statements.
"FINANCIAL STATEMENTS DELIVERY DATE" shall have the meaning set forth
in Section 3.1(g) of this Agreement.
"FIXTURES AND EQUIPMENT" shall mean with respect to any Person all of
the furniture, fixtures, furnishings, automobiles, tractors, trailers,
machinery, equipment and supplies owned by such Person, wherever located and
including any such Fixtures and Equipment in the possession of any third party.
"FLORIDA CONDOMINIUM" shall mean the condominium parcel located at 308
Mainsail Circle, Jupiter, Florida 33477, together with all rights, easements and
privileges appertaining or relating thereto, and all buildings, fixtures and
improvements located thereon.
"FOREIGN SUBSIDIARIES" shall mean, collectively, Smit-Matrix, the
Russian Ventures and any of their respective subsidiaries or Affiliates which
are organized under the laws of a country other than the United States.
"FORMER FACILITY" shall be used solely for purposes of Section 5.22
hereof and shall mean, with respect to each Corporation, each plant, office,
manufacturing facility, store, warehouse, improvement, administrative building
and all real property and related facilities which was or were owned, leased or
operated by such Corporation at any time prior to the date hereof, but excluding
any Facilities.
"FOUNDATION DOCUMENTS" shall have the meaning set forth in Section
6.1(a) of this Agreement.
"GAAP" shall mean generally accepted accounting principles in the
United States of America, as in effect from time to time, consistently applied.
The parties acknowledge and agree, however, that for the purposes of this
Agreement, the Target's accounting policies and practices that are set forth in
Schedule 1.4 hereto shall be considered GAAP.
"HARPER LOAN" shall mean that certain term loan made to the Target by
Signet Bank in the outstanding amount of $169,000 for the purpose of
repurchasing any stock of the Subject Companies owned by the Harper Group, Inc.
"HAZARDOUS SUBSTANCE" shall mean any quantity of asbestos in any form,
urea formaldehyde, PCB's, radon gas, crude oil or any fraction thereof, all
forms of natural gas, petroleum
6
<PAGE>
products or by-products, any radioactive substance, any toxic, infectious,
reactive, corrosive, ignitible or flammable chemical or chemical compound and
any other hazardous substance, material or waste (as defined in or for
purposes of any Environmental Law), whether solid, liquid or gas.
"HSR ACT" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, and the rules and regulations promulgated thereunder.
"INSURANCE POLICIES" shall mean the insurance policies relating to the
Target or any of its Subsidiaries or the Assets of the Target or any of its
Subsidiaries as described in Schedule 5.17 and any insurance policies of such
Subject Companies not required to be so listed.
"INTELLECTUAL PROPERTY RIGHTS" shall have the meaning set forth in
Section 5.4 of this Agreement.
"INTERIM BALANCE SHEET" shall mean the consolidated balance sheet of
the Target dated the Interim Balance Sheet Date, prepared in accordance with
GAAP, and previously delivered to Buyer and attached hereto as Schedule 1.1.
"INTERIM BALANCE SHEET DATE" shall mean June 30, 1996.
"INTERIM FINANCIAL STATEMENTS" shall mean the Interim Balance Sheet
and the consolidated statements of operations and income, changes in
stockholders' equity and cash flow for each of the Subject Companies for the
period ended on the Interim Balance Sheet Date, prepared in accordance with GAAP
and previously delivered to Buyer and attached hereto as Schedule 1.2.
"LEASED REAL PROPERTY" shall mean with respect to each Subject Company
all leased property described in the Facility Leases of such Subject Company.
"LEASEHOLD ESTATES" shall mean with respect to each Subject Company
all of such Subject Company's rights as lessee under the Facility Leases of such
Subject Company.
"LEASEHOLD IMPROVEMENTS" shall mean with respect to each Subject
Company all of such Subject Company's leasehold improvements situated in or on
the Leased Real Property leased under the Facility Leases of such Subject
Company.
"LEASES" shall mean with respect to each Subject Company all of the
existing leases with respect to the personal or real property of such Subject
Company.
"LEP TRANSACTIONS" shall mean the purchases by Buyer and an indirect
wholly owned subsidiary of Buyer of all of the issued and outstanding capital
stock of LEP Profit International, Inc., a Delaware corporation, and LEP
International, Inc., a corporation organized under the laws of Canada,
respectively, each as of October 31, 1996.
"LIABILITIES" shall mean any liability, indebtedness, obligation,
guaranty or endorsement of or by any Person of any type, whether accrued,
absolute, contingent, matured or unmatured. "LIABILITY" shall have the
correlative meaning.
"LOSSES" shall have the meaning set forth in Section 10.1 of this
Agreement.
7
<PAGE>
"MATERIAL ADVERSE EFFECT" shall mean (i) a material adverse effect
or change in (A) when taken as a whole, the condition (financial or
otherwise) of or in the Assets, Business, properties, Liabilities, reserves,
working capital, earnings, technology, prospects or relations with customers
or employees of the Subject Companies, or (B) the right or ability of the
Subject Companies to consummate the transactions contemplated hereby, or (ii)
any event or condition which would, with the passage of time, constitute a
"Material Adverse Effect."
"MORTGAGES" shall mean with respect to each Subject Company all deeds
of trust, mortgages or other Encumbrances securing indebtedness and relating to
any of the Owned Real Property of such Subject Company.
"NET WORTH DEFICIENCY" shall have the meaning set forth in Section
3.1(d) of this Agreement.
"NET WORTH SURPLUS" shall have the meaning set forth in Section 3.1(e)
of this Agreement.
"OFFERING MEMORANDUM" shall have the meaning set forth in Section
4.2(b)(ii) of this Agreement.
"OVERLAP PERIOD" shall have the meaning set forth in Section 10.2 of
this Agreement.
"ORDINARY COURSE OF BUSINESS" or "ORDINARY COURSE" or any similar
phrase shall mean the ordinary course of the Business of each of the Subject
Companies or the Russian Ventures, as the case may be, consistent with the past
practice of such Subject Company or Russian Venture as applicable.
"OWNED REAL PROPERTY" shall mean with respect to each Subject Company
all real property owned in fee by such Subject Company, including without
limitation all rights, easements and privileges appertaining or relating
thereto, all buildings, fixtures and improvements located thereon and all
Facilities thereon, if any.
"PERMITTED ENCUMBRANCES" shall mean any (i) Encumbrances reflected in
the Interim Balance Sheet, (ii) Encumbrances for Taxes assessments or
governmental charges or landlords', mechanics', workmen's, materialmans' or
other similar liens, in each case not yet due or delinquent or which are being
contested in good faith and which, in the aggregate, are not substantial in
amount, do not materially detract from the value of the Assets subject thereto
or interfere with the present use thereof and which have not arisen other than
in the ordinary course of business, (iii) liens or Encumbrances that in the
aggregate are not substantial in amount, do not materially detract from the
value of the Assets subject thereto or interfere with the present use thereof
and have not arisen other than in the ordinary course of business and (iv)
Encumbrances of record set forth in Schedule 1.5 hereto.
"PERMITS" shall mean with respect to any Person all licenses, permits,
franchises, approvals, authorizations, consents or orders of any governmental
authority, whether foreign, federal, state or local required for conduct or
operation of the Business of such Person.
"PERMITTED DISTRIBUTIONS" shall have the meaning set forth in Section
8.6 of this Agreement.
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"PERSON" shall mean an individual, a partnership, a corporation, a
limited liability company, a joint venture, a trust or unincorporated
organization or a government entity (or department, agency or political
subdivision thereof).
"PERSONNEL" shall have the meaning set forth in Section 5.9(b) of this
Agreement.
"POST-CLOSING PERIOD" shall mean any Tax period (or portion thereof)
that is not a Pre-Closing Period.
"PRE-CLOSING PERIOD" shall mean any Tax period ending on or prior to
the Closing Date and, with respect to any Tax period that includes but does not
end on the Closing Date, the portion of such period that ends on and includes
the Closing Date.
"PURCHASE PRICE" shall have the meaning set forth in Section 2.1(b) of
this Agreement.
"REGISTRATION RIGHTS AGREEMENT" shall have the meaning set forth in
Section 4.3(b) of this Agreement.
"REGULATIONS" shall mean any laws, statutes, ordinances, code,
regulations, rules and orders of any foreign, federal, state or local government
and any other governmental department or agency.
"RELEASE" shall mean and include any spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
dumping, migrating within the environment or disposing into the environment or
the workplace of any Hazardous Substance, and as otherwise defined in any
Environmental Law.
"RETURNS" shall mean all returns, reports, estimates, information
returns and statements of any nature with respect to Taxes.
"RUSSIAN VENTURES" shall mean Russian-American Company Matrix-St.
Petersburg, a closed joint stock company under the laws of the Russian
Federation; Matrix-Almaty, a limited liability company under the laws of the
Republic of Kazakhstan; Matrix-Mariupol, a limited liability company under the
laws of Ukraine; Matrix International, a commercial organization under the laws
of the Azerbaijan Republic; and the other entities listed in Schedule 6.1(b)(1).
"SHARES" shall have the meaning set forth in Section 2.1(b) of this
Agreement.
"SEA BRIDGE" shall mean Sea Bridge Container Lines, a general
partnership.
"SEA BRIDGE ASSETS" shall mean all of the business, properties, assets
and rights of any kind, whether tangible or intangible, real or personal, owned
by Sea Bridge, including without limitation (a) all records and lists of the
Sellers and Sea Bridge pertaining to the Sea Bridge Assets and Sea Bridge, (b)
all records and lists pertaining to the business, customers, suppliers or
personnel of Sea Bridge, (c) all business and marketing plans of Sea Bridge and
(d) all books, ledgers, files, reports, plans, drawings, operating records and
Permits of every kind maintained by Sea Bridge.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
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"SELLER INDEMNIFIED PARTIES" shall have the meaning set forth in
Section 9.3(b) of this Agreement.
"SELLERS" shall have the meaning set forth in the forepart of this
Agreement.
"SELLERS' ACCOUNTANT" shall have the meaning set forth in Section
3.1(a) of this Agreement.
"SMIT-MATRIX" shall mean Whelchel N.V., a company organized under the
laws of Curacao, Netherlands Antilles, and its direct and indirect subsidiaries.
"SMIT-MATRIX STOCK" shall mean the number of issued and outstanding
shares of capital stock of Whelchel N.V. owned by the Target as set forth in
Schedule 5.1(b)(ii).
"STOCKHOLDERS AGREEMENT" shall have the meaning set forth in Section
4.3(c) of this Agreement.
"SUBJECT COMPANY" shall have the meaning set forth in the forepart of
this Agreement.
"SUBSIDIARY" shall mean (a) any corporation in an unbroken chain of
corporations beginning with the Target if each corporation other than the last
corporation owns a majority of the common stock or has the power to vote or
direct the voting of sufficient securities to elect a majority of the directors,
(b) any partnership in which any corporation included in (a) above is a general
partner, or (c) any partnership or limited liability company in which any
corporation included in (a) above possesses a 50% or greater interest in the
total capital or total income of such partnership or limited liability company,
as the case may be. Notwithstanding anything to the contrary herein, none of
the Russian Ventures shall be deemed to be a Subsidiary of Target or any
Subsidiary of Target for the purposes of this Agreement.
"TARGET" shall mean Matrix International Logistics, Inc., a Delaware
corporation.
"TARGET STOCK" shall have the meaning set forth in Section 2.1(a) of
this Agreement.
"TAX" or "TAXES" shall mean any federal, state, local or foreign net
or gross income, gross receipts, license, payroll, employment, excise,
severance, stamp, business, occupation, premium, (including taxes under Code
Sec. 59A), customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax, levy, impost, governmental fee or like
assessment or charge of any kind whatsoever, including any interest, penalty or
addition thereto, whether disputed or not, imposed by any governmental authority
or arising under any Tax law or agreement, including, without limitation, any
joint venture or partnership agreement.
"THIRD PARTY" shall mean any Person who is not a Subject Company, a
Subsidiary or a Seller (or one of their respective Affiliates).
"WARRANT AGREEMENTS" shall mean (i) the Warrant Agreement by and
between Buyer and William E. Myers, Jr., dated May 2, 1996; (ii) the Warrant
Agreement by and between Buyer and William E. Myers, Jr., dated October 31,
1996; (iii) the Warrant Agreement by and between Buyer
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and William E. Myers, Jr., dated November 7, 1996; (iv) the Warrant Agreement
by and between Buyer and David W.M. Harvey, dated May 2, 1996; (v) the
Warrant Agreement by and between Buyer and David W.M. Harvey, dated October
31, 1996; (vi) the Warrant Agreement by and between Buyer and David W.M.
Harvey, dated November 7, 1996; (vii) the Warrant Agreement by and between
Buyer and Brian E. Sanderson, dated May 2, 1996; (v) the Warrant Agreement by
and between Buyer and Brian E. Sanderson, dated October 31, 1996; (vi) the
Warrant Agreement by and between Buyer and Brian E. Sanderson, dated November
7, 1996; (vii) the Warrant Agreement by and between Buyer and Kurt Kamm,
dated May 2, 1996; (viii) the Warrant Agreement by and between Buyer and
William Kidd, dated May 2, 1996; and (ix) the Warrant Agreement by and
between Buyer and Edward Mandell, dated May 2, 1996;
"YEAR-END BALANCE SHEET" shall mean the audited consolidated balance
sheet of the Target, dated as of the Year-End Balance Sheet Date, together with
notes thereon, prepared in accordance with GAAP.
"YEAR-END BALANCE SHEET DATE" shall mean December 31, 1995.
"YEAR-END FINANCIAL STATEMENTS" shall mean the Year-End Balance Sheet
and the audited consolidated statements of operations and income, changes in
shareholders' equity and cash flow of each of the Target for the periods ending
on the Year-End Balance Sheet Date, together with notes thereon, prepared in
accordance with GAAP.
ARTICLE II
PURCHASE AND SALE OF STOCK
2.1 PURCHASE AND SALE OF STOCK.
(a) TRANSFER OF STOCK. Upon the terms and subject to the conditions
set forth herein, on the Closing Date each of the Sellers shall sell, convey,
transfer, assign, and deliver to Buyer, and Buyer shall purchase from such
Sellers, all of the outstanding shares of capital stock of the Target (the
"TARGET STOCK") in the amounts set forth next to the name of each such Seller in
Schedule 2.1 hereto.
(b) PURCHASE PRICE. Upon the terms and subject to the conditions set
forth herein, in consideration for the transfer of the Target Stock pursuant to
Section 2.1(a) of this Agreement, on the Closing Date Buyer shall pay to the
Sellers in accordance with Section 4.3(a) an aggregate of (x) Nineteen Million
Two Hundred and Forty-Five Thousand and Twelve Dollars ($19,245,012) (the "CASH
PORTION") and (y) ninety-six thousand (96,000) shares of the common stock of
Buyer (the "BUYER COMMON STOCK"), with a deemed value of Two Million Eight
Hundred and Eighty Thousand Dollars ($2,880,000) (or $30.00 per share) (the
"SHARES" and together with the Cash Portion, the "PURCHASE PRICE"). On the
Closing Date, Buyer shall deliver to the Sellers (i) the Cash Portion in cash by
wire transfer of immediately available funds to the respective bank accounts
designated by the Sellers in a writing delivered to Buyer not less than three
(3) business days prior to the Closing and (ii) stock certificates evidencing
the Shares. The Purchase Price shall be allocated among the Sellers as set
forth in Schedule 2.1 hereto. The Shares shall be entitled to receive the
benefits of, and shall be held pursuant to the limitations set forth in, the
Registration Rights Agreement and the Stockholders Agreement. The Shares, when
delivered by Buyer to the Sellers pursuant to this Section 2.1(b), shall
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be duly authorized and validly issued, fully paid and nonassessable, and free
and clear of any Encumbrances and preemptive rights (other than as provided
for in the Stockholders Agreement, the Registration Rights Agreement, the
Warrant Agreements, the Employment Agreements, the Amended and Restated
Certificate of Incorporation of Buyer and the Restated Bylaws of Buyer).
ARTICLE III
POST-CLOSING MATTERS
3.1 POST-CLOSING ADJUSTMENT.
(a) As promptly as practicable after the Closing Date (but in no
event more than sixty (60) days after the Closing Date), Buyer shall cause the
Target to prepare and deliver to the Sellers consolidated financial statements
of the Target and its Subsidiaries as of the close of business on the day
immediately preceding the Closing Date (the "CLOSING FINANCIAL STATEMENTS").
Such Closing Financial Statements shall be accompanied by a certificate of the
Chief Financial Officer of Buyer (or if Buyer does not have a Chief Financial
Officer, the Chief Financial Officer of one of Buyer's subsidiaries (other than
the Target or any of its Subsidiaries)) to the effect that the Closing Financial
Statements present fairly, in accordance with GAAP, the financial condition of
the Target and its Subsidiaries as of the close of business on the Closing Date
prior to giving effect to the Acquisition. The balance sheet contained in the
Closing Financial Statements shall be referred to herein as the "CLOSING BALANCE
SHEET." The Closing Financial Statements will be prepared in accordance with
GAAP, applied on a basis consistent with the Interim Financial Statements and
the Year-End Financial Statements. The Sellers and a firm of independent public
accountants designated by the Sellers (the "SELLERS' ACCOUNTANT") will be
entitled to reasonable access during normal business hours to the relevant
records and working papers of the Target and its accountants to aid in their
review of the Closing Financial Statements. The Closing Financial Statements
shall be deemed to be accepted by and shall be conclusive for the purposes of
the adjustment described in Sections 3.1(b) and 3.1(c) hereof with respect to
the Target and its Subsidiaries except to the extent, if any, that the Sellers
or the Sellers' Accountant shall have delivered, within sixty (60) days after
the date on which the Closing Financial Statements are delivered to Sellers, a
written notice to Buyer stating each and every item to which the Sellers takes
exception as not being in accordance with GAAP applied on a basis consistent
with the Interim Financial Statements and the Year-End Financial Statements or
as having computational errors, specifying in reasonable detail the nature and
extent of any such exception (it being understood that any amounts not disputed
shall be paid promptly). If a change proposed by the Sellers is disputed by the
Buyer, then Buyer and the Sellers shall negotiate in good faith to resolve such
dispute. If, after a period of twenty (20) days following the date on which the
Sellers give Buyer notice of any such proposed change, any such proposed change
still remains disputed, then Buyer and the Sellers shall together choose an
independent firm of public accountants of nationally recognized standing (the
"ACCOUNTING FIRM") to resolve any remaining disputes. Each of the parties
agrees not to select an accounting firm to review disputed items pursuant to
this Section 3.1(a) if, at the time of selection, either Buyer, any of the
Sellers or the Target or any of its Subsidiaries retains, uses or employs or
contemplates retaining such accounting firm, for any engagement having a purpose
other than the performance of services pursuant to this Section 3.1(a). The
Accounting Firm shall act as an arbitrator to determine, based solely on
presentations by the Sellers and Buyer, and not by independent review, only
those issues still in dispute. The decision of the Accounting Firm shall be
final and binding and shall be in accordance with the provisions of this Section
3.1(a). All of the fees and expenses of the Accounting Firm, if any, shall be
paid equally by Buyer, on the one hand, and the Sellers, on the other
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hand; PROVIDED, HOWEVER, that, if the Accounting Firm determines that either
party's position is totally correct, then the other party shall pay one
hundred percent (100%) of the costs and expenses incurred by the Accounting
Firm in connection with any such determination.
(b) In the event that there is a Net Worth Deficiency (as defined
below) with respect to the Target and its Subsidiaries, the Sellers shall pay to
Buyer, as an adjustment to the Purchase Price, an amount equal to the Net Worth
Deficiency. Any payments required to be made by the Sellers pursuant to this
Section 3.1(b) shall be made within ten (10) days of the Financial Statements
Delivery Date (as defined below) by wire transfer of immediately available funds
to an account designated by Buyer.
(c) In the event that there is a Net Worth Surplus (as defined below)
with respect to the Target and its Subsidiaries, Buyer shall pay to the Sellers,
as an adjustment to the Purchase Price, an amount equal to the Net Worth
Surplus. Any payments required to be made by the Buyer pursuant to this Section
3.1(c) shall be made within ten (10) days of the Financial Statements Delivery
Date by wire transfer of immediately available funds to the respective accounts
designated by the Sellers. The percentage of the Net Worth Surplus allocated to
each Seller shall be equal to the percentage of the Purchase Price allocated to
such Seller.
(d) The term "NET WORTH DEFICIENCY" shall mean with respect to the
Target and its Subsidiaries the amount, if any, by which the Closing Net Worth
of the Target and its Subsidiaries is less than three million six hundred and
seventy-one thousand dollars ($3,671,000).
(e) The term "NET WORTH SURPLUS" shall mean with respect to the
Target and its Subsidiaries the amount, if any, by which the Closing Net Worth
of the Target and its Subsidiaries exceeds three million six hundred and
seventy-one thousand dollars ($3,671,000).
(f) The term "CLOSING NET WORTH" shall mean, with respect to the
Target and its Subsidiaries, the amount by which the total Assets of the Target
and its Subsidiaries exceeds the total liabilities other than the Excluded
Liabilities of the Target and its Subsidiaries, in each case as set forth on the
Closing Balance Sheet; PROVIDED, HOWEVER, that if any change to the Closing
Financial Statements is agreed to by Buyer and the Sellers in accordance with
Section 3.1(a) or any dispute between Buyer and the Sellers with respect to the
Closing Financial Statements is resolved in accordance with Section 3.1(a), then
"CLOSING NET WORTH" shall be calculated after giving effect to any such change
or resolution.
(g) The term "FINANCIAL STATEMENTS DELIVERY DATE" shall mean, with
respect to the Target and its Subsidiaries, the date on which the Closing
Financial Statements are delivered pursuant to Section 3.1(a); PROVIDED,
HOWEVER, that if any change to the Closing Financial Statements is agreed to by
Buyer and the Sellers in accordance with Section 3.1(a), then the date on which
Buyer and the Sellers agree in writing to such change shall be the Financial
Statement Delivery Date; and PROVIDED, FURTHER, that if any dispute with respect
to the Closing Financial Statements is resolved in accordance with
Section 3.1(a), then the date on which the Accounting Firm delivers its decision
with respect to such dispute shall be the "FINANCIAL STATEMENT DELIVERY DATE".
3.2 INTEREST. All payments required to be made pursuant to Section
3.1 shall be paid with interest thereon at the rate of eight percent (8.0%) per
annum and accruing from the Closing Date to the date of payment.
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ARTICLE IV
CLOSING
4.1 CLOSING. Upon the terms and subject to the conditions set forth
herein, the closing of the transactions contemplated herein (the "CLOSING")
shall be held at 10:00 a.m. local time on the Closing Date at the offices of
Latham & Watkins, Sears Tower, Suite 5800, 233 South Wacker Drive, Chicago, IL
60606, unless the parties hereto otherwise agree.
4.2 DELIVERIES AT CLOSING.
(a) STOCK CERTIFICATES. At the Closing, each of the Sellers shall
deliver to Buyer certificates(s) evidencing that number of shares of Target
Stock set forth opposite such Seller's name on Schedule 2.1 (duly endorsed in
blank for transfer or accompanied by stock powers duly executed in blank).
(b) BUYER CERTIFICATES. Buyer will furnish the Sellers with such
certificates of its officers and others to evidence compliance with the
conditions set forth in this Agreement as may be reasonably requested by the
Sellers, which shall include, but not be limited to:
(i) A certificate executed by the Secretary or an Assistant
Secretary of Buyer certifying as of the Closing Date (i) a true and complete
copy of the Certificate of Incorporation of Buyer, and all amendments thereto
certified as of a recent date by the Secretary of State of Delaware, (ii) a true
and complete copy of the bylaws of Buyer, (iii) a true and complete copy of the
resolutions of the board of directors and, if required by law, the stockholders
of Buyer authorizing the execution, delivery and performance of this Agreement
by Buyer and the consummation of the transactions contemplated hereby, and (iv)
incumbency matters;
(ii) A certificate of the appropriate Secretary of States
certifying the good standing of Buyer in its state of incorporation and all
states in which it is qualified to do business; and
(iii) A certificate acknowledging that Buyer has not relied
on the Confidential Memorandum relating to the Business of the Target prepared
by Ernst & Young, LLP on behalf of the Target and the Sellers and supplied to
Buyer prior to the date hereof (the "OFFERING MEMORANDUM") in consummating the
transactions contemplated hereby and that the Sellers are making no
representations and warranties with respect to the Offering Memorandum.
(c) SELLERS' CERTIFICATES. The Sellers will furnish Buyer with such
certificates of the Sellers and the officers of the Subject Companies and others
to evidence compliance with the conditions set forth in this Agreement as may be
reasonably requested by Buyer, which shall include, but not be limited to:
(i) A certificate executed by the Secretary or an Assistant
Secretary of each Subject Company certifying as of the Closing Date (i) a true
and complete copy of the Certificate of Incorporation of such Subject Company
and all amendments thereto, certified as of a recent date by the appropriate
Secretary of State, (ii) a true and complete copy of the bylaws of such Subject
Company, (iii) a true and complete copy of the resolution of the board of
directors and stockholders of such Subject Company authorizing the consummation
of the transactions contemplated hereby, and (iv) incumbency matters;
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(ii) A certificate of the appropriate Secretary of State
certifying the good standing of each Subject Company in its state of
incorporation and all states in which it is qualified to do business;
(iii) A certificate executed by each of the Sellers
acknowledging that the Sellers have not relied on any business plan of Buyer
in consummating the transactions contemplated hereby and that Buyer is not
making any representations or warranties regarding projections, forecasts or
estimates, with respect to the future performance of Buyer; and
(iv) A certificate of each of the Sellers' non-foreign
status, pursuant to Treasury Regulation section 1.1445-2(b)(2).
(d) OPINION OF BUYER'S COUNSEL. At the Closing, Buyer shall deliver
to the Sellers an opinion of Latham & Watkins, counsel to Buyer, dated as of the
Closing Date, in form and substance reasonably satisfactory to the parties and
customary in transactions of the type contemplated by this Agreement.
(e) OPINION OF SELLERS' COUNSEL. At the Closing, the Sellers shall
deliver to Buyer an opinion of Winthrop, Stimson, Putnam & Roberts, special
counsel to the Sellers, dated as of the Closing Date, in form and substance
reasonably satisfactory to the parties and customary in transactions of the type
contemplated by this Agreement.
4.3 OTHER CLOSING TRANSACTIONS.
(a) PAYMENT OF PURCHASE PRICE. At the Closing, Buyer shall deliver
to each of the Sellers their respective portions of the Purchase Price as
provided in Section 2.1(b).
(b) REGISTRATION RIGHTS AGREEMENTS. At the Closing, Buyer and the
Sellers shall enter into a second amended and restated registration rights
agreement, in the form of EXHIBIT A hereto (the "REGISTRATION RIGHTS
AGREEMENT").
(c) STOCKHOLDERS AGREEMENT. At the Closing, Buyer and the Sellers
shall enter into a second amended and restated stockholders agreement, in the
form of EXHIBIT B hereto (the "STOCKHOLDERS AGREEMENT").
(d) EMPLOYMENT AGREEMENTS. At the Closing, Buyer shall cause the
Target to enter into employment agreements with each of the Sellers, in the form
of EXHIBIT C hereto (the "EMPLOYMENT AGREEMENTS").
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF
THE SELLERS
Each of the Sellers hereby, severally but not jointly, represents and
warrants to Buyer that:
5.1 ORGANIZATION; CAPITALIZATION; SUBSIDIARIES.
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(a) SUBJECT COMPANIES.
(i) Each Subject Company is duly incorporated, validly existing and
in good standing under the laws of the state of its incorporation, has full
corporate power and authority and has taken all corporate action necessary
to conduct its Business as it is presently being conducted and to own,
lease and operate its properties and Assets. Except as set forth in
Schedule 5.1(a), each Subject Company is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction in which
such qualification is necessary under the applicable law as a result of the
conduct of its Business or the ownership (or leasing) of its properties,
except where the failure to be so qualified or in good standing would not
have a Material Adverse Effect. Copies of the Certificate or Articles of
Incorporation and Bylaws of each Subject Company and all amendments
thereto, heretofore delivered to Buyer, are accurate and complete as of the
date hereof.
(ii) The capitalization of each of the Subject Companies is set forth
in Schedule 5.1(a)(ii) hereto. All of the outstanding shares of capital
stock of each of the Subject Companies are duly authorized, validly issued,
fully paid and non-assessable. Each Seller represents as to himself that
he has title to all of the outstanding shares of capital stock of the
Target set forth next to his name in Schedule 2.1 free and clear of all
Encumbrances with full right, power and authority to transfer such shares
to Buyer. Except as set forth in Schedule 5.1(a)(ii), the Target owns all
of the issued and outstanding shares of capital stock of each of its
Subsidiaries. Except as set forth in Schedule 5.1(a)(ii), there are no
outstanding subscriptions, calls, commitments, warrants or options for the
purchase of shares of any capital stock or other securities of (or other
ownership interests in) any of the Subject Companies, any securities
convertible into or exchangeable for shares of capital stock or other
securities issued by (or other ownership interests in) such Subject Company
or any other commitments of any kind for the issuance of additional shares
of capital stock or other securities issued by (or other ownership
interests in) such Subject Company. Upon delivery to Buyer, the capital
stock of the Subject Companies will be free and clear of all Encumbrances
(other than Encumbrances imposed on Buyer) and shall be duly authorized,
validly issued, fully paid and non-assessable. Schedule 5.1(a)(ii)
contains a true, correct and complete list of all Subsidiaries of the
Target, including the name, jurisdiction of incorporation, share ownership
of each such Subsidiary, as well as each jurisdiction in which such
Subsidiary is authorized to do business.
(b) SMIT-MATRIX.
(i) Copies of the organizational documents of Smit-Matrix and all
amendments thereto, heretofore delivered to Buyer, are, to the knowledge of
the Sellers, accurate and complete as of the date hereof.
(ii) To the knowledge of the Sellers, the capitalization of Smit-
Matrix is set forth in Schedule 5.1(b)(ii) hereto. To the knowledge of the
Sellers, all of the Smit-Matrix Stock is duly authorized, validly issued,
fully paid and non-assessable. The Target has title to all of the
outstanding shares of capital stock of Smit-Matrix set forth next to the
name of the Target in Schedule 5.1(b)(ii), to the knowledge of the Sellers,
free and clear of all Encumbrances. Except as set forth in Schedule
5.1(b)(ii), to the knowledge of the Sellers, there are no outstanding
subscriptions, calls, commitments, warrants or options for the purchase of
shares of any capital stock or other securities of (or other ownership
interests in) Smit-Matrix, any securities convertible into or exchangeable
for shares of capital stock or other securities issued
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by (or other ownership interests in) Smit-Matrix or any other commitments
of any kind for the issuance of additional shares of capital stock or other
securities issued by (or other ownership interests in) Smit-Matrix.
5.2 AUTHORIZATION. Each Seller represents as to himself that he has
the requisite power and authority and has taken all action necessary to execute
and deliver this Agreement, to consummate the transactions contemplated hereby
and to perform his obligations hereunder, and no other actions on the part of
such Seller are necessary to authorize this Agreement and the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
each of the Sellers and (assuming due authorization, execution and delivery by
Buyer and each other Seller) is a legal, valid and binding obligation of the
each of the Sellers enforceable against each of them in accordance with its
terms, except as such enforceability may be limited by (i) bankruptcy,
insolvency, moratorium, reorganization and other similar laws affecting
creditors' rights generally and (ii) the general principles of equity,
regardless of whether asserted in a proceeding in equity or at law.
5.3 TITLE TO ASSETS. Schedule 5.3 identifies all personal property
with a book value in excess of $50,000 owned or leased by any of the Subject
Companies (except for Intellectual Property Rights), and sets forth whether such
property is owned or leased by the Subject Companies. Each of the Subject
Companies owns, leases or has rights to use free and clear of any Encumbrances,
the Assets set forth next to its name in Schedule 5.3, except for Permitted
Encumbrances and Encumbrances specifically identified in Schedule 5.3. Except
for those Assets which may be purchased by the Target and its Subsidiaries from
time to time in the Ordinary Course, the Assets include all assets necessary for
the conduct of the Business as presently operated in the Ordinary Course. The
Assets are in reasonable operating condition and repair (except for ordinary war
and tear). With respect to Leases of personal property set forth in Schedule
5.3, no Subject Company nor any of the Sellers has received any notice of
cancellation or termination under any option or right reserved to the lessor,
nor any notice of Default thereunder. All lessors under the Leases set forth in
Schedule 5.3 have, or will have prior to the Closing Date, consented (where such
consent is necessary pursuant to the terms of the applicable Lease) to the
change of control, if any, of the Subject Company which is a lessee under such
Lease.
5.4 INTELLECTUAL PROPERTY RIGHTS. Schedule 5.4 (i) contains, with
respect to each Subject Company, detailed information (including where
applicable the federal registration number and the date of registration or
application for registration and the name in which registration was applied for)
concerning (x) all of such Subject Company's United States and foreign, common
law and registered trademarks and of other marks, trade names or other trade
rights, and all pending applications for any such registrations and all of such
Subject Company's patents and copyrights and all pending applications therefor,
and (y) all other trademarks and other marks, trade names and other trade rights
and all other trade secrets, designs, plans, specifications, and other
intellectual property rights of any kind of such Subject Company, whether or not
registered (all of the items referred to in this clause (i) being "INTELLECTUAL
PROPERTY RIGHTS"). Each Subject Company owns (or, as set forth in Schedule 5.4,
possesses adequate and enforceable licenses or other rights to use) all
Intellectual Property Rights now used or proposed to be used in its Business.
Except as set forth in Schedule 5.4, no Person has a right to receive a royalty
or similar payment in respect of any Intellectual Property Rights pursuant to
any contractual arrangements entered into by any Subject Company and no Subject
Company has licenses granted by or to it or any other agreements to which it is
a party, relating in whole or in part to any of the Intellectual Property
Rights. Except as set forth in Schedule 5.4, no Subject Company has received
written or, to the knowledge of the Sellers, other notice that any Subject
Company's use of the Intellectual Property Rights is interfering with,
infringing upon or otherwise
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violating the rights of any Third Party in or to such Intellectual Property
Rights, and no proceedings have been instituted against or written, or to the
knowledge of the Sellers, other notices received by any Subject Company or
any of the Sellers alleging that any Subject Company's use of any
Intellectual Property Rights infringes upon or otherwise violates any rights
of a Third Party in or to such Intellectual Property Rights, which
infringement or violation would have a Material Adverse Effect.
5.5 FACILITIES. On the Closing Date, none of the Subject Companies
will have any Owned Real Property. Schedule 5.5 identifies all Facilities and
contains a complete and accurate, in all material respects, description of the
terms of all Facility Leases pursuant to which each Subject Company leases real
property, including without limitation a general description of the leased
property, the term, the applicable rent, and any requirements for the consent of
third parties to "changes of control" or other similar events pursuant to the
terms of the Facility Lease in respect of such Facility. All such Facility
Leases are valid, binding and enforceable against the applicable Subject Company
and, to the knowledge of the Sellers, against each of the other parties thereto
in accordance with their terms and are in full force and effect, except as such
enforceability may be limited by (i) bankruptcy, insolvency, moratorium,
reorganization and other similar laws affecting creditor's rights generally and
(ii) the general principles of equity, regardless of whether asserted in a
proceeding in equity or at law. Each Subject Company which is a party to any
Facility Lease, and, to the knowledge of the Sellers, each other party to such
Facility Leases, has in all material respects performed all obligations required
to be performed by it through the date hereof and no Seller nor any of the
Subject Companies has received written, or to the knowledge of the Sellers,
other notice of any cancellation or termination under any option or right
reserved to the lessor in any Facility Lease, nor any notice of Default
thereunder which would have a Material Adverse Effect. No event has occurred
which (whether with or without notice, lapse of time or both or the happening or
occurrence of any other event) would constitute a Default under any Facility
Lease on the part of any Subject Company, which Default would have a Material
Adverse Effect. To the knowledge of the Sellers, there has been no occurrence
of any event which (whether with or without notice, lapse of time or both or the
happening or occurrence of any other event) would constitute a Default under any
Facility Lease by any party thereto other than a Subject Company, which Default
would have a Material Adverse Effect. All lessors under the Facility Leases
have, or will have prior to the Closing Date, consented (where such consent is
necessary pursuant to the terms of the applicable Lease) to the change of
control, if any, of the Subject Company which is a lessee under such Facility
Lease.
(a) LEASES OR OTHER AGREEMENTS. Except for Facility Leases listed in
Schedule 5.5(a), there are no leases, subleases, licenses, occupancy agreements,
options, rights, concessions or other agreements or arrangements, written or
oral, granting to any Person the right to purchase, use or occupy any Facility
or the Leased Real Property, or any portion thereof or interest therein (other
than Permitted Encumbrances).
(b) FACILITY LEASES AND LEASED REAL PROPERTY. With respect to each
Facility Lease of each Subject Company, such Subject Company has and will have
at the Closing an unencumbered interest in the Leasehold Estate, subject only to
Permitted Encumbrances and those Encumbrances set forth in Schedule 5.5(b).
Each Subject Company enjoys peaceful and undisturbed possession of all its
Leased Real Property, subject to the rights of the fee owners.
(c) UTILITIES. All Facilities are supplied with utilities (including
without limitation water, sewage, disposal, electricity, gas and telephone) and
other services necessary for the operation of such Facilities as currently
operated, except where the failure to be so supplied would not have a Material
Adverse Effect, and, to the knowledge of the Sellers, there is no condition
which would
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reasonably be expected to result in the termination of the present access
from any Facility to such utility services.
(d) IMPROVEMENTS, FIXTURES AND EQUIPMENT. The Leasehold Improvements
and all Fixtures and Equipment and other tangible assets owned, leased or used
by each Subject Company at the Facilities are (i) to the knowledge of the
Sellers structurally sound, (ii) in good operating condition and repair, subject
to ordinary wear and tear and (iii) sufficient for the current operation of the
Business of each Subject Company as presently conducted except, in the case of
clauses (i), (ii) and (iii), those instances which would not have a Material
Adverse Effect and, in the case of clause (iii), except for Assets which may be
purchased by the Subject Companies from time to time in the Ordinary Course.
None of the Leasehold Improvements is subject to any commitment or other
arrangement for its sale or use by any of the Subject Companies, any of their
respective Affiliates or any other Third Parties, except for arrangements or
commitments which, individually or in the aggregate, would not have a Material
Adverse Effect.
(e) NO SPECIAL ASSESSMENT. None of the Sellers nor any Subject
Company has received notice of any special assessment relating to any Facility
or any portion thereof, and, to the knowledge of the Sellers, there is no
pending or threatened special assessment relating to any such Facility.
5.6 CONTRACTS AND COMMITMENTS. Except for Contracts listed in
Schedule 5.6 and except for Contracts made in the Ordinary Course of Business
since the date hereof or as expressly contemplated by this Agreement and the
transactions contemplated hereby, none of the Subject Companies is a party to,
or bound by, any Contract of any kind to be performed after the Closing Date (i)
pursuant to which it is obligated to expend more than $50,000 in any twelve-
month period and that is not subject to cancellation on not more than thirty
(30) days' notice by such Subject Company, as the case may be, without penalty
or increased cost except for agreements to charter transportation services made
in the Ordinary Course of Business or (ii) with any Personnel or other
Affiliates of such Subject Company. To the best knowledge of the Sellers, there
is no Default by any party to any such Contract, which Default would have a
Material Adverse Effect. Schedule 5.6 lists the following Contracts to which
any Subject Company is a party, or by which any of such Subject Company's Assets
are bound:
(a) any written Contract (or group of related written Contracts)
creating a partnership or joint venture with any other Person;
(b) any promissory notes, loans, agreements in respect of
indebtedness for borrowed money, indentures in respect of indebtedness for
borrowed money, evidences of indebtedness, letters of credit in which the Target
or any of its Subsidiaries is the account party or guarantees of any of the
items described above, individually or in the aggregate in excess of $25,000,
whether any Subject Company shall be the borrower, lender or guarantor
thereunder or whereby any Assets are pledged (excluding credit provided by the
Subject Company in the ordinary course of business to purchasers of its products
or services);
(c) any written Contracts to employ or terminate key Personnel (as
defined below) and other material Contracts with present or former officers,
directors or shareholders or other personnel of any Subject Company.
(d) any written Contract (or group of related written Contracts)
concerning confidentiality or non-competition arrangements;
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(e) any written Contract (or group of related written Contracts)
between any Subject Company and (i) any Russian Venture or (ii) Smit-Matrix;
(f) any written Contract with any of its directors, officers,
shareholders or employees, any Affiliate thereof or any member of any such
person's immediate family (x) providing for the furnishing of material services
by, (y) providing for the rental of material real or personal property from, or
(z) otherwise requiring material payments to (other than for services as
officers, directors or employees of any Subject Company), any such Person or any
corporation, partnership, trust or other entity in which any such Person has a
substantial interest as a shareholder, officer, director, trustee or partner;
(g) except for Contracts with attorneys and accountants for services
to be provided in connection with the Acquisition, any written distribution,
franchise, license, technical assistance, sales, commission, sales agent or
advertising Contracts related to the Assets or the Business of any Subject
Company involving receipts in excess of $500,000 or expenditures in excess of
$50,000 that are not cancelable (without penalty or other termination fees) by
the Subject Company party thereto on not more than thirty (30) days' notice;
(h) any options with respect to any property, real or personal, with
a book value in excess of $50,000 whether a Subject Company is the grantor or
grantee thereunder;
(i) except for agreements to charter or purchase transportation
services made in the Ordinary Course of Business, any Contracts involving
expenditures in excess of $50,000 that are not cancelable (without penalty or
other termination fees) by the Subject Company party thereto on not more than
thirty (30) days' notice;
(j) any written Contract with the United States, any state or local
government or any agency or department thereof;
(k) except for this Agreement, any Contract that (A) limits or
contains restrictions on the ability of any Subject Company to declare or pay
dividends on, to make any other distributions in respect of or to issue or
purchase, redeem or otherwise acquire its capital stock, to incur indebtedness,
to incur or suffer to exist any lien, to purchase or sell all or a material
portion of Assets, to change the lines of business in which it participates or
engages or to engage in any business combination or (B) requires any Subject
Company to maintain specified financial ratios or levels of net worth or other
indicia of financial condition;
(l) any other written Contract (or group of related written
Contracts) involving aggregate payments of more than $500,000 to any Subject
Company or not entered into in the Ordinary Course of Business; or
(m) any written proposal to enter into any contract, agreement or
other arrangement with respect to any of the matters referred to in the
foregoing clauses (a) through (l).
The Sellers have delivered to Buyer true, correct and complete, in all material
respects, copies of each written Contract listed in Schedule 5.6 to which a
Subject Company is a party, including all amendments and supplements thereto,
and have included as part of Schedule 5.6 a brief summary of any such oral
contracts, agreements or other arrangements and any written proposals to enter
into any such Contracts. Schedule 5.6 sets forth all consents required for the
beneficial assignment by any
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Subject Company to Buyer of the rights, benefits and claims under the
Contracts as a result of the transactions contemplated hereby. To the
knowledge of the Sellers, all of the Contracts to which any Subject Company
is party or by which it or any of the Assets is bound or affected are valid,
binding and enforceable against the applicable Subject Company and, to the
knowledge of the Sellers, against each of the other parties thereto in
accordance with their terms, except as such enforceability may be limited by
(i) bankruptcy, moratorium, reorganization and other similar laws affecting
creditor's rights generally and (ii) the general principles of equity,
regardless of whether asserted in a proceeding in equity or at law. Each
Subject Company which is a party to such Contracts and, to the knowledge of
the Sellers, each other person which is a party thereto has complied in all
material respects with the provisions thereof, no party is in Default
thereunder and no written, or to the knowledge of the Sellers, other notice
of any claim of Default has been given to such Subject Company, except for
Defaults which would not have a Material Adverse Effect. To the knowledge of
the Sellers, none of the products and services called for by any unfinished
Contract involving payments to any Subject Company in excess of $100,000
cannot be supplied in accordance with the terms of such Contract, including
time specifications and, to the knowledge of the Sellers, no outstanding bid,
proposal or unfinished Contract will upon performance by such Subject Company
result in a loss to such Subject Company.
5.7 NO CONFLICT OR VIOLATION.
(a) None of the execution, delivery or performance of this Agreement
nor the consummation of the transactions contemplated hereby, will result in (i)
a violation of or a conflict with any provision of (x) the Certificate or
Articles of Incorporation or Bylaws of the Target or any of its Subsidiaries or
(y) to the knowledge of the Sellers, the organizational documents of Smit-
Matrix, (ii) a breach of, or a Default under, or the creation of any right of
any party to accelerate, terminate or cancel, any Contract set forth in Schedule
5.6, Permit, authorization or concession to which any Subject Company is a party
or by which any of the Assets of such Subject Company are bound, (iii) a
violation by such Subject Company of any law, statute, rule, regulation,
ordinance, code, order, judgment, writ, injunction, decree or award, or (iv) an
imposition of any Encumbrance, restriction or charge on the Business of such
Subject Company or on any of the Assets of such Subject Company except in the
case of clauses (ii), (iii) and (iv) above, for breaches, Defaults,
terminations, accelerations, cancellations, violations or creations of
Encumbrances which, individually or in the aggregate, would not have a Material
Adverse Effect.
(b) None of the execution, delivery or performance of this Agreement
nor the consummation of the transactions contemplated hereby, nor compliance by
any of the Sellers with the provisions hereof will result in a violation by such
Seller of any law, statute, rule, regulation, ordinance, code, order, judgment,
writ, injunction, decree or award, except for violations which would not,
individually or in the aggregate, have a Material Adverse Effect.
5.8 FINANCIAL STATEMENTS. The Sellers have heretofore caused the
Target to deliver to Buyer true and complete copies of the Financial Statements.
Except as set forth in Schedule 5.8, the Financial Statements (i) were prepared
in accordance with GAAP throughout the periods indicated and (ii) present fairly
and accurately in all material respects, as of the respective dates thereof or
the periods covered thereby, as applicable, the consolidated financial position,
consolidated balance sheet, income statement and cash flow and consolidated
results of operations of the Target (except, in the case of the Interim
Financial Statements and the monthly unaudited consolidated financial
statements, for normal year-end adjustments which were not and are not expected
to be material in effect and the absence of footnotes which, if presented, would
not differ materially from those included in the Year-End
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Financial Statements). As of the Year-End Balance Sheet Date, there were no
Liabilities of any Subject Company due or to become due, which, in accordance
with GAAP, should have been reflected or shown in the Year-End Financial
Statements, which were not so reflected or shown therein. Except as set
forth in Schedule 5.8 and for Liabilities incurred pursuant to this
Agreement, since the Year-End Balance Sheet Date, there have been no
Liabilities incurred by any Subject Company, except for Liabilities (i)
incurred in the Ordinary Course of Business which would not, individually or
in the aggregate, have a Material Adverse Effect, and (ii) incurred outside
the Ordinary Course of Business which do not exceed $50,000 individually or
$100,000 in the aggregate.
5.9 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
Schedule 5.9, since December 31, 1995, there has not been:
(a) to the knowledge of the Sellers, any event which has had or would
have a Material Adverse Effect;
(b) except for normal periodic increases in the Ordinary Course of
Business, any (i) increase in the compensation payable or to become payable by
any Subject Company to any of its current or former officers, employees, or
agents (collectively, "PERSONNEL"), (ii) grant, payment or accrual, contingent
or otherwise, for or to the credit of any of the Personnel with respect to any
bonus, incentive compensation, service award or other like benefit, or
(iii) employment agreement (written or verbal) made by any Subject Company to
which such Subject Company is a party;
(c) except for Permitted Distributions, any sale, lease, assignment
or transfer of any of the Assets of any Subject Company, other than in the
Ordinary Course to persons that are not Affiliates;
(d) any cancellation, compromise, waiver or release of any right or
claim (or series of related rights or claims) (i) involving an Affiliate of such
Subject Company, (ii) involving more than $50,000, or (iii) outside the Ordinary
Course of Business;
(e) any amendment, acceleration, cancellation, termination or
modification or threatened acceleration or termination of any Contract, license
or other instrument (i) involving an Affiliate of any Subject Company or (ii)
involving payments in excess of $50,000 in the aggregate;
(f) outside of the Ordinary Course of Business, any unfulfilled
commitments for capital expenditures or the execution of any Lease, Contract,
license, sublease or sublicense (or series of related Contracts, Leases,
subleases, licenses or sublicenses) or any incurring of Liability therefor (i)
involving an Affiliate of any Subject Company, or (ii) involving payments in
excess of $50,000 in the aggregate;
(g) any delay or failure to repay when due any obligation of any
Subject Company, individually in excess of $100,000, or in the aggregate in
excess of $250,000;
(h) failure to operate the Business of any Subject Company in the
Ordinary Course;
(i) any material change in accounting methods or practices by any
Subject Company;
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(j) except as contemplated by Section 10.16, any declaration, setting
aside for payment or payment of any dividend or distribution in respect of any
capital stock of any Subject Company or any redemption, purchase, or other
acquisition of any of such Subject Company's equity securities or any bonus, fee
or other payment, or any other transfer of any Assets to or on behalf of any
shareholder of such Subject Company, any Affiliate of such Subject Company or
any Affiliate of any shareholder, including, but not limited to, any payment of
principal of or interest on any debt owed to any such shareholder or Affiliate
or any payment of a bonus, fee or other payment to any such shareholder or
Affiliate as an employee of such Subject Company;
(k) any issuance by any Subject Company of, or commitment of such
Subject Company to issue, any shares of stock or other equity securities (or
other ownership interests) or obligations or securities convertible into or
exchangeable for shares of stock or other equity securities (or such other
ownership interests);
(l) any loan to, or any acquisition of the securities or assets of
any other Person (i) involving an Affiliate of any Subject Company, (ii)
involving more than $50,000 in the aggregate, or (iii) outside the Ordinary
Course of Business;
(m) any loan to, or other agreement with, any present Personnel of
any Subject Company outside the Ordinary Course of Business giving rise to any
claim or right on its part against the Person or on the part of the Person
against it;
(n) any charitable contribution made or pledged by such Subject
Company in an aggregate amount in excess of $50,000;
(o) payment of any expenses relating to the transactions contemplated
by this Agreement, including, without limitation, the payment of the fees and
expenses of any professionals engaged in connection with the transactions
contemplated by this Agreement; or
(p) agreement (either oral or written) by any Subject Company or any
of its Personnel to do any of the foregoing.
5.10 THIS SECTION INTENTIONALLY OMITTED.
5.11 ACCOUNTS RECEIVABLE. The accounts receivable reflected on the
Interim Balance Sheet, and all accounts receivable of each of the Subject
Companies arising since the Interim Balance Sheet Date, represent bona fide
claims against debtors for sales made, services performed or other charges
arising on or before the date hereof, and all the goods delivered and services
performed that gave rise to said accounts were delivered or performed in
accordance with the applicable orders, Contracts or customer requirements,
subject to the reserves for doubtful accounts appearing in the Interim Financial
Statements and the Closing Financial Statements which were established in
accordance with GAAP.
5.12 LITIGATION. Except as set forth in Schedule 5.12, there are no
Actions pending or, to the knowledge of the Sellers, threatened (a) against, or,
to the knowledge of the Sellers, relating to or affecting (i) any Subject
Company, the Assets or Facilities of such Subject Company or the Business,
(ii) any Employee Plan of any Subject Company or any trust or other funding
instrument or any fiduciary or administrator thereof in their capacity as such,
(iii) any officers or directors of any Subject Company, as such, or (iv) the
transactions contemplated by this Agreement or before or by any
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federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, any of which
would have a Material Adverse Effect, (b) which, if determined adversely to
any Subject Company, would reasonably be expected to enjoin or affect the
rights of the parties with respect to the transactions contemplated by this
Agreement, (c) that involves a risk of material criminal liability, or (d) in
which any Subject Company is a plaintiff, including any derivative suits
brought by or on behalf of such Subject Company. No Subject Company is in
Default with respect to any judgment, order, writ, injunction or decree of
any court or governmental agency, and there are no unsatisfied judgments
against such Subject Company or the Business or Assets of such Subject
Company.
5.13 LABOR MATTERS. No Subject Company is a party to any labor
agreement with respect to its employees with any labor organization, union,
group or association and there are no employee unions (nor any other similar
labor or employee organizations) under local statute. No Subject Company has,
in the past two years, experienced any written, or to the knowledge of the
Sellers, other request for an election relating to its employees or an attempt
to make such Subject Company enter into a binding agreement with organized labor
that would cover the employees of such Subject Company. Schedule 5.13 sets
forth the names and current annual salary rates or current hourly wages of all
present employees of any Subject Company whose annual cash compensation for the
1995 fiscal year exceeded $100,000, and also sets forth the earnings for each
such employee as reflected on Form W-2 for the 1995 calendar year. There is no
labor strike or material labor disturbance pending or, to the knowledge of the
Sellers, threatened against any Subject Company nor, to the knowledge of the
Sellers, is any grievance currently being asserted, and in the past two years,
no Subject Company has experienced a labor strike or other material labor
disturbance.
5.14 PERMITS, CONSENTS AND APPROVALS; COMPLIANCE WITH LAW.
(a) Schedule 5.14(a) sets forth a complete list of all Permits used
in the operation of the Business or otherwise owned or validly held by any
Subject Company, except for Permits the failure of which to hold or own would
not have a Material Adverse Effect, setting forth the grantor, the grantee, the
function and the expiration and renewal date of each such Permit. To the
knowledge of the Sellers, each Permit listed in Schedule 5.14(a) is valid,
binding and in full force and effect. Except such Permits the failure of which
to obtain would not have a Material Adverse Effect, each Subject Company has all
Permits required under any Regulation for the operation of its Business or the
ownership of the Assets, and possesses such Permits free and clear of all
Encumbrances except for Permitted Encumbrances and Encumbrances set forth in
Schedule 5.14(a). No Subject Company is in Default, nor has any Subject Company
received any written, or to the knowledge of the Sellers, other notice of any
claim of Default, with respect to any Permit, except for Defaults which,
individually or in the aggregate, would not have a Material Adverse Effect. No
present or former shareholder, director, officer or employee of any Subject
Company or any Affiliate thereof, or any other Person, owns or has any
proprietary, financial or other interest (direct or indirect) in any Permit
which such Subject Company owns, possesses or uses.
(b) Other than in connection with or in compliance with the
provisions of the HSR Act, and except as disclosed in Schedule 5.14(b) hereto,
no consent, approval or authorization of, notice to, declaration, filing or
registration with, or Permit from, any domestic or foreign governmental or
regulatory body or authority, or any other Person, is required to be made or
obtained by any Subject Company or any Seller in connection with the execution,
delivery or performance by the Sellers or the Target or any of its Subsidiaries
of this Agreement and the consummation by the Sellers or the Target
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or any of its Subsidiaries of the transactions contemplated hereby, except
for those the failure of which to make or obtain would not have a Material
Adverse Effect.
(c) Each Subject Company and the conduct of the Business of each
Subject Company has not violated and is in compliance with all Regulations and
Court Orders relating to the Assets or the Business or operations of such
Subject Company, except where the violation or failure to comply, individually
or in the aggregate, would not have a Material Adverse Effect. No Subject
Company and none of the Sellers have received any written, or to the knowledge
of the Sellers, other notice to the effect that, any Subject Company is not in
compliance with any such Regulations or Court Orders or that any charge or
complaint has been brought with respect thereto, which failure to be in
compliance, in any one case or in the aggregate, would have a Material Adverse
Effect.
5.15 TAX MATTERS
(a) FILING OF TAX RETURNS. Each Subject Company (and any affiliated
group of which any such Subject Company is now or has been a member) has timely
filed with the appropriate taxing authorities all Returns required to be filed
through the date hereof and will timely file any such Returns required to be
filed on or prior to the Closing Date. The Returns and other information filed
are complete and accurate in all material respects. Except as specified in
Schedule 5.15(a), no Subject Company, nor any group of which such Subject
Company is now or was a member, has requested any extension of time within which
to file Returns in respect of any Taxes. Each Subject Company has delivered to
Buyer complete and accurate copies of such Subject Company's foreign, federal,
state and local Returns for the years 1993, 1994 and 1995.
(b) PAYMENT OF TAXES. All Taxes payable by any Subject Company or
any affiliated group with which any Subject Company files a consolidated or
combined Return (whether or not shown on any Return) in respect of Pre-Closing
Periods have been timely paid, or will be timely paid, or an adequate reserve
has been established therefor, as set forth in the Financial Statements, and no
Subject Company has any material Liability for Taxes in excess of the amounts so
paid or reserves so established.
(c) AUDITS, INVESTIGATIONS OR CLAIMS. Except as set forth in
Schedule 5.15(c), no material deficiencies for Taxes have been claimed, proposed
or assessed by any taxing or other governmental authority against any Subject
Company. Except as set forth in Schedule 5.15(c), there are no pending or, to
the knowledge of the Sellers, threatened audits, investigations or claims for or
relating to any material additional Liability in respect of Taxes, and there are
no matters under discussion between any Subject Company or any Seller and any
governmental authorities with respect to Taxes that in the reasonable judgment
of any Subject Company, or its counsel, is likely to result in a material
additional Liability for Taxes. Audits of foreign, federal, state, and local
Returns by the relevant taxing authorities have been completed for each period
and set forth in Schedule 5.15(c) and, except as set forth in Schedule 5.15(c),
no Subject Company has been notified that any taxing authority intends to audit
a Return for any period. Except as set forth in Schedule 5.15(c), no extension
of a statute of limitations relating to Taxes is in effect with respect to any
Subject Company.
(d) LIEN. There are no liens for Taxes (other than for current Taxes
not yet due and payable) on the Assets.
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(e) SAFE HARBOR LEASE PROPERTY. None of the Assets is property that
is required to be treated as being owned by any other Person pursuant to the so-
called safe harbor lease provisions of former Section 168(f)(8) of the Code.
(f) SECURITY FOR TAX-EXEMPT OBLIGATIONS. None of the Assets directly
or indirectly secures any debt the interest on which is tax-exempt under Section
103(a) of the Code.
(g) TAX-EXEMPT USE PROPERTY. None of the Assets is "tax-exempt use
property" within the meaning of Section 168(h) of the Code.
(h) FOREIGN PERSON. No Subject Company and no Seller is a Person
other than a United States Person within the meaning of the Code.
(i) NO WITHHOLDING. The transaction contemplated herein is not
subject to the tax withholding provisions of Section 3406 of the Code, or of
Subchapter A of Chapter 3 of the Code or of any other provision of law.
(j) PARTNERSHIP. Except as set forth in the Schedule 5.15(j), no
Subject Company is a party to any joint venture, partnership, or other
arrangement or contract that could be treated as a partnership for federal
income tax purposes.
(k) WITHHOLDING. Each Subject Company has withheld all Taxes
required to have been withheld by it in connection with amounts paid or owing to
any employee, independent contractor, creditor, stockholder, or other third
party, and such withheld Taxes have either been duly paid to the proper
governmental authority or set aside in accounts for such purpose.
(l) COLLAPSIBLE CORPORATIONS. No Subject Company has filed a consent
under Code Section 341(f) concerning collapsible corporations.
(m) GOLDEN PARACHUTE PAYMENTS. No Subject Company has made any
payments, nor is any Subject Company obligated to make any payments, and no
Subject Company is a party to any agreement that could obligate it to make any
payments that would not be deductible under Code Section 280G.
(n) TAX ALLOCATION AGREEMENTS. None of the Subject Companies are a
party to any Tax allocation or sharing agreement.
(o) JOINT AND SEVERAL LIABILITY. None of the Subject Companies (A)
has been a member of any affiliated group filing a consolidated federal income
Tax Return (other than a group the common parent of which is Target) and (B) has
any liability for the Taxes of any person as defined in Section 7701(a)(1) of
the Code (other than the Subject Companies) under Treasury Regulation Section
1.1502-6 (or any similar provision of state, local, or foreign law), as a
transferee or successor, by contract, or otherwise.
(p) NO U.S. INVESTMENT BY FOREIGN SUBSIDIARIES. To the knowledge of
the Sellers, neither Smit-Matrix, nor any of the Russian Ventures, nor any of
their respective Subsidiaries or Affiliates which are organized under the laws
of a country other than the United States (the "Foreign Subsidiaries") has any
investment in U.S. property within the meaning of Code Section 956.
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(q) NO SECTION 338 AND 336 ELECTIONS. There are no elections in
effect made by any Subject Company pursuant to Code Sections 338 or 336(e) or
the regulations thereunder and neither the Company nor any of the
Subsidiaries is subject to any constructive elections under Code Section 338
or the regulations thereunder.
(r) CHANGE IN ACCOUNTING METHOD. None of the Subject Companies
has agreed to or is required to make any adjustment pursuant to Code Section
481(a) by reason of a change in accounting method initiated by any such
company and no Subject Company has knowledge that the Internal Revenue
Service has proposed any such adjustment or change in accounting method.
(s) CERTAIN ACTIONS. No Subject Company has taken, and none will
take, any action not in accordance with past practice that would have the
effect of deferring any Tax liability of a Subject Company from any taxable
period ending on or before the Closing Date to any subsequent taxable period.
(t) NO EXCESS LOSS ACCOUNTS. There currently are no excess loss
accounts, deferred intercompany gains or losses, or other like items
pertaining to any subject Company.
(u) NO TRANSFER PRICING AGREEMENTS. No Subject Company has
entered into transfer pricing agreements or other like arrangements with
respect to any foreign jurisdiction.
(v) INFORMATION REGARDING FOREIGN SUBSIDIARIES. To the knowledge
of the Sellers, none of the Foreign Subsidiaries is (i) engaged in a United
States trade or business for federal income tax purposes; (ii) a passive
foreign investment company within the meaning of the Code; or (iii) a foreign
investment company within the meaning of the Code.
(w) INTERNATIONAL BOYCOTT. No Subject Company has participated in
or cooperated with an international boycott or has been requested to do so in
connection with any transaction or proposed transaction.
(x) SUBPART F INCOME. Buyer would not be required to include any
amount in gross income with respect to any of the Foreign Subsidiaries
pursuant to section 951 of the Code if the taxable year of any such Foreign
Subsidiaries were deemed to end on the Closing Date after the Closing.
5.16 SEVERANCE ARRANGEMENTS. Except as set forth in Schedule
5.16, no Subject Company has entered into any severance agreement in respect
of any Personnel of such Subject Company that will result in any obligation
(absolute or contingent) of Buyer, any Subject Company or any other Person to
make any payment to any such Personnel following termination of employment.
5.17 INSURANCE. Schedule 5.17 contains a complete and accurate
list, in all material respects, of all policies or binders of fire,
liability, title, workers' compensation, product liability and other forms of
insurance (showing as to each policy or binder the carrier, policy number,
coverage limits, expiration dates, annual premiums and a general description
of the type of coverage provided) maintained by each Subject Company on the
Business, the Assets or Personnel of such Subject Company. To the knowledge
of the Sellers, all of such policies are in full force and effect and are
sufficient for compliance with all Contracts to which such Subject Company is
a party. No Subject Company is in Default under any of such policies or
binders, and no Subject Company has failed to give any notice or to present
any claim under any such policy or binder in a due and timely fashion,
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except for Defaults or failures to give notice which would not have a
Material Adverse Effect. No insurer has advised any Subject Company or the
Sellers in writing that it intends to reduce coverage, increase premiums or
fail to renew any existing policy or binder. There are no outstanding unpaid
premiums except in the ordinary course of business and no notice of
cancellation or nonrenewal of any such coverage has been received. There are
no provisions in such insurance policies for retroactive or retrospective
premium adjustments. All products liability, general liability and workers'
compensation insurance policies maintained by any Subject Company have been
occurrence policies and not claims made policies. Except as set forth in
Schedule 5.17, there are no outstanding performance bonds covering or issued
for the benefit of any Subject Company. There are no outstanding unpaid
claims under any such policies or binders. No policies or binders will be
cancelled by the Target or any of its Subsidiaries before the Closing Date
with the current carrier of such policy or binder, PROVIDED, HOWEVER, that if
any such policy or binder is cancelled by the carrier, the Sellers shall use
commercially reasonable efforts to cause the applicable Subject Company to
replace such policy or binder on substantially similar terms and subject to
substantially similar conditions. No Subject Company nor any Person to whom
any policy referred to in this Section has been issued has received notice
that any insurer under such policy is denying liability with respect to a
claim thereunder or defending under a reservation of rights clause.
5.18 THIS SECTION INTENTIONALLY OMITTED.
5.19 PAYMENTS. No Subject Company has (i) directly or indirectly,
paid or delivered any fee, commission or other sum of money or item or
property, however characterized, to any finder, agent, client, customer,
supplier, government official or other party, in the United States or any
other country, which is in any manner related to the Business, Assets or
operations of such Subject Company, and which is, or may be with discovery,
illegal under any federal, state or local laws of the United States currently
in effect (including without limitation the U.S. Foreign Corrupt Practices
Act) or any other country having jurisdiction, (ii) participated, directly or
indirectly, in any illegal boycotts or other similar illegal practices
affecting any of its actual or potential customers, or (iii) established or
maintained any unrecorded fund or asset for any purpose or made any false
entries on the Books and Records of such Subject Company for any reason.
5.20 CUSTOMERS AND SUPPLIERS. Schedule 5.20 contains a complete
and accurate list of (i) the fifteen (15) largest volume customers (in
dollars) of the Subject Companies during the fiscal year ended December 31,
1995, showing the approximate total sales by the Subject Companies to each
such customer during such fiscal year; and (ii) the fifteen (15) largest
volume suppliers (in dollars) of the Subject Companies during the fiscal year
ended December 31, 1995, showing the approximate total purchases by such
Subject Company from each such supplier during such fiscal year. Since the
Interim Balance Sheet Date, there has been no adverse change in the business
relationship with any customer or supplier named in Schedule 5.20, except for
changes which, individually or in the aggregate, would not have a Material
Adverse Effect.
5.21 BANK ACCOUNTS. Schedule 5.21 contains a true and correct
list of the names of each bank, savings and loan, securities broker or other
financial institution in which each Subject Company has an account, including
cash contribution accounts, or safe deposit boxes, and the names of all
Persons authorized to draw thereon or to have access thereto.
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5.22 ENVIRONMENTAL MATTERS
(a) COMPLIANCE WITH ENVIRONMENTAL LAWS. Except as set forth in
Schedule 5.22(a), each Corporation, the Facilities and, to the knowledge of
the Sellers, all Former Facilities have been maintained at all times in
compliance with all the Environmental Laws, except for noncompliance which
would not have, individually or in the aggregate, a Material Adverse Effect.
(b) PERMITS REQUIRED. Except as set forth in Schedule 5.22(b),
the consummation of any of the transactions contemplated by this Agreement
will not require an application for the issuance, renewal, transfer or
extension of, or any other administrative action regarding, any Permit
required under any Environmental Law, except where the failure to so apply
would not have a Material Adverse Effect;
(c) CLAIMS. None of the Corporations has received any written, or
to the knowledge of the Sellers, other notice that it is in violation of or
in non-compliance with the conditions of any Permit required under any
Environmental Law or the provisions of any Environmental Law, nor is there
now pending or, to the knowledge of the Sellers, threatened, any Action
against any Corporation under any Environmental Law, except for violations,
non-compliance or Actions which either singly or in the aggregate would not
have a Material Adverse Effect;
(d) JUDGMENTS. There are no consent decrees, judgments, judicial
or administrative orders or agreements with, or liens by, any governmental
authority or quasi-governmental entity relating to any Environmental Law
which regulate, obligate or bind in any way any Corporation or, to the
knowledge of the Sellers, otherwise affect any Corporation, Facility or
Former Facility;
(e) ENVIRONMENTAL CONDITIONS. Except as set forth in Schedule
5.22(e), there are no Environmental Conditions in any way relating to the
Business, including the Owned Real Property and the Leased Real Property that
would have a Material Adverse Effect;
(f) STORAGE TANK OR PIPELINE. Except as set forth in Schedule
5.22(f), there is not now and, to the knowledge of the Sellers, there has not
been at any time in the past, any underground or above-ground storage tank or
pipeline at any Facility or Former Facility where the installation, use,
maintenance, repair, testing, closure or removal of such tank or pipeline was
not in compliance with all Environmental Laws and there has been no Release
from or rupture of any such tank or pipeline, including without limitation
any such Release from or in connection with the filling or emptying of such
tank that would have a Material Adverse Effect;
(g) ENVIRONMENTAL AUDITS OR ASSESSMENTS. True, complete and
correct copies of all Environmental Assessments, have been delivered to Buyer
and a list of all such reports, audits and assessments and any other similar
report, audit or assessment of which any such Corporation has knowledge is
included in Schedule 5.22(g);
(h) INDEMNIFICATION AGREEMENTS. No Corporation is a party,
whether as a direct signatory or as successor, assign or third party
beneficiary, or otherwise bound, to any Lease or other Contract (excluding
insurance policies disclosed in the Disclosure Schedule) under which such
Corporation is obligated by or entitled to the benefits of, directly or
indirectly, any representation, warranty, indemnification, covenant,
restriction or other undertaking concerning Environmental Conditions; and
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(i) RELEASES OR WAIVERS. No Corporation has released any other
Person from any claim under any Environmental Law or waived any rights
concerning any Environmental Condition.
5.23 EMPLOYEE BENEFIT PLANS.
(a) Schedule 5.23 attached hereto sets forth all "employee benefit
plans," as defined in Section 3(3) of ERISA, and any other employee benefit
plans or arrangements (each, an "EMPLOYEE BENEFIT PLAN" and, collectively,
the "EMPLOYEE BENEFIT PLANS"), including, without limitation, severance or
termination pay, sick leave, vacation pay, salary continuation for
disability, consulting or change in control compensation and death benefit
agreements, other compensation agreements, retirement, deferred compensation,
bonus, stock option or purchase, hospitalization, medical insurance, life
insurance and scholarship programs, any executive arrangements, programs, or
contracts, employee fringe benefit arrangements, programs or contracts, and
all "employee pension plans," as defined in Section 3(2) of ERISA (the
"PENSION PLANS"), (i) sponsored, maintained or contributed by (A) any Subject
Company or (B) any other organization which is a member of a controlled group
of organizations (within the meaning of Sections 414(b), (c), (m) or (o) of
the Code) of which any Subject Company is a member (an "ERISA AFFILIATE"),
which covers present or former employees of any Subject Company or any ERISA
Affiliate.
(b) No Subject Company nor any ERISA Affiliate currently
maintains, sponsors, contributes to or is required to contribute to (or has
ever sponsored, maintained or contributed to or been required to sponsor,
maintain or contribute to) a Pension Plan subject to Section 412 of the Code
or Title IV of ERISA.
(c) Each Pension Plan and related trust intended to qualify under
Sections 401(a) and 501 of the Code is subject of a valid opinion letter from
the IRS with respect to conformance with Sections 401(a) and 501 of the Code
for all periods from the effective date of each such Pension Plan to the date
of this Agreement and each of the Subject Companies has adopted all
amendments and is in compliance with all applicable requirements in order to
rely on such opinion letter for purposes of maintaining a Pension Plan
qualified under Sections 401(a) and 501 of the Code.
(d) Neither any Subject Company nor any ERISA Affiliate has at any
time contributed to or been required to contribute to a "multiemployer plan"
within the meaning of Section 3(37) or Section 4001(a)(3) of ERISA.
(e) All contributions and premium payments required to be made to
or with respect to an Employee Benefit Plan prior to the Closing Date have
been made when due.
(f) The execution and delivery of this Agreement by the Sellers
and the consummation of the transactions contemplated hereunder will not
result in any obligation or Liability (with respect to accrued benefits or
otherwise) or the acceleration of any obligation or Liability to any Employee
Benefit Plan, to any employee or former employee of any Subject Company or
any ERISA Affiliate.
(g) There is no material violation of ERISA with respect to the
filing of applicable reports, documents, and notices regarding the Employee
Benefit Plans with the Secretary of Labor and the Secretary of the Treasury
or the furnishing of such documents to the participants or beneficiaries of
the Employee Benefit Plans.
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(h) True, correct and complete copies of the following documents,
with respect to each of the Employee Benefit Plans, have been delivered or
made available to the Buyer by or on behalf of the Subject Companies, where
applicable, (i) any plans and related trust documents, and amendments
thereto, (ii) the most recent IRS Forms 5500 with all attachments thereto,
(iii) IRS opinion letter, and (iv) summary plan descriptions.
(i) There are no pending actions, claims or lawsuits which have
been asserted or instituted against any of the Employee Benefit Plans, the
assets of any of the trusts under such plans or the plan sponsor or the plan
administrator, or, to the knowledge of the Sellers, against any fiduciary of
any of the Employee Benefit Plans with respect to the operation of such plans
(other than routine benefit claims).
(j) All amendments and actions required to bring the Employee
Benefit Plans into conformity in all material respects with the applicable
provisions of ERISA and other applicable laws have been made or taken except
to the extent that such amendments or actions are not required by law to be
made or taken until a date after the Closing Date.
(k) The Employee Benefit Plans have been maintained, in all
material respects, in accordance with their terms and with the provisions of
ERISA (including the rules and regulations thereunder), the Code and other
applicable Federal and state law. Neither any Subject Company nor any ERISA
Affiliate has engaged in a prohibited transaction, as such term is defined in
Section 4975 of the Code or Section 406 of ERISA, or any transaction in
violation of Section 404 or Section 406 of ERISA. To the knowledge of the
Sellers, no Person has engaged in a prohibited transaction, as such term is
defined in Section 4975 of the Code or Section 406 of ERISA, or any
transaction in violation of Section 404 or Section 406 of ERISA.
(l) Neither any Subject Company nor any ERISA Affiliate maintains
retired life and retired health insurance plans which are Employee Benefit
Plans which are "welfare benefit plans" within the meaning of Section 3(1) of
ERISA and which provide for continuing benefits or coverage for any
participant or any beneficiary of a participant except as may be required
under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
("COBRA") and at the expense of the participant or the participant's
beneficiary. Each Subject Company and each ERISA Affiliate which maintains a
"welfare benefit plan" within the meaning of Section 3(1) of ERISA has
complied with the notice and continuation requirements of COBRA and the
regulations thereunder.
(m) Neither any Subject Company nor any ERISA Affiliate has any
announced plan or legally binding commitment (i) to create any additional
Employee Benefit Plans which are intended to cover employees or former
employees of such Subject Company (with respect to their relationship with
such entity) or (ii) amend or modify (other than amendments and modifications
required by law) any existing Employee Benefit Plan which covers or has
covered employees or former employees of such Subject Company (with respect
to their relationship with such entities) which would result in a material
Liability to Buyer or any of its Affiliates.
5.24 NO BROKERS OR ADVISORS. Except for Ernst & Young LLP, none
of the Subject Companies and none of the Sellers has employed any broker,
finder, advisor or intermediary in connection with the transactions
contemplated by this Agreement which would be entitled to a broker's,
finder's or similar fee or commission in connection therewith or upon the
consummation thereof. The Target shall bear the cost of any payments to
which Ernst & Young LLP shall be entitled.
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5.25 NO OTHER AGREEMENTS TO SELL THE ASSETS OR CAPITAL STOCK OF
ANY SUBJECT COMPANY. Except as set forth in Schedule 5.25, no Subject
Company or Seller has any legal obligation, absolute or contingent, to any
other Person or firm to sell or effect a sale of all or a material portion of
the Assets of any Subject Company, to sell or effect a sale of all or a
majority of the capital stock of any Subject Company, or to effect any
merger, consolidation or other reorganization of such Subject Company or to
enter into any agreement or cause the entering into of an agreement with
respect thereto.
5.26 ACQUISITION OF BUYER COMMON STOCK.
(a) Each of the Sellers represents that any shares of Buyer Common
Stock acquired by him pursuant to Article II shall be acquired by him for his
own account and not as nominee or agent for any other Person and not with a
view to, or for offer or sale in connection with, any distribution thereof
(within the meaning of the Securities Act that would violate the securities
laws of the United States of America or any state thereof.
(b) Each of the Sellers is an "accredited investor" as such term
is defined in Rule 501(a) of Regulation D under the Securities Act. Each of
the Sellers further represents that he is knowledgeable, sophisticated and
experienced in business and financial matters and that he is able to bear the
economic risks of his investment in the shares of Buyer Common Stock and is
currently able to afford the complete loss of such investment.
(c) Each of the Sellers hereby acknowledges that he was afforded
the opportunity (i) to ask such questions as he has deemed necessary of, and
to receive answers from, representatives of Buyer concerning the terms and
conditions of the issuance of shares of Buyer Common Stock and the merits and
risks of acquiring such Buyer Common Stock and (ii) to obtain such additional
information which Buyer possesses or can acquire without unreasonable effort
or expense that is necessary to verify the accuracy and completeness of the
information provided to such Seller. Each of the Sellers acknowledges that
he is aware of the LEP Transactions, and that he was afforded the opportunity
to exercise the rights set forth in clauses (i) and (ii) above with respect
to the LEP Transactions.
(d) Each of the Sellers acknowledges that if he desires to sell or
otherwise dispose of all or any shares of Buyer Common Stock acquired by him
pursuant to Article II (other than pursuant to an effective registration
statement under the Securities Act or a sale or other disposition made
pursuant to Rule 144 promulgated thereunder), if requested by Buyer, such
Seller will deliver to Buyer an opinion of counsel, reasonably satisfactory
in form and substance to Buyer, that registration and qualification under the
Securities Act are not required. Upon original issuance thereof, and until
such time as the same is no longer required under the applicable requirements
of the Securities Act, the shares of Buyer Common Stock acquired by the
Sellers pursuant to Article II (and all securities issued in exchange
therefor or substitution thereof) shall bear the following legends:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY
STATE SECURITIES LAW, AND SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF UNLESS THE SAME ARE REGISTERED AND QUALIFIED
IN ACCORDANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS,
OR IN THE OPINION
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OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY
SUCH REGISTRATION AND QUALIFICATION ARE NOT REQUIRED."
"THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO THAT CERTAIN
SECOND AMENDED AND RESTATED STOCKHOLDERS AGREEMENT, DATED AS OF
NOVEMBER 7, 1996, THAT CERTAIN SECOND AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT DATED AS OF NOVEMBER 7, 1996 AND AN
EMPLOYMENT AGREEMENT DATED AS OF NOVEMBER 7, 1996 COPIES OF WHICH ARE
ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY AND WILL BE FURNISHED
TO THE HOLDER ON REQUEST TO THE SECRETARY OF THE COMPANY. SUCH
STOCKHOLDERS AGREEMENT, REGISTRATION RIGHTS AGREEMENT AND EMPLOYMENT
AGREEMENT PROVIDE, AMONG OTHER THINGS, FOR CERTAIN RESTRICTIONS ON
VOTING, SALE, TRANSFER, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF
THE SECURITIES EVIDENCED BY THIS CERTIFICATE AND THAT SUCH SECURITIES
MAY BE SUBJECT TO PURCHASE BY THE COMPANY AS WELL AS CERTAIN OTHER
PERSONS UPON THE OCCURRENCE OF CERTAIN EVENTS. ANY ISSUANCE, SALE,
ASSIGNMENT, TRANSFER OR OTHER DISPOSITION OF THE SECURITIES EVIDENCED
BY THIS CERTIFICATE TO PERSONS WHO ARE NOT A PARTY TO SUCH
STOCKHOLDERS AGREEMENT INCONSISTENT THEREWITH SHALL BE NULL AND VOID."
5.27 NO SEC DISCLOSURE. Each of the Sellers represents and
warrants as to himself that no event has occurred during the past five years
that, if such individual were a director or executive officer of a company
registered under the Securities Act, would be required to be disclosed
pursuant to Item 401(f) of Regulation S-K promulgated under the Securities
Act.
5.28 BOOKS AND RECORDS. The minute books and other similar records
of the Subject Companies as made available to Buyer prior to the execution of
this Agreement contain a true and complete record, in all material respects,
of all action taken at all meetings and by all written consents in lieu of
meetings of the stockholders of the Subject Companies, the boards of
directors and committees of the boards of directors of the Subject Companies.
The stock transfer ledgers and other similar records of the Subject
Companies as made available to Buyer prior to the execution of this Agreement
accurately reflect all record transfers prior to the execution of this
Agreement in the capital stock of the Subject Companies.
5.29 NO POWERS OF ATTORNEY. Except as set forth in Schedule 5.29,
no Subject Company has delegated any powers of attorney or made any
comparable delegations of authority, which delegations remain outstanding.
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF
THE SELLERS WITH RESPECT TO THE RUSSIAN VENTURES
Each of the Sellers hereby, severally but not jointly, represents and
warrants, to the knowledge of such Seller, as follows:
6.1 ORGANIZATION AND CAPITALIZATION.
(a) Each of the Russian Ventures is duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization, has full power and authority and has taken all action necessary
to conduct its Business as it is presently being conducted and to own, lease
and operate its properties and Assets. Copies of the foundation agreements,
charters, and certificates of registration, or such similar documents as are
required in the relevant jurisdiction (the "FOUNDATION DOCUMENTS") of each of
the Russian Ventures, and all amendments thereto, heretofore delivered to
Buyer, are accurate and complete as of the date hereof.
(b) A list of the owners of all of the issued and outstanding
shares of capital stock (or other ownership interests) of each of the Russian
Ventures is set forth in Schedule 6.1(b) hereto. All of the outstanding
shares of capital stock (or other ownership interests) of each of the Russian
Ventures are duly authorized, validly issued, fully paid and non-assessable.
The Target has title to all of the outstanding shares of capital stock of
each of the Russian Ventures set forth next to its name in Schedule 6.1(b)
free and clear of all Encumbrances. There are no outstanding subscriptions,
calls, commitments, warrants or options for the purchase of shares of any
capital stock or other securities of (or other ownership interests in) any
Russian Venture or any securities convertible into or exchangeable for shares
of capital stock or other securities issued by (or other ownership interests
in) such Russian Venture or any other commitments of any kind for the
issuance of additional shares of capital stock or other securities issued by
(or other ownership interests in) such Russian Venture.
(c) Schedule 6.1(c) contains a true, correct and complete list
of all Subsidiaries or Affiliates of the Russian Ventures, including the
name, jurisdiction of organization and share ownership of each such
Subsidiary or Affiliate.
6.2 AUTHORIZATION. Each of the Russian Ventures has all requisite
power and authority and has taken all action necessary to own, lease and operate
the Assets, and to conduct its Business as it is presently being conducted.
6.3 CONTRACTS AND COMMITMENTS.
(a) Schedule 6.3(a) lists the following Contracts to which any
Russian Venture is a party, or by which any of such Russian Venture's Assets are
bound:
(i) any labor or union contracts;
(ii) any Contracts to employ or terminate or pay severance to
Personnel and any other Contracts with present or former officers,
directors or shareholders or other personnel or any of any Russian Venture
or any of their respective affiliates or family members; and
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(iii) any written arrangement with any of its directors, officers,
shareholders or employees, any affiliate thereof or any member of any such
person's immediate family (x) providing for the furnishing of material
services by, (y) providing for the rental of material real or personal
property from, or (z) otherwise requiring material payments to (other than
for services as officers, directors or employees of any Russian Venture),
any such Person or any corporation, partnership, trust or other entity in
which any such Person has a substantial interest as a shareholder, officer,
director, trustee or partner.
(b) None of the Russian Ventures is a party to any of the Contracts
listed below:
(i) any promissory notes, loans, agreements with respect to
indebtedness of borrowed money, indentures with respect to indebtedness of
borrowed money, evidences of indebtedness, letters of credit, guarantees,
or other instruments relating to an obligation to pay money, individually
in excess of or in the aggregate in excess of $25,000, whether any Russian
Venture shall be the borrower, lender or guarantor thereunder or whereby
any Assets are pledged (excluding credit provided by the Russian Venture in
the Ordinary Course of Business to purchasers of its products);
(ii) any written arrangement (or group of related written
arrangements) concerning non-competition; or
(iii) any other written arrangement (or group of related written
arrangements) under which the consequences of a Default or termination
would have a Material Adverse Effect.
The Sellers have delivered to Buyer true, correct and complete, in all
material respects, copies of each written Contract listed in Schedule 6.3(a)
to which a Russian Venture is a party, including all amendments and
supplements thereto, and have included as part of Schedule 6.3(a) a brief
summary of any such oral contracts, agreements or other arrangements and any
written proposals to enter into any such Contracts. All of the Contracts set
forth in Schedule 6.3(a) are valid, binding and enforceable in accordance
with their terms, except as such enforceability may be limited by (i)
bankruptcy, moratorium, reorganization, and other similar laws affecting
creditors' rights generally, and (ii) the general principles of equity,
regardless of whether asserted in a proceeding in equity or at law.
6.4 NO CONFLICT OR VIOLATION.
(a) None of the execution, delivery or performance of this
Agreement nor the consummation of the transactions contemplated hereby, will
result in (A) a violation of or a conflict with any provision of the
Foundation Documents of any Russian Venture, (B) a breach of, or a Default
under, or the creation of any right of any party to accelerate, terminate or
cancel, any Contract set forth in Schedule 6.3, Permit, authorization or
concession to which any Russian Venture is a party or by which any of the
Assets of such Russian Venture are bound, (C) a violation by such Russian
Venture of any law, statute, rule, regulation, ordinance, code, order,
judgment, writ, injunction, decree or award, or (D) an imposition of any
Encumbrance, restriction or charge on the Business of such Russian Venture or
on any of the Assets of such Russian Venture, except in the case of clauses
(B), (C) and (D) above, for breaches, Defaults, terminations, accelerations,
cancellations, violations or creations of Encumbrances which, individually or
in the aggregate, would not have a Material Adverse Effect.
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6.5 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
Schedule 6.5, since December 31, 1995, there has not been any event which has
had or would have a Material Adverse Effect.
6.6 LIABILITIES. No Russian Venture has any Liabilities or
obligations (absolute, accrued, contingent or otherwise) due or to become due,
except for Liabilities which, individually or in the aggregate, would not have a
Material Adverse Effect.
6.7 LITIGATION. There are no Actions pending or threatened (i)
against or relating to or affecting (A) any Russian Venture, the Assets of such
Russian Venture or the operation of the Business, (B) any Employee Plan of any
Russian Venture or any trust or other funding instrument, or any fiduciary or
administrator thereof in their capacity as such, (C) any officers or directors
of any Russian Venture, as such or by any governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, any of which
would have a Material Adverse Effect, (ii) which, if determined adversely to any
Russian Venture, would enjoin or affect the rights of the parties with respect
to the transactions contemplated by this Agreement, (iii) that involves a risk
of material criminal liability, or (iv) in which any Russian Venture is a
plaintiff. No Russian Venture is in Default with respect to any judgment,
order, writ, injunction or decree of any court or governmental agency, and there
are no unsatisfied judgments against such Russian Venture or the Business or
Assets of any Russian Venture.
6.8 PERMITS, CONSENTS AND APPROVALS; COMPLIANCE WITH LAW.
(a) Schedule 6.8(a) sets forth a complete list of all Permits used
in the operation of the Business of any Russian Venture or otherwise owned or
validly held by any Russian Venture, except for Permits the failure of which to
hold or own would not have a Material Adverse Effect, setting forth the grantor,
the grantee, the function and the expiration and renewal date of each such
Permit. Each Permit listed in Schedule 6.8(a) is valid, binding and in full
force and effect. Except such Permits the failure of which to obtain would not
have a Material Adverse Effect, each Russian Venture has all Permits required
under any Regulation in the operation of its Business or the ownership of the
Assets, and possesses such Permits free and clear of all Encumbrances, except
for Permitted Encumbrances and Encumbrances set forth in Schedule 6.8. No
Russian Venture is in Default, nor has any Russian Venture received any notice
of any claim of Default, with respect to any Permit, except for Defaults which,
individually or in the aggregate, would not have a Material Adverse Effect. No
present or former director, officer or employee of any Russian Venture or any
affiliate thereof, or any other Person, owns or has any proprietary, financial
or other interest (direct or indirect) in any Permit which such Russian Venture
owns, possesses or uses.
(b) Except as set forth in Schedule 6.8(b), no notice to, consent,
approval or authorization of, declaration, filing or registration with, or
Permit from, any domestic or foreign governmental or regulatory body or
authority, or any other Person, is required to be made or obtained by any
Russian Venture in connection with the execution, delivery or performance of
this Agreement and the consummation of the transactions contemplated hereby,
except for those the failure of which to make or obtain would not have a
Material Adverse Effect.
(c) No Russian Venture has, directly or indirectly, paid or
delivered any fee, commission or other sum of money or item of property, however
characterized, to any finder, agent, client, customer, supplier, government
official or other party, in any country, which is in any manner related to the
business, Assets or operations of such Russian Venture, and which is, or may be
with the
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passage of time or discovery, illegal under any federal, state or local laws
of the United States currently in effect (including, without limitation the
U.S. Foreign Corrupt Practices Act) or any other country having jurisdiction.
Each Russian Venture and the conduct of the business of each Russian Venture
has not violated and is in compliance with all Regulations and Court Orders
relating to the Assets or the Business or operations of such Russian Venture,
except where the violation or failure to comply, individually or in the
aggregate, could not have a Material Adverse Effect. No Russian Venture and
none of the Sellers have received any notice to the effect that, any Russian
Venture is not in compliance with any such Regulations or Court Orders or
that any charge or complaint has been brought with respect thereto, which
failure to be in compliance could, in any one case or in the aggregate, have
a Material Adverse Effect.
6.9 TAX MATTERS.
(a) FILING OF TAX RETURNS. Each Russian Venture has timely filed
with the appropriate taxing authorities all returns (including without
limitation information returns and other material information) in respect of
Taxes required to be filed through the date hereof and will timely file any such
returns required to be filed on or prior to the Closing Date. The returns and
other information filed are complete and accurate in all material respects.
Each Russian Venture has delivered to Buyer complete and accurate copies of each
Russian Venture's tax returns for the years 1993, 1994 and 1995.
(b) PAYMENT OF TAXES. All Taxes payable by any Russian Venture in
respect of periods beginning before the Closing Date have been timely paid and
no Russian Venture has any Liability for Taxes in excess of $100,000.
(c) AUDITS, INVESTIGATIONS OR CLAIMS. No material deficiencies for
Taxes have been claimed, proposed or assessed by any taxing or other
governmental authority against any Russian Venture. There are no pending or
threatened audits, investigations or claims for or relating to any material
additional Liability in respect of Taxes, and there are no matters under
discussion with any governmental authorities with respect to Taxes that in the
reasonable judgment of any Russian Venture, or its counsel, is likely to result
in a material additional Liability for Taxes.
(d) LIEN. There are no liens for Taxes (other than for current
Taxes not yet due and payable) on the Assets of any of the Russian Ventures.
(e) PARTNERSHIP. No Russian Venture is a party to any joint
venture, partnership, or other arrangement or contract that could be treated as
a partnership for the purpose of applicable tax law.
(f) WITHHOLDING. Each Russian Venture has withheld all Taxes
required to have been withheld by it in connection with amounts paid or owing to
any employee, independent contractor, creditor, stockholder, or other third
party, and such withheld Taxes have either been duly paid to the proper
governmental authority or set aside in accounts for such purpose.
(g) NO U.S. INVESTMENT BY FOREIGN SUBSIDIARIES. None of the
Russian Ventures has any investment in U.S. property within the meaning of Code
Section 956.
(h) CERTAIN ACTIONS. No Russian Venture has taken, and none will
take, any action not in accordance with past practice that would have the effect
of deferring any Tax liability of a
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Russian Venture from any taxable period ending on or before the Closing Date
to any subsequent taxable period.
(i) NO EXCESS LOSS ACCOUNTS. There currently are no excess loss
accounts, deferred intercompany gains or losses, or other like items pertaining
to any Russian Venture.
(j) NO TRANSFER PRICING AGREEMENTS. No Russian Venture has entered
into transfer pricing agreements or other like arrangements with respect to any
foreign jurisdiction including the United States.
(k) INFORMATION REGARDING FOREIGN SUBSIDIARIES. None of the
Russian Ventures is (i) engaged in a United States trade or business for federal
income tax purposes; (ii) a passive foreign investment company within the
meaning of the Code; or (iii) a foreign investment company within the meaning of
the Code.
(l) BOOKS AND RECORDS. The minute books and other similar records
of the Russian Ventures as made available to Buyer prior to the execution of
this Agreement contain a true and complete record, in all material respects, of
all action taken at all meetings and by all written consents in lieu of meetings
of the Sellers, the boards of directors and committees of the boards of
directors of the Russian Ventures. The shareholder's register, the book of
pledges and other similar records of the Russian Ventures as made available to
Buyer prior to the execution of this Agreement accurately reflect all record
transfers prior to the execution of this Agreement in the capital stock of the
Russian Ventures.
6.10 BANK ACCOUNTS. Schedule 6.10 contains a true and correct list
of the names of each bank or other financial institution in which each Russian
Venture has an account, including cash contribution accounts, or safe deposit
boxes, and the names of all Persons authorized to draw thereon or to have access
thereto.
6.11 ENVIRONMENTAL MATTERS.
(a) COMPLIANCE WITH ENVIRONMENTAL LAWS. Except as set forth in
Schedule 6.11(a), each Russian Venture and each of the facilities and former
facilities thereof have been maintained at all times in compliance with all
environmental laws in the place of its operation, except for noncompliance which
would not have, individually or in the aggregate, a Material Adverse Effect; and
(b) JUDGMENTS. There are no consent decrees, judgments, judicial
or administrative orders or agreements with, or liens by, any governmental
authority or quasi-governmental entity relating to any Environmental Law which
regulate, obligate, bind or in any way affect any Russian Venture.
6.12 NO OTHER AGREEMENTS TO SELL THE ASSETS OR CAPITAL STOCK OF SUCH
SUBJECT COMPANY. No Russian Venture has any legal obligation, absolute or
contingent, to any Person or firm to sell or effect a sale of all or
substantially all of its Assets, to sell or effect a sale of any or all of its
capital stock, or to effect any merger, consolidation or other reorganization or
to enter into any agreement or cause the entering into of an agreement with
respect thereto.
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6.13 NO POWERS OF ATTORNEY. Except as set forth in Schedule 6.13,
no Russian Venture has delegated any powers of attorney or made any comparable
delegations of authority, which delegations remain outstanding.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to the Sellers as follows:
7.1 ORGANIZATION OF BUYER. Buyer is duly incorporated, validly
existing and in good standing under the laws of the state of its incorporation,
has full corporate power and authority and has taken all corporate action
necessary to conduct its business as it is presently being conducted and to own,
lease and operate its properties and Assets. Buyer is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
in which such qualification is necessary under the applicable law as a result of
the conduct of its business or the ownership (or leasing) of its properties,
except where the failure to be so qualified or in good standing would not have a
material adverse effect on Buyer or its ability to perform its obligations
hereunder. Copies of the Certificate of Incorporation and Bylaws of Buyer and
all amendments thereto, heretofore delivered to the Sellers are accurate and
correct as of the date hereof.
7.2 AUTHORIZATION. Buyer has all necessary corporate power and
authority and has taken all corporate action necessary to enter into this
Agreement, to consummate the transactions contemplated hereby and to perform its
obligations hereunder and no other actions on the part of Buyer are necessary to
authorize this Agreement and the transactions contemplated hereby. This
Agreement has been duly executed and delivered by Buyer and (assuming due
authorization, execution and delivery by each of the Sellers) is a legal, valid
and binding obligation of Buyer, enforceable against it in accordance with its
terms, except as such enforceability may be limited by (i) bankruptcy,
insolvency, moratorium, reorganization and other similar laws affecting
creditors' rights generally and (ii) the general principles of equity,
regardless of whether asserted in a proceeding in equity or at law.
7.3 NO CONFLICT OR VIOLATION. None of the execution, delivery or
performance of this Agreement nor the consummation of the transactions
contemplated hereby, nor compliance by Buyer with the provisions hereof will
result in (i) a violation of or a conflict with any provision of the Certificate
of Incorporation or Bylaws, each as amended to date, of Buyer, (ii) a breach of,
or a default under, or the creation of any right of any party to accelerate,
terminate or cancel, any contract, permit, authorization or concession to which
Buyer is a party or by which any of the Assets of Buyer is bound, (iii) a
violation by Buyer of any law, statute, rule, regulation, ordinance, code,
order, judgment, writ, injunction, decree or award, or (iv) an imposition of any
Encumbrance, restriction or charge on the business of Buyer or on any of the
Assets of Buyer, except in the case of clauses (ii), (iii) and (iv) above for
breaches, defaults, terminations, accelerations, cancellations, violations, and
creations of encumbrances which, individually or in the aggregate, would not
have a material adverse effect on the business, operations, conditions
(financial or otherwise) or properties of Buyer.
7.4 CONSENTS AND APPROVALS. Other than in connection with or in
compliance with the provisions of the HSR Act, no notice to, consent, approval
or authorization of, or declaration, filing or registration with, or permit
from, any domestic or foreign governmental or regulatory body or authority, or
any other Person, is required to be made or obtained by Buyer in connection with
the
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execution, delivery or performance of this Agreement and the consummation of
the transactions contemplated hereby.
7.5 CAPITALIZATION. The capitalization of Buyer is set forth in
Schedule 7.5 hereto. All of the outstanding shares of capital stock of Buyer
and each of its subsidiaries are duly authorized, validly issued, fully paid and
non-assessable. Buyer owns all of the issued and outstanding shares of capital
stock of each of its direct subsidiaries. Except as set forth in Schedule 7.5,
there are no outstanding subscriptions, calls, commitments, warrants or options
for the purchase of shares of any capital stock or other securities of (or other
ownership interests in) Buyer or its subsidiaries, any securities convertible
into or exchangeable for shares of capital stock or other securities issued by
(or other ownership interests in) Buyer or its subsidiaries or any other
commitments of any kind for the issuance of additional shares of capital stock
or other securities issued by (or other ownership interests in) Buyer or its
subsidiaries. Schedule 7.5 contains a true, correct and complete list of all
direct subsidiaries of Buyer, including the name, jurisdiction of incorporation
and share ownership of each such subsidiary, as well as each jurisdiction in
which such subsidiary is authorized to do business.
7.6 ISSUANCE OF COMMON STOCK. The shares of Buyer Common Stock to be
issued to the Sellers pursuant to Article II will be free and clear of all
Encumbrances and will be duly authorized, validly issued, fully paid and non-
assessable. The shares of Buyer Common Stock issued to the Sellers pursuant to
Article II hereof will not be subject to registration under the Securities Act.
7.7 FINANCIAL STATEMENTS. Buyer has heretofore delivered to the
Sellers true and complete copies of the following financial statements: (i) the
audited balance sheet of The Bekins Company as of March 31, 1996, (ii) the
audited income statement for the year then ended and (iii) the consolidated
monthly unaudited financial statement of The Bekins Company for the month ended
September 30, 1996, (clauses (i), (ii) and (iii) above, together with the notes
thereto, as applicable, being collectively referred to as the "BUYER FINANCIAL
STATEMENTS"). The Buyer Financial Statements (i) were prepared in accordance
with GAAP throughout the periods indicated and (ii) present fairly and
accurately in all material respects, as of the respective dates thereof or the
periods covered thereby, as applicable, the consolidated financial position,
consolidated balance sheet, income statement and cash flow and consolidated
results of operations of The Bekins Company (except in the case of the monthly
consolidated unaudited financial statements, for normal year-end adjustments
which were not and are not expected to be material in effect, and the absence of
footnotes, which, if inserted, would not differ materially from those included
in the audited consolidated financial statements of The Bekins Company dated as
of March 31, 1996 for the year then ended). Since the organization of Buyer,
until the consummation of the LEP Transactions, The Bekins Company (together
with its subsidiaries) has been the sole operating entity owned by Buyer.
Except as disclosed in the Buyer Financial Statements, as of March 31, 1996,
there were no actual or contingent debts, liabilities or obligations of Buyer
which were required by GAAP to be disclosed in the Buyer Financial Statements
which were not disclosed on the Buyer Financial Statements. Each of the parties
hereto acknowledge that, as of the date hereof, the Buyer has neither made an
allocation of the purchase price with respect to its acquisition of The Bekins
Company nor completed an amortization schedule with respect to the assets of The
Bekins Company.
7.8 LITIGATION. Except as set forth in Schedule 7.8, there is no
action, suit, proceeding or investigation pending or, to the knowledge of Buyer,
threatened against Buyer, The Bekins Company or any of the subsidiaries of The
Bekins Company at law, in equity or otherwise, in, before, or by any court or
governmental agency or authority which if adversely determined could reasonably
be expected to enjoin or affect the rights of the parties with respect to the
transactions contemplated by this Agreement or which is reasonably likely to
have a material adverse effect on the business,
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operations, condition (financial or otherwise) or properties of Buyer. The
Buyer is not in Default with respect to any judgment, order, writ,
injunction, or decree of any court or governmental agency and there are no
unsatisfied judgments against Buyer or its Assets or business.
7.9 BROKERS. Buyer has not employed any broker, finder, advisor or
intermediary in connection with the transactions contemplated by this Agreement
which would be entitled to a broker's, finder's, or similar fee or commission in
connection therewith or upon the consummation thereof, other than William E.
Myers & Company, the fees of which will be paid by Buyer.
7.10 INVESTMENT. Buyer is acquiring the Target Stock for its own
account for investment, without a view to, or for resale in connection with, the
distribution thereof in violation of federal or state securities laws and with
no present intention of distributing any part thereof. Buyer will not
distribute or resell any Target Stock in violation of any such law.
7.11 EQUITY. For the period from May 1, 1996 through the Closing
Date, Buyer shall have issued shares of its common stock for cash proceeds of
not less than $45,000,000.
7.12 SOLVENCY. Buyer is not and will not be after giving effect to
the transactions contemplated by this Agreement (x) insolvent or (y) left with
unreasonably small capital with which to engage in its business as contemplated
pursuant to the transactions hereby, and Buyer has not and will not have after
giving effect to the transactions contemplated by this Agreement, incurred debts
beyond its ability to pay such debts as they mature.
ARTICLE VIII
ACTIONS OF THE SELLERS AND BUYER BEFORE AND AFTER THE CLOSING DATE
Each of the Sellers and Buyer covenant and agree with each other as
follows:
8.1 FURTHER ASSURANCES. Upon the terms and subject to the conditions
contained herein, each of the parties hereto agree, both before and after the
Closing, (i) to use all reasonable efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary, proper or
advisable to consummate and make effective the transactions contemplated by this
Agreement, (ii) to execute any documents, instruments or conveyances of any kind
which may be reasonably necessary or advisable to carry out any of the
transactions contemplated hereunder, and (iii) to cooperate with each other in
connection with the foregoing, including using commercially reasonable efforts
(A) to obtain all necessary waivers, consents and approvals from other parties
to the Contracts, Intellectual Property Rights and Leases; PROVIDED, HOWEVER,
that no party shall be required to make any payments, commence litigation or
agree to modifications of the terms thereof in order to obtain any such waivers,
consents or approvals, (B) to obtain all necessary Permits as are required to be
obtained under any Regulations, (C) to defend all Actions challenging this
Agreement or the consummation of the transactions contemplated hereby, (D) to
lift or rescind any injunction or restraining order or other Court Order
adversely affecting the ability of the parties to consummate the transactions
contemplated hereby, (E) to effect all registrations and filings, including
without limitation submissions of information requested by governmental
authorities, and (F) to fulfill all conditions to this Agreement.
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8.2 EMPLOYEE MATTERS. (a) Following the Closing, Buyer will cause
the Subject Companies to continue to offer employment to all of the respective
employees (other than the Sellers), with said offer being on remuneration and
benefit levels comparable, in the aggregate, to those presently offered by the
Subject Companies to such employees. Such employment will be on an "at will"
basis and no employee will be guaranteed continuing employment with any Subject
Company on an ongoing basis. Each party hereto will cooperate with the other
party in their joint efforts to retain such employees.
(b) No provision of this Agreement shall create any third party
beneficiary rights in any employees of any Subject Company, any beneficiary or
dependents thereof or any collective bargaining representatives thereof, with
respect to the compensation, terms and conditions of employment and benefits
that may be provided to any employee of any Subject Company by Buyer or under
any benefit plan which Buyer may maintain.
8.3 THIS SECTION INTENTIONALLY OMITTED.
8.4 EXCLUDED ASSETS AND EXCLUDED LIABILITIES. On or prior to the
Closing, the Target shall cause the Excluded Assets to be distributed to the
Sellers and the Sellers shall discharge the Excluded Liabilities.
8.5 CONTRIBUTION OF SEA BRIDGE ASSETS. On or prior to the Closing
Date, the Sellers shall create a new wholly-owned subsidiary of the Target in
such form as shall be reasonably satisfactory to Buyer and shall cause Sea
Bridge to contribute the Sea Bridge Assets to such newly created subsidiary.
8.6 DIVIDENDS AND OTHER DISTRIBUTIONS. Prior to the Closing Date,
no Subject Company nor any of its Affiliates shall have set aside, made or
otherwise paid any direct or indirect distributions or dividends in respect of
the capital stock of (or other ownership interests in) any Subject Company,
other than current salaries, from April 9, 1996 through the Closing Date, except
for those amounts reserved for such purpose in the Interim Balance Sheet, which,
in no event shall be greater than $2,550,000,(1) MINUS (i) the amount of the
Harper Loan ($169,000) and (ii) the amount of any expenses of professionals or
other persons (including without limitation Winthrop, Stimson, Putnam & Roberts
and Ernst & Young, LLP) paid or payable by the Target in connection with the
transactions contemplated hereby (such distributions referred to herein as
"PERMITTED DISTRIBUTIONS"). On or prior to the Closing Date, (i) the Permitted
Distributions shall have been made by the Target to the Sellers, (ii) all
amounts deducted from the Permitted Distributions shall have been paid to the
party to whom such amounts are due and (iii) Buyer shall receive evidence of
payment in full of all amounts due by the Target pursuant hereto. The amount of
any expenses of professionals or other persons to be paid by the Sellers or the
Target in connection with this Agreement after the Closing Date shall be borne
exclusively by the Sellers.
8.7 AMENDMENT TO CHARTER AND BYLAWS. The Certificate of
Incorporation and/or Bylaws of the Target shall have been amended by the
Sellers in a form satisfactory to Buyer to include, without limitation, the
establishment of a five person board of directors with two classes of
directors. One class of directors ("CLASS B DIRECTORS") will be made up of
four directors, each of whom will have
- -------------------------------
(1) This number is the sum of the accrued compensation ($2.7 million) plus the
approximate value of the Excluded Liabilities ($311k) minus the approximate
value of the Excluded Assets ($461).
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one vote on all matters presented to such board of directors. The second class
of directors ("CLASS A DIRECTORS"), shall be made up of one director who shall
have a single vote weighted to equal five times the vote of any individual Class
B Director. The amended Certificate of Incorporation and Bylaws shall become
effective as of the Closing. At the Closing, each of the Sellers shall have
been designated a Class B Director, and Buyer shall have designated the Class A
Director.
ARTICLE IX
ACTIONS BY THE SELLERS AND BUYER
AFTER THE CLOSING
9.1 BOOKS AND RECORDS. The Sellers and Buyer agree that each will
cooperate with and make available to the other party, during normal business
hours, all Books and Records of each of the Subject Companies and the books and
records of Buyer, information and current Personnel (without substantial
disruption of employment) retained and remaining in existence after the Closing
Date that are necessary or useful in connection with any Tax inquiry, audit,
investigation or dispute, any litigation or investigation or any other matter
requiring any such Books and Records (or with respect to Buyer, books and
records), information or employees for any reasonable business purpose. The
party requesting any such Books and Records (or with respect to Buyer, books and
records), information or employees shall bear all of the out-of-pocket costs and
expenses (including without limitation, attorneys' fees, but excluding
reimbursement for salaries and employee benefits) reasonably incurred in
connection with providing such Books and Records (or with respect to Buyer,
books and records), information or employees (except that the costs and expenses
of the Sellers of copying applicable sections of the Books and Records for such
purpose shall be borne by the Target).
9.2 SURVIVAL OF REPRESENTATIONS, ETC. The representations and
warranties of the Sellers and Buyer contained herein and as provided in the
preceding sentence shall survive the Closing Date until June 30, 1998; PROVIDED,
HOWEVER, that the representations and warranties contained in Section 5.22 shall
survive the Closing Date until June 30, 1999, and the representations and
warranties contained in Section 5.15 and Section 5.23 shall continue to survive
until sixty (60) days after the expiration of the applicable statute of
limitations (giving effect to any waiver or extension thereof).
9.3 INDEMNIFICATIONS.
(a) BY THE SELLERS. In addition to the indemnification obligations
of the Sellers set forth in Article X hereof, the Sellers shall severally, but
not jointly, indemnify, save and hold harmless Buyer, the Subject Companies,
their respective Affiliates and Subsidiaries, and each of their respective
representatives (collectively, the "BUYER INDEMNIFIED PARTIES"), from and
against any and all costs, losses, Liabilities, obligations, damages, lawsuits,
deficiencies, claims, demands, and expenses (whether or not arising out of
third-party claims), including without limitation interest, penalties, costs of
mitigation, losses in connection with any Environmental Law (including without
limitation any clean-up, remedial correction or responsive action), damages to
the environment, attorneys' fees and all amounts paid in investigation, defense
or settlement of any of the foregoing (herein, "DAMAGES"), incurred in
connection with, arising out of, resulting from or incident to (i) any breach of
any representation or warranty made by the Sellers (other than any
representation or warranty contained in Section 5.15 of this Agreement, for
which indemnification is provided pursuant to the terms of Section 10.1 hereof)
in this Agreement; (ii) any breach of any covenant or agreement made by the
Sellers in this Agreement; (iii) any Liabilities or obligations of any of the
Subject Companies in connection with
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Abe Ranish's purchase and ownership of shares of Buyer common stock; (iv) any
Liability or obligations of the Sellers with respect to Smit-Matrix incurred
or arising out of occurrences on or prior to the Closing; or (v) any Excluded
Liability.
The term "DAMAGES" as used in this Section 9.3 is not limited to
matters asserted by third parties against any indemnified party, but includes
Damages incurred or sustained by an indemnified party in the absence of third
party claims. Payments by any indemnified party of amounts for which such
indemnified party is indemnified hereunder shall not be a condition precedent to
recovery. The rights and remedies provided in this Article IX shall be
exclusive as to any Damages incurred by a party under this Agreement; PROVIDED,
HOWEVER, that nothing herein shall preclude a party from exercising its rights
under this Agreement and applicable law to such equitable remedies, including
without limitation specific performance and injunctions.
(b) BY BUYER. Buyer shall indemnify and save and hold harmless the
Sellers and their respective Affiliates and representatives (the "SELLER
INDEMNIFIED PARTIES") from and against any and all Damages incurred in
connection with, arising out of, resulting from or incident to (i) any breach of
any representation or warranty made by Buyer in this Agreement; or (ii) any
breach of any covenant or agreement made by Buyer in this Agreement; (iii) any
Liabilities of any Subject Company arising on or prior to the Closing Date
(except for (A) the Excluded Liabilities, and (B) any Liabilities incurred or
assumed by the Sellers or any Subject Company or Russian Venture in or pursuant
to this Agreement, including without limitation the obligations of the Sellers
set forth in Sections 9.3(a) and 10.1.)
(c) COOPERATION. The indemnified party shall cooperate in all
reasonable respects with the indemnifying party and its representatives
(including without limitation its attorneys) in the investigation, trial and
defense of such lawsuit or action and any appeal arising therefrom; PROVIDED,
HOWEVER, that the indemnified party may, at its own cost, participate in
negotiations, arbitrations and the investigation, trial and defense of such
lawsuit or action and any appeal arising therefrom. The parties shall cooperate
with each other in any notifications to insurers.
(d) DEFENSE OF CLAIMS. If a claim for Damages (a "CLAIM") is to
be made by a party entitled to indemnification hereunder against the
indemnifying party, the party claiming such indemnification shall, subject to
Section 9.2 hereof, give written notice (a "CLAIM NOTICE") to the
indemnifying party as soon as practicable after the party entitled to
indemnification becomes aware of any fact, condition or event which may give
rise to Damages for which indemnification may be sought under this Section
9.3. If any lawsuit or enforcement action is filed against any party
entitled to the benefit of indemnity hereunder, written notice thereof shall
be given to the indemnifying party as promptly as practicable (and in any
event within thirty (30) calendar days after the service of the citation or
summons). The failure of any indemnified party to give timely notice
hereunder shall not affect rights to indemnification hereunder, except to the
extent that the indemnifying party has been damaged by such failure. After
such notice, if the indemnifying party promptly (and in any event within 30
days) confirms in writing to the indemnified party that the indemnifying
party shall assume the defense and management of the claim under the terms of
its indemnity hereunder, then the indemnifying party shall be entitled, if it
so elects at its own cost, risk and expense, (i) to take control of the
defense and investigation of such lawsuit or action, (ii) to employ and
engage attorneys of its own choice, but, in any event, reasonably acceptable
to the indemnified party, to handle and defend the same unless the named
parties to such action or proceeding (including any impleaded parties)
include both the indemnifying party and the indemnified party and the
indemnified party has been advised in writing by counsel that there may be
one or more legal defenses available to such indemnified party that are
different from or additional to those available to the indemnifying party, in
which event the
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indemnified party shall be entitled, at the indemnifying party's cost, risk
and expense, to separate counsel of its own choosing, and (iii) to compromise
or settle such lawsuit or action, which compromise or settlement shall be
made only with the written consent of the indemnified party, such consent not
to be unreasonably withheld. If, at any time, the indemnifying party
hereunder reasonably believes that any part of a Claim for which it has
agreed to assume the defense, negotiation, investigation and management
involves matters beyond the scope of its indemnification obligations
hereunder, the indemnifying party shall so notify the indemnified party in
writing of such determination and the indemnified party shall have the right,
at its own cost and expense, to assume the defense, negotiation,
investigation and management of such portion of such Claim; PROVIDED,
HOWEVER, that if such portion of such Claim is ultimately determined to have
been the obligation of the indemnifying party pursuant to the terms of the
indemnification obligations described herein, all reasonable costs and
expenses incurred by the indemnified party in connection with its defense,
negotiation, investigation and management of such portion of such Claim shall
be reimbursed to the indemnified party by the indemnifying party. If the
indemnifying party fails to assume the defense of such lawsuit or action
within thirty (30) calendar days after receipt of the Claim Notice, the
indemnified party against which such lawsuit or action has been asserted will
(upon delivering notice to such effect to the indemnifying party) have the
right to undertake, at the indemnifying party's cost and expense, the
defense, compromise or settlement of such lawsuit or action on behalf of and
for the account and risk of the indemnifying party; PROVIDED, HOWEVER, that
such Lawsuit or action shall not be compromised or settled without the
written consent of the indemnifying party, which consent shall not be
unreasonably withheld. In the event the indemnified party assumes the
defense of the lawsuit or action, the indemnified party will keep the
indemnifying party reasonably informed of the progress of any such defense,
compromise or settlement. The indemnifying party shall be liable for any
settlement of any action effected pursuant to and in accordance with this
Section 9.3 and for any final judgment (subject to any right of appeal), and
the indemnifying party agrees to indemnify and hold harmless an indemnified
party from and against any Damages by reason of such settlement or judgment.
(e) BROKERS AND FINDERS; ADVISORS. Other than William E. Myers &
Co. and Ernst & Young, LLP, no agent, broker, investment banker, financial
advisor or other Person is or will be entitled to any broker's or finder's fee
or any other commission or similar fee in connection with any of the
transactions contemplated hereby. Each party hereto agrees to hold the other
parties hereto harmless from and against any and all claims, liabilities or
obligations with respect to any such fee or commission or expenses related
thereto asserted by any Person (i) with respect to any such fee or commission or
expenses related thereto or (ii) on the basis of any act or statement alleged to
have been made by any party hereto or any of their respective representatives or
Affiliates, it being understood and agreed that the cost of any payments to
which Ernst & Young LLP shall be entitled shall be deducted from the Permitted
Distributions and shall be paid by the Target prior to Closing pursuant to
Section 8.6.
(f) REPRESENTATIVES. No individual representative of any party
shall be personally liable for any Damages under the provisions contained in
this Section 9.3. Nothing herein shall relieve either party of any Liability to
make any payment expressly required to be made by such party pursuant to this
Agreement.
(g) LIMITATION ON INDEMNITY/COMMITMENTS.
(i) The indemnification obligation of the parties hereto
with respect to any breach of any representation or warranty pursuant to
Sections 9.3(a) or (b) shall be limited to Claims for Damages made prior to
last date of survival thereof referred to in Section 9.2. The
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indemnification obligation of the parties hereto with respect to any breach
of any covenant or agreement pursuant to Sections 9.3(a) or (b) shall
survive indefinitely subject to the terms of this Agreement.
(ii) The Buyer Indemnified Parties may not recover Damages
from any Seller pursuant to Section 9.3(a)(i) until the aggregate amount of
Damages relating to such Claims for which the Buyer Indemnified Parties, in
the aggregate, are seeking indemnification under Section 9.3(a)(i) exceeds
two hundred and fifty thousand dollars ($250,000); PROVIDED, HOWEVER, in
the event that the aggregate amount of Damages for which the Buyer
Indemnified Parties are seeking indemnification under Section 9.3(a)(i)
exceeds such amount, the Buyer Indemnified Parties may recover the full
amount of such Damages less two hundred thousand dollars ($200,000) (the
"DEDUCTIBLE"). Notwithstanding the foregoing, the maximum amount of
Damages for which the Sellers shall be liable pursuant to this Section 9.3
shall be $20,000,000 plus (in the case of payments to the Sellers pursuant
to Section 3.1(c)) or minus (in the case of payments to Buyer pursuant to
Section 3.1(b)) the amount of any post closing adjustment as set forth in
Section 3.1 hereof. The Buyer Indemnified Parties shall have the right to
make a Claim hereunder prior to the time at which the Deductible (if any)
that is applicable to such Claim has been surpassed for the purpose of
asserting such Claim within the relevant survival period of the applicable
indemnification obligation, and any such Claim made within such period
shall, to the extent such Deductible ultimately is met, survive until its
final resolution.
(iii) The Seller Indemnified Parties may not recover Damages
from Buyer pursuant to Section 9.3(b)(i) until the aggregate amount of
Damages for which the Seller Indemnified Parties, in the aggregate, are
seeking indemnification exceeds two hundred and fifty thousand dollars
($250,000); PROVIDED, HOWEVER, in the event that the aggregate amount of
Damages for which the Sellers Indemnified Parties, are seeking
indemnification under Section 9.3(b)(i) exceeds such amount, the Seller
Indemnified Parties may recover the full amount of such Damages less the
Deductible. Notwithstanding the foregoing, the maximum amount of Damages
for which Buyer shall be liable pursuant to this Section 9.3 shall be an
amount equal to $10,000,000. The Seller Indemnified Parties shall have the
right to make a Claim hereunder prior to the time at which the Deductible
(if any) that is applicable to such Claim has been surpassed for the
purpose of asserting such Claim within the relevant survival period of the
applicable indemnification obligation, and any such Claim made within such
period shall, to the extent such Deductible ultimately is met, survive
until its final resolution.
(iv) The Sellers' liability under the indemnification
provisions of Section 9.3(a) hereof or otherwise under this Agreement shall
be subject to reduction in an amount equal to the value of any (i) net tax
benefit (giving effect to the time value of money at a discounting rate of
10%) realized by Buyer (by reason of a tax deduction, basis adjustment,
shifting of income, credits and/or deductions or otherwise from one or more
fiscal periods to another); (ii) insurance benefit realized by Buyer in
connection with the loss or damage suffered by Buyer which forms the basis
of the Sellers' liability hereunder and (iii) third party (i.e., non-
Seller) indemnified benefit realized by Buyer in connection with the loss
or damage suffered by Buyer which forms the basis of Sellers' liability
hereunder; PROVIDED, HOWEVER, that Buyer shall have no obligation to pursue
any benefits described in clause (iii) above but shall be required to
pursue benefits described in clause (ii) above, in each case before making
a claim against the Sellers pursuant to the terms of this Section 9.3;
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(v) Buyer's liability under the indemnification provisions
of Section 9.3(b) hereof or otherwise under this Agreement shall be subject
to reduction in an amount equal to the value of any (i) net tax benefit any
Seller (giving effect to the time value of money at a discounting rate of
10%) realized (by reason of a tax deduction, basis adjustment, shifting of
income, credits and/or deductions or otherwise from one or more fiscal
periods to another); (ii) insurance benefit realized by any Seller in
connection with the loss or damage suffered by such Seller which forms the
basis of Buyer's liability hereunder and (iii) third party (i.e., non-
Buyer) indemnified benefit realized by Buyer in connection with the loss or
damage suffered by the Sellers which forms the basis of Buyer's liability
hereunder; PROVIDED, HOWEVER, that the Sellers shall have no obligation to
pursue any benefits described in clause (iii) above but shall be required
to pursue benefits described in clause (ii) above, in each case before
making a claim against Buyer pursuant to the terms of this Section 9.3;
(vi) Neither (a) the termination of the representations or
warranties contained herein, nor (b) the expiration of the indemnification
obligations described above, will affect the rights of a Person in respect
of any Claim made by such Person received by the indemnifying party prior
to the expiration of the applicable survival period provided herein;
(vii) It is specifically understood and agreed that in the
event a misrepresentation made herein or pursuant hereto or a breach of any
representation, warranty or covenant contained herein is discovered by any party
hereto and asserted by it after the Closing, the remedy of such party shall be
limited to indemnification as set forth in Section 9.3(a) (in the case of Buyer)
and Section 9.3(b) (in the case of the Sellers) hereof (as limited by the
provisions set forth in this Section or elsewhere in this Agreement), and such
party shall not be entitled to the rescission of this Agreement, nor shall a
multiplier be used in the computation of Damages as the amount of a Claim, nor
shall such party otherwise be entitled to any consequential damages including,
without limitation, lost profits.
9.4 FURTHER ACTIONS. (a) Following the Closing, the Sellers agree to
execute such documents and take such actions as may be requested by Buyer's
counsel and otherwise cooperate with Buyer and its Affiliates and their
representatives in connection with any filings required to be made with the
Securities and Exchange Commission as a consequence of the transactions
contemplated by this Agreement.
ARTICLE X
TAX MATTERS
10.1 TAX INDEMNIFICATION. Except to the extent covered by
Liabilities or reserves reflected on the Closing Balance Sheet, the Sellers
shall be responsible for and pay and shall, severally, but not jointly,
indemnify and hold harmless Buyer and each of the Subject Companies (and each of
their respective Affiliates, successors and assigns) with respect to (i) any and
all Taxes imposed on any of the Subject Companies, or for which any of the
Subject Companies is liable, with respect to any Pre-Closing Periods, (ii) all
Taxes arising out of a breach of the Sellers' representations and warranties
contained in Section 5.15 hereof and (iii) any costs or expenses ("LOSSES") with
respect to the Taxes indemnified hereunder.
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10.2 APPORTIONMENT. Any Taxes with respect to any Subject Company
that relate to a Tax period beginning on or before the Closing Date and ending
after the Closing Date (an "OVERLAP PERIOD") shall be apportioned between the
Pre-Closing Period and the Post-Closing Period, (i) in the case of real or
personal property Taxes (and any other Taxes not measured or measurable, in
whole or in part, by net or gross income or receipts), on a per diem basis and,
(ii) in the case of other Taxes, as determined from the Books and Records of
such Subject Company during the portion of such period ending on the Closing
Date and the portion of such period beginning on the day following the Closing
Date consistent with the past practices of each Subject Company. Buyer shall
cause each Subject Company to file any Returns for any Overlap Period, and Buyer
shall pay all Taxes shown as due on any such Returns. The Sellers shall pay
Buyer all such Taxes apportioned to the Pre-Closing Period (to the extent not
paid by any Subject Company prior to the Closing Date or accrued or otherwise
reflected as a Liability on the Closing Balance Sheet) due pursuant to the
filing of any such Returns under the provisions of this Section 10.2(b) within
fifteen (15) business days of receipt of notice of such filing by Buyer, which
notice shall set forth in reasonable detail the calculations regarding the
Sellers' share of such Taxes.
10.3 REFUNDS. Buyer agrees to assign and promptly remit (and to cause
each Subject Company to assign and promptly remit) all refunds (including
interest thereon) net of any tax effect to Buyer or any Subject Company,
received by Buyer or any Subject Company of any Taxes for which the Sellers have
indemnified Buyer or any Subject Company hereunder; PROVIDED, HOWEVER, that
Buyer shall be entitled to the portion of any refund resulting from a carryback
of a net operating loss, net capital loss, tax credit or similar item sustained
or arising in any period after the Closing Date. Buyer agrees that upon
reasonable request of the Sellers, Buyer shall file or cause the Subject
Companies to file, at the Sellers' reasonable expense, a claim for refund of any
Tax for which the Sellers have indemnified Buyer or the Subject Companies
hereunder with the exception of any resulting from the operation of the Subject
Companies subsequent to the Closing Date.
10.4 RETURNS. The Sellers shall prepare or cause to be prepared, and
timely file or cause to be filed, all Returns of any Subject Company for all
taxable periods of such Subject Company ending on or prior to the Closing Date
and shall pay or cause to be paid all Taxes due with respect to such Returns.
With respect to any such Returns required to be filed by the Sellers and not
required to be filed before the Closing Date, the Sellers shall provide Buyer
and its authorized representatives with copies of any such completed Return at
least fifteen (15) business days prior to the due date for filing of such Return
and Buyer and its representatives shall have the right to review such Return
prior to the filing of such Return. The Sellers and Buyer agree to consult and
resolve in good faith any issues arising as a result of such review.
10.5 OTHER MATTERS. (a) Buyer shall pay, or cause to be paid, and
shall indemnify and hold harmless the Sellers (and each of their successors and
assigns) against any Liability for Taxes imposed on Buyer or any Subject Company
or for which the Buyer or any Subject Company is liable with respect to Post-
Closing Periods.
(b) Buyer shall promptly notify the Sellers in writing upon receipt by
Buyer or any Affiliate of Buyer of notice of (i) any pending or threatened
federal, state, local or foreign Tax audits or assessments of any Subject
Company, so long as any Pre-Closing Period remains open, and (ii) any pending or
threatened federal, state, local or foreign Tax audits or assessments of Buyer
or any Affiliate of Buyer which may affect the Tax Liabilities of any Subject
Company with respect to any Pre-Closing Period. The Sellers shall promptly
notify Buyer in writing upon receipt by the Sellers or
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any Affiliate of the Sellers of notice of any pending or threatened federal,
state, local or foreign Tax audits or assessments relating to the income,
properties or operations of any Subject Company.
(c) Buyer shall have the right to represent the interests of any
Subject Company in any Tax audit or administrative or court proceeding relating
to any Returns (including any proceeding relating to such Subject Company for
Pre-Closing Periods). In the event that Buyer compromises or settles any Tax
claim, or consents or agrees to any Tax Liability, relating to any Subject
Company for any Pre-Closing Period, the Sellers shall have the right to review
such compromise, settlement, consent or agreement. Notwithstanding anything to
the contrary contained or implied in this Agreement, without the prior written
consent of the Sellers, not to be unreasonably withheld, neither Buyer nor any
of its Affiliates shall agree or consent to compromise or settle, either
administratively or after the commencement of litigation, any issue or claim
arising in any such audit or proceeding, or otherwise agree or consent to any
Tax Liability of Buyer, any of its Affiliates, or any Subject Company, to the
extent that any such compromise, settlement, consent or agreement may affect the
Tax Liability of the Sellers, any of their respective Affiliates, or any Subject
Company for any Pre-Closing Period (including without limitation the reduction
of asset basis or cost adjustments, the lengthening of any amortization or
depreciation periods, the denial of amortization or depreciation deductions, or
the reduction of loss or credit carrybacks).
(d) After the Closing Date, Buyer and the Sellers shall make available
to the other, as reasonably requested, all information, records or documents
relating to Tax Liabilities or potential Tax Liabilities of the Sellers, any
Affiliate of the Sellers or any Subject Company for any Pre-Closing Period, and
shall preserve all such information, records and documents until 60 days
following the expiration of any applicable statute of limitations, including
extensions thereof, or such other period as required by law or upon request of
the other party. Buyer and the Sellers shall also make available to each other
as reasonably requested by Buyer or the Sellers, as the case may be, personnel
responsible for preparing or maintaining information, records and documents, in
connection with Tax matters. In case at any time after the Closing Date any
further action is necessary to carry out the purposes of this Agreement, the
parties hereto shall take all such necessary action.
(e) All sales, value added, use, state or local transfer and gains
Taxes, registration, stamp and similar Taxes imposed in connection with the
transactions contemplated by this Agreement shall be borne equally by Buyer, on
the one hand, and the Sellers, on the other hand.
(f) Any payments made to the Sellers, any Subject Company or Buyer
pursuant to this Article X or in Article IX shall constitute an adjustment of
the Purchase Price for Tax purposes and shall be treated as such by Buyer and
the Sellers on their Returns to the extent permitted by law.
(g) All Tax sharing or similar agreements, if any, to which any
Subject Company is a party will be canceled at or prior to the Closing and
neither the Buyer nor any Subject Company shall have any obligation under any
such agreement.
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ARTICLE XI
MISCELLANEOUS
11.1 ASSIGNMENT. Neither this Agreement nor any of the rights or
obligations hereunder may be assigned by any party without the prior written
consent of the other party; except that Buyer may, without such consent, assign
all such rights to any lender as collateral security and assign all such rights
and obligations to a wholly owned subsidiary (or a partnership controlled by
Buyer) or Subsidiaries of Buyer or to a successor in interest to Buyer which
shall assume all obligations and Liabilities of Buyer under this Agreement,
PROVIDED, HOWEVER, that no such assignment by Buyer shall relieve Buyer in any
way of its obligations hereunder. Subject to the foregoing, this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
11.2 NOTICES. All notices, requests, demands and other
communications which are required or may be given under this Agreement shall
be in writing and shall be deemed to have been duly given when received if
personally delivered; when transmitted if transmitted by telecopy, electronic
or digital transmission method; the day after it is sent, if sent for next
day delivery to a domestic address by recognized overnight delivery service
(E.G., Federal Express); and upon receipt, if sent by certified or registered
mail, return receipt requested. In each case notice shall be sent to:
If to any of the Sellers, addressed to such Seller at:
Matrix International Logistics, Inc.
205 South Whiting Street
Alexandria, VA 22304
Telephone: (703) 461-8700
Telecopy: (703) 461-3679
with a copy to:
Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, New York 10004
Attn: Kenneth E. Adelsberg
Telephone: (212) 858-1000
Telecopy: (212) 858-1500
If to Buyer, addressed to:
International Logistics Limited
310 South Street
Morristown, NJ 07962
Attention: Roger E. Payton
Telephone: (201) 898-0290
Telecopy: (201) 898-0840
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With a copy to:
Latham & Watkins
633 W. Fifth Street, Suite 4000
Los Angeles, CA 90071-2007
Attn: Paul D. Tosetti
Telephone: (213) 485-1234
Telecopy: (213) 891-8763
or to such other place and with such other copies as either party may designate
as to itself by written notice to the others.
11.3 CHOICE OF LAW. This Agreement shall be construed in accordance
with and governed by the laws of the State of New York (without giving effect to
its choice of law principles), except with respect to matters of law concerning
the internal corporate affairs of any corporate entity which is a party to or
the subject of this Agreement, and as to those matters the law of the
jurisdiction under which the respective entity derives its powers shall govern.
11.4 ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS. This Agreement,
together with all exhibits and schedules hereto (including the Disclosure
Schedule and the other agreements referred to herein), constitutes the entire
agreement among the parties pertaining to the subject matter hereof and
supersedes all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the parties. This Agreement may not be amended
except in an instrument in writing signed on behalf of each of the parties
hereto. No amendment, supplement, modification or waiver of this Agreement
shall be binding unless executed in writing by the party to be bound thereby.
No waiver of any of the provisions of this Agreement shall be deemed or shall
constitute a waiver of any other provision hereof (whether or not similar), nor
shall such waiver constitute a continuing waiver unless otherwise expressly
provided.
11.5 MULTIPLE COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.6 EXPENSES. Except as otherwise specified herein, Buyer shall pay
its own legal, accounting, out-of-pocket and other expenses incident to this
Agreement and to any action taken by Buyer in preparation for carrying this
Agreement into effect. Subject to the provisions of Section 8.6 of this
Agreement, the Target shall pay the legal, accounting, out-of-pocket and other
expenses of the Sellers incidental to this Agreement and to any action taken by
the Sellers in preparation for carrying this Agreement into effect, which
expenses shall be deducted from the Permitted Distributions as set forth in
Section 8.6 of this Agreement.
11.7 INVALIDITY. In the event that any one or more of the provisions
contained in this Agreement or in any other instrument referred to herein,
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, then to the maximum extent permitted by law, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument.
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11.8 TITLES. The titles, captions or headings of the Articles and
Sections herein are inserted for convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement.
11.9 PUBLICITY. Except as required by law, neither Buyer nor the
Target or the Sellers shall issue any press release or make any public statement
regarding this Agreement and the transactions contemplated hereby, without prior
written approval of the other party; PROVIDED, HOWEVER, that in the case of
announcements, statements, acknowledgments or revelations which either party is
required by law to make, issue or release, the making, issuing or releasing of
any such announcement, statement, acknowledgment or revelation by the party so
required to do so by law shall not constitute a breach of this Agreement if such
party shall have given, to the extent reasonably possible, not less than two (2)
calendar days prior notice to the other party, and shall have attempted, to the
extent reasonably possible, to clear such announcement, statement,
acknowledgment or revelation with the other party. Each party hereto agrees
that it will not unreasonably withhold any such consent or clearance. Buyer
may, with the consent of Sellers, issue or make an appropriate press release or
public announcement after the Closing.
11.10 CONFIDENTIAL INFORMATION.
(a) NO DISCLOSURE. The parties acknowledge that the transaction
described herein is of a confidential nature and shall not be disclosed except
to consultants, advisors and Affiliates, or as required by law, until such time
as the parties make a public announcement regarding the transaction as provided
in Section 11.9.
(b) PRESERVATION OF CONFIDENTIALITY. In connection with the
negotiation of this Agreement, the preparation for the consummation of the
transactions contemplated hereby, and the performance of obligations hereunder,
Buyer acknowledges that it will have access to confidential and proprietary
information relating to the Subject Companies and the Target and the Sellers
acknowledge that they will have access to confidential information relating to
the Buyer and its Affiliates, in each case, including technical, manufacturing
or marketing information, ideas, methods, developments, inventions,
improvements, business plans, trade secrets, scientific or statistical data,
diagrams, drawings, specifications or other proprietary information relating
thereto, together with all analyses, compilations, studies or other documents,
records or data prepared by the Target or Buyer, as the case may be, or their
respective representatives or Affiliates, which contain or otherwise reflect or
are generated from such information ("CONFIDENTIAL INFORMATION"). The term
"CONFIDENTIAL INFORMATION" does not include information received by one party in
connection with the transactions contemplated hereby which (i) is or becomes
generally available to the public other than as a result of a disclosure by such
party or its representatives, (ii) was within such party's possession prior to
its being furnished to such party by or on behalf of the other party in
connection with the transactions contemplated hereby, provided that the source
of such information was not known by such party to be bound by a confidentiality
agreement with or other contractual, legal or fiduciary obligation of
confidentiality to the other party or any other Person with respect to such
information or (iii) becomes available to such party on a non-confidential basis
from a source other than the other party or any of their respective
representatives, provided that such source is not bound by a confidentiality
agreement with or other contractual, legal or fiduciary obligation of
confidentiality to the other party or any other Person with respect to such
information.
(c) Each party shall treat all Confidential Information of the
other party as confidential, preserve the confidentiality thereof and not
disclose any such Confidential Information,
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except to its representatives and Affiliates who need to know such
Confidential Information in connection with the transactions contemplated
hereby. Each party shall use all reasonable efforts to cause its
representatives to treat all such Confidential Information of the other party
as confidential, preserve the confidentiality thereof and not disclose any
such Confidential Information. Each party shall be responsible for any
breach of this Agreement by any of its representatives. If, however,
Confidential Information is disclosed, the party responsible for such
disclosure shall immediately notify the other party in writing and take all
reasonable steps required to prevent further disclosure.
(d) Until the Closing or the termination of this Agreement, all
Confidential Information shall remain the property of the party who originally
possessed such information. In the event of the termination of this Agreement
for any reason whatsoever, each party shall, and shall cause its representatives
to, return to the other party all Confidential Information (including all
copies, summaries and extracts thereof) furnished to such party by the other
party in connection with the transactions contemplated hereby.
(e) If one party or any of its representatives or Affiliates is
requested or required (by oral questions, interrogatories, requests for
information or documents in legal proceedings, subpoena, civil investigative
demand or other similar process) or is required by operation of law to disclose
any Confidential Information, such party shall provide the other party with
prompt written notice of such request or requirement, which notice shall, if
practicable, be at least 48 hours prior to making such disclosure, so that the
other party may seek a protective order or other appropriate remedy and/or waive
compliance with the provisions of this Agreement. If, in the absence of a
protective order or other remedy or the receipt of such a waiver, such party or
any of its representatives are nonetheless, in the opinion of counsel, legally
compelled to disclose Confidential Information, then such party may disclose
that portion of the Confidential Information which such counsel advises is
legally required to be disclosed, provided that such party uses its reasonable
efforts to preserve the confidentiality of the Confidential Information,
whereupon such disclosure shall not constitute a breach of this Agreement.
11.11 BURDEN AND BENEFIT. This Agreement shall be binding upon and
shall inure to the benefit of, the parties hereto and their respective
successors and permitted assigns. There are no third party beneficiaries of
this Agreement; PROVIDED, HOWEVER, that any Person that is not a party to this
Agreement but, by the terms of Section 9.3 or Section 10.1, is entitled to
indemnification, shall be considered a third party beneficiary of this
Agreement, with full rights of enforcement as though such Person was a signatory
to this Agreement.
11.12 KNOWLEDGE. Whenever a phrase herein is qualified by "to the
knowledge of the Sellers" or a similar phrase, it is intended to refer to the
actual knowledge of the Sellers, collectively, after having made a reasonable
investigation of the circumstances forming the basis of his knowledge by
consulting with those persons listed in Schedule 11.12 hereto, it being
understood that the Sellers shall have no other investigatory obligations.
Notwithstanding the foregoing, Buyer and the Sellers agree and acknowledge that
(i) the Sellers were actively involved in the organization of the Russian
Ventures, (ii) the Sellers have been and are currently involved in the conduct,
operation and financial administration of the Russian Ventures and (iii) "the
knowledge of the Sellers" with respect to the representations and warranties
made by the Sellers in Article VI of this Agreement incorporates the collective
knowledge acquired by the Sellers as a result of such involvement.
11.13 ATTORNEYS' FEES. If any party to this Agreement brings an
action to enforce its rights under this Agreement, the prevailing party shall be
entitled to recover its costs and expenses,
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including without limitation reasonable attorneys' fees, incurred in
connection with such action, including any appeal of such action.
11.14 RELIANCE ON REPRESENTATIONS AND WARRANTIES. The Sellers and
the Target understand that Buyer, and for purposes of certain opinions to be
delivered at the Closing, Latham & Watkins and Winthrop, Stimson, Putnam &
Roberts, will rely upon the accuracy and truth of the representations and
warranties set forth in Article V and it hereby consents to such reliance.
Buyer understands that Latham & Watkins and Winthrop, Stimson, Putnam &
Roberts, for purposes of certain opinions to be delivered at the Closing,
will rely upon the accuracy and truth of the representations and warranties
set forth in Article VII and it hereby consents to such reliance.
11.15 THIS SECTION INTENTIONALLY OMITTED.
11.16 LIMITATION OF LIABILITY. Notwithstanding anything to the
contrary in this Agreement, in no event shall any party hereto be liable for any
incidental or consequential damages occasioned by any failure to perform or the
breach of any obligation under this Agreement.
11.17 ADDITIONAL SURVIVAL. In addition to the survival of
representations and warranties and other provisions referenced in Section 11.2
of this Agreement, which shall survive pursuant to the terms of such Section,
the obligations of the Sellers and Buyer contained in Sections 2.1, 3.1, 3.2,
4.2, 4.3, 8.1, 8.2 and 11.10 and in Articles IX and X of this Agreement shall
survive the Closing Date indefinitely.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed on their respective behalf, by their respective officers
thereunto duly authorized, all as of the day and year first above written.
BUYER:
INTERNATIONAL LOGISTICS LIMITED
/s/ Roger E. Payton
-----------------------------------
By: Roger E. Payton
Title: President
SELLERS:
/s/ Douglas Cruikshank
-----------------------------------
Douglas Cruikshank
/s/ Ronald S. Cruse
-----------------------------------
Ronald S. Cruse
/s/ Steve Hitchcock
-----------------------------------
Steve Hitchcock
/s/ Paul D. Smith
-----------------------------------
Paul D. Smith
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SCHEDULES
Schedule 1.1 Interim Balance Sheet
Schedule 1.2 Interim Financial Statements
Schedule 1.3 Excluded Assets
Schedule 1.4 Target's Accounting Practices
Schedule 1.5 Permitted Encumbrances
Schedule 2.1 Purchase Price Allocation and Stock Ownership
Schedule 5.1 Target's Organization; Capitalization
Schedule 5.3 Title to Assets
Schedule 5.4 Intellectual Property Rights
Schedule 5.5 Facility Leases
Schedule 5.6 Contracts and Commitments
Schedule 5.8 Financial Statements
Schedule 5.9 Absence of Certain Changes or Events
Schedule 5.12 Litigation
Schedule 5.13 Labor Matters
Schedule 5.14 Permits, Consents, Approvals, Compliance with Law
Schedule 5.15 Tax Matters
Schedule 5.16 Severance Arrangements
Schedule 5.17 Insurance
Schedule 5.20 Customers and Suppliers
Schedule 5.21 Bank Accounts
Schedule 5.22 Environmental Matters
Schedule 5.23 Employee Benefit Plans
Schedule 5.25 Agreements to Sell Assets or Capital Stock
Schedule 5.29 Power of Attorney
Schedule 6.1 Russian Ventures' Organization; Capitalization
Schedule 6.3 Russian Ventures' Contracts and Commitments
Schedule 6.5 Russian Ventures' Absence of Certain Changes or Events
Schedule 6.8 Russian Ventures' Permits, Consents, Approvals, Compliance
with Law
Schedule 6.10 Russian Ventures' Bank Accounts
Schedule 6.11 Russian Ventures' Environmental Matters
Schedule 6.13 Russian Ventures' Power of Attorney
Schedule 7.5 Buyer's Capitalization
Schedule 7.8 Buyer's Litigation
Schedule 11.12 Sellers' Knowledge
v
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EXHIBIT 12.1
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
FOR THE PERIODS ENDED
<TABLE>
<CAPTION>
DECEMBER 31, 1996 SEPTEMBER 30, 1997
----------------- ------------------
<S> <C> <C>
EARNINGS
Loss before extraordinary item and taxes $ (22,385) $ (16,445)
Add(Subtract):
Fixed Charges 12,444 8,867
Share of loss in Equity Investments 2,344 814
Gain on Sale of Business (655) -
--------- ---------
Adjusted Earnings (8,252) (8,884)
--------- ---------
--------- ---------
FIXED CHARGES
Interest Charges 11,715 8,288
Rent expense attributable to interest 24
Amortization of Debt issuance costs 705 579
--------- ---------
Total Fixed Charges $ 12,444 $ 8,867
--------- ---------
--------- ---------
Ratio of Earnings to fixed charges - -
--------- ---------
--------- ---------
Earnings insufficient to cover fixed charges $20,696 $15,531
--------- ---------
--------- ---------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 21.1
INTERNATIONAL LOGISTICS LIMITED AND SUBSIDIARIES
ORGANIZATIONAL CHART
International Logistics Limited
(Delaware)
<S> <C> <C> <C> <C> <C>
LIW Holdings Corp. The Bekins Company LEP Profit ILLCAN, Inc. ILLSCOT, Inc. Matrix International
(Delaware) (Delaware) International, Inc. (Delaware) (Delaware) Logistics, Inc.
(Delaware) (Delaware)
90% 10%
See Schedule A See Schedule B See Schedule C See Schedule D
LEP International, Co.
(Canada; Nova Scotia
unlimited liabilty
company)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE A
LIW HOLDINGS CORP.
(DELAWARE)
LEP International
Worldwide
Limited (U.K.)
(United Kingdom)
<S> <C> <C> <C> <C>
LEP International LEP International, LEP International LEP International LEP International
Limited S.A. (Far East) Limited (S) Pte Ltd Philippines, Inc.
(United Kingdom) (Spain) (Hong Kong) (Singapore) (Philippines)
LEP Albarelli LEP International LEP International AB Olson &
S.P.A. B.V. GmbH Wright
(Italy) Netherlands (Germany) (Sweden)
</TABLE>
<PAGE>
SCHEDULE B
The Bekins Company
(Delaware)
Bekins Van Lines Company
(Nebraska)
<PAGE>
SCHEDULE C
LEP Profit International, Inc.
(Delaware)
LEP Fairs, Inc. Airfreight Consolidators LEP Profit International, Inc.
(Georgia) International, Inc. (Puerto Rico)
(New York)
<PAGE>
SCHEDULE D
Matrix International Logistics
Inc.
(Delaware)
Bay Area Matrix, Inc. L.A. Matrix, Inc. Southwest Matrix, Matrix CT Inc.
(Delaware) (Delaware) Inc. (Delaware)
(Delaware)
<PAGE>
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of International Logistics
Limited on Form S-4 of our reports dated March 31, 1997 and September 8, 1997,
appearing in the Prospectus, which is part of this Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
/s/ DELOITTE & TOUCHE LLP
- --------------------------
DELOITTE & TOUCHE LLP
Chicago, Illinois
December 17, 1997
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 of International Logistics Limited of our
report dated October 3, 1997, relating to the financial statements of LEP
International Worldwide Limited, which appears on page F-22 of such Prospectus.
We also consent to the references to us under the headings "Experts" and
"Selected Financial Data" in such Prospectus. However, it should be noted that
Price Waterhouse has not prepared or certified such "Selected Financial Data."
/s/ PRICE WATERHOUSE
PRICE WATERHOUSE
London
England
December 17, 1997
<PAGE>
Exhibit 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our firm) included in or made as part of
this Registration Statement on Form S-4 of International Logistics Limited.
December 18, 1997 /s/ Arthur Andersen LLP
-------------------------------
ARTHUR ANDERSEN LLP
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENTS OF OPERATIONS FOUND ON PAGES F-5 AND F-6 OF THE COMPANYS
FORM S-4 FOR THE YEAR ENDED DECEMBER 31, 1996 AND THE PERIOD ENDED SEPTEMBER 30,
1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001015527
<NAME> INTERNATIONAL LOGISTICS LIMITED
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997
<PERIOD-START> JAN-01-1996 JAN-01-1997
<PERIOD-END> DEC-31-1996 SEP-30-1997
<CASH> 3,424 26,124
<SECURITIES> 0 0
<RECEIVABLES> 123,153 269,701
<ALLOWANCES> 3,675 14,882
<INVENTORY> 0 0
<CURRENT-ASSETS> 135,036 310,498
<PP&E> 13,448 50,847
<DEPRECIATION> 1,667 4,151
<TOTAL-ASSETS> 236,684 457,431
<CURRENT-LIABILITIES> 123,144 310,634
<BONDS> 0 0
0 8,052
0 0
<COMMON> 2 2
<OTHER-SE> 40,617 29,243
<TOTAL-LIABILITY-AND-EQUITY> 236,684 457,431
<SALES> 225,793 550,141
<TOTAL-REVENUES> 225,793 550,141
<CGS> 181,208 436,466
<TOTAL-COSTS> 235,072 564,263
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 2,981 5,765
<INCOME-PRETAX> (12,260) (19,799)
<INCOME-TAX> (4,013) (6,546)
<INCOME-CONTINUING> (8,247) (13,253)
<DISCONTINUED> 0 0
<EXTRAORDINARY> (997) 0
<CHANGES> 0 0
<NET-INCOME> (9,244) (13,253)
<EPS-PRIMARY> (7.37) (6.48)
<EPS-DILUTED> 0 0
</TABLE>
<PAGE>
EXHIBIT 99.1
LETTER OF TRANSMITTAL
INTERNATIONAL LOGISTICS LIMITED
OFFER TO EXCHANGE ITS
9 3/4% SENIOR NOTES DUE 2007
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR ANY AND ALL OF ITS OUTSTANDING
9 3/4% SENIOR NOTES DUE 2007
PURSUANT TO THE PROSPECTUS
DATED ________ ___, 1998
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON ________________, 1998, UNLESS THE OFFER IS EXTENDED
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
FIRST TRUST NATIONAL ASSOCIATION
BY MAIL/OVERNIGHT DELIVERY/HAND:
180 East Fifth Street
St. Paul, Minnesota 55101
Attention: Specialized Finance Department
TO CONFIRM BY TELEPHONE OR FOR INFORMATION:
(612)244-1215
FACSIMILE TRANSMISSIONS:
(612)244-1537
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA FACSIMILE
TO A NUMBER OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID
DELIVERY.
THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY BEFORE THIS
LETTER OF TRANSMITTAL IS COMPLETED.
Capitalized terms used but not defined herein shall have the same meaning given
them in the Prospectus (as defined below).
This Letter of Transmittal is to be completed by holders of the Old Notes
(as defined below) either if Old Notes are to be forwarded herewith or
if tenders of Old Notes are to be made by book-entry transfer to an
account maintained by First Trust National Association (the "Exchange Agent")
at The Depository Trust Company ("DTC") pursuant to the procedures set forth
in "The Exchange Offer -- Procedures for Tendering the Old Notes"
in the Prospectus.
Holders of Old Notes whose certificates (the "Certificates") for such
Old Notes are not immediately available or who cannot deliver their
Certificates and all other required documents to the Exchange Agent on
or prior to the Expiration Date or who cannot complete the procedures
for book-entry transfer on a timely basis, must tender their Old Notes
according to the guaranteed delivery procedures set forth in "The Exchange
Offer -- Procedures for Tendering the Old Notes" in the Prospectus.
DELIVERY OF DOCUMENTS TO THE COMPANY OR DTC DOES NOT CONSTITUTE DELIVERY
TO THE EXCHANGE AGENT.
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
-1-
<PAGE>
ALL TENDERING HOLDERS COMPLETE THIS BOX
DESCRIPTION OF OLD NOTES TENDERED
<TABLE>
<CAPTION>
Please Print Name and Address of Old Notes Tendered Principal Amount of
Registered Holder Certificate (Attach Additional List of Old Notes Tendered (if Principal
(Please Fill in if Blank) Number(s)* Necessary) Amount of Old Notes Less than All)**
<S> <C> <C> <C>
TOTAL AMOUNT TENDERED:
</TABLE>
* Need not be completed by book-entry holders.
** Old Notes may be tendered in whole or in part in denominations of $1,000
and integral multiples hereof.
(BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY)
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY
BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT
WITH DTC AND COMPLETE THE FOLLOWING:
Name of Tendering Institution _____________________________________
DTC Account Number ________________________________________________
Transaction Code Number ___________________________________________
/ / CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED
DELIVERY IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name of Registered Holder(s) ______________________________________
Window Ticket Number (if any) _____________________________________
Date of Execution of Notice of Guaranteed Delivery ________________
Name of Institution Which Guaranteed Delivery _____________________
If Guaranteed Delivery is to be made By Book-Entry Transfer:
Name of Tendering Institution _____________________________________
DTC Account Number ________________________________________________
Transaction Code Number ___________________________________________
/ / CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED
OLD NOTES ARE TO BE RETURNED BY CREDITING THE DTC ACCOUNT NUMBER SET
FORTH ABOVE.
/ / CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE OLD NOTES
FOR ITS OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING
ACTIVITIES (A "PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR
SUPPLEMENTS THERETO.
Name: _____________________________________________________________
Address: __________________________________________________________
-2-
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to International Logistics
Limited, (the "Company"), the above described aggregate principal amount of
the Company's 9 3/4% Senior Notes Due 2007 (the "Old Notes") in exchange
for a like aggregate principal amount of the Company's 9 3/4% Senior
Notes Due 2007 (the "New Notes") which have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), upon the terms and
subject to the conditions set forth in the Prospectus dated _____________ __,
1998 (as the same may be amended or supplemented from time to time, the
"Prospectus"), receipt of which is acknowledged, and in this Letter of
Transmittal (which, together with the Prospectus, constitute the "Exchange
Offer").
Subject to and effective upon the acceptance for exchange of
all or any portion of the Old Notes tendered herewith in accordance with the
terms and conditions of the Exchange Offer (including, if the Exchange Offer
is extended or amended, the terms and conditions of any such extension or
amendment), the undersigned hereby sells, assigns and transfers to or upon
the order of the Company all right, title and interest in and to such Old
Notes as are being tendered herewith. The undersigned hereby irrevocably
constitutes and appoints the Exchange Agent as its agent and attorney-in-fact
(with full knowledge that the Exchange Agent is also acting as agent of the
Company in connection with the Exchange Offer) with respect to the tendered
Old Notes, with full power of substitution (such power of attorney being
deemed to be an irrevocable power coupled with an interest), subject only to
the right of withdrawal described in the Prospectus, to (i) deliver
Certificates for Old Notes to the Company together with all accompanying
evidences of transfer and authenticity to, or upon the order of, the Company,
upon receipt by the Exchange Agent, as the undersigned's agent, of the New
Notes to be issued in exchange for such Old Notes, (ii) present Certificates
for such Old Notes for transfer, and to transfer the Old Notes on the books
of the Company, and (iii) receive for the account of the Company all benefits
and otherwise exercise all rights of beneficial ownership of such Old Notes,
all in accordance with the terms and conditions of the Exchange Offer.
THE UNDERSIGNED HEREBY REPRESENTS AND WARRANTS THAT THE
UNDERSIGNED HAS FULL POWER AND AUTHORITY TO TENDER, EXCHANGE, SELL, ASSIGN
AND TRANSFER THE OLD NOTES TENDERED HEREBY AND THAT, WHEN THE SAME ARE
ACCEPTED FOR EXCHANGE, THE COMPANY WILL ACQUIRE GOOD, MARKETABLE AND
UNENCUMBERED TITLE THERETO, FREE AND CLEAR OF ALL LIENS, RESTRICTIONS,
CHARGES AND ENCUMBRANCES, AND THAT THE OLD NOTES TENDERED HEREBY ARE NOT
SUBJECT TO ANY ADVERSE CLAIMS OR PROXIES. THE UNDERSIGNED WILL, UPON
REQUEST, EXECUTE AND DELIVER ANY ADDITIONAL DOCUMENTS DEEMED BY THE COMPANY
OR THE EXCHANGE AGENT TO BE NECESSARY OR DESIRABLE TO COMPLETE THE EXCHANGE,
ASSIGNMENT AND TRANSFER OF THE OLD NOTES TENDERED HEREBY, AND THE UNDERSIGNED
WILL COMPLY WITH ITS OBLIGATIONS UNDER THE REGISTRATION RIGHTS AGREEMENT.
THE UNDERSIGNED HAS READ AND AGREES TO ALL OF THE TERMS OF THE EXCHANGE OFFER.
The names(s) and address(es) of the registered holder(s) of
the Old Notes tendered hereby should be printed above, if they are not
already set forth above, as they appear on the Certificates representing such
Old Notes. The Certificate number(s) and the Old Notes that the undersigned
wishes to tender should be indicated in the appropriate boxes above.
If any tendered Old Notes are not exchanged pursuant to the
Exchange Offer for any reason, or if Certificates are submitted for more Old
Notes than are tendered or accepted for exchange, Certificates for such
nonexchanged or nontendered Old Notes will be returned (or, in the case of
Old Notes tendered by book-entry transfer, such Old Notes will be credited to
an account maintained at DTC), without expense to the tendering holder,
promptly following the expiration or termination of the Exchange Offer.
The undersigned understands that tenders of Old Notes
pursuant to any one of the procedures described in "The Exchange Offer --
Procedures for Tendering the Old Notes" in the Prospectus and in the
instructions hereto will, upon the Company's acceptance for exchange of such
tendered Old Notes, constitute a binding agreement between the undersigned
and the Company upon the terms and subject to the conditions of the Exchange
Offer. The undersigned recognizes that, under certain circumstances set
forth in the Prospectus, the Company may not be required to accept for
exchange any of the Old Notes tendered hereby.
3
<PAGE>
Unless otherwise indicated herein in the box entitled
"Special Issuance Instructions" below, the undersigned hereby directs that
the New Notes be issued in the name(s) of the undersigned or, in the case of
a book-entry transfer of the Old Notes, that such New Notes be credited to
the account indicated above maintained at DTC. If applicable, substitute
Certificates representing the Old Notes not exchanged or not accepted for
exchange will be issued to the undersigned or, in the case of a book-entry
transfer of Old Notes, will be credited to the account indicated above
maintained at DTC. Similarly, unless otherwise indicated under "Special
Delivery Instructions," please deliver New Notes to the undersigned at the
address shown below the undersigned's signature.
BY TENDERING OLD NOTES AND EXECUTING THIS LETTER OF
TRANSMITTAL, THE UNDERSIGNED HEREBY REPRESENTS AND AGREES THAT (I) THE
UNDERSIGNED IS NOT AN "AFFILIATE" OF THE COMPANY, (II) ANY NEW NOTES TO BE
RECEIVED BY THE UNDERSIGNED ARE BEING ACQUIRED IN THE ORDINARY COURSE OF ITS
BUSINESS, (III) THE UNDERSIGNED HAS NO ARRANGEMENT OR UNDERSTANDING WITH ANY
PERSON TO PARTICIPATE IN A DISTRIBUTION (WITHIN THE MEANING OF THE SECURITIES
ACT) OF NEW NOTES TO BE RECEIVED IN THE EXCHANGE OFFER, AND (IV) IF THE
UNDERSIGNED IS NOT A BROKER-DEALER, THE UNDERSIGNED IS NOT ENGAGED IN, AND
DOES NOT INTEND TO ENGAGE IN, A DISTRIBUTION (WITHIN THE MEANING OF THE
SECURITIES ACT) OF SUCH NEW NOTES. BY TENDERING OLD NOTES PURSUANT TO THE
EXCHANGE OFFER AND EXECUTING THIS LETTER OF TRANSMITTAL, A HOLDER OF OLD
NOTES WHICH IS A BROKER-DEALER REPRESENTS AND AGREES, CONSISTENT WITH CERTAIN
INTERPRETIVE LETTERS ISSUED BY THE STAFF OF THE DIVISION OF CORPORATION
FINANCE OF THE SECURITIES AND EXCHANGE COMMISSION TO THIRD PARTIES, THAT (A)
SUCH OLD NOTES HELD BY THE BROKER-DEALER ARE HELD ONLY AS A NOMINEE, OR (B)
SUCH OLD NOTES WERE ACQUIRED BY SUCH BROKER-DEALER FOR ITS OWN ACCOUNT AS A
RESULT OF MARKET-MAKING ACTIVITIES OR OTHER TRADING ACTIVITIES AND IT WILL
DELIVER THE PROSPECTUS (AS AMENDED OR SUPPLEMENTED FROM TIME TO TIME) MEETING
THE REQUIREMENTS OF THE SECURITIES ACT IN CONNECTION WITH ANY RESALE OF SUCH
NEW NOTES (PROVIDED THAT, BY SO ACKNOWLEDGING AND BY DELIVERING A PROSPECTUS,
SUCH BROKER-DEALER WILL NOT BE DEEMED TO ADMIT THAT IT IS AN "UNDERWRITER"
WITHIN THE MEANING OF THE SECURITIES ACT).
THE COMPANY HAS AGREED THAT, SUBJECT TO THE PROVISIONS OF
THE REGISTRATION RIGHTS AGREEMENT, THE PROSPECTUS, AS IT MAY BE AMENDED OR
SUPPLEMENTED FROM TIME TO TIME, MAY BE USED BY A PARTICIPATING BROKER-DEALER
(AS DEFINED BELOW) IN CONNECTION WITH RESALES OF NEW NOTES RECEIVED IN
EXCHANGE FOR OLD NOTES, WHERE SUCH OLD NOTES WERE ACQUIRED BY SUCH
PARTICIPATING BROKER-DEALER FOR ITS OWN ACCOUNT AS A RESULT OF MARKET-MAKING
ACTIVITIES OR OTHER TRADING ACTIVITIES, FOR A PERIOD OF UP TO ONE YEAR AFTER
THE DATE WHEN THE REGISTRATION STATEMENT BECOMES EFFECTIVE OR, IF EARLIER,
WHEN ALL SUCH NEW NOTES HAVE BEEN DISPOSED OF BY SUCH PARTICIPATING
BROKER-DEALER. IN THAT REGARD, EACH BROKER-DEALER WHO ACQUIRED OLD NOTES FOR
ITS OWN ACCOUNT AS A RESULT OF MARKET-MAKING OR OTHER TRADING ACTIVITIES (A
"PARTICIPATING BROKER-DEALER"), BY TENDERING SUCH OLD NOTES AND EXECUTING
THIS LETTER OF TRANSMITTAL, AGREES THAT UPON RECEIPT OF NOTICE FROM THE
COMPANY OF THE OCCURRENCE OF ANY EVENT OR THE DISCOVERY OF ANY FACT WHICH
MAKES ANY STATEMENT CONTAINED OR INCORPORATED BY REFERENCE IN THE PROSPECTUS
UNTRUE IN ANY MATERIAL RESPECT OR WHICH CAUSES THE PROSPECTUS TO OMIT TO
STATE A MATERIAL FACT NECESSARY IN ORDER TO MAKE THE STATEMENTS CONTAINED OR
INCORPORATED BY REFERENCE THEREIN, IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH
THEY WERE MADE, NOT MISLEADING OR OF THE OCCURRENCE OF CERTAIN OTHER EVENTS
SPECIFIED IN THE REGISTRATION RIGHTS AGREEMENT, SUCH PARTICIPATING
BROKER-DEALER WILL SUSPEND THE SALE OF NEW NOTES PURSUANT TO THE PROSPECTUS
UNTIL THE COMPANY HAS AMENDED OR SUPPLEMENTED THE PROSPECTUS TO CORRECT SUCH
MISSTATEMENT OR OMISSION AND HAS FURNISHED COPIES OF THE AMENDED OR
SUPPLEMENTED PROSPECTUS TO THE PARTICIPATING BROKER-DEALER OR THE COMPANY HAS
GIVEN NOTICE THAT THE SALE OF THE NEW NOTES MAY BE RESUMED, AS THE CASE MAY
BE. IF THE COMPANY GIVES SUCH NOTICE TO SUSPEND THE SALE OF THE NEW NOTES, IT
SHALL EXTEND THE ONE YEAR PERIOD REFERRED TO ABOVE DURING WHICH PARTICIPATING
BROKER-DEALERS ARE ENTITLED TO USE THE PROSPECTUS IN CONNECTION
4
<PAGE>
WITH THE RESALE OF NEW NOTES BY THE NUMBER OF DAYS DURING THE PERIOD FROM AND
INCLUDING THE DATE OF THE GIVING OF SUCH NOTICE TO AND INCLUDING THE DATE ON
WHICH THE COMPANY HAS GIVEN NOTICE THAT THE SALE OF NEW NOTES MAYBE RESUMED,
AS THE CASE MAY BE.
All authority herein conferred or agreed to be conferred in
this Letter of Transmittal shall survive the death or incapacity of the
undersigned and any obligation of the undersigned hereunder shall be binding
upon the heirs, executors, administrators, personal representatives, trustees
in bankruptcy, legal representatives, successors and assigns of the
undersigned. Except as stated in the Prospectus, this tender is irrevocable.
<PAGE>
HOLDER(S) SIGN HERE
(SEE INSTRUCTIONS 2, 5 AND 6)
(PLEASE COMPLETE SUBSTITUTE FORM W-9 ON PAGE 13)
(NOTE: SIGNATURE(S) MUST BE GUARANTEED IF REQUIRED BY INSTRUCTION 2)
Must be signed by registered holder(s) exactly as name(s) appear(s)
on Certificate(s) for the Old Notes hereby tendered or on a security position
listing, or by any person(s) authorized to be come the registered holder(s)
by endorsements and documents transmitted herewith (including such opinions
of counsel, certifications and other information as may be required by the
Company or the Trustee for the Old Notes to comply with the restrictions on
transfer applicable to the Old Notes). If signature is by an
attorney-in-fact, executor, administrator, trustee, guardian, officer of a
corporation or another acting in a fiduciary capacity or representing
capacity, please set forth the signer's full title. See Instruction 5.
_______________________________________________________________________________
_______________________________________________________________________________
(SIGNATURE(S) OF HOLDER(S))
Date:____________________________________________________________________, 1997
Name(s)________________________________________________________________________
_______________________________________________________________________________
(PLEASE PRINT)
Capacity (full title)__________________________________________________________
Address________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone Number_________________________________________________
_______________________________________________________________________________
(TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER(S))
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 2 AND 5)
_______________________________________________________________________________
(AUTHORIZED SIGNATURE)
Date:____________________________________________________________________, 1997
Name of Firm___________________________________________________________________
Capacity (full title)__________________________________________________________
(PLEASE PRINT)
Address________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone Number ________________________________________________
-6-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5 AND 6) (SEE INSTRUCTIONS 1, 5 AND 6)
To be completed ONLY if the New Notes are to be issued in To be completed ONLY if New Notes are to be sent to
the name of someone other than the registered holder of the someone other than the registered holder of the Old Notes
Old Notes whose name(s) appear(s) above. whose name(s) appear(s) above, or such registered holder(s) at
an address other than that shown above.
Issue: Send:
/ / Old Notes not tendered / / Old Notes not tendered
/ / New Notes, to: / / New Notes, to:
Name(s)_____________________________________________________ Name(s)_____________________________________________________
Address_____________________________________________________ Address_____________________________________________________
____________________________________________________________ ____________________________________________________________
____________________________________________________________ ____________________________________________________________
____________________________________________________________ ____________________________________________________________
(INCLUDE ZIP CODE) (INCLUDE ZIP CODE)
Area Code and Telephone Number______________________________ Area Code and Telephone Number______________________________
____________________________________________________________ ____________________________________________________________
(TAX IDENTIFICATION OR SOCIAL (TAX IDENTIFICATION OR SOCIAL
SECURITY NUMBER(S)) SECURITY NUMBER(S))
</TABLE>
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED
DELIVERY PROCEDURES. This Letter of Transmittal is to be completed either if
(a) Certificates are to be forwarded herewith or (b) tenders are to be made
pursuant to the procedures for tender by book-entry transfer set forth in
"The Exchange Offer--Procedures for Tendering Old Notes" in the Prospectus.
Certificates, or timely confirmation of a book-entry transfer of such Old
Notes into the Exchange Agent's account at DTC, as well as this Letter of
Transmittal (or facsimile thereof), properly completed and duly executed,
with any required signature guarantees, and any other documents required by
this Letter of Transmittal, must be received by the Exchange Agent at its
address set forth herein on or prior to the Expiration Date. Old Notes may
be tendered in whole or in part in the principal amount of $1,000 and
integral multiples of $1,000.
Holders who wish to tender their Old Notes and (i) whose Old Notes are
not immediately available or (ii) who cannot deliver their Old Notes, this
Letter of Transmittal and all other required documents to the Exchange Agent
on or prior to the Expiration Date or (iii) who cannot complete the
procedures for delivery by book-entry transfer on a timely basis, may tender
their Old Notes by properly completing and duly executing a Notice of
Guaranteed Delivery pursuant to the guaranteed delivery procedures set forth
in "The Exchange Offer--Procedures for Tendering Old Notes" in the
Prospectus. Pursuant to such procedures: (i) such tender must be made by or
through an Eligible Institution (as defined below); (ii) a properly completed
and duly executed Notice of Guaranteed Delivery, substantially in the form
made available by the Company, must be received by the Exchange Agent on or
prior to the Expiration Date; and (iii) the Certificates (or a book-entry
confirmation (as defined in the Prospectus)) representing all tendered Old
Notes, in proper form for transfer, together with a Letter of Transmittal (or
facsimile thereof)), properly completed and duly executed, with any required
signature guarantees and any other documents required by this Letter of
Transmittal, must be received by the Exchange Agent within five New York
Stock Exchange, Inc. trading days after the date of execution of such Notice
of Guaranteed Delivery, all as provided in "The Exchange Offer--Guaranteed
Delivery Procedures" in the Prospectus.
The Notice of Guaranteed Delivery may be delivered by hand or
transmitted by facsimile or mail to the Exchange Agent, and must include a
guarantee by an Eligible Institution in the form set forth in such Notice.
For Old Notes to be properly tendered pursuant to the guaranteed delivery
procedure, the Exchange Agent must receive a Notice of Guaranteed Delivery on
or prior to the Expiration Date. As used herein and in the Prospectus,
"Eligible Institution" means a firm or other entity identified in Rule
17Ad-15 under the Exchange Act as "an eligible guarantor institution,"
including (as such terms are defined therein) (i) a bank; (ii) a broker,
dealer, municipal securities broker or dealer or government securities broker
or dealer; (iii) a credit union; (iv) a national securities exchange,
registered securities association or clearing agency; or (v) a savings
association that is a participant in a Securities Transfer Association.
THE METHOD OF DELIVERY OF CERTIFICATES, THIS LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING
HOLDER AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY
THE EXCHANGE AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN
RECEIPT REQUESTED, PROPERLY INSURED, OR OVERNIGHT DELIVERY SERVICE IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE
TIMELY DELIVERY.
The Company will not accept any alternative, conditional or contingent
tenders. Each tendering holder, by execution of a Letter of Transmittal (or
facsimile thereof), waives any right to receive any notice of the acceptance of
such tender.
8
<PAGE>
2. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of
Transmittal is required if:
(i) this Letter of Transmittal is signed by the registered
holder (which term, for purposes of this document, shall
include any participant in DTC whose name appears on a
security position listing as the owner of the Old Notes)
of Old Notes tendered herewith, unless such holder(s) has
completed either the box entitled "Special Issuance
Instructions" or the box entitled "Special Delivery
Instructions" above, or
(ii) such Old Notes are tendered for the account of a firm
that is an Eligible Institution.
In all other cases, an Eligible Institution must guarantee the signature(s) on
this Letter of Transmittal. See Instruction 5.
3. INADEQUATE SPACE. If the space provided in the box captioned
"Description of Old Notes" is inadequate, the Certificate number(s) and/or the
principal amount of Old Notes and any other required information should be
listed on a separate signed schedule which is attached to this Letter of
Transmittal.
4. PARTIAL TENDERS AND WITHDRAWAL RIGHTS. Tender of the Old Notes
will be accepted only in the principal amount of $1,000 and integral
multiples thereof. If less than all the Old Notes evidenced by any
Certificate submitted are to be tendered, fill in the principal amount of the
Old Notes which are to be tendered in the box entitled "Principal Amount of
Old Notes Tendered (if less than all)." In such case, new Certificate(s) for
the remainder of the Old Notes that were evidenced by your old Certificate(s)
will only be sent to the holder of the Old Note, promptly after the
Expiration Date. All Old Notes represented by Certificates delivered to the
Exchange Agent will be deemed to have been tendered unless otherwise
indicated.
Except as otherwise provided herein, tenders of the Old Notes may be
withdrawn at any time on or prior to the Expiration Date. In order for a
withdrawal to be effective on or prior to that time, a written, telegraphic,
telex or facsimile transmission of such notice of withdrawal must be timely
received by the Exchange Agent at one of its addresses set forth above or in
the Prospectus on or prior to the Expiration Date. Any such notice of
withdrawal must specify the name of the person who tendered the Old Notes to
be withdrawn, the aggregate principal amount of Old Notes to be withdrawn,
and (if Certificates for Old Notes have been tendered) the name of the
registered holder of the Old Notes as set forth on the Certificate for the
Old Notes, if different from that of the person who tendered such Old Notes.
If Certificates for the Old Notes have been delivered or otherwise identified
to the Exchange Agent, then prior to the physical release of such
Certificates for the Old Notes, the tendering holder must submit the serial
numbers shown on the particular Certificates for the Old Notes to be
withdrawn and the signature on the notice of withdrawal must be guaranteed by
an Eligible Institution, except in the case of Old Notes tendered for the
account of an Eligible Institution. If Old Notes have been tendered pursuant
to the procedures for book-entry transfer set forth in "The Exchange
Offer--Procedures for Tendering Old Notes," the notice of withdrawal must
specify the name and number of the account at DTC to be credited with the
withdrawal of Old Notes, in which case a notice of withdrawal will be
effective if delivered to the Exchange Agent by written, telegraphic, telex
or facsimile transmission. Withdrawals of tenders of Old Notes may not be
rescinded. Old Notes properly withdrawn will not be deemed validly tendered
for purposes of the Exchange Offer, but may be retendered at any subsequent
time on or prior to the Expiration Date by following any of the procedures
described in the Prospectus under "The Exchange Offer--Procedures for
Tendering Old Notes."
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by the Company, in its
sole discretion, whose determination shall be final and binding on all parties.
Neither the Company, any affiliates or assigns of the Company, the Exchange
Agent nor any
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<PAGE>
other person shall be under any duty to give any notification of any
irregularities in any notice of withdrawal or incur any liability for failure
to give any such notification. Any Old Notes which have been tendered but
which are withdrawn will be returned to the holder thereof without cost to
such holder promptly after withdrawal.
5. SIGNATURES ON LETTER OF TRANSMITTAL, ASSIGNMENTS AND ENDORSEMENTS.
If this Letter of Transmittal is signed by the registered holder(s) of the
Old Notes tendered hereby, the signature(s) must correspond exactly with the
name(s) as written on the face of the Certificate(s) without alteration,
enlargement or any change whatsoever.
If any of the Old Notes tendered hereby are owned of record by two or
more joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Old Notes are registered in different name(s) on
several Certificates, it will be necessary to complete, sign and submit as
many separate Letters of Transmittal (or facsimiles thereof) as there are
different registrations of Certificates.
If this Letter of Transmittal or any Certificates or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing and must submit proper
evidence satisfactory to the Company, in its sole discretion, of such
persons' authority to so act.
When this Letter of Transmittal is signed by the registered owner(s)
of the Old Notes listed and transmitted hereby, no endorsement(s) of
Certificate(s) or separate bond power(s) are required unless New Notes are to
be issued in the name of a person other than the registered holder(s).
Signature(s) on such Certificate(s) or bond power(s) must be guaranteed by an
Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered owner(s) of the Old Notes listed, the Certificates must be
endorsed or accompanied by appropriate bond powers, signed exactly as the
name or names of the registered owner(s) appear(s) on the Certificates, and
also must be accompanied by such opinions of counsel, certifications and
other information as the Company or the Trustee for the Old Notes may require
in accordance with the restrictions on transfer applicable to the Old Notes.
Signatures on such Certificates or bond powers must be guaranteed by an
Eligible Institution.
6. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If New Notes are to be
issued in the name of a person other than the signer of this Letter of
Transmittal, or if New Notes are to be sent to someone other than the signer of
this Letter of Transmittal or to an address other than that shown above, the
appropriate boxes on this Letter of Transmittal should be completed.
Certificates of Old Notes not exchanged will be returned by mail or, if tendered
by book-entry transfer, by crediting the account indicated above maintained at
DTC. See Instruction 4.
7. IRREGULARITIES. The Company will determine, in its sole
discretion, all questions as to the form of documents, validity, eligibility
(including time of receipt) and acceptance for exchange of any tender of Old
Notes, which determination shall be final and binding on all parties. The
company reserves the absolute right to reject any and all tenders determined
by it not to be in proper form or the acceptance of which, or exchange for,
may, in the view of counsel to the Company, be unlawful. The Company also
reserves the absolute right, subject to applicable law, to waive any of the
conditions of the Exchange Offer set forth in the Prospectus under "The
Exchange Offer--Certain Conditions to the Exchange Offer" or any conditions
or irregularity in any tender of Old Notes of any particular holder whether
or not similar conditions or irregularities are waived in the case of other
holders. The Company's interpretation of the terms and conditions of the
Exchange Offer (including this Letter of Transmittal and the instructions
hereto) will be final and binding. No
10
<PAGE>
tender of Old Notes will be deemed to have been validly made until all
irregularities with respect to such tender have been cured or waived.
Neither the Company, any affiliates or assigns of the Company, the Exchange
Agent, nor any other person shall be under any duty to give notification of
any irregularities in tenders or incur any liability for failure to give such
notification.
8. QUESTIONS, REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES.
Questions and requests for assistance may be directed to the Exchange Agent
at its address and telephone number set forth on the front of this Letter of
Transmittal. Additional copies of the Prospectus, the Notice of Guaranteed
Delivery and the Letter of Transmittal may be obtained from the Exchange
Agent or from your broker, dealer, commercial bank, trust company or other
nominee.
9. 31% BACKUP WITHHOLDING; SUBSTITUTE FORM W-9. Under U.S. Federal
income tax law, a holder whose tendered Old Notes are accepted for exchange
is required to provide the Exchange Agent with such holder's correct taxpayer
identification number ("TIN") on Substitute Form W-9 below. If the Exchange
Agent is not provided with the correct TIN, the Internal Revenue Service (the
"IRS") may subject the holder or other payee to a $50 penalty. In addition,
payments to such holders or other payees with respect to Old Notes exchanged
pursuant to the Exchange Offer may be subject to 31% backup withholding.
The box in Part 2 of the Substitute Form W-9 may be checked in if the
tendering holder has not been issued a TIN and has applied for a TIN or
intends to apply for a TIN in the near future. If the box in Part 2 is
checked, the holder or other payee must also complete the Certificate of
Awaiting Taxpayer Identification Number below in order to avoid backup
withholding. Notwithstanding that the box in Part 2 is checked and the
Certificate of Awaiting Taxpayer Identification Number is completed, the
Exchange Agent will withhold 31% of all payments made prior to the time a
properly certified TIN is provided to the Exchange Agent. The Exchange Agent
will retain such amounts withheld during the 60 day period following the date
of the Substitute Form W-9. If the holder furnishes the Exchange Agent with
its TIN within 60 days after the date of the Substitute Form W-9, the amounts
retained during the 60 day period will be remitted to the holder and no
further amounts shall be retained or withheld from payments made to the
holder thereafter. If, however, the holder has not provided the Exchange
Agent with its TIN within such 60 day period, amounts withheld will be
remitted to the IRS as backup withholding. In addition, 31% of all payments
made thereafter will be withheld and remitted to the IRS until a correct TIN
is provided.
The holder is required to give the Exchange Agent the TIN (e.g.,
social security number or employer identification number) of the registered
owner of the Old Notes or of the last transferee appearing on the transfers
attached to, or endorsed on, the Old Notes. If the Old Notes are registered
in more than one name or are not in the name of the actual owner, consult the
enclosed "Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9" for additional guidance on which number to report.
Certain holders (including, among others, corporations, financial
institutions and certain foreign persons) may not be subject to these backup
withholding and reporting requirements. Such holders should nevertheless
complete the attached Substitute Form W-9 below, and write "exempt" on the
face thereof, to avoid possible erroneous backup withholding. A foreign
person may qualify as an exempt recipient by submitting a properly completed
IRS Form W-8, signed under penalties of perjury, attesting to that holder's
exempt status. Please consult the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for additional
guidance on which holders are exempt from backup withholding.
Backup withholding is not an additional U.S. Federal income tax.
Rather, the U.S. Federal income tax liability of a person subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained.
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<PAGE>
10. LOST, DESTROYED OR STOLEN CERTIFICATES. If any Certificate(s)
representing Old Notes have been lost, destroyed or stolen, the holder should
promptly notify the Exchange Agent. The holder will then be instructed as to
the steps that must be taken in order to replace the Certificate(s). This
Letter of Transmittal and related documents cannot be processed until the
procedures for replacing lost, destroyed or stolen Certificate(s) have been
followed.
11. SECURITY TRANSFER TAXES. Holders who tender their Old Notes for
exchange will not be obligated to pay any transfer taxes in connection
therewith. If, however, New Notes are to be delivered to, or are to be
issued in the name of, any person other than the registered holder of the Old
Notes tendered, or if a transfer tax is imposed for any reason other than the
exchange of Old Notes in connection with the Exchange Offer, then the amount
of any such transfer tax (whether imposed on the registered holder or any
other persons) will be payable by the tendering holder. If satisfactory
evidence of payment of such taxes or exemption therefrom is not submitted
with the Letter of Transmittal, the amount of such transfer taxes will be
billed directly to such tendering holder.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE THEREOF) AND ALL
OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR
TO THE EXPIRATION DATE.
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<PAGE>
TO BE COMPLETED BY ALL
TENDERING SECURITYHOLDERS
(SEE INSTRUCTION 9)
PAYER'S NAME:____________
SUBSTITUTE
FORM W-9
PART 1 - PLEASE PROVIDE YOUR TIN ON THE LINE AT
RIGHT AND CERTIFY BY SIGNING AND DATING BELOW
TIN_____________
Social Security Number or
Employer Identification Number
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
PAYOR'S REQUEST FOR
TAXPAYER IDENTIFICATION
NUMBER (TIN) AND
CERTIFICATION
NAME (Please Print)
______________________________________________
ADDRESS_______________________________________
______________________________________________
CITY__________________________________________
STATE___________________ ZIP CODE___________
PART 2
Awaiting
TIN / /
Part 3 - CERTIFICATION - UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT (1)
the number shown on this form is my correct taxpayer identification number
(or I am waiting for a number to be issued to me), (2) I am not subject to
backup withholding either because (i) I am exempt from backup withholding,
(ii) I have not been notified by the Internal Revenue Service ("IRS") that I
am subject to backup withholding as a result of a failure to report all
interest or dividends, or (iii) the IRS has notified me that I am not longer
subject to backup withholding, and (3) any other information provided on this
form is true and correct.
SIGNATURE______________________________ DATE ___________________
You must cross out item (iii) in Part (2) above if you have been notified by
the IRS that you are subject to backup withholding because of underreporting
interest or dividends on your tax return and you have not been notified by
the IRS that you are no longer subject to backup withholding.
NOTE; FAILURE TO COMPLETE AND RETURN THIS FORM MAY IN CERTAIN CIRCUMSTANCES
RESULT IN BACKUP WITHHOLDING OF 31% OF ANY AMOUNTS PAID TO YOU PURSUANT TO
THE EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION
OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTION FORM W-9 FOR ADDITIONAL
DETAILS.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (1) I have mailed or delivered
an application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(2) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number by the
time of payment, 31% of all payments made to me on account of the New Notes
shall be retained until I provide a taxpayer identification number to the
Exchange Agent and that, if I do not provide my taxpayer identification
number within 60 days, such retained amounts shall be remitted to the
Internal Revenue Service as backup withholding and 31% of all reportable
payments made to me thereafter will be withheld and remitted to the Internal
Revenue Service until I provide a taxpayer identification number.
Signature _____________________________ Date _______________, 1997
<PAGE>
Exhibit 99.2
NOTICE OF GUARANTEED DELIVERY
FOR TENDER OF
9 3/4% SENIOR SUBORDINATED NOTES DUE 2007
OF
STATION CASINOS, INC.
This Notice of Guaranteed Delivery, or one substantially equivalent to this
form, must be used to accept the Exchange Offer (as defined below) if
(i) certificates for the Company's (as defined below) 9 3/4% Senior Notes Due
2007 (the "Old Notes") are not immediately available, (ii) the Old Notes, the
Letter of Transmittal and all other required documents cannot be delivered to
______________ (the "Exchange Agent") on or prior to the Expiration Date (as
defined in the Prospectus referred to below) or (iii) the procedures for
delivery by book-entry transfer cannot be completed on a timely basis. This
Notice of Guaranteed Delivery may be delivered by hand, overnight courier or
mail, or transmitted by facsimile transmission, to the Exchange Agent. See "The
Exchange Offer - Procedures for Tendering the Notes" in the Prospectus.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
---------------------------
BY MAIL/OVERNIGHT DELIVERY/HAND:
TO CONFIRM BY TELEPHONE OR FOR INFORMATION:
FACSIMILE TRANSMISSIONS:
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF THIS NOTICE OF GUARANTEED DELIVERY VIA FACSIMILE
TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE SIGNATURES.
IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN
"ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEE
MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER
OF TRANSMITTAL.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to International Logistics Limited, a Delaware
corporation (the "Company"), upon the terms and subject to the conditions set
forth in the Prospectus dated November __, 1997 (as the same may be amended or
supplemented from time to time, the "Prospectus"), and the related Letter of
Transmittal (which together constitute the "Exchange Offer"), receipt of which
is hereby acknowledged, the aggregate principal amount of the Notes set forth
below pursuant to the guaranteed delivery procedures set forth in the Prospectus
under the caption, "The Exchange Offer -- Procedures for Tendering Old Notes."
Aggregate Principal Name(s) of Registered Holder(s)
Amount Tendered:
Certificate No(s). Address(es):
(if available): Area Code and Telephone Number(s).
If the Notes will be tendered by book-entry transfer, provide the following
information:
Signature(s):
DTC Account Number:
Date:
THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED
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<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm or other entity identified in Rule 17Ad-15 under the
Securities Exchange Act of 1934, as amended, as an "eligible guarantor
institution," including (as such terms are defined therein): (i) a bank;
(ii) a broker, dealer, municipal securities broker, municipal securities dealer,
government securities broker, government securities dealer; (iii) a credit
union; (iv) a national securities exchange, registered securities association or
clearing agency; or (v) a savings association that is a participant in a
Securities Transfer Association recognized program (each of the foregoing being
referred to as an "Eligible Institution"), hereby guarantees to deliver to the
Exchange Agent, at one of its addresses set forth above, either the Notes
tendered hereby in proper form for transfer, or confirmation of the book entry
transfer of such Notes to the Exchange Agent's account at The Depositary Trust
Company ("DTC"), pursuant to the procedures for book-entry transfer set forth in
the Prospectus, in either case together with one or more properly completed and
duly executed Letter(s) of Transmittal (or facsimile thereof) and any other
required documents within five business days after the date of execution of this
Notice of Guaranteed Delivery.
The undersigned acknowledges that it must deliver the Letter(s) of Transmittal
and the Notes tendered hereby to the Exchange Agent within the time period set
forth above and that failure to do so could result in a financial loss to the
undersigned.
Name of Firm
(Authorized Signature)
(Title)
Address
(INCLUDE ZIP CODE)
Area Code and Telephone Number
Date:
NOTE:DO NOT SEND THE NOTES WITH THIS NOTICE OF GUARANTEED DELIVERY. ACTUAL
SURRENDER OF THE NOTES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, A
PROPERLY COMPLETED AND DULY EXECUTED LETTER OF TRANSMITTAL AND ANY OTHER
REQUIRED DOCUMENTS.
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