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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
COMMISSION FILE NUMBER 333-42607
GEOLOGISTICS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 22-3438013
(STATE OF OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1251 EAST DYER ROAD, SUITE 200
SANTA ANA, CALIFORNIA 92705
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (714) 513-3000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE.
-----------------------
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
-----
The aggregate market value of the equity of the Registrant held by nonaffiliates
of the registrant is not applicable as the equity of the registrant is privately
held.
At March 28, 2000, 2,129,893 shares of the Registrant's Common Stock, $.001
par value, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE: NONE
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TABLE OF CONTENTS
PART I.
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Item 1. Business of the Company...................................................... 2
Item 2. Properties................................................................... 15
Item 3. Legal Proceedings............................................................ 15
Item 4. Submission of Matters to a Vote of Security Holders.......................... 15
PART II.
Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters..... 16
Item 6. Selected Consolidated Financial Data of the Company.......................... 16
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations........................................................ 18
Item 7a. Quantitative and Qualitative Disclosures About Market Risk................... 28
Item 8. Consolidated Financial Statements and Supplementary Data..................... 30
Item 9. Change in and Disagreements with Accountants on Accounting and Financial
Disclosure................................................................. 30
PART III.
Item 10. Directors and Executive Officers of the Registrant........................... 32
Item 11. Executive Compensation....................................................... 34
Item 12. Security Ownership of Certain Beneficial Owners and Management............... 40
Item 13. Certain Relationships and Related Transactions............................... 41
Part IV.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.............. 42
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PART I.
ITEM 1. BUSINESS OF THE COMPANY
HISTORY
GeoLogistics Corporation (the "Company") is a leading provider of
global logistics services for major multinational companies. The Company offers
comprehensive logistics and freight forwarding services that fulfill the
individual requirements of multinational customers that outsource their
logistics needs. 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.
In May 1996, the Company acquired a business formerly known as The
Bekins Company ("Bekins"). Founded in 1891, Bekins has historically been a
provider of household goods ("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 ("Bekins Worldwide
Solutions" or "BWS"). In 1999, Bekins introduced a specialized
business-to-consumer transportation solution under the name "HomeDirectUSA"
to service the growing market for residential delivery and installation of
high value oversized products like furniture. As of December 31, 1999, Bekins
operated through a United States network of 75 BWS service centers and 312
HHG service centers, all of which were owned by independent agents.
In October 1996, the Company acquired LEP-USA ("Americas") and
LEP-Canada ("Canada") from LEP International Worldwide Limited ("LIW") in the
first step of the overall acquisition of LIW. Founded in 1973, Americas was a
non-asset-based freight forwarder serving niche transport segments of both the
United States and international freight forwarding and logistics markets. In
September 1999, the Company exited the domestic freight forwarding portion of
the Americas business. As of December 31, 1999, Americas operated 26 full
service international freight forwarding offices throughout the United States
which are utilized to service the international logistics and freight forwarding
business. Founded in 1930, Canada operates 13 offices located throughout Canada
and provides international freight forwarding and logistics services, focusing
on inbound transportation, customs clearance activities and trade fairs and
exhibitions.
In November 1996, the Company acquired Matrix ("Services"). Founded in
1986, Services offers specialized international household goods relocation
services for executives of multinational companies and government agencies and
project forwarding for major infrastructure development projects. As part of its
restructuring efforts, the Company has initiated a plan to integrate the project
forwarding business into the Americas and the household goods relocation
services into Bekins. Services operates through 8 offices in the United States,
1 in Holland, one exclusive agent in Canada and 5 joint venture offices in the
Commonwealth of Independent States (the former Soviet Union).
In September 1997, the Company expanded its international operations by
acquiring LIW. Founded in 1849, LIW provides complete freight forwarding and
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logistics services through 171 branches in 23 countries as of December 31, 1999.
In Europe, LIW operates a pan-European transportation network and has offices in
11 countries including one of the largest freight forwarding businesses in the
United Kingdom. In the Asia Pacific region, LIW maintains locations in 12
countries and is particularly well-established in the Hong Kong, Singapore and
Philippines markets. Additionally, through strategic alliances in Latin America
and the Middle East, LIW provides freight forwarding and logistics services in
an additional 52 countries as of December 31, 1999.
In July 1998, GeoLogistics Air Services ("GLAS"), a subsidiary of the
Company purchased substantially all of the operating assets and assumed certain
of the liabilities of Caribbean Air Services, Inc. ("CAS"). CAS is a provider of
air logistics services between the United States, Puerto Rico, and the Dominican
Republic. In September 1998, the Americas business unit transferred operations
and business offices related to its Puerto Rico business to GLAS to benefit from
combined operational efficiencies. On September 10, 1999, the Company sold
substantially all of the assets of its GLAS business unit. See discussion of the
sale in "Management's Discussion and Analysis of Financial Condition and Results
of Operations".
OVERVIEW
The Company is one of the largest non-asset-based providers of
worldwide logistics and transportation services headquartered in the United
States. 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 customer specific requirements for transportation
and related services, and arranging and monitoring all aspects of material
supply chain activity utilizing advanced information technology systems. These
logistics solutions include 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 the HHG divisions of
Bekins and Services.
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
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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.
The Company operates 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 December 31, 1999, the Company serviced over
45,000 active customers through a global network of 161 countries consisting of
operations located in 109 countries and strategic alliance partners located in
52 countries.
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 FedEx 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.
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 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 receives 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
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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.
FREIGHT FORWARDING. Freight forwarding services are provided through the
following modes of transportation:
- AIR FREIGHT. The air freight forwarding industry is highly fragmented.
Many 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,
pad-wrapped products, 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
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truckload carriers in regions where the marketing presence of the
truckload carriers may not be as strong as the freight forwarders.
LOGISTICS SERVICES. Demand for these services 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 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, with
extensive, global networks and advanced logistics information systems.
RELOCATION SERVICES. 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 lower
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 December 31, 1999, the Company operated a global network in 109
countries consisting of 822 locations and strategic partnerships in 52 countries
with 400 locations. Within this network of approximately 1,200 locations, the
Company maintains a strong local presence in North and South
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America, Europe and Asia Pacific through Company locations, exclusive agents,
strategic alliance partners and non-exclusive agents.
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, processes and provide consistently high levels of customer
service.
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 foreign 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.
NORTH AMERICA. As of December 31, 1999, the Company had 31 Company-managed
offices located in 25 cities with approximately 1,547 employees and had agents
covering an additional 67 locations in the United States. The Company developed
its North American network through the acquisition and integration of Bekins HHG
and BWS in May 1996 and Americas and Canada in October 1996. In addition, as of
December 31, 1999, Americas and Canada provided international freight
forwarding, customs brokerage, and logistics services through 34 offices located
throughout the United States and Canada. Services provided project cargo and HHG
relocation services through 12 offices located in the United States.
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EUROPE. The Company is a major provider of freight forwarding and
transportation and logistics services throughout Europe. As of December 31,
1999, Europe employed approximately 2,421 employees in 163 locations in 11
European countries. Through its United Kingdom subsidiary, the Company is one of
the largest freight forwarders in the United Kingdom, with approximately 43
locations with 825 employees as of December 31, 1999. Services maintains
international operations through 5 joint venture offices in the former Soviet
Union and numerous non-exclusive and unaffiliated HHG agents worldwide.
ASIA PACIFIC. As of December 31, 1999, the Company had 77 locations in 12
countries in the Asia Pacific region with approximately 2,205 employees. The
Company is a major participant in the freight forwarding markets of Hong Kong,
Singapore and the Philippines.
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 FedEx Corporation and United Parcel Service
of America. The Company's basic freight forwarding business includes the
following services which are complemented by customized and information
technology-based options to meet customers' specific needs:
- International door-to-door shipment of freight, including service to
remote destinations, lesser developed countries and locations which
are difficult to reach.
- Value-added complementary services including customs brokerage, full
tracking of goods in transit, warehousing, packing/unpacking and
insurance.
LOGISTICS SERVICES. Logistics services involve taking responsibility for
several or all steps in the supply chain of raw materials and 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 perform complex, multi-phased distribution
projects. The Company's logistics services provide value to the Company's
customers by providing 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:
- Direct-to-consumer distribution which involves coordination and
delivery of purchases from internet retailers to consumers as well
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as customer service and follow-up.
- 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 the
removal of an old photocopying system for reuse, recycling or
remanufacture at the time of delivery of a new photocopying system.
RELOCATION SERVICES. The Company's domestic and international relocation
services are generally provided through Bekins and Services 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 corporate
accounts, private transferees and the government/military sectors. As of
December 31, 1999, Bekins operated through a network of 312 independent HHG
agents. Based on 1998 revenue data filed with the Surface Transportation Board
("STB"), Bekins is the sixth largest carrier of household goods.
The Company's international relocation services are provided primarily
through Services from its Connecticut, Virginia and California offices. The
Company's principal customers for international relocation services are
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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.
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 improving
margins. The Company utilizes CONTROL, 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,
carriers and internal business units. CONTROL is currently installed in the
majority of the Company's operations in Europe, the United States and key
locations in Asia. The Company's Purchase Order Management System ("ORDERS")
provides item level tracking at the purchase order level and links multiple
purchase orders to fulfill customer service requirements. ORDERS is currently
installed in the Company's operations worldwide. BUSINESS 400 is a financial
system that is fully integrated with CONTROL and is utilized in the Company's
operations throughout Europe and Asia. PeopleSoft is the financial system used
by the Company's operations in the United States and is also integrated with
CONTROL. Geo-Vista is the Company's global e-commerce system that provides
access to the Company's systems and databases over the Internet. The Company
believes that it is well positioned to exploit emerging e-commerce
technologies. The Company's Bekins HHG and BWS operations currently utilize the
Direct Connect Solutions and Warehouse Management Systems, mainframe and server
systems that provide 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 Services operations currently utilize MATRAK. The Company's
Americas subsidiary also utilizes CONTROL for all international shipments.
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 Company believes that its information systems
result in increased efficiencies and reduced costs by providing direct interface
between the Company, its customers, agents and strategic alliance partners.
In 1999, the Company completed its comprehensive project to upgrade
its information technology to properly recognize the year 2000. The Company,
its key customers and suppliers, and agents were not materially impacted by
the Year 2000 change. See discussion of Company initiatives in "Management's
Discussion and Analysis of Financial Condition and Results of Operations".
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MARKETING
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. 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.
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 intensely 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 truck carriers 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, many of which
are more extensive than the Company's. 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.
The Company 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
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consolidating their members' shipments to obtain lower freight rates from
carriers. As an ocean freight forwarder, the Company encounters strong
competition in every country 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. The Motor Carrier Act reduced regulation in the
trucking industry, and 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.
Services competes with a large number of specialized competitors although the
Company believes that Services differentiates its offerings from many of its
competitors by focusing on "high-end" executive relocation services for
leading multinational companies and organizations.
REGULATION
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 regulate the level of Company's fees in any
material respect. The Company's ocean freight Nonvessel Operating Common Carrier
("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
12
<PAGE>
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 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 State Transportation
Board ("STB") and Federal Highway Administration ("FHWA"). 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 FHWA. 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 FHWA, 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
Department of Transportation ("DOT") or state regulatory agencies 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 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.
13
<PAGE>
The Company operates nationwide as an interstate common carrier through
its subsidiaries, Bekins HHG and BWS, who hold Certificates of Public
Convenience and Necessity that were granted by the DOT. 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 originally granted by the DOT. The Company is required to comply with
STB and FHWA regulations. In addition, the FHWA 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 foreign 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.
From time to time, United States 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.
TRADEMARKS
The Company has registered trademarks on a number of variations of the
Bekins name and corporate logo in the United States and the LEP trademarks.
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. Additionally, in 1998, the
Company registered the GeoLogistics name and a related "G" logo in the countries
in which the Company operates.
EMPLOYEES
As of December 31, 1999, the Company and its subsidiaries had
approximately 6,200 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 approximately 102 employees at 5
locations are members of collective bargaining units affiliated with the
teamsters, out of a total of approximately 1,283 employees as of December 31,
1999.
14
<PAGE>
ITEM 2. PROPERTIES
The properties used in the Company's operations consist principally of
leased freight forwarding offices and warehouse and distribution facilities. As
of December 31, 1999, the Company had 183 office facilities, 7 of which were
owned and 176 of which were leased, and 140 warehouse facilities, 13 of which
were owned and 127 of which were leased, constituting, in the aggregate,
approximately 1.1 million square feet of office space and 3.2 million square
feet of warehouse space in 32 countries.
The following table sets forth certain information relating to the
Company's domestic and foreign properties as of December 31, 1999.
<TABLE>
<CAPTION>
NUMBER OF FACILITIES
OWNED LEASED TOTAL
----- ------ -----
<S> <C> <C> <C>
United States -- 53 53
Canada ...... 1 12 13
Asia Pacific 1 93 94
Europe ...... 18 145 163
--- --- ---
Total .... 20 303 323
=== === ===
</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.
ITEM 3. LEGAL PROCEEDINGS
The Company is currently defending a claim brought by Danish Customs
and Excise for payment of customs duties and excise taxes of approximately
$5.5 million related to alleged irregularities in connection with a number of
shipments of freight out of Denmark. The Company and its subsidiaries are
also defendants in legal proceedings arising in the ordinary course of
business and are subject to certain claims. The Company believes it has
established adequate reserves for the total alleged liabilities. 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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of 1999, no matters were submitted to a
vote of the security holders.
15
<PAGE>
PART II.
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS.
The Company was formed in 1996 by investment entities managed by
William E. Simon & Sons, LLC, ("WESS") and Oaktree Capital Management, LLC,
("OCM"). WESS and OCM collectively own 82.9% of the outstanding common stock of
the Company. The remaining 17.1% of the outstanding shares are owned by
employees and certain qualified non-employee investors. There are 69
shareholders of record of the Company's common stock as of December 31, 1999.
The Company is restricted in the payment of dividends to common and
preferred shareholders by the terms of its 9 3/4% Senior Notes and its Series
A Participating Preferred Stock. These agreements provide for the payment of
dividends only in the event that certain conditions are met.
In accordance with the terms of these agreements, the Company did not
pay any cash dividends in 1999 or 1998 and does not intend to pay cash dividends
in the future.
ITEM 6. 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 and with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere
herein. The selected consolidated financial data have been derived from the
audited consolidated financial statements of the Company and Bekins (the
"Company Predecessor").
16
<PAGE>
<TABLE>
<CAPTION>
Period From Period From Company
May 2, 1996 April 1, 1996 Predecessor (1)
Year Ended December 31, To To Year Ended
------------------------------------------ December 31, May 1, March 31,(2)
1999(6) 1998(5) 1997(3) 1996(3) 1996(2) 1996 1995
----------- ----------- ----------- ----------- ------------- ------- ------
(in thousands except for share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues ......................... $ 1,558,204 $ 1,526,753 $ 978,249 $ 225,793 $ 17,458 $231,752 $242,966
Net revenues ..................... 362,894 372,220 219,200 44,585 3,824 52,141 51,688
Selling, general and
administrative expenses ........ 378,048 366,268 204,733 37,554 3,309 42,810 43,008
Restructuring and other
non-recurring charges (7) ...... 18,997 -- -- -- -- -- --
Asset impairment charges (7) ..... 11,888 -- -- -- -- -- --
Depreciation and amortization .... 20,021 18,126 30,398 16,310 337 4,194 5,675
----------- ----------- ----------- ----------- -------- -------- --------
Operating income (loss) .......... (66,060) (12,174) (15,931) (9,279) 178 5,137 3,005
Gain on sale of business.......... 68,920 -- -- -- -- -- --
Income (loss) before minority
interest and extraordinary
loss ........................... (48,233) (37,101) (16,298) (8,247) (27) 1,198 196
Minority interest ................ 1,478 932 1,067 -- -- -- --
Extraordinary loss on early
extinguishment of debt, net
of tax benefit of $1,528
and $664(4) .................... -- -- (2,293) (997) -- -- --
----------- ----------- ----------- ----------- -------- -------- --------
Net income (loss) .............. (49,711) (38,033) (19,658) (9,244) (27) 1,198 196
Preferred stock dividend ........... 2,100 963 -- -- -- -- --
----------- ----------- ----------- ----------- -------- -------- --------
Loss applicable to common
stock ............................ $ (51,811) $ (38,996) $ (19,658) $ (9,244) $ (27) $ 1,198 $ 196
=========== =========== =========== =========== ======== ======== ========
Per share information-
Basic and diluted:
Loss per share before
extraordinary loss ............. $ (24.31) $ (18.39) $ (8.47) $ (6.58) $ -- $ -- $ --
Extraordinary loss ............... -- -- (1.12) (.79) -- -- --
Net loss ......................... $ (24.31) $ (18.39) $ (9.59) $ (7.37) $ -- $ -- $ --
Basic and diluted weighted
average shares ................. 2,131,393 2,120,365 2,049,800 1,254,200 -- -- --
Balance Sheet Data:
Current assets ................... $ 295,027 $ 321,198 $ 319,732 $ 135,036 $ 32,834 $ 33,313 $ 35,389
Property and equipment, net ...... 75,983 95,254 59,073 11,781 8,143 8,266 10,080
Total assets ..................... 447,656 549,178 485,766 236,684 63,845 64,476 71,276
Current liabilities .............. 292,287 309,704 301,809 123,144 48,798 48,188 36,799
Long-term debt (including
current portion) ............... 165,137 195,726 121,228 66,314 15,634 11,915 21,049
Other non-current liabilities
and minority interest........... 48,834 54,781 48,248 11,117 6,567 7,768 7,423
Stockholders' equity (deficit) ... $ (46,380) $ 1,516 $ 22,919 $ 40,619 $ 8,112 $ 8,137 $ 6,879
</TABLE>
See accompanying Notes to Selected Consolidated Financial Data of the Company.
17
<PAGE>
NOTES TO SELECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY:
(1) On May 2, 1996, the Company acquired all of the outstanding shares of
The Bekins Company ("Company Predecessor, Bekins").
(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. The following is selected financial information of BMS:
<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31,
---------
1996 1995
------- -------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues .................... $47,264 $53,948
Net revenues ................ 17,855 19,564
Depreciation and amortization 1,237 1,453
Operating income ............ 243 470
</TABLE>
(3) Includes the results of Americas and Canada since their acquisition on
November 1, 1996, the results of Services since its acquisition on
November 7, 1996 and the results of LIW since September 30, 1997.
(4) On October 31, 1996, the Company applied proceeds from a bank
borrowing facility to repay 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.
On October 29, 1997, the Company applied proceeds from the sale of the
Senior Notes to repay the indebtedness outstanding under a bank
borrowing facility. In connection with such transaction, the Company
recorded an extraordinary loss of $3,821 ($2,293 net of taxes)
related to the write-off of unamortized deferred financing costs.
(5) Includes the operations of GLAS from July 13, 1998 (date of
acquisition).
(6) Includes the operations of GLAS through September 10, 1999 (date of
disposition). See Management's Discussion and Analysis of Financial
Condition and Results of Operations.
(7) See Management's Discussion and Analysis of Financial Condition and
Results of Operations--Restructuring and Other Non-Recurring
Charges/Asset Impairment Charges.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION
WITH SELECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY, AND THE CONSOLIDATED
FINANCIAL STATEMENTS OF THE COMPANY INCLUDED ELSEWHERE IN THIS REPORT. THIS
ANNUAL REPORT ON FORM 10-K MAY CONTAIN "FORWARD-LOOKING STATEMENTS" WITHIN THE
MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION
18
<PAGE>
21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. DISCUSSIONS CONTAINING
SUCH FORWARD-LOOKING STATEMENTS MAY BE FOUND IN THE MATERIAL SET FORTH HEREIN AS
WELL AS WITHIN THIS ANNUAL REPORT GENERALLY. ALSO, DOCUMENTS SUBSEQUENTLY FILED
BY THE COMPANY WITH THE SECURITIES AND EXCHANGE COMMISSION MAY CONTAIN
FORWARD-LOOKING STATEMENTS. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
PROJECTIONS IN THE FORWARD-LOOKING STATEMENTS AS A RESULT OF THE CHALLENGES AND
UNCERTAINTIES INHERENT IN SUCCESSFULLY IMPLEMENTING ITS BRANDING, INFORMATION
TECHNOLOGY AND COST REDUCTION STRATEGIES AND THE OTHER RISK FACTORS AND MATTERS
IDENTIFIED HEREIN OR IN OTHER PUBLIC FILINGS BY THE COMPANY, INCLUDING BUT NOT
LIMITED TO, THE COMPANY'S REGISTRATION STATEMENT ON FORM S-4 (FILE NO.
333-42607) SUCH AS RISKS RELATING TO THE COMPANY'S LEVERAGE AND ABILITY TO
SERVICE ITS DEBT OBLIGATIONS, THE COMPANY'S ABILITY TO ACCESS ADDITIONAL CAPITAL
RESERVES, CHALLENGES PRESENTED BY INTEGRATION OF RECENT ACQUISITIONS AND IN THE
AMERICAS BUSINESS, RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS AND CURRENCY
FLUCTUATIONS AND RISKS RELATED TO INFORMATION TECHNOLOGY IMPLEMENTATION AND
INTEGRATION.
GENERAL
The Company commenced operation on May 2, 1996 in connection with its
acquisition of Bekins. On October 31, 1996, the Company acquired Americas and
Canada and securities representing 33.3%, in the aggregate, of the common equity
of Europe and Asia. On November 7, 1996, the Company acquired Services. Between
September 30, 1997 and December 15, 1997, the Company completed the acquisition
of all of the remaining equity securities of the Europe and Asia business (the
"LIW Acquisition"). On July 13, 1998, the Company purchased substantially all of
the operating assets and assumed certain of the liabilities ("Air Services
Acquisition") of Caribbean Air Services, Inc. ("CAS"). The Company disposed
of such assets and other assets relating to its Puerto Rico services on
September 10, 1999. All 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 fair values at the
dates of acquisition.
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, Services has a significant project logistics
business which is cyclical due to its dependence upon the timing of shipment
volumes for large, one-time projects.
The Company operates 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 Pacific. 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 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.
19
<PAGE>
RESTRUCTURING AND OTHER NON-RECURRING CHARGES/ASSET IMPAIRMENT CHARGES
On March 4, 1999, the Company announced the intended restructuring
of its GeoLogistics Americas ("Americas") business as a result of a difficult
domestic freight forwarding environment. Due to lower volumes in the European
region, the Company initiated a process to reevaluate the operations of its
other business units to determine what initiatives could be taken to reduce
costs and streamline administrative operations. As part of this restructuring
process, a new management team was put in place in an effort to improve
global operating results.
In connection with these efforts, the Company (a) exited the
majority of its domestic freight forwarding portion of Americas business at
the end of the third quarter of 1999, (b) is rationalizing personnel such
that their numbers and skill sets are suited to the ongoing services and
volumes of the business, (c) closed, or will close, facilities in the United
States and Europe, (d) arranged for the settlement of remaining obligations
to the selling shareholders of the project forwarding and international
household goods relocation services business and integrated the project
forwarding business into the Americas business and the international
household goods relocation services into Bekins and (e) revalued assets to
reflect fair values. The aggregate charge for these actions is expected to be
approximately $34.6 million of which $30.9 million was recorded in 1999 and
the remaining balance of $3.7 million is expected to be recorded in the first
half of 2000. The restructuring and non-recurring charges include provisions
for the termination of 460 sales, administrative and warehouse employees
globally at a cost of approximately $16.6 million. Of this cost $13.9
million, representing the termination of 420 employees, was recorded in 1999
and $2.7 million which relates to the termination of the remaining 40
employees is expected to be recorded in the first half of 2000. The
restructuring and non-recurring charge is also comprised of $1.6 million
related to facility closure and lease terminations, $1.5 million additional
allowance for bad debts, $1.1 million for the termination of certain
agreements, and $0.9 million for other miscellaneous exit costs. Accrued
liabilities at December 31, 1999 included approximately $7.7 million of
future severance payments related to 176 employees terminated prior to
December 31, 1999; approximately $1.1 million related to facility closure and
exit costs; and $1.0 million was included in allowance for doubtful accounts.
The non-cash charges for asset impairment relate to the write-off of $3.5
million of goodwill as a result of exiting the domestic freight forwarding
portion of Americas' business, a $6.8 million reevaluation of capitalized
software costs and $1.6 million related to the pending sale of certain real
property. In addition to actions for which immediate financial recognition is
required, many additional actions have been taken including revised incentive
plans for the sales and management staffs (including the employees who will
continue to operate the international freight forwarding operations in the
United States), expansion of logistics facilities in Thailand and expansion
of facilities and logistics capabilities in China.
The aforementioned restructuring and other non-recurring charges
along with the asset impairment charges are expected to provide savings of
approximately $17.0 million in selling, general and administrative expenses
and $1.5 million reduction in depreciation and amortization for the 2000
fiscal year.
20
<PAGE>
SALE OF BUSINESS
On September 10, 1999, the Company sold substantially all of the assets
of its GLAS business unit ("GLAS Assets") for aggregate cash consideration of
approximately $116 million. The $68.9 million gain on this sale has been
reflected in the consolidated statement of operations for the year ended
December 31, 1999 and the consolidated statement of cash flows for the year
ended December 31, 1999.
The sale proceeds were applied by the Company to fund a $10 million
escrow account in connection with certain warranties to the purchaser, pay fees
and expenses associated with the transaction and reduce revolving debt that was
secured by the GLAS Assets. As of December 31, 1999, the Company has recorded a
$1.8 million allowance relating to the warranties and subsequent to December 31,
1999, the Company settled certain remaining obligations and warranties
associated with the escrow account and obtained the release of $8.2 million.
For the year ended December 31, 1999, revenues and operating income
from the GLAS operations were approximately $66.8 million, and $10.5 million,
respectively.
The following discussion and analysis relates to the results of
operations for the Company as reported for the years ended December 31, 1999,
1998 and 1997 and should be read in conjunction with the consolidated financial
statements of the Company included elsewhere in this Form 10-K.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1999 1998 1997
----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues ......................................... $ 1,558,204 $ 1,526,753 $ 978,249
Net revenues ..................................... 362,894 372,220 219,200
Selling, general and administrative expenses ..... 378,048 366,268 204,733
Restructuring and other non-recurring charges .... 18,997 -- --
Asset impairment charges ......................... 11,888 -- --
Depreciation and amortization .................... 20,021 18,126 30,398
----------- ----------- -----------
Operating loss ................................... (66,060) (12,174) (15,931)
Interest expense, net ............................ 23,086 16,984 8,576
Gain on sale of business ......................... 68,920 -- --
Other expense .................................... 749 214 211
Income tax expense (benefit) ..................... 27,258 7,729 (8,420)
Minority interests ............................... 1,478 932 1,067
----------- ----------- -----------
Loss before extraordinary item ................... (49,711) (38,033) (17,365)
Extraordinary loss on early extinguishment
of debt net of tax
benefit of $1,528 ................................ -- -- (2,293)
----------- ----------- -----------
Net loss ......................................... $ (49,711) $ (38,033) $ (19,658)
=========== =========== ===========
</TABLE>
21
<PAGE>
YEAR ENDED DECEMBER 31, 1999 VERSUS YEAR ENDED DECEMBER 31, 1998
REVENUES. The Company's revenues increased by approximately $31.4
million to $1,558.2 million for the year ended December 31, 1999 from
$1,526.8 million for the year ended December 31, 1998. Revenue comparisons
for each business unit are presented before intercompany eliminations.
Contributing additional revenue of $22.4 million in the period was GLAS. The
Asia Pacific region revenues increased $76.4 million, due primarily to
increased export volumes and new customers. This increase was offset by a
decline in the Americas business unit of $51.1 million, due to lower volumes
as a result of a difficult freight forwarding environment and the exit from
the domestic business at the end of the third quarter of 1999. BWS revenues
declined $10.3 million primarily due to lower volumes resulting from customer
industry consolidations. Europe's revenues declined $13.0 million primarily
as a result of market softness in the region. Services' revenues decreased
$9.5 million, on lower volume in both international relocation and project
cargo product lines as a result of declining international relocations and
continued delays in the commencement of several large overseas projects,
particularly by companies engaged in the oil and gas industry. Had foreign
exchange rates remained constant from 1998 to 1999, consolidated revenues
would have been $13.8 million more than the actual 1999 results.
NET REVENUES. This represents revenues after direct transportation
and other costs. Net revenues decreased by approximately $9.3 million, to
$362.9 million for the year ended December 31, 1999 from $372.2 million for
the same period in 1998. Net revenues as a percentage of revenues decreased
to 23.3% in 1999 from 24.4% for the same period in 1998.
GLAS contributed an increase of $7.4 million as a result of the
acquisition of Caribbean Air Services in July 1998. In addition, the Asia
Pacific region contributed an increase of $9.4 million to net revenues on the
strength of higher volumes. These increases were offset by declines in all
other business units of the Company except Canada which increased $1.3
million. Americas posted a decrease in net revenues of $13.3 million from the
previous year as a result of the competitive freight forwarding environment
in the United States which led to the exit from the domestic freight
forwarding market by the Company during the third quarter of 1999. The
softness in Europe's economy contributed $8.8 million to the decrease. BWS
and Services net revenues decreased $3.3 million and $1.8 million,
respectively, as a result of lower volumes as previously discussed, and
margin erosion.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased by approximately $11.7 million, to $378.0
million for the year ended December 31, 1999 from $366.3 million for the year
ended December 31, 1998. These expenses as a percentage of net revenues
increased to 104.2% in 1999 from 98.4% for the same period in 1998. Selling,
general and administrative expenses increased over the prior year in most of
the Company's operating units. Asia Pacific expenses increased $6.8 million
due to higher warehousing and employee costs required to support the 26.0%
increase in revenues. Selling, general and administrative expenses in Europe
decreased $0.6 million compared to prior year. Selling, general and
administrative expenses in Canada increased $3.4 million due to additional
warehousing costs required to support new business. Expenses also include an
additional $3.6 million for eight and one half months of GLAS operations in
1999 versus five and one half months of operations in 1998 from the date of
Air Services Acquisition. Americas expenses decreased by $6.3 million as a
result of the exit from the domestic business and the implementation of cost
control initiatives.
RESTRUCTURING, NON-RECURRING AND ASSET IMPAIRMENT CHARGES. As
previously discussed, the Company has implemented its restructuring and
reorganization
22
<PAGE>
plans which resulted in $19.0 million of restructuring and non-recurring
charges related to the shut down of the domestic freight forwarding business
and the streamlining of other corporate and administrative functions. In
addition, the Company has recorded asset impairment charges of approximately
$11.9 million relating to goodwill, capitalized software and property as a
result of exiting the domestic freight forwarding portion of Americas
business, a reevaluation of capitalized software costs and the pending sale
of certain property of its Italian subsidiary. These charges have all been
reflected in the results of operations of the Company for the year ended
December 31, 1999. No such items were recorded during 1998.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
increased $1.9 million for the year ended December 31, 1999 compared to 1998
primarily as the result of an increase in fixed assets related to information
technology.
OPERATING LOSS. The Company recorded a $66.1 million operating loss
for the year ended December 31, 1999 compared to a $12.2 million operating
loss for the year ended December 31, 1998. Operating income (loss) before
depreciation and amortization; restructuring and other non-recurring charges,
and asset impairment charges was $(15.2) million for 1999 compared to $6.0
million for 1998. Increased profits in Asia Pacific, GLAS and Bekins HHG were
offset by restructuring charges and higher operating losses in all other
operating units.
INTEREST EXPENSE, NET. Interest expense, net, increased by
approximately $6.1 million to $23.1 million for 1999 from $17.0 million for
the same period of 1998. The increase was associated with interest related to
borrowings incurred to finance the Air Services Acquisition in July 1998,
higher levels of working capital-related borrowings required as a result of
the losses incurred at BWS, Services, Europe and the Americas operating
units, and the write-off of $1.5 million of deferred financing fees related
to the revolving credit agreement which was amended in September 1999.
INCOME TAXES. The income tax provision for the year ended December 31,
1999 increased $19.6 million to a $27.3 million provision versus a $7.7 million
tax provision for the same period of 1998. The increase for 1999 relates
primarily to gains associated with the sale of the GLAS assets. No income tax
benefit has been recorded for business units incurring operating losses in 1999.
Management believes that the realization of the entire net deferred tax asset is
uncertain and has established a valuation allowance due to such uncertainty.
SALE OF BUSINESS. On September 10, 1999, the Company sold substantially
all of its GLAS business unit for aggregate cash consideration of approximately
$116 million. The GLAS sale resulted in a gain of approximately $68.9 million.
MINORITY INTERESTS. Interests held by minority shareholders in the
earnings of certain foreign subsidiaries were $1.5 million and $0.9 million for
the years ended December 31, 1999 and 1998, respectively.
NET LOSS. Net loss increased by $11.7 million to $49.7 million for
the year ended December 31, 1999 compared to $38.0 million for the same
period of 1998. This increase in loss was due primarily to operating losses
attributable to the Americas, BWS, Europe and Services, increased interest
expense, income taxes
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<PAGE>
and restructuring charges partly offset by the gain attributable to the sale
of the GLAS assets and improved operating results in Asia Pacific and Bekins
HHG.
YEAR ENDED DECEMBER 31, 1998 VERSUS YEAR ENDED DECEMBER 31, 1997
REVENUES. The Company's revenues increased by approximately $548.6
million, to $1,526.8 million for the year ended December 31, 1998 from $978.2
million for the year ended December 31, 1997. Approximately $593.1 million of
the increase related to the LIW Acquisition, which was partially offset in
1998 by the temporary negative effect of strategically shifting to "owned"
operations from agent representation in India and South Africa. Also
contributing additional revenue of $23.6 million in the period was the Air
Services Acquisition. In addition, BWS revenues increased $20.0 million, or
21.7% due primarily to increased volume from new customers. Services business
unit revenues also increased $4.5 million, or 6.9% on higher volume in both
project cargo and international relocation product lines. Revenues at the
Americas business unit declined $103.8 million, or 27.8% due to lower
domestic and international forwarding volumes. Additionally, Americas
business between the United Sates and Puerto Rico was shifted to the
management of Air Services during the third quarter which accounted for $18.5
million of the decrease.
NET REVENUES. Net revenues increased by approximately $153.0
million, to $372.2 million for the year ended December 31, 1998 from $219.2
million for the same period in 1997. Net revenues as a percentage of revenues
increased to 24.4% in 1998 from 22.4% for the same period in 1997 primarily
due to a shift in product offerings to higher margin value-added services
resulting from the acquisition of Europe and Asia. Net revenue increases are
primarily the result of additional revenue contributed as a result of the LIW
Acquisition ($152.2 million) and the Air Services Acquisition ($13.2 million)
partially offset by a reduction in Americas net revenues. In addition, BWS
net revenues increased $2.8 million, or 13.4%, due to higher volumes.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased by approximately $161.6 million, to $366.3
million for the year ended December 31, 1998 from $204.7 million for the year
ended December 31, 1997. These expenses as a percentage of net revenues
increased to 98.4% in 1998 from 93.4% for the same period in 1997 due to the
higher expenses at the Americas business unit and for general corporate
purposes in addition to specific corporate initiatives relating to a new
branding strategy, a logistics consulting infrastructure team and expanded
strategic information technology projects. Selling, general and administrative
expenses relating to the LIW and Air Services Acquisitions amounted to $144.6
million of the increase from 1997.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
decreased 40.4% to $18.1 million for the year ended December 31, 1998 compared
to $30.4 million for the year ended December 31, 1997 primarily as the result of
a $20.6 million decrease in amortization of intangible assets (acquired in the
1996 acquisitions) that was fully amortized by the end of 1997. The decrease was
partially offset by an additional $4.0 million of depreciation and amortization
resulting from the LIW and Air Services Acquisitions.
OPERATING LOSS. The Company recorded a $12.2 million operating loss
for the year ended December 31, 1998 compared to a $15.9 million operating
loss for the year ended December 31, 1997. These improved results were due
primarily to the operating profits of Europe and Asia and Air Services ($19.9
million) and lower amortization expense ($12.3 million) offset by the
increased losses at the Americas business unit, higher corporate operating
expenses, costs associated with the strategic initiatives previously
discussed, and customer start-up costs.
Operating profit, excluding depreciation and amortization, and
corporate expenses, decreased $6.8 million to $16.6 million for the year
ended December 31, 1998 compared to $23.4 million for the year ended December
31, 1997. Improvements due to the LIW and Air Services Acquisitions were
offset by higher operating losses at the Americas business unit.
Operating loss for the year ended December 31, 1998 includes results
of the Air Services business unit since its acquisition on July 13, 1998
while operating profit for the year ended December 31, 1997 included the
results of Europe and Asia from September 30, 1997.
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<PAGE>
INTEREST EXPENSE, NET. Interest expense, net, increased by
approximately $8.4 million, to $17.0 million for 1998 from $8.6 million for
the year ended December 31, 1997. The increase was associated with the
issuance of the Company's 9-3/4% Senior Notes ("Senior Notes") in October
1997, issuance of the $15 million debt to finance to the Air Services
Acquisition and higher levels of working capital-related borrowings.
INCOME TAX PROVISION. The income tax provision for the year ended
December 31, 1998 increased $16.1 million to a $7.7 million provision versus a
$8.4 million tax benefit for the same period of 1997. The increase is due to
operating losses incurred during 1998 for which no anticipated future benefit
was recorded.
MINORITY INTERESTS. Interests held by minority shareholders in the
earnings of certain foreign subsidiaries were $0.9 million and $1.1 million for
the year ended December 31, 1998 and 1997, respectively.
NET LOSS. Net loss increased by $18.3 million to $38.0 million for the
year ended December 31, 1998 compared to $19.7 million for the same period of
1997. This increase is due primarily to an increase in losses attributable to
the Americas, interest expense and income taxes partially offset by a reduction
in the operating loss of other business units which was attributable to lower
depreciation and amortization and the operating profits generated by the LIW and
Air Services Acquisitions.
LIQUIDITY AND CAPITAL RESOURCES
During the year ended December 31, 1999, net cash used by operating
activities was $79.5 million versus $43.9 million for the same period in
1998. The increase was primarily due to increased operating losses. During
1999, cash provided by investing activities was $95.9 million while cash used
in investing activities was $61.2 million in 1998. This increase is primarily
due to the sale of GLAS in 1999. Cash used in investing activities in 1998
included $26.3 million related to the purchase of Caribbean Air Services.
During 1999 capital expenditures were $7.2 million as compared to $34.0
million in the same period of 1998. For 2000, capital expenditures are
estimated to be $13.8 million, primarily related to information technology
and to support new business projects. Cash used in financing activities in
1999 was $34.5 million while cash provided from financing activities in 1998
was $84.1 million, primarily as a result of repayment of revolving debt with
the proceeds from the sale of GLAS.
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<PAGE>
As a result of the disposition of GLAS (see Note 3 to consolidated
financial statements) the Company, together with its guarantor subsidiaries
entered into an amendment to the revolving credit agreement. Among other
changes, the amendment provides for (a) reductions in credit availability
from $100.0 million to $50.5 million in the aggregate with a sublimit of
$20.0 million in the United Kingdom, (b) reductions in the percentage of
eligible accounts receivable that qualify for the U.S. and United Kingdom
borrowing base which affect the Company's ability to incur debt under the
revolving credit facility, (c) the elimination of the interest coverage ratio
covenant, (d) the change in the maturity date to March 31, 2000, (e) the
reduction of the Supplemental Commitment from $30.0 million to $15.0 million
and (f) the amendment of the EBITDA and certain other covenants. Subsequent
to December 31, 1999, all borrowings related to the Supplemental Commitment
and revolving credit facility were repaid with borrowings under the New
Revolver described below.
On March 31, 2000, the Company borrowed against a new credit
facility (the "New Revolver") with Congress Financial Corporation (Western),
a subsidiary of First Union Bank and its Canadian and United Kingdom
affiliates (the "Lenders"). The three-year New Revolver provides for maximum
borrowings of $90 million and is comprised of three separate agreements, one
in each of the United States, Canada and the United Kingdom. This New
Revolver replaces the credit facility in place at December 31, 1999 by and
among the Company and ING (U.S.) Capital Corporation and the lenders party
thereto. The Company believes that the New Revolver will provide a sufficient
level of flexibility and capacity to allow for the completion of the
aforementioned restructuring.
The three agreements making up the New Revolver involve four
borrowers in the United States and the operating companies in the United
Kingdom and Canada. The four borrowers in the United States are comprised of
Bekins Worldwide Solutions, Bekins Van Lines, GeoLogistics Services and
GeoLogistics Americas. The Company has guaranteed each of the three separate
agreements constituting the New Revolver. The individual agreement credit
levels are $50 million in the United States, $15 million in Canada and $25
million in the United Kingdom. The United States and Canada agreements allow
for a maximum increase or decrease of $5 million in the United States
facility with a corresponding decrease or increase in the Canadian facility.
Such adjustments are limited to once per quarter. The New Revolver has a
letter of credit sub-limit of $30 million. The maximum amount that can be
borrowed is dependent upon the amount of accounts receivable of the borrowers
and letters of credit provided by certain stockholders and their affiliates.
The amount that may be borrowed will be equal to 85% of eligible billed
receivables plus 65% of eligible unbilled or accrued receivables as defined
in the agreement, plus 100% of the face amount of the letters of credit
provided by affiliates of stockholders. As of March 31, 2000, the aggregate
of such letters of credit was $13 million, with additional commitments of up
to $6 million, which amount may be reduced under certain circumstances.
Interest rate spreads are set according to levels of the Company's
EBITDA on a trailing twelve-month basis. These spreads will be set at 0.25%
over prime for such borrowings and 2.75% over LIBOR for eurodollar borrowings
until the first such test period which will be the twelve months ended
September 30, 2000 and quarterly thereafter. Applicable spreads can range
from 0% to 0.5% on prime borrowings and from 2.5% to 3.0% for eurodollar
borrowings.
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<PAGE>
The six borrowers have provided their respective Lenders with liens
on all accounts and all other of their assets. The four borrowers under the
United States agreement have given the Canadian lender a guarantee secured by
all their assets; the three agreements are not otherwise
cross-collateralized. The Company has fully guaranteed each of the three
agreements, and its guarantee of the United States agreement is secured by
its assets (with certain exceptions). Finally, one other subsidiary of the
Company has given a lien on certain of its assets to the United States
lender.
Each of the three agreements constituting the New Revolver contains
covenants restricting the activities of the respective borrowers. These
restrictions include, among others, limitations on indebtedness, liens, the
making of loans or investments, the making of acquisitions and the
disposition of assets. Dividends, including to the Company, are prohibited,
but the borrowers are permitted to lend money to the Company for the purpose
of paying interest on the Company's senior notes, taxes and certain other
expenses up to a specified amount. The borrowers are also permitted to lend
to other borrowers and, if certain financial tests are met, other
subsidiaries of the Company. These restrictions are not applicable to the
Company.
Events of Default under the New Revolver include, among others, the
failure to pay, the failure to observe covenants, the failure to pay certain
third party debt or judgments, bankruptcy and other insolvency events, any
material adverse change, change of control with respect to the Company and
the failure of the Company to maintain a specified level of net worth or the
United States, Canadian and United Kingdom borrowers to maintain another
specified level of net worth. An Event of Default under any one of the three
agreements is automatically an Event of Default under the other two.
Within North America, the Company has utilized borrowings under its
credit facilities to meet working capital requirements and to fund capital
expenditures principally related to information technology. At March 31,
2000, the Company had an eligible working capital borrowing base under its
New Revolver of $80.4 million. After the settlement of outstanding loans,
fees and letter of credit obligations with the previous lenders, the Company
had $11.2 million of additional borrowing capacity. The Company anticipates
that it will pay approximately $12.5 million in cash for restructuring
charges during the first half of 2000. The Company expects that it will
finance such cash payments with borrowings under its credit facility.
The indenture relating to the Company's Senior Notes generally
provides that, subject to certain exceptions, the Company not incur
indebtedness unless on the date of such incurrence the consolidated coverage
ratio of the Company exceeds 2.25 to 1.0 and that the restricted subsidiaries
of the Company may not incur indebtedness unless on the date of such
incurrence the consolidated coverage ratio of the Company exceeds 2.5 to 1.0.
The indenture permits the Company to incur up to $115.0 million of total
indebtedness (consisting of $100.0 million of bank debt and $15.0 million of
other debt) notwithstanding the Company's inability to meet the consolidated
coverage ratio test. As of February 29, 2000, the Company had incurred $27.4
million of indebtedness under its United States and United Kingdom bank
credit facilities and, as of such date, the Company would have been able to
incur an additional $13.1 million of indebtedness pursuant to the terms of
such facilities. As of February 29, 2000, the Company had incurred $3.1
million of other debt and would have been able to incur an additional $11.9
million of other debt pursuant to the terms of the indenture. In addition,
the indenture permits the Company to incur up to $30.0 million under its
foreign credit facilities notwithstanding the Company's inability to meet the
consolidated coverage ratio test. As of February 29, 2000, the Company had
incurred $18.5 million of indebtedness under its foreign credit facilities
and as of such date, would have been able to incur an additional $11.5
million of indebtedness under such facilities in compliance with the terms of
the indenture.
The Company has recently financed operations from borrowings under
its credit facilities. As of March 31, 2000, the Company had $11.2 million of
borrowing capacity under its New Revolver. The Company's ability to borrow
funds under the New Revolver is subject to fluctuations in its borrowing base
based on its accounts receivable and the Company's ability to borrow
additional funds other than under the New Revolver is significantly
restricted by the terms of the indenture and the New Revolver. If the Company
is unable to generate sufficient cash flow to finance its operations it could
be required to borrow under its existing credit facilities to fund such
operations. If the Company's credit facilities are not sufficient to fund
ongoing operations, the Company could be required to adopt one or more
alternatives, such as reducing or delaying planned expansion or capital
expenditures, selling or leasing assets, restructuring debt or obtaining
additional debt or equity capital. The Company will continue to investigate
strategic alternatives to improve its financial position, including the sale
of non-core assets. There can be no assurance that any of these alternatives
could be effected on satisfactory terms or at all.
The Company believes that net cash provided by borrowings available
under the New Revolver will provide it with sufficient resources to meet
working capital requirements, debt service and other cash needs over the next
year.
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YEAR 2000
The Company, its key customers and suppliers and agents were not
materially impacted by the Year 2000 change.
The Company completed a comprehensive project to upgrade its
information technology including hardware and software to properly recognize
the Year 2000 ("Year 2000 Plan"). As a provider of global logistics and
transportation services, the Company is reliant on its computer systems and
applications to conduct its business. In addition to these systems, the
Company is also reliant upon the system capabilities of its business partners.
The Company also conducted a survey of its business partners to
certify Year 2000 compliance. The Company also worked with major customers to
gain Year 2000 certification with them in response to their inquiries and
surveys.
The total costs of the compliance process were approximately $1.1
million. This does not include the costs associated with the Company's
strategic information plan much of which addressed the Year 2000 project as
well as strategic initiatives.
The Company prepared manual operational procedures which were in
place should disruption from a Company system or third party system occur. In
addition, all system development was stopped and all technical resources made
available for any unexpected system problems during the first quarter of
2000. The Company has not nor does it expect to experience any significant
problems as a result of the year 2000.
CONVERSION TO THE EURO CURRENCY
On January 1, 1999, certain member countries of the European Union
established fixed conversion rates between their existing currencies and the
European Union's single currency ("Euro"). The Company conducts business in
member countries that have and have not fixed conversion rates to their
national currencies. The transition period for the introduction of the Euro
is between January 1, 1999 and June 30, 2002. The Company is addressing the
issues involved with the introduction of the Euro. The more important issues
facing the Company include: converting information technology systems;
reassessing currency risk; negotiating and amending licensing agreements and
contracts; and processing tax and accounting records.
Based upon progress to date, the Company believes that use of the
Euro will not have a significant impact on the manner in which it conducts
its business affairs and processes its business and accounting records.
Accordingly, conversion to the Euro is not expected to have a material effect
on the Company's financial condition or results of operations.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company is exposed to the impact of interest rate changes,
foreign currency fluctuations and changes in the market values of its
investments.
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POLICIES AND PROCEDURES
In the normal course of business, the Company employs established
policies and procedures to manage its exposure to changes in interest rates and
fluctuations in the value of foreign currencies using a variety of financial
instruments.
In order to mitigate the impact of fluctuations in the general level of
interest rates, the Company generally maintains a large portion of its debt as
fixed rate in nature by borrowing on a long-term basis. At December 31, 1999,
67% of the total outstanding debt of the Company was at fixed rates. At
year-end, the fair value of the Company's long-term debt was estimated at $ 85.1
million versus a book value of $165.1 million. The impact of a hypothetical 10%
adverse change in interest rates would be approximately $0.8 million.
The Company's objectives in managing the exposure to foreign
currency fluctuations is to reduce earnings and cash flow volatility
associated with foreign exchange rate changes and allow management to focus
its attention on its core business issues and challenges. Accordingly, the
Company enters into various contracts which change in value as foreign
exchange rates change to minimize the impact of currency movements on certain
existing commitments and anticipated foreign earnings. The Company may use a
combination of financial instruments to manage these risks, including forward
contracts or option related instruments. The principal currencies hedged are
the British pound, German mark, Canadian dollar and some Asian currencies
such as the Hong Kong dollar and Singapore dollar. By policy, the Company
maintains hedge coverage between minimum and maximum percentages of its
anticipated foreign exchange exposures for the next year. The gains and
losses on these contracts are offset by changes in the value of the related
exposures. At December 31, 1999, the Company had approximately $5.9 million
in notional amounts of forward contracts and options outstanding. The credit
and market risks under these agreements are not considered to be significant
since the counterparties have high credit ratings. In addition, the net
investment position in these forward contracts and options is not material.
The Company's pretax loss from foreign subsidiaries and affiliates
translated into U.S. dollars using a weighted average exchange rate was $11.0
million for the year ending December 31, 1999. On that basis, the potential
loss in the value of the Company's pretax loss from foreign subsidiaries
resulting from a hypothetical 10% adverse change in quoted foreign currency
exchange rates would amount to $1.5 million.
It is the Company's policy to enter into foreign currency transactions
only to the extent considered necessary to meet its objectives as stated above.
The Company does not enter into foreign currency transactions for speculative
purposes.
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ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
Page
----
<S> <C>
Reports of Independent Auditors 50
Consolidated Balance Sheets 53
Consolidated Statements of Operations 55
Consolidated Statements of Cash Flows 56
Consolidated Statements of Stockholders' Equity (Deficit) 57
Notes to Consolidated Financial Statements 58
Schedule II Valuation and Qualifying Accounts and Reserves 83
</TABLE>
All other 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 this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On November 16, 1998 (the "Effective Date of Termination"), the Company
agreed with Deloitte & Touche, LLP ("D&T") that D&T would not stand for
re-election as the Company's independent accountants.
D&T's reports on the consolidated financial statements of GeoLogistics
Corporation for the year ended December 31, 1997 and the period from May 2, 1996
"Date of Operations Commenced" through December 31, 1996 did not contain an
adverse opinion, or disclaimer of opinion, nor were the reports qualified or
modified as to uncertainty, audit scope or accounting principles.
During the period beginning on January 1, 1998 and ending on the
Effective Date of Termination, the year ended December 31, 1997, and the period
from May 2, 1996 through December 31, 1996 there have been no disagreements
between the Company and D&T on any matters of accounting principles or
practices, financial statement disclosure or auditing scope or procedure which
disagreements, if not resolved to the satisfaction of D&T, would have caused D&T
to make reference to the subject matter of the disagreements in connection with
its reports. In addition, there have been no events requiring disclosure under
Item 304(a)(1)(v) of Regulation S-K.
D&T has furnished the Company with a letter addressed to the Securities
and Exchange Commission (the "Commission") stating that D&T agrees with the
statements made by the Company.
Effective November 19, 1998 (the "Effective Date of Engagement"), the
Company engaged Ernst & Young LLP ("E&Y") as its independent auditors.
The selection of E&Y was approved by the Audit Committee of the
Company's Board of Directors.
Since the Effective Date of Engagement there have been no
disagreements between the Company and E&Y on any matters of accounting
principles or practices, financial statement disclosure of auditing scope or
procedure which disagreements, if not resolved to the satisfaction of E&Y,
would have caused E&Y to make reference to the subject matter of the
disagreements in connection with its reports.
During the periods prior to the Effective Date of Engagement and all
subsequent interim periods preceding the date hereof, neither the Company nor
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someone on its behalf had consulted E&Y regarding any matters or events as set
forth in Item 304 (a) (2) of Regulation S-K.
31
<PAGE>
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth the directors, executive officers and
certain key management personnel of the Company and certain of its subsidiaries
as of March 28, 2000. 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>
Robert Arovas(1).............. 57 Chief Executive Officer and Director
Janet D. Helvey............... 47 Senior Vice President, Finance
Ronald Jackson................ 47 Vice President, Secretary and General Counsel
Terry G. Clarke............... 44 Vice President-Treasurer
William E. Simon, Jr.(2)...... 48 Chairman of the Board
Vincent J. Cebula(1)(2)(3).... 36 Director
Stephen A. Kaplan(2).......... 41 Director
Michael B. Lenard(1)(2)....... 44 Director
</TABLE>
- -----------
(1) Member of Executive Committee of the Board of Directors.
(2) Pursuant to a stockholders agreement, Logistical Simon L.L.C. ("Logistical
Simon") has the right to designate two members to the Board of Directors,
OCM Principal Opportunities Fund, L.P. (the "Opportunities Fund") has the
right to designate one member of the Board of Directors and TCW Special
Credits Fund V - The Principal Fund (the "Principal Fund") has the right to
designate one member of the Board of Directors. Messrs. Simon and Lenard
are designees of Logistical Simon, Mr. Cebula is the designee of the
Opportunities Fund and Mr. Kaplan is the designee of the Principal Fund.
(3) Member of Audit Committee and Executive Committee.
ROBERT AROVAS has been a director of the Company since January, 2000
and the Chief Executive Officer since October, 1999. From June 1999 to
October 1999 Mr. Arovas was the Chief Operating Officer of the Company. Prior
to joining the Company, Mr. Arovas was Executive Vice President and Chief
Financial Officer of Fritz Companies, Inc. from January 1997 to May 1999.
Prior to January 1997, Mr. Arovas was Senior Vice President and Chief
Financial Officer of BAX Global, Inc. (formerly Burlington Air Express, Inc.)
for nine years and was previously a Vice President of the Pittston Company
(the parent company of Burlington Air Express, Inc.).
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<PAGE>
JANET D. HELVEY has been Senior Vice President, Finance since
October, 1999. Prior to joining the Company, Ms. Helvey was Vice
President-Accounts Receivable of Fritz Companies, Inc. from March 1997 to
September 1999. Prior to March 1997, Ms. Helvey was Controller-Accounts
Receivable of BAX Global, Inc.
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-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.
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. 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. Mr. Cebula also serves on the
boards of directors of 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., KinderCare
Learning Centers, Inc., Roller Bearing Holding Company, Inc., Biopure
Corporation 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
33
<PAGE>
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.
ITEM 11. EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE. The Compensation Committee of the Board
of Directors has furnished the following report on executive compensation for
fiscal 1999.
The Company's compensation program for executives consists of three key
elements:
- - Base salary,
- - Performance-based annual bonus,
- - Periodic grants of stock warrants.
The Compensation Committee believes that this three-part approach best
serves the interests of the Company and its stockholders. It enables the
Company to meet the requirements of the highly competitive environment in
which the Company operates while ensuring that executive officers are
compensated in a way that advances both the short- and long-term interest of
stockholders. Under this approach, compensation for these officers involves a
high proportion of pay that is "at risk"--namely, the annual bonus and stock
warrants. The variable annual bonus permits individual performance to be
recognized on an annual basis, and is based, in significant part, on an
evaluation of the contribution made by the officer to Company performance.
Stock warrants relate a significant portion of long-term remuneration
directly to stock price appreciation realized by all of the Company's
stockholders.
BASE SALARY. Base salaries for the Company's executive officers, as well as
changes in such salaries, are based upon recommendations by the Chief Executive
Officer, taking into account such factors as competitive industry salaries; a
subjective assessment of the nature of the position; the contribution and
experience of the officer, and the length of the officer's service. These
recommendations are reviewed with the Compensation Committee, which then
approves or disapproves such recommendations.
ANNUAL BONUS. Annual bonuses for fiscal 1999 to executive officers of the
Company were granted under the Company's annual bonus performance plan for
Executive Officers. This plan is administered by the Executive Committee.
Under the plan, the Committee establishes specific annual "performance
targets" for each covered executive officer. The performance targets may be
based on one or more of the following business criteria: earnings before
interest, taxes, depreciation and amortization (EBITDA), return on assets and
completion of personal business objectives, or on any combination thereof.
The maximum bonus for any fiscal year may not exceed 70% of base salary in
the case of the Chief Executive Officer and between 40% and 50% in the case
of all other executives.
STOCK WARRANTS. Stock warrants may be made to executive officers upon initial
employment, upon promotion to a new, higher level position that entails
34
<PAGE>
increased responsibility and accountability, in connection with the execution of
a new employment agreement, or at the discretion of the Compensation Committee.
Warrants are recommended by the Chief Executive Officer of the Company to the
Compensation Committee whose approval is required.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. None of the
members of the Board's Compensation Committee is or has been an officer of
employee of the Company.
SUMMARY COMPENSATION TABLE. The Summary Compensation Table below sets forth
the annual base salary and other annual compensation earned in 1999, 1998 and
1997 by Mr. Arovas and the four other most highly-paid executive officers of
the Company whose cash salary and bonus compensation exceeded $100,000 in
1999 (the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ------------
SECURITIES
UNDERLYING ALL OTHER
FISCAL SALARY BONUS OPTIONS/SARS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR $ $ # $
- --------------------------- ------ ---------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Robert Arovas................... 1999 162,500 (1) - - $8,292 (3)
Director and Chief
Executive Officer
Roger E. Payton................. 1999 342,747 (2) - - 17,930 (4)
Former Director, 1998 365,000 - - 50,507 (4)
President and 1997 349,726 100,000 - 41,623 (4)
Chief Executive
Officer
Luis F. Solis................... 1999 250,008 50,000 - 16,084 (5)
Former Executive 1998 250,000 - 5,000 24,348 (5)
Vice President of 1997 208,340 (2) 62,500 37,500 22,159 (5)
Strategic Marketing
Larry Tieman.................... 1999 250,008 - - 25,947 (6)
Former Chief 1998 250,000 - - 24,390 (6)
Information 1997 208,340 (2) 62,500 - 16,839 (6)
Officer
Gary S. Holter.................. 1999 250,000 - - -
Former Chief 1998 250,000 - - 24,615 (7)
Financial Officer 1997 212,500 62,500 - 21,818 (7)
Ronald Jackson.................. 1999 170,016 - - 22,732 (8)
Vice President, 1998 170,000 - - 20,416 (8)
Secretary and 1997 42,500 (1) - 8,000 14,309 (8)
General Counsel
</TABLE>
- ----------
(1) Mr. Arovas began his employment with the Company in June 1999. Mr. Jackson
began his employment with the Company in October 1997.
(2) Mr. Payton was President and Chief Executive Officer of the Company from
May 1996 through September 1999. Mr. Solis was Executive Vice President of
Strategic Marketing from March 1997 through June 1999. Mr. Tieman was Chief
Information Officer of the Company from March 1997 through January 2000.
35
<PAGE>
(3) The Company provided Mr. Arovas with an automobile for his use at the cost
of $6,042 in 1999. In 1999, the Company contributed $2,250 to an account
established for Mr. Arovas' benefit pursuant to the Deferred Plan.
(4) Mr. Payton received an automobile allowance of $3,000, $12,000 and $12,000
in 1999, 1998 and 1997, respectively. Additionally, the Company paid
$1,183, $23,316 and $23,198 in premiums for a life insurance policy for Mr.
Payton in 1999, 1998 and 1997, respectively, and contributed $13,747,
$15,191 and $6,425 in 1999, 1998 and 1997, respectively, as a matching
payment to the account established for Mr. Payton's benefit pursuant to the
Deferred Plan (as defined).
(5) Mr. Solis received an automobile allowance of $12,000, $12,000 and $10,000
in 1999, 1998 and 1997, respectively. Additionally, in 1999, 1998 and 1997
the Company paid $1,010, $1,010 and $909, respectively in premiums for a
life insurance policy for Mr. Solis and contributed $3,074, $11,338 and
$11,250, respectively in 1999, 1998 and 1997 as matching payments to an
account established for Mr. Solis' benefit pursuant to the Deferred Plan.
(6) Mr. Tieman received an automobile allowance of $12,000, $12,000 and $10,000
in 1999, 1998 and 1997, respectively. Additionally, in 1999, 1998 and 1997
the Company paid $2,390, $2,390 and $2,151, respectively in premiums for a
life insurance policy for Mr. Tieman and contributed $11,557, $10,000 and
$4,688, respectively in 1999, 1998 and 1997 as matching payments to an
account established for Mr. Tieman's benefit pursuant to the Deferred Plan.
(7) Mr. Holter received an automobile allowance of $12,000 and $11,100 in
1998 and 1997, respectively. Additionally, in 1998 and 1997 the Company
paid $1,273 and $1,145, respectively, in premiums for a life insurance
policy for Mr. Holter and contributed $11,342 and $9,573 in 1998 and 1997,
respectively, as matching payments to accounts established for Mr. Holter's
benefit pursuant to the Deferred Plan and the Company's 401(k) plan.
(8) Mr. Jackson received an automobile allowance of $12,000, $12,000 and $3,000
in 1999, 1998 and 1997, respectively. Additionally, in 1999, 1998 and 1997
the Company paid $2,138, $1,924 and $1,116, respectively in premiums for a
life insurance policy for Mr. Jackson, in 1997 reimbursed $10,193, of
relocation expenses and in 1999 and 1998 contributed $8,594 and $6,492,
respectively as matching payments to an account established for Mr.
Jackson's benefit pursuant to the Deferred Plan.
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.
FISCAL YEAR END WARRANT VALUES. The following table sets forth information
concerning the fiscal year-end value of unexercised warrants held by the Named
Executive Officers.
36
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
WARRANTS IN THE MONEY WARRANTS
AT 12/31/99 AT 12/31/99
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/NONEXERCISABLE
---- --------------------------------- --------------------------
<S> <C> <C>
Larry Tieman (2)................. 42,500/42,500 (1)
Ronald Jackson................... 8,000/8,000 (1)
</TABLE>
- -----------
(1) None are in-the-money.
(2) Cancelled on February 1, 2000 for no value.
EMPLOYMENT AGREEMENTS
Mr. Arovas entered into an agreement with the Company effective as of
June 15, 1999 which terminates June 15, 2002 (the "Arovas Agreement"). The
Arovas Agreement provides for a base salary of not less than $300,000, with
annual increases and bonuses based upon Mr. Arovas' satisfaction of certain
financial targets and other defined management objectives. The Arovas Agreement
also provides for (1) 25,000 shares of restricted Company stock, subject to the
terms and provisions of the GeoLogistics Corporation 1999 Long-Term Incentive
Plan and the Restricted Share Award Agreement; (2) an irrevocable bank letter of
credit in the amount of $500,000, subject to adjustment, payable in the event of
the Company's failure to pay Mr. Arovas amounts due and owing, or benefits due
as a result of the Company's bankruptcy or insolvency or any other reason; (3)
the use of a Company-paid automobile.
The Arovas Agreement may be terminated by the Company for "cause" (as
defined in the Arovas Agreement) or upon the death or, under certain
circumstances, disability of Mr. Arovas. In the event that the Company
terminates the Arovas Agreement without cause, Mr. Arovas is entitled to receive
his salary for the greater of a period of one year from the date of termination
or the remaining term under the Arovas Agreement. During the term of the Arovas
Agreement and any period during which Mr. Arovas receives severance pay, Mr.
Arovas 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. Payton's employment agreement with the Company, which was
effective as of April 30, 1996 and was to terminate on April 30, 2000 (the
"Payton Agreement"), was terminated October 1, 1999. The Payton Agreement
provided 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 provided 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 Company did not make any severance
payments to Mr. Payton in connection with the termination of him employment
in October 1999, but as part of the settlement arrangements the
Company repurchased from Mr. Payton, 10,000 shares of restricted Company
stock for an average price of $27.124 per share and agreed to repurchase, in
installments between March 2000 and May 2001, the remaining 12,500 shares of
restricted Company stock, owned by Mr. Payton, for a price of $12.24 per
share. Following termination of the Payton Agreement on October 1, 1999. Mr.
Payton entered into an employment agreement with Bekins, which was effective
as of October 1, 1999 (the "October Agreement") and which terminated on
January 2, 2000. The October Agreement also provided for a salary of $20,000
per month. The October Agreement also provided for the payment by Bekins of
the premium on one of Mr. Payton's personal life insurance policies and an
automobile allowance in the amount of $1,000 per month. Bekins also entered
into a consultancy agreement with Mr. Payton, which came into effect on
January 3, 2000 (the "Consultancy Agreement"). The Consultancy Agreement
terminates on December 31, 2000 and provides that Mr. Payton will receive a
total of $125,000 in consultancy fees over the term of the Consultancy
Agreement.
Mr. Solis' employment agreement with the Company, which was
effective as of March 3, 1997 and was to terminate on March 3, 2000 (the
"Solis Agreement"), was terminated July 31, 1999. The Solis Agreement
provided for a base salary of not less than $250,000 per year and provided
that Mr. Solis may receive performance-based cash bonus compensation and
performance-based equity compensation if certain financial and other defined
management objectives to be agreed upon annually between the executive and
the Company at the beginning of
37
<PAGE>
each fiscal year are satisfied. Warrants to purchase common stock held by Mr.
Solis on his termination date were cancelled in accordance with the terms of the
warrant agreement.
Mr. Tieman's employment agreement with the Company, which was
effective as of March 3, 1997 and was to terminate on March 3, 2000 (the
"Tieman Agreement"), was terminated January 31, 2000. The Tieman Agreement
provided for a base salary of not less than $250,000 per year and provided
that Mr. Tieman may receive performance-based cash bonus compensation and
performance-based equity compensation if certain financial and other defined
management objectives to be agreed upon annually between the executive and
the Company at the beginning of each fiscal year are satisfied. In connection
with Mr. Tieman's termination in January 2000, the Company repurchased all of
the shares of common stock and warrants to purchase common stock held by Mr.
Tieman for nominal consideration pursuant to the terms of the purchase and
subscription agreements related to such securities.
Mr. Holter's employment agreement with the Company which was
effective as of March 1, 1997 and was to terminate on March 1, 2000 (the
"Holter Agreement") was terminated February 28, 1999. The Holter Agreement
provided for a base salary of not less than $200,000 per year and provided
that Mr. Holter would receive performance-based cash bonus compensation and
performance-based equity compensation if certain financial and other defined
management objectives to be agreed upon annually between the executive and
the Company at the beginning of each fiscal year were satisfied. In October
1997, Mr. Holter's base salary was increased to $250,000 per year. In
connection with the termination of Mr. Holter's employment agreement in
February 1999, the Company repurchased all of the shares of common stock and
warrants to purchase common stock held by Mr. Holter for nominal
consideration pursuant to the terms of the purchase and subscription
agreements related to such securities.
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 to be agreed upon
annually between the executive and the Company at the beginning of each fiscal
year 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.
INCENTIVE COMPENSATION PLANS
EMPLOYEE STOCK PURCHASE PLAN. The Company's Employee Stock Purchase Plans (the
"Purchase Plans") provide 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 150,000 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 62
employees purchased on aggregate of 110,417 shares of common stock pursuant to
the Purchase Plans.
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)
38
<PAGE>
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 a
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 December 31, 1999, 680 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 318,500 shares of Common Stock, or shares purchased upon exercise
thereof, held by employees of the Company are subject to repurchase by the
Company pursuant to the terms of such warrants upon the termination of
employment of any holder of such warrants prior to an initial public offering of
the Company's Common Stock. The repurchase price depends upon, among other
factors, the circumstances surrounding termination of employment, the fair
39
<PAGE>
market value of the Common Stock on the date of termination and the purchase
price paid by the employee. As of December 31, 1999, the Company had
agreements to purchase an aggregate of 36,500 shares of common stock for
aggregate consideration of $2.0 million at various dates through May 1, 2001.
Moreover, the Company had agreements to acquire certain employee warrants and
subsequent to December 31, 1999, the Company paid $1.1 million for warrants
to purchase these 42,361 shares of common stock.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of March 28, 2000 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 and Named 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>
NUMBER OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER(1) SHARES(2) CLASS
- --------------------------------------- --------- -----
BENEFICIAL OWNERSHIP
---------- ---------
<S> <C> <C>
Oaktree Capital Management, LLC(3)........................... 1,295,575 60.8%
The TCW Group, Inc.(4)....................................... 695,575 32.7
TCW Special Credits Fund V - The Principal Fund.............. 695,575 32.7
OCM Principal Opportunities Fund, L.P........................ 600,000 28.2
Logistical Simon, L.L.C.(5).................................. 569,532 26.7
Stephen A. Kaplan(6)......................................... 1,295,575 60.8
Vincent J. Cebula(6)......................................... 1,295,575 60.8
William E. Simon, Jr.(7)..................................... 569,532 26.7
Michael B. Lenard(7)......................................... 569,532 26.7
Robert Arovas................................................ 25,000 1.2
Roger E. Payton.............................................. 12,500 *
Luis F. Solis................................................ 7,000 *
Executive Officers and Directors as a Group (12 persons)(8).. 1,909,607
</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, and Mr. Cebula is 333 South
Grand Avenue, 28th 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.
(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
40
<PAGE>
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 100,000 shares of Common Stock issuable upon exercise of warrants
which are currently exercisable.
(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,
or Mr. Cebula, 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 and Mr. Cebula disclaims beneficial ownership of such
shares.
(7) All such shares are owned by Logistical Simon. To the extent Mr. Simon, or
Mr. Lenard, 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 and Mr. Lenard disclaims beneficial ownership of such
shares.
(8) See notes (6)-(7).
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In connection with the New Revolver, OCM Principal Opportunities
Fund L.P., and Alham, Inc. (an affiliate of Logistical Simon, L.L.C.),
collectively the "Investors", provided the Agent Bank of the New Revolver
with letters of credit of $19 million, which may be reduced upon certain
circumstances (the "Sponsor LC's").
41
<PAGE>
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Exhibits and Financial Statements and Schedules
(1) Financial Statements and Schedules
See Index to Consolidated Financial Statements and Supplemental Data at
page 49.
(2) Exhibits
The documents set forth below are filed herewith or incorporated herein by
reference to the location indicated.
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
2.1 Purchase agreement dated as of June 15, 1998 by and among the
Company, Caribbean Air Services, Inc. and Amertranz Worldwide
Holding Corp. (incorporated by reference from the GeoLogistics
Corporation's Current Report on Form 8-K filed July 22, 1998).
3.1 Amended and Restated Certificate of Incorporation (incorporated
by reference from the GeoLogistics Corporation's Current Report
on Form 8-K filed July 22, 1998).
3.2 Certificate of Amendment of Amended and Restated Certificate of
Incorporation (incorporated by reference from GeoLogistics
Corporation's Registration Statement on Form S-4 effective April
28, 1998).
3.3 Certificate of Designation of Series A Participating Preferred
Stock (incorporated by reference from the GeoLogistics
Corporation's Current Report on Form 8-K filed July 22, 1998).
3.4 Amended and Restated Bylaws of GeoLogistics Corporation.
4.1 Indenture dated as of October 19, 1997 between the Company and
First Trust National Association, as Trustee (incorporated by
reference from GeoLogistics Corporation's Registration Statement
on Form S-4 effective April 28, 1998).
4.2 Form of New Note (included as Exhibit B to Exhibit 4.1)(
incorporated by reference from GeoLogistics Corporation's
Registration Statement on Form S-4 effective April 28, 1998).
4.3 Form of Guarantee (included as Exhibit B to Exhibit 4.1)(
incorporated by reference from GeoLogistics Corporation's
Registration Statement on Form S-4 effective April 28, 1998).
</TABLE>
42
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
4.4 First Supplemental Indenture dated as of July 13, 1998 by and
among GeoLogistics Air Services Inc., a wholly owned subsidiary
of GeoLogistics Corporation, and U.S. Bank Trust National
Association, as trustee (incorporated by reference from the
GeoLogistics Corporation's Current Report on Form 8-K filed July
22, 1998).
4.5 Second Supplemental Indenture dated as of November 30, 1998 by
and among GeoLogistics Network Solutions, Inc., Bekins Van Lines,
LLC, each an indirect wholly owned subsidiary of GeoLogistics
Corporation, and U.S. Bank Trust National Association, as
trustee (incorporated by reference from the GeoLogistics
Corporation's Annual Report on Form 10-K for the fiscal year
ended December 31, 1998).
10.1 Fourth Amended and Restated Stockholders Agreement dated as of
July 10, 1998 by and among the Company and the holders listed on
Exhibit A attached thereto (incorporated by reference from the
GeoLogistics Corporation's Current Report on Form 8-K filed July
22, 1998).
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 (incorporated by reference
from GeoLogistics Corporation's Registration Statement on Form
S-4 effective April 28, 1998).
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 (incorporated by reference
from GeoLogistics Corporation's Registration Statement on Form
S-4 effective April 28, 1998).
10.4 Executive Management Agreement dated as of October 31, 1996 by
and between the Company and William E. Simon & Sons, L.L.C.
(incorporated by reference from GeoLogistics Corporation's
Registration Statement on Form S-4 effective April 28, 1998).
10.5 Employment Agreement dated as of April 30, 1996 between the
Company and Roger E. Payton (incorporated by reference from
GeoLogistics Corporation's Registration Statement on Form S-4
effective April 28, 1998).
10.6 Form of Employment Agreement between the Company and each of
Messrs. Solis, Tieman and Jackson (incorporated by reference from
GeoLogistics Corporation's Registration Statement on Form S-4
effective April 28, 1998).
10.7 Promissory Note made by Mr. Payton in favor of the Company
(incorporated by reference from GeoLogistics Corporation's
Registration Statement on Form S-4 effective April 28, 1998).
</TABLE>
43
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
10.8 Form of Pledge Agreement executed by Messrs. Payton and Solis
(incorporated by reference from GeoLogistics Corporation's
Registration Statement on Form S-4 effective April 28, 1998).
10.9 Form of Warrant issued by the Company to Roger E. Payton
(incorporated by reference from GeoLogistics Corporation's
Registration Statement on Form S-4 effective April 28, 1998).
10.10 Form of Subscription Agreement executed by Roger E. Payton and
the Company (incorporated by reference from GeoLogistics
Corporation's Registration Statement on Form S-4 effective April
28, 1998).
10.11 Form of Warrant issued by the Company to Messrs. Tieman and Solis
(incorporated by reference from GeoLogistics Corporation's
Registration Statement on Form S-4 effective April 28, 1998).
10.12 Form of Subscription Agreement executed by the Company and each
of Messrs. Tieman and Solis (incorporated by reference from
GeoLogistics Corporation's Registration Statement on Form S-4
effective April 28, 1998).
10.13 Form of Indemnification Agreement (incorporated by reference from
GeoLogistics Corporation's Registration Statement on Form S-4
effective April 28, 1998).
10.14 Deferred Compensation Plan (incorporated by reference from
GeoLogistics Corporation's Registration Statement on Form S-4
effective April 28, 1998).
10.15 Employee Stock Purchase Plan dated March 3, 1997 (incorporated by
reference from GeoLogistics Corporation's Registration Statement
on Form S-4 effective April 28, 1998).
10.16 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 (incorporated by
reference from GeoLogistics Corporation's Registration Statement
on Form S-4 effective April 28, 1998).
10.17 Form of Warrant Agreement between the Company and Mr. Myers
(incorporated by reference from GeoLogistics Corporation's
Registration Statement on Form S-4 effective April 28, 1998).
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
10.18 Amendment No. 1 to Amended and Restated Loan Agreement
(incorporated by reference from the GeoLogistics Corporation's
Current Report on Form 8-K filed July 22, 1998).
10.19 Amendment No. 2 to Amended and Restated Loan Agreement
(incorporated by reference from the GeoLogistics Corporation's
Current Report on Form 8-K filed July 22, 1998).
10.20 Credit Agreement dated as of July 10, 1998 by and among the
Company as borrower and ING (U.S.) Capital Corporation as
administrative agent and the Lenders party thereto (incorporated
by reference from the GeoLogistics Corporation's Current Report
on Form 8-K filed July 22, 1998).
10.21 Registration Rights Agreement dated as of July 13, 1998 by and
among the company and the holders listed on the signature pages
thereof (incorporated by reference from the GeoLogistics
Corporation's Current Report on Form 8-K filed July 22, 1998).
10.22 Amendment No. 3 to Amended and Restated Loan Agreement
(Incorporated by reference from the GeoLogistics Corporation's
Current Report on Form 8-K filed March 5, 1999).
10.23 Asset Purchase Agreement dated as of August 6, 1999 among
GeoLogistics Air Services, Inc., GeoLogistics Americas, Inc., and
GeoLogistics Corporation and FDX Logistics, Inc. (formerly FDX
Global Logistics, Inc.) and FDX Corporation (incorporated by
reference from the GeoLogistics Corporation's Current Report on
Form 8-K filed September 17, 1999).
10.24 Amendment No. 4, dated as of September 10, 1999, to the Amended
and Restated Loan Agreement dated as of October 28, 1997 (as
previously amended by an Amendment No. 1 dated December 12, 1997,
an Amendment No. 2 dated as of July 10, 1998, and an Amendment
No. 3 dated as of February 26, 1999, the "Loan Agreement"), among
GeoLogistics Corporation, GeoLogistics Services, Inc.,
GeoLogistics Americas, Inc., The Bekins Company, ILLCAN, Inc.,
ILLSCOT, Inc., GeoLogistics Limited, and ING (U.S.) Capital
Corporation (now known as ING (U.S.) Capital LLC and referred to
as "ING Capital"), and ING Bank, N.V. (London, England Branch)
(incorporated by reference from the GeoLogistics Corporation's
Current Report on Form 8-K filed September 17, 1999).
10.25 Restricted Share Award Agreement between GeoLogistics
Corporation and Robert Arovas.
10.26 Joint Escrow Instruction and Release Agreement dated as of
February 18, 2000 among FedEx Global Logistics, Inc. (formerly
FDX Global Logistics, Inc. and FDX Logistics, Inc.), FedEx
Corporation (formerly FDX Corporation), GeoLogistics
Corporation and GeoLogistics AirServices Inc.
10.27 Sixth Amended and Restated Stockholders Agreement dated as of
January 27, 2000 by and among the Company and the holders
listed on Exhibit A attached thereto.
10.28 GeoLogistics Corporation's 1999 Long-Term Incentive Plan.
10.29 Loan Agreement by and between Congress Financial Corporation
(Canada) as Lender and GeoLogistics Corporation as Borrower
dated as of March 23, 2000.
10.30 Loan and Security Agreement by and between Congress Financial
Corporation (Western) as Lender and Bekins Worldwide Solutions,
Inc., Bekins Van Lines, LLC, GeoLogistics Services, Inc., and
GeoLogistics Americas, Inc., collectively, as Borrowers dated as
of March 23, 2000.
10.31 Facility Agreement by and between GeoLogistics Limited and
Burdale Financial Limited dated March 31, 2000.
21.1 Subsidiaries of the Registrant.
27 Financial Data Schedule
</TABLE>
45
<PAGE>
(b) Reports on Form 8-K
There were no reports filed on Form 8-K in the fourth quarter of 1999.
46
<PAGE>
SIGNATURES
Pursuant to the requirements Section 1300 15(d) of the Securities Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
GeoLogistics Corporation
(Registrant)
/S/ ROBERT AROVAS APRIL 4, 2000
- ------------------------------------------------- --------------
Name: Robert Arovas Date
Title: CHIEF EXECUTIVE OFFICER AND DIRECTOR
Pursuant to the requirements of the Securities Act of 1934 this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
47
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
- ---------------------------------- ---------------------------------- --------------
<S> <C> <C>
/s/ Robert Arovas Chief Executive Officer APRIL 4, 2000
- ---------------------------------- and Director (Principal
Robert Arovas Executive Officer)
/s/ Janet D. Helvey
- ---------------------------------- Senior Vice President, Finance APRIL 4, 2000
Janet D. Helvey
/s/ Vincent J. Cebula
- ---------------------------------- Director APRIL 4, 2000
Vincent J. Cebula
/s/ Stephen A. Kaplan
- ---------------------------------- Director APRIL 4, 2000
Stephen A. Kaplan
/s/ Michael B. Lenard
- ---------------------------------- Director APRIL 4, 2000
Michael B. Lenard
/s/ William E. Simon, Jr.
- ---------------------------------- Director APRIL 4, 2000
William E. Simon, Jr.
</TABLE>
This Report on Form 10-K represents the Company's annual report for the fiscal
year ended December 31, 1999. No other annual report is available.
48
<PAGE>
GEOLOGISTICS CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
Page
----
<S> <C>
Reports of Independent Auditors.................................. 50
Consolidated Balance Sheets...................................... 53
Consolidated Statements of Operations............................ 55
Consolidated Statements of Cash Flows............................ 56
Consolidated Statements of Stockholders' Equity (Deficit)........ 57
Notes to Consolidated Financial Statements....................... 58
Schedule II Valuation and Qualifying Accounts and Reserves....... 83
</TABLE>
49
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors of GeoLogistics Corporation
Santa Ana, California
We have audited the accompanying consolidated balance sheets of
GeoLogistics Corporation and subsidiaries ("Company") as of December 31, 1999
and 1998 and the related consolidated statements of operations, stockholders'
equity (deficit), and cash flows for the years ended December 31, 1999 and 1998.
Our audits also included the financial statement schedule listed in the Index at
Item 14(a)2. These financial statements and the schedule are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements and the schedule based on our audits.
We conducted our audits in accordance with 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 consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of GeoLogistics Corporation and subsidiaries as of December 31, 1999
and 1998, and the consolidated results of their operations and their cash
flows for the years ended December 31, 1999 and 1998, in conformity with
accounting principles generally accepted in the United States. Also, in our
opinion, the related financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.
ERNST & YOUNG LLP
Chicago, Illinois
March 31, 2000
50
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors of GeoLogistics Corporation
Santa Ana, California
We have audited the accompanying consolidated statements of operations,
stockholders' equity, and cash flows of GeoLogistics Corporation and
subsidiaries ("Company") for the year ended December 31, 1997. 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 results of operations and
cash flows of GeoLogistics Corporation and subsidiaries for the year ended
December 31, 1997, in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Chicago, Illinois
March 17, 1998
51
<PAGE>
(This page has been left blank intentionally.)
52
<PAGE>
GEOLOGISTICS CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1999 1998
--------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ................ $ 2,628 $ 15,152
Accounts receivable:
Trade, net ............................. 245,492 267,047
Other .................................. 20,865 11,046
Deferred income taxes .................... 361 7,245
Prepaid expenses ......................... 25,681 20,708
--------- ---------
Total current assets .............. 295,027 321,198
PROPERTY AND EQUIPMENT:
Land .................................... 2,352 4,884
Buildings and leasehold improvements .... 41,998 49,963
Operating equipment and other ........... 19,932 21,473
Transportation equipment ................ 7,960 10,663
Capitalized software .................... 26,389 26,635
--------- ---------
98,631 113,618
Less accumulated depreciation ........... (22,648) (18,364)
--------- ---------
Property and equipment, net .......... 75,983 95,254
NOTES RECEIVABLE, less current portion ..... 1,241 1,711
DEFERRED INCOME TAXES ...................... 547 19,168
INTANGIBLE ASSETS, net ..................... 55,285 91,274
OTHER ASSETS ............................... 19,573 20,573
--------- ---------
TOTAL ASSETS ....................... $ 447,656 $ 549,178
========= =========
</TABLE>
See notes to consolidated financial statements.
53
<PAGE>
GEOLOGISTICS CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE DATA)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
December 31,
1999 1998
--------- ---------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable ............................... $ 160,914 $ 139,696
Accrued expenses ............................... 116,676 149,519
Income taxes payable ........................... 2,475 7,940
Current portion of long-term debt .............. 12,222 12,549
--------- ---------
Total current liabilities .................. 292,287 309,704
LONG-TERM DEBT, less current portion ............. 152,915 183,177
OTHER NONCURRENT LIABILITIES ..................... 46,747 52,400
MINORITY INTEREST ................................ 2,087 2,381
--------- ---------
Total liabilities .......................... 494,036 547,662
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, 15,000 shares authorized,
issued and outstanding ....................... 14,550 14,550
Common stock ($.001 par value, 5,000,000
shares authorized, 2,129,893 and 2,128,893
shares issued and outstanding at December 31,
1999 and 1998, respectively) ................ 2 2
Additional paid-in capital ..................... 56,962 55,371
Accumulated deficit ............................ (119,709) (67,898)
Notes receivable from stockholders ............. -- (191)
Accumulated other comprehensive income (loss) .. 1,815 (318)
--------- ---------
Total stockholders' equity (deficit) ....... (46,380) 1,516
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT) ................................ $ 447,656 $ 549,178
========= =========
</TABLE>
See notes to consolidated financial statements.
54
<PAGE>
GEOLOGISTICS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Revenues ......................................... $ 1,558,204 $ 1,526,753 $ 978,249
Transportation and other direct costs ............ 1,195,310 1,154,533 759,049
----------- ----------- -----------
Net revenues ..................................... 362,894 372,220 219,200
Selling, general and administrative expenses ..... 378,048 366,268 204,733
Restructuring and other non-recurring charges .... 18,997 -- --
Asset impairment charges ......................... 11,888 -- --
Depreciation and amortization .................... 20,021 18,126 30,398
----------- ----------- -----------
Operating loss ................................... (66,060) (12,174) (15,931)
Interest expense, net and amortization of
debt issuance costs ............................ 23,086 16,984 8,576
Gain on sale of business ......................... 68,920 -- --
Other expense, net ............................... 749 214 211
----------- ----------- -----------
Loss before income taxes, minority interests
and extraordinary loss ......................... (20,975) (29,372) (24,718)
Income tax expense(benefit) ...................... 27,258 7,729 (8,420)
----------- ----------- -----------
Loss before minority interest and
extraordinary loss ............................. (48,233) (37,101) (16,298)
Minority interests ............................... 1,478 932 1,067
----------- ----------- -----------
Loss before extraordinary loss ................... (49,711) (38,033) (17,365)
Extraordinary loss on early extinguishment
of debt net of tax benefit of $1,528 ........... -- -- (2,293)
----------- ----------- -----------
Net loss ......................................... (49,711) (38,033) (19,658)
Preferred stock dividend ......................... 2,100 963 --
----------- ----------- -----------
Loss applicable to common stock .................. $ (51,811) $ (38,996) $ (19,658)
=========== =========== ===========
PER COMMON SHARE - BASIC AND DILUTED:
Loss before extraordinary loss ................ $ (24.31) $ (18.39) $ (8.47)
Extraordinary loss ............................ -- -- (1.12)
----------- ----------- -----------
Net loss ...................................... $ (24.31) $ (18.39) $ (9.59)
=========== =========== ===========
Basic and diluted weighted average number of
common shares outstanding ...................... 2,131,393 2,120,365 2,049,800
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
55
<PAGE>
GEOLOGISTICS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ........................................... $ (49,711) $ (38,033) $ (19,658)
Adjustments to reconcile net loss to net
cash used in operating activities:
Asset impairment charges ......................... 11,888 -- --
Gain on sale of business.......................... (68,920) -- --
(Gain) loss on sale of net assets (116) -- 60
Depreciation and amortization .................... 20,021 18,126 30,398
Amortization of deferred items ................... 3,343 1,217 861
Deferred income taxes ............................ 25,505 976 (10,070)
Extraordinary item, net of tax ................... -- -- 2,293
Change in operating assets and liabilities:
Accounts receivable-trade, net ................... 8,266 (9,823) (2,129)
Prepaid expenses and other current assets ........ (6,746) (7,399) 1,945
Accounts payable and accrued expenses ............ (13,618) (1,673) (5,795)
Other ............................................ (9,386) (7,321) (5,654)
--------- --------- ---------
Net cash used in operating activities .......... (79,474) (43,930) (7,749)
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Business acquisitions ............................ -- (27,133) (14,470)
Proceeds from sale of business ................... 102,704 -- --
Purchases of property and equipment, net.......... (7,229) (34,020) (11,744)
Proceeds from the sale of net assets ............. 438 -- 7,545
--------- --------- ---------
Net cash provided by (used in) investing
activities ................................... 95,913 (61,153) (18,669)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds (repayments) from revolving line
of credit, net ................................. (25,200) 49,100 --
Proceeds from long-term debt ..................... 17,812 25,344 110,000
Payments on long-term debt ....................... (22,529) (6,694) (64,692)
Debt issuance costs .............................. (627) (616) (8,918)
Issuance of common stock ......................... -- 3,264 2,585
Issuance of preferred stock ...................... -- 14,550 --
Repurchase of common stock ....................... (231) (18) (551)
Dividend payments to minority interests .......... (3,766) (803) (104)
--------- --------- ---------
Net cash provided by (used in) financing
activities ................................... (34,541) 84,127 38,320
--------- --------- ---------
Effect of exchange rate changes on cash and
cash equivalents ................................. 5,578 (1,801) 395
--------- --------- ---------
Net increase (decrease) in cash and cash
equivalents ...................................... (12,524) (22,757) 12,297
Cash and cash equivalents of acquired companies .... -- -- 22,188
Cash and cash equivalents, beginning of period ..... 15,152 37,909 3,424
========= ========= =========
Cash and cash equivalents, end of period ........... $ 2,628 $ 15,152 $ 37,909
========= ========= =========
SUPPLEMENTAL DISCLOSURES:
Interest paid ...................................... $ 19,771 $ 15,256 $ 7,715
========= ========= =========
Income taxes paid .................................. $ 6,698 $ 2,402 $ 2,021
========= ========= =========
Noncash common stock transactions .................. $ 1,822 $ 1,440 $ 207
========= ========= =========
New capital leases ................................. $ 880 $ 9,963 $ 1,260
========= ========= =========
Noncash proceeds from the sale of net assets ....... $ -- -- $ 2,496
========= ========= =========
</TABLE>
See notes to consolidated financial statements.
56
<PAGE>
GEOLOGISTICS CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
ADDITIONAL
PREFERRED STOCK COMMON STOCK PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT
<S> <C> <C> <C> <C> <C> <C>
BALANCE,
January 1, 1997 ......... -- $ -- 2,016,667 $ 2 $50,050 $ (9,244)
Sale of stock ........... 85,119 2,792
Repurchase of
common stock ............ (27,560) (551)
Net loss ................ (19,658)
Foreign currency
translation adjustment ..
------ ------- --------- ---- ------- -----------
BALANCE,
December 31, 1997 ....... -- -- 2,074,226 2 52,291 (28,902)
Sale of stock ........... 15,000 14,550 55,267 3,098
Repurchase of
common stock ............ (600) (18)
Net loss ................ (38,033)
Preferred stock
dividends ............... (963)
Foreign currency
translation adjustment ..
------ ------- --------- ---- ------- -----------
BALANCE,
December 31, 1998 ....... 15,000 14,550 2,128,893 2 55,371 (67,898)
Repurchase of
common stock ............ (24,000) (231)
Sale of stock ........... 1,822
Restricted stock grant .. 25,000
Net loss ................ (49,711)
Preferred stock dividends (2,100)
Foreign currency
translation adjustment ..
------ ------- --------- ---- ------- -----------
BALANCE,
December 31, 1999 ....... 15,000 $14,550 2,129,893 $ 2 $56,962 $ (119,709)
====== ======= ========= ==== ======= ===========
</TABLE>
<TABLE>
NOTES
RECEIVABLE CUMULATIVE TOTAL OTHER
FROM TRANSLATION STOCKHOLDERS' COMPREHENSIVE COMPREHENSIVE
STOCKHOLDERS ADJUSTMENT EQUITY(DEFICIT) INCOME (LOSS) LOSS
<S> <C> <C> <C> <C> <C>
BALANCE,
January 1, 1997 ....... $(150) $ (39) $ 40,619
Sale of stock ........ (207) 2,585
Repurchase of
common stock ............ (551)
Net loss ................ (19,658) $ (76) $(19,734)
======== ========
Foreign currency
translation adjustment .. (76) (76)
-------- ------- -----------
BALANCE,
December 31, 1997 ....... (357) (115) 22,919
Sale of stock ........... 166 17,814
Repurchase of
common stock ............ (18)
Net loss ................ (38,033) (203) (38,236)
======== ========
Preferred stock
dividends ............... (963)
Foreign currency
translation adjustment .. (203) (203)
-------- ------- -----------
BALANCE,
December 31, 1998 ....... (191) (318) 1,516
Repurchase of
common stock ............ (231)
Sale of stock ........... 191 2,013
Restricted stock grant .. --
Net loss ................ (49,711) $ 2,133 $(47,578)
======== ========
Preferred stock dividends (2,100)
Foreign currency
translation adjustment .. 2,133 2,133
-------- ------- -----------
BALANCE,
December 31, 1999 ....... $ -- $ 1,815 $ (46,380)
======== ======= ===========
</TABLE>
See notes to consolidated financial statements.
57
<PAGE>
GEOLOGISTICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
1. GENERAL INFORMATION
GeoLogistics Corporation ("GeoLogistics" or the "Company") was formed
and incorporated in Delaware in 1996 by entities managed by William E. Simon and
Sons, LLC ("WESS") and Oaktree Capital Management, LLC ("OCM"). GeoLogistics
made three acquisitions during the period ended December 31, 1996, and one
acquisition during each of the years ended December 31, 1997 and 1998.
The Company is one of the largest non-asset based providers of
worldwide logistics and transportation services headquartered in the United
States. 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.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION. The accompanying consolidated financial
statements include the accounts of GeoLogistics and its majority owned
subsidiaries. The Company records its investment in each unconsolidated
affiliated company (20 to 50 percent ownership) at its related equity in the net
assets of such affiliate. Other investments (less than 20 percent ownership) are
recorded at cost. Intercompany accounts and transactions have been eliminated.
The financial statements reflect minority interests in foreign affiliates
acquired in connection with the acquisition of LEP International Worldwide
Limited ("LIW")(see Note 3).
RECLASSIFICATIONS. Certain amounts for prior years have been
reclassified to conform with 1999 financial statement and footnote presentation.
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 when purchased.
PROPERTY AND EQUIPMENT. Property and equipment are stated at cost, less
accumulated depreciation. Depreciation of owned assets and amortization of
capital lease assets is provided using the straight-line method over the
estimated useful lives of the related assets. Leasehold improvements are
amortized 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
capitalized.
Maintenance and repairs are expensed as incurred. Estimated useful lives are as
follows:
<TABLE>
<S> <C>
Transportation equipment................................................................ 4-8 years
Operating equipment and other........................................................... 3-8 years
Buildings and leasehold improvements.................................................... 25-40 years
Furniture and fixtures.................................................................. 3-10 years
Capitalized software.................................................................... 3-5 years
</TABLE>
The Company capitalizes all external direct costs of materials and
services consumed in developing or obtaining internal-use computer software, and
payroll and payroll related costs for employees who are directly associated with
a project to develop computer software. Training costs and maintenance fees are
expensed as incurred or, if such costs are included in the price of the
software, allocated over the term of the service provided.
58
<PAGE>
GEOLOGISTICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
INTANGIBLE ASSETS. Intangible assets include principally costs 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 software, agent and customer contracts,
drivers' network and goodwill. Provision for amortization has been made on the
straight-line method based upon the estimated useful lives of the intangible
asset categories.
The Company reviews long-lived assets for impairment whenever events or
changes in circumstances indicate the carrying amount of such assets may not be
recoverable. Recoverability of these assets is determined by comparing the
forecasted undiscounted net cash flows of the operation to which the assets
relate to the carrying amount. If undiscounted net cash flows are insufficient
to recover the carrying amount of its assets, then the assets are written down
to fair value. Fair value is determined based on discounted cash flows or
appraised values, depending upon the nature of the assets. Based on present
operations and strategic plans, the Company believes that no impairment exists
other than the impairment described in Note 4.
OTHER ASSETS. Other assets as of December 31, 1999 and 1998 consist
primarily of pension assets of $15,195 and $14,088, respectively, investments in
an affiliate and deposits related to certain operating leases.
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, 1999 and 1998 due to their short-term
nature; the carrying value of the Company's revolving debt approximates fair
value due to its variable interest rates. Fair values of other debt instruments
were calculated based on broker quotes or quoted market prices or rates for the
same or similar investments. As of December 31, 1999 and 1998, the carrying
amount of other debt instruments subject to fair value disclosures was $110,000
with a fair value of $30,000 and $102,900, respectively. The fair value is not
indicative of the amounts the Company would pay to redeem the debt. See Note 7
for redemption rights and obligations.
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
these subsidiaries are translated at the rate of exchange at the balance sheet
date. Translation adjustments are included in accumulated other comprehensive
loss in the accompanying consolidated balance sheets. Income and expenses are
translated at average monthly rates of exchange. Gains and losses from foreign
currency transactions are included in results of operations.
FOREIGN CURRENCY RISK MANAGEMENT. The Company's objective in managing
the exposure to foreign currency fluctuations is to reduce earnings and cash
flow volatility associated with foreign exchange rate changes and allow
management to focus its attention on its core business issues and challenges.
Accordingly, the Company enters into various contracts which change in value as
foreign exchange rates change to protect certain of its existing foreign assets,
liabilities, commitments and anticipated foreign earnings. The Company may use a
combination of financial instruments to manage these risks, including forward
contracts or option related instruments. The principal currencies hedged are the
British Pound, German Mark, Canadian Dollar and some Asian currencies such as
the Hong Kong and Singapore dollar. By policy, the Company maintains hedge
coverage between minimum and maximum percentages of its anticipated foreign
exchange exposures for the next year. The gains and losses on these contracts
are
59
<PAGE>
GEOLOGISTICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
offset by changes in the value of the related exposures. At December 31, 1999
and 1998, the notional amount of the Company's outstanding forward contracts
were approximately $5,872 and $44,500, respectively. The credit and market
risks under these agreements are not considered to be significant since the
counterparties have high credit ratings.
It is the Company's policy to enter into foreign currency transactions
only to the extent considered necessary to meet its objective as stated above.
The Company does not enter into foreign currency or interest rate transactions
for speculative purposes. Transaction gains for the years ended December 31,
1999, 1998 and 1997 were $583, $2,715 and $1,155 respectively.
In June 1998, the Financial Accounting Standards Board Issued
Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS No.133"), which was originally required to be adopted in
years beginning after June 15, 1999. This new accounting standard will
require that all derivatives be recorded on the balance sheet at fair value.
If the derivative is a hedge, depending on the nature of the hedge, changes
in fair value of the hedged assets, liabilities, or firm commitments are
recognized through earnings or recognized in other comprehensive income until
the hedged item is recognized in earnings. Management is currently assessing
the impact that the adoption of SFAS No. 133 will have on the Company's
financial position, results of operations, and cash flows.
The FASB recently issued SFAS No. 137 which delays the effective
date of SFAS No. 133 until fiscal years beginning after June 15, 2000. In
addition, SFAS No. 137 requires that all derivatives that are expected to be
hedges must be designated as such on the first day of the period in which the
statement becomes effective. The Company, which utilizes fundamental
derivatives to hedge changes in interest rates and foreign currencies,
expects to adopt SFAS No. 133 effective January 1, 2001.
REVENUE RECOGNITION. The Company's policy is to recognize 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 recognized at the time the freight departs the
terminal of origin. Customs brokerage revenue is recognized upon completing the
documents necessary for customs clearance. Storage revenue is recognized as
services are performed. Transportation and other direct costs are recognized
concurrently with revenues. For both international and domestic revenues, the
above methods of revenue recognition approximate recognizing revenues and
expenses when a shipment is completed.
ADVERTISING COSTS. The Company expenses all advertising costs in the
year incurred. Advertising expense was $3,039 in 1999, $3,892 in 1998 and $897
in 1997.
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. 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 $21,032 and $21,862 at December 31, 1999 and 1998, 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
60
<PAGE>
GEOLOGISTICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
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. Basic earnings per common share is computed using
the weighted average number of shares outstanding. Diluted earnings per common
share is computed under the treasury stock method using the weighted average
number of shares outstanding adjusted for the incremental shares attributed to
outstanding warrants to purchase common stock. Incremental shares of zero, zero,
and .1 million in 1999, 1998, and 1997, respectively, were not used in the
calculation of diluted loss per common share due to their antidilutive effect.
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 transportation and other direct
costs, tax contingencies, insurance claims, cargo loss and damage claims.
ACCUMULATED OTHER COMPREHENSIVE INCOME. Other comprehensive income
in the financial statements of the Company represents foreign currency
translation adjustments resulting from the conversion of the financial
statements of foreign subsidiaries from local currency to U.S. dollars.
3. ACQUISITIONS AND DIVESTITURE
On May 2, 1996, the Company acquired all of the outstanding shares of Bekins, 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 $49,700 including
assumptions of debt and acquisition costs. The consideration was comprised of
$49,500 in cash and the exchange of 45,560 shares of Bekins stock valued at $200
for shares of GeoLogistics. The value assigned to the Company's stock issued in
the exchange was based on treatment required by Emerging Issues Task Force
("EITF") publication 88-16 BASIS IN LEVERAGED BUYOUT TRANSACTIONS, which states
that residual interest in the acquired company should be carried over at the
predecessor's basis. Therefore, the $200 of basis previously included in Bekins
was carried over to the shares of common stock of the Company. The excess of the
purchase price over the fair value of the net assets acquired of $17,900 has
been recorded as goodwill, and is being amortized on a straight-line basis over
40 years.
The Company 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. Upon the acquisition of
Bekins by the Company on May 2, 1996, BMS was treated as discontinued and the
net remaining assets were classified as assets held for sale in the balance
sheet. During 1997 all remaining assets of BMS were sold. Losses from operations
since May 2, 1996 of $4,000, partially offset by the gain on sale of the assets
of $2,600, were considered in the allocation of the purchase price.
On October 31, 1996, the Company acquired all of the outstanding shares
of Americas and Canada from LIW for $32,000 in cash including assumption of debt
and acquisition costs. Americas and Canada provide domestic and international
freight forwarding services, as well as value-added domestic logistic services.
In September, 1999, the Company exited the domestic freight forwarding business
and wrote off $3,500 of goodwill related to that business (see
61
<PAGE>
GEOLOGISTICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
note 4). The remaining excess of the purchase price over the fair value of the
net assets acquired of $17,400 is being amortized on a straight-line basis over
40 years. In addition to the acquisition of Americas and Canada, the Company
acquired a 33.3% interest in the equity of LIW for the aggregate price of one
dollar.
On November 7, 1996, the Company acquired all of the outstanding shares
of Services, an international project cargo freight forwarder that also
specializes in premium international household relocation services, for $30,000
including assumption of debt and acquisition costs. The consideration was
comprised of $27,000 in cash and $3,000 of the Company's common stock (valued at
$30 per share, the same price paid by shareholders for additional stock
purchases made on October 31, 1996). The excess of the purchase price over the
fair value of the net assets acquired of $18,900 has been recorded as goodwill
and is being amortized on a straight-line basis over 25 years.
On September 30, 1997, the Company increased its holdings of LIW's
common stock, a United Kingdom based international freight forwarder with
operations primarily in Europe and Asia, from 33.3% to 75.2%. In December
1997, the Company acquired LIW's remaining outstanding common stock and
acquired and retired LIW's outstanding preferred stock. Consideration
included 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 purchase price ($14,500, including
assumption of debt and acquisition costs) has been allocated to the assets
acquired and liabilities assumed based on their fair value at the date of
purchase. The operating results of each acquired company are included in the
results of the Company from the respective dates of acquisition.
On July 13, 1998, the Company purchased substantially all of the
operating assets and assumed certain of the liabilities of Caribbean Air
Services, Inc. ("CAS"), for aggregate cash consideration of $27,000. CAS is a
provider of air logistics services between the United States, Puerto Rico, and
the Dominican Republic. Goodwill of approximately $27,200 was recorded and being
amortized over 25 years. On September 10, 1999, the Company sold substantially
all of the assets of its GLAS business unit which was comprised of CAS and
certain operations of another subsidiary ("GLAS Assets") for aggregate cash
consideration of approximately $116,000. The $68,920 gain on this sale has been
reflected in the consolidated financial statements for the year ended December
31, 1999.
The sale proceeds were applied by the Company to fund a $10,000 escrow
account in connection with certain warranties to the purchaser, pay fees and
expenses associated with the transaction and reduce revolving debt that was
secured by the GLAS Assets. As of December 31, 1999, the Company has recorded a
$1,800 allowance relating to the warranties and subsequent to December 31, 1999,
the Company settled certain remaining obligations and warranties associated with
the escrow account and obtained the release of $8,200.
For the year ended December 31, 1999, revenues and operating income from the
GLAS operations were approximately $66,800 and $10,500, respectively.
4. RESTRUCTURING AND OTHER NON-RECURRING CHARGES/ASSET IMPAIRMENT CHARGES
On March 4, 1999, the Company announced the intended restructuring
of its GeoLogistics Americas ("Americas") business as a result of a difficult
domestic freight forwarding environment. Due to lower volumes in the European
region, the Company initiated a process to reevaluate the operations of its
other business units to determine what initiatives could be taken to reduce
costs and streamline administrative operations. As part of this restructuring
process a new management team was put in place in an effort to improve global
operating
62
<PAGE>
GEOLOGISTICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
results.
In connection with these efforts, the Company (a) exited the
majority of its domestic freight forwarding portion of Americas business at
the end of the third quarter of 1999, (b) is rationalizing personnel such
that their numbers and skill sets are suited to the ongoing services and
volumes of the business, (c) closed, or will close, facilities in the United
States and Europe, (d) arranged for the settlement of remaining obligations
to the selling shareholders of the project forwarding and international
household goods relocation services business and integrated the project
forwarding business into the Americas business and the international
household goods relocation services into Bekins and (e) revalued assets to
reflect fair values. The aggregate charge for these actions is expected to be
approximately $34,600 of which $30,885 was recorded in 1999 and the remaining
balance of $3,715 is expected to be recorded in the first half of 2000. The
restructuring and non-recurring charges include provisions for the
termination of 460 sales, administrative and warehouse employees globally at
a cost of approximately $16,600. Of this cost $13,900, representing the
termination of 420 employees, was recorded in 1999 and $2,700 which relates
to the termination of the remaining 40 employees is expected to be recorded
in the first half of 2000. The restructuring and non-recurring charge is also
comprised of $1,600 related to facility closure and lease terminations,
$1,500 additional allowance for bad debts, $1,100 for the termination of
certain agreements, and $900 for other miscellaneous exit costs. Accrued
liabilities at December 31, 1999 included approximately $7,700 of future
severance payments related to 176 employees terminated prior to December 31,
1999; approximately $1,100 related to facility closure and exit costs; and
$1,000 was included in allowance for doubtful accounts. The non-cash charges
for asset impairment relate to the write-off of $3,500 of goodwill as a
result of exiting the domestic freight forwarding portion of Americas'
business, a $6,800 reevaluation of capitalized software costs and $1,600
related to the pending sale of certain property of its Italian subsidiary. In
addition to actions for which immediate financial recognition is required,
many additional actions have been taken including revised incentive plans for
the sales and management staffs (including the employees who will continue to
operate the international freight forwarding operations in the United
States), expansion of logistics facilities in Thailand and expansion of
facilities and logistics capabilities in China.
5. INTANGIBLE ASSETS
Intangible assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- AMORTIZATION
1999 1998 PERIOD
-------- -------- ------
<S> <C> <C> <C>
Goodwill................................... $ 55,653 $ 83,902 25-40 years
Agent contracts............................ 3,291 5,610 2-5 years
Customer contracts......................... 486 2,045 2 years
Debt issuance costs........................ 9,327 9,404 5-10 years
Trademarks................................. 1,307 885 10 years
Other...................................... 249 853 4 years
-------- --------
70,313 102,699
Less accumulated
amortization.............. (15,028) (11,425)
-------- --------
$ 55,285 $ 91,274
======== ========
</TABLE>
6. ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER NONCURRENT LIABILITIES
63
<PAGE>
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 totaled approximately $7,000 and $14,300 at December 31, 1999 and 1998,
respectively.
Accrued expenses and other noncurrent liabilities consist of the
following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1999 1998
-------- --------
<S> <C> <C>
ACCRUED EXPENSES
Transportation............................................................ $ 42,998 $ 87,445
Employee related.......................................................... 23,723 25,865
Restructuring reserve..................................................... 8,816 -
Rents and utilities....................................................... 837 889
Insurance and litigation.................................................. 8,036 9,321
Acquisition related....................................................... 3,192 4,177
Customer programs......................................................... 2,638 2,124
Accrued interest.......................................................... 2,950 2,914
VAT/Sales tax payables.................................................... 2,196 3,097
Other..................................................................... 21,290 13,687
-------- --------
$116,676 $149,519
======== ========
OTHER NONCURRENT LIABILITIES
<S> <C> <C>
Employee benefit programs................................................. $ 25,765 $ 30,034
Insurance................................................................. 3,583 5,192
Acquisition related....................................................... 7,101 8,054
Preferred dividend payable................................................ 3,083 963
Other..................................................................... 7,215 8,157
-------- --------
$ 46,747 $ 52,400
======== ========
</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 Company's 1996
acquisitions, the Company recorded certain acquisition reserves related to the
closure of duplicate administrative and warehouse facilities, consolidation of
redundant business systems, and reduction of personnel performing duplicate
tasks. Estimated termination benefits include approximately $3,800 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
$3,900. Approximately $1,600 was accrued for all other consolidation, relocation
and related activities. In 1997, the Company adjusted certain of these reserves
and recorded additional reserves in connection with the acquisition of LIW
relating to redundant office facilities ($1,300), terminations and relocations
of approximately 40 people ($2,600) and facility closures ($4,600). All costs
were accrued as part of the purchase accounting in accordance with approved
management plans. In 1998, the Company utilized $8,600 of reserves recorded in
the acquisitions previously discussed and recorded additional reserves of $300
for facility closures relating to the CAS acquisition and $600 for redundant
facilities relating to the LIW Acquisition. In 1999, the Company
64
<PAGE>
GEOLOGISTICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
utilized $1,938 of the aforementioned reserves. As of December 31, 1999, the
remaining acquisition reserves of $10,293 relate primarily to lease
termination costs, litigation reserves, various tax liabilities and
employment termination liabilities.
7. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
INTEREST RATES 1999 1998
-------------- -------- --------
<S> <C> <C> <C>
Senior Notes.................................. 9.75% $110,000 $110,000
Promissory Notes.............................. 8.25% - 9.50% - 15,000
Revolving Credit Facility..................... 8.50% - 9.97% 23,900 49,100
Supplemental Commitment....................... 9.97% 15,000 -
Capital lease obligations, due in various installments
through 2003............................... 5.04% - 18.79% 6,268 10,548
Other......................................... 4.07% - 14.14% 9,969 11,078
-------- --------
165,137 195,726
Less current portion.......................... 12,222 12,549
-------- --------
$152,915 $183,177
-------- --------
-------- --------
</TABLE>
The assets under capital leases represent primarily computer equipment with a
net book value as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1999 1998
------- -------
<S> <C> <C>
Cost $13,269 $11,354
Accumulated depreciation (7,078) (3,050)
------- -------
Net book value $ 6,191 $8,304
======= ======
</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, 1999 are as follows:
<TABLE>
<CAPTION>
CAPITAL
LEASES DEBT TOTAL
------ ---- -----
<S> <C> <C> <C>
2000.................................................. $4,004 $47,522 $51,526
2001.................................................. 2,098 708 2,806
2002.................................................. 746 639 1,385
2003.................................................. 110 - 110
2004.................................................. - - -
Thereafter............................................ - 110,000 110,000
------ -------- --------
6,958 158,869 165,827
Less amounts representing interest 690 - 690
------ -------- --------
$6,268 $158,869 $165,137
====== ======== ========
</TABLE>
SENIOR NOTES: In October 1997 the Company issued $110,000 in aggregate
principal amount of its 9 3/4 % Senior Notes (the "Notes") which are due October
15, 2007, and are general unsecured obligations of the Company. The Notes are
fully and unconditionally guaranteed on a
65
<PAGE>
GEOLOGISTICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
joint and several senior basis by all existing and future domestic Restricted
Subsidiaries (as defined in the indenture relating to the Notes). Three of the
Company's domestic subsidiaries hold as their sole assets all of the issued and
outstanding equity interests of the Company's non-guarantor foreign
subsidiaries. The Notes are subject to various covenants, including, limitations
on additional indebtedness, restricted payments, dividends and payment
restrictions on the ability of the Company's subsidiaries to pay dividends. The
Notes may not be redeemed at the option of the Company prior to October 15,
2002, except in connection with one or more public equity offerings by the
Company. Upon the occurrence of a Change of Control, the holders of the Notes
would have the right to require the Company to purchase their Notes at a price
equal to 101% of the then outstanding aggregate principal amount thereof, plus
accrued and unpaid interest to the date of purchase.
The following is condensed combined financial information of guarantor
and non-guarantor subsidiaries for 1999, 1998 and 1997:
66
<PAGE>
GEOLOGISTICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE SHEET AS OF DECEMBER 31, 1999
- ------------------------------------------------------------------------------------------------------------------------------------
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS COMBINED
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents................ $ 1,621 $(2,365) $ 3,372 $ - $ 2,628
- ------------------------------------------------------------------------------------------------------------------------------------
Accounts receivable trade, net........... (1,023) 79,275 209,285 (42,045) 245,492
- ------------------------------------------------------------------------------------------------------------------------------------
Property, net............................ 1,766 19,427 54,790 - 75,983
- ------------------------------------------------------------------------------------------------------------------------------------
Intangible assets, net................... 6,496 45,467 4,267 (945) 55,285
- ------------------------------------------------------------------------------------------------------------------------------------
Other assets............................. 195,841 6,076 335,402 (469,051) 68,268
------- -------- -------- ---------- --------
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets........................... $204,701 $147,880 $607,116 $(512,041) $447,656
======== ======== ======== ========== ========
- ------------------------------------------------------------------------------------------------------------------------------------
Current liabilities....................... $ 6,933 $ 91,447 $239,185 $ (45,278) $292,287
- ------------------------------------------------------------------------------------------------------------------------------------
Long-term debt........................... 149,154 867 2,894 - 152,915
- ------------------------------------------------------------------------------------------------------------------------------------
Other non-current liabilities............ 17,125 81,777 126,956 (177,024) 48,834
- ------------------------------------------------------------------------------------------------------------------------------------
Stockholders' equity (deficit)........... 31,489 (26,211) 238,081 (289,739) (46,380)
------- -------- -------- ---------- --------
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities and
Stockholders' equity (deficit)....... $204,701 $147,880 $607,116 $(512,041) $447,656
======== ======== ======== ========== ========
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1999
-----------------------------------------------------------------------------------------------------------------------------------
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS COMBINED
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues................................. $ - $596,031 $1,116,804 $(154,631) $1,558,204
-----------------------------------------------------------------------------------------------------------------------------------
Transportation and other direct - 465,479 884,462 (154,631) 1,195,310
costs..................................
-----------------------------------------------------------------------------------------------------------------------------------
Operating expenses....................... 13,188 156,666 228,215 - 398,069
-----------------------------------------------------------------------------------------------------------------------------------
Restructuring and other non-
recurring charges 2,213 9,872 6,912 - 18,997
-----------------------------------------------------------------------------------------------------------------------------------
Asset impairment charges................. 2,152 5,926 3,810 - 11,888
--------- --------- -------- ---------- ---------
-----------------------------------------------------------------------------------------------------------------------------------
Operating loss............................ (17,553) (41,912) (6,595) - (66,060)
-----------------------------------------------------------------------------------------------------------------------------------
Gain on sale of business................. - 68,920 - - 68,920
-----------------------------------------------------------------------------------------------------------------------------------
Interest and other, net.................. (4,092) (15,371) (4,372) - (23,835)
-----------------------------------------------------------------------------------------------------------------------------------
Income tax provision..................... 1,537 25,132 589 - 27,258
-----------------------------------------------------------------------------------------------------------------------------------
Minority interests....................... - - 1,478 - 1,478
--------- --------- -------- ---------- ---------
-----------------------------------------------------------------------------------------------------------------------------------
Net (loss) income..................... $(23,182) $ (13,495) $(13,034) $ - $ (49,711)
========= ========= ======== ========== =========
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1999
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS COMBINED
<S> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------------------------
Cash flows from:
--------------------------------------------------------------------------------------------------------------------------------
Operating activities................. $ 21,741 $(99,028) $ (2,187) $ - $(79,474)
--------------------------------------------------------------------------------------------------------------------------------
Investing activities:
--------------------------------------------------------------------------------------------------------------------------------
Purchases of property and
equipment, net...................... 6,928 (6,293) (7,426) - (6,791)
--------------------------------------------------------------------------------------------------------------------------------
Proceeds from sale of business....... - 102,704 - - 102,704
------- -------- ------- ---------- --------
--------------------------------------------------------------------------------------------------------------------------------
Net investing ........................... 6,928 96,411 (7,426) - 95,913
--------------------------------------------------------------------------------------------------------------------------------
Financing activities:
--------------------------------------------------------------------------------------------------------------------------------
Debt transactions, net................. (26,844) (2,282) (1,418) - (30,544)
--------------------------------------------------------------------------------------------------------------------------------
Equity transactions, net............... (231) - - - (231)
--------------------------------------------------------------------------------------------------------------------------------
Dividend payments to minority
interests............................ - - (3,766) - (3,766)
------- ------- ------ ---------- --------
--------------------------------------------------------------------------------------------------------------------------------
Net financing........................... (27,075) (2,282) (5,184) - (34,541)
--------------------------------------------------------------------------------------------------------------------------------
Effect of exchange rate
changes in cash and
cash equivalents...................... - - 5,578 - 5,578
------- ------- ------ ---------- --------
--------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash
and cash equivalents.................. 1,594 (4,899) (9,219) - (12,524)
--------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents,
beginning of year...................... 27 2,534 12,591 - 15,152
------- ------- ------ ---------- --------
--------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year.. $1,621 $(2,365) $3,372 $ - $ 2,628
======= ======== ====== ========== ========
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
67
<PAGE>
GEOLOGISTICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE SHEET AS OF DECEMBER 31, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS COMBINED
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents................ $ 27 $2,534 $ 12,591 $ - $ 15,152
- ------------------------------------------------------------------------------------------------------------------------------------
Accounts receivable trade, net........... - 102,545 197,814 (33,312) 267,047
- ------------------------------------------------------------------------------------------------------------------------------------
Property, net............................ 10,761 22,499 61,994 - 95,254
- ------------------------------------------------------------------------------------------------------------------------------------
Intangible assets, net................... 9,372 78,902 3,971 (971) 91,274
- ------------------------------------------------------------------------------------------------------------------------------------
Other assets............................. 221,628 33,138 334,945 (509,260) 80,451
-------- -------- -------- --------- --------
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets........................... $241,788 $239,618 $611,315 $(543,543) $549,178
======== ======== ======== ========= =========
- ------------------------------------------------------------------------------------------------------------------------------------
Current liabilities...................... $5,283 $116,010 $224,114 $ (35,703) $309,704
- ------------------------------------------------------------------------------------------------------------------------------------
Long-term debt........................... 175,361 2,809 5,007 - 183,177
- ------------------------------------------------------------------------------------------------------------------------------------
Other non-current liabilities............ 6,156 137,932 125,134 (214,441) 54,781
- ------------------------------------------------------------------------------------------------------------------------------------
Stockholders' equity (deficit)........... 54,988 (17,133) 257,060 (293,399) 1,516
-------- -------- -------- --------- --------
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities and
Stockholders' equity (deficit)....... $241,788 $239,618 $611,315 $(543,543) $549,178
======== ======== ======== ========== ========
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1998
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS COMBINED
<S> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------------------------
Revenues................................. $ - $635,209 $1,016,117 $(124,573) $1,526,753
-----------------------------------------------------------------------------------------------------------------------------------
Transportation and other direct
costs.................................. - 493,472 785,634 (124,573) 1,154,533
-----------------------------------------------------------------------------------------------------------------------------------
Operating expenses....................... 11,345 157,702 215,347 - 384,394
-------- -------- ------- --------- ---------
-----------------------------------------------------------------------------------------------------------------------------------
Operating profit (loss)................... (11,345) (15,965) 15,136 - (12,174)
-----------------------------------------------------------------------------------------------------------------------------------
Interest and other, net.................. (2,654) (12,892) (1,652) - (17,198)
-----------------------------------------------------------------------------------------------------------------------------------
Income tax benefit (provision)........... 4,899 (7,446) (5,182) - (7,729)
-----------------------------------------------------------------------------------------------------------------------------------
Minority interests....................... - - (932) - (932)
-------- -------- ------- --------- ---------
-----------------------------------------------------------------------------------------------------------------------------------
Net (loss) income..................... $(9,100) $(36,303) $ 7,370 $ - $(38,033)
======== ========= ======== ========= =========
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1998
-----------------------------------------------------------------------------------------------------------------------------------
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS COMBINED
-----------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cash flows from:
-------------------------------------------------------------------------------------------------------------------------------
Operating activities................. $(20,353) $(27,962) $ 4,268 $117 $(43,930)
--------------------------------------------------------------------------------------------------------------------------------
Investing activities:
--------------------------------------------------------------------------------------------------------------------------------
Purchases of property and
equipment, net...................... (5,728) (19,136) (9,156) - (34,020)
-------------------------------------------------------------------------------------------------------------------------------
Business acquisitions................ - (27,133) - - (27,133)
--------- ------- -------- ------ ----------
--------------------------------------------------------------------------------------------------------------------------------
Net investing (5,728) (46,269) (9,156) - (61,153)
--------------------------------------------------------------------------------------------------------------------------------
Financing activities:
--------------------------------------------------------------------------------------------------------------------------------
Debt transactions, net................. (1,504) 74,489 (5,734) (117) 67,134
--------------------------------------------------------------------------------------------------------------------------------
Equity transactions, net............... 17,796 - - - 17,796
--------------------------------------------------------------------------------------------------------------------------------
Dividend payments to minority
interests............................ - - (803) - (803)
--------- ------- -------- ------ ----------
--------------------------------------------------------------------------------------------------------------------------------
Net financing 16,292 74,489 (6,537) (117) 84,127
--------- ------- -------- ------ ----------
Effect of exchange rate
changes in cash and
cash equivalents...................... 2,238 - (4,039) - (1,801)
--------- ------- -------- ------ ----------
--------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and
cash equivalents...................... (7,551) 258 (15,464) - (22,757)
--------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents,
beginning of year...................... 7,578 2,276 28,055 - 37,909
--------- ------- -------- ------ ----------
--------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year
$ 27 $2,534 $12,591 $ - $15,152
========= ======= ======== ======= ==========
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
68
<PAGE>
GEOLOGISTICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS COMBINED
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Revenues................................. $ - $661,201 $367,377 $(50,329) $978,249
- ------------------------------------------------------------------------------------------------------------------------------------
Transportation and other direct
costs.................................. - 519,892 289,486 (50,329) 759,049
- ------------------------------------------------------------------------------------------------------------------------------------
Operating expenses....................... 2,917 159,664 72,550 - 235,131
------- ------- ------ --------- -------
- ------------------------------------------------------------------------------------------------------------------------------------
Operating profit (loss)................... (2,917) (18,355) 5,341 - (15,931)
- ------------------------------------------------------------------------------------------------------------------------------------
Interest and other, net.................. (735) (7,016) (1,036) - (8,787)
- ------------------------------------------------------------------------------------------------------------------------------------
Income tax benefit (provision)........... 1,410 8,612 (1,602) - 8,420
- ------------------------------------------------------------------------------------------------------------------------------------
Minority interests....................... - - (1,067) - (1,067)
- ------------------------------------------------------------------------------------------------------------------------------------
Extraordinary loss........................ (1,666) (420) (207) - (2,293)
-------- --------- ------- ---- ---------
- ------------------------------------------------------------------------------------------------------------------------------------
Net (loss) income..................... $(3,908) $(17,179) $ 1,429 $ - $(19,658)
======== ========= ======= ==== =========
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS COMBINED
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flows from:
--------------------------------------------------------------------------------------------------------------------------------
Operating activities.................... $ 2,996 $ (8,116) $ (2,568) $(61) $ (7,749)
--------------------------------------------------------------------------------------------------------------------------------
Investing activities:
--------------------------------------------------------------------------------------------------------------------------------
Business acquisitions - net: (14,470) - - - (14,470)
--------------------------------------------------------------------------------------------------------------------------------
Purchases of property and
equipment, net...................... (4,715) 1,937 (1,421) - (4,199)
--------------------------------------------------------------------------------------------------------------------------------
Financing activities:
--------------------------------------------------------------------------------------------------------------------------------
Debt transactions, net................. 21,672 5,238 9,315 61 36,286
--------------------------------------------------------------------------------------------------------------------------------
Equity transactions, net............... 2,034 - - - 2,034
--------- ------ -------- --- --------
--------------------------------------------------------------------------------------------------------------------------------
Net financing.......................... 23,706 5,238 9,315 61 38,320
--------------------------------------------------------------------------------------------------------------------------------
Effect of exchange rate
changes in cash and
cash equivalents...................... - - 395 - 395
--------- ------ -------- --- --------
--------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and
cash equivalents...................... 7,517 (941) 5,721 - 12,297
--------------------------------------------------------------------------------------------------------------------------------
Cash of acquired companies.............. - - 22,188 - 22,188
--------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents,
Beginning of year...................... 61 3,217 146 - 3,424
--------- ------ -------- --- --------
--------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year
$7,578 $ 2,276 $28,055 $ - $ 37,909
========= ======= ======== ==== ========
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
69
<PAGE>
GEOLOGISTICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
The indenture relating to the Company's Senior Notes generally provides
that, subject to certain exceptions, the Company not incur indebtedness unless
on the date of such incurrence the consolidated coverage ratio of the Company
exceeds 2.25 to 1.0 and that the restricted subsidiaries of the Company may not
incur indebtedness unless on the date of such incurrence the consolidated
coverage ratio of the Company exceeds 2.5 to 1.0. The indenture permits the
Company to incur up to $115,000 of total indebtedness (consisting of $100,000 of
bank debt and $15,000 of other debt) notwithstanding the Company's inability to
meet the consolidated coverage ratio test. As of December 31, 1999, the Company
had incurred $3,300 of other debt and would have been able to incur an
additional $11,700 of other debt pursuant to the terms of the indenture. In
addition, the indenture permits the Company to incur up to $30,000 under its
foreign credit facilities notwithstanding the Company's inability to meet the
consolidated coverage ratio test. As of December 31, 1999, the Company had
incurred $12,900 of indebtedness under its foreign credit facilities and, as of
such date, would have been able to incur an additional $17,100 of indebtedness
under such facilities in compliance with the terms of the indenture.
The Company's indenture related to the Senior Notes contain certain
restrictive covenants. These restrictive covenants include limitations related
to the maintenance of networth indebtedness, restricted payments, sales of
assets and subsidiary stock, transactions with affiliates, provisions relating
to changes of control, liens, sale or issuance of capital stock of restricted
subsidiaries, sale/leaseback transactions, and restrictions on mergers,
consolidation and sales of assets.
PROMISSORY NOTES: In July, 1998 the Company borrowed $15,000 pursuant
to a term loan executed by and among the Company and ING (U.S.) Capital
Corporation. The loan was unsecured and was evidenced by promissory notes in
aggregate principal amount of $15,000 due March 31, 2000 (the "Promissory
Notes"). Borrowings under the facility were guaranteed by certain direct and
indirect subsidiaries of the Company, each of which was either a borrower or
guarantor under the Company's existing loan agreement or its 9 3/4% Senior Notes
due 2007. In February 1999, the Promissory Notes were repaid with borrowings
incurred by the Company pursuant to Amendment No. 3 to Amended and Restated Loan
Agreement discussed below.
REVOLVING CREDIT FACILITY. At December 31, 1999, $23,900 was
outstanding under the Facility and the Company had an eligible borrowing base of
$50,500. Letters of credit of $9,800 were outstanding, leaving approximately
$16,800 of unused availability under the facility. Interest on the facility
accrues at either the prime rate or LIBOR plus an applicable interest margin. At
December 31, 1999, the floating margin rate was 2.00% for prime rate loans and
3.50% for LIBOR loans.
The credit facility contains certain 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.
On February 26, 1999, the Company executed an amendment to its bank
credit facility (the "February Amendment"). The February Amendment, among other
things, (a) included covenants that were required due to pending results of the
Company, (b) provided for an additional $30,500 commitment ("Supplemental
Commitment") by one of the Company's existing lenders, (c) required the obligors
under the bank credit facility to grant a security interest in all of
70
<PAGE>
GEOLOGISTICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
their personal property, including all trademarks and other intangibles, to the
extent not already included in the collateral, and certain property to secure
the loans under the bank credit facility and (d) increased the margins
applicable to Eurodollar and base rate loans based on specified funded debt
ratios.
As a result of the disposition of GLAS in September 1999 (see Note 3)
the Company, together with its guarantor subsidiaries entered into an amendment
to the revolving credit agreement ("the September Amendment"). Among other
changes, the September Amendment provided for (a) reductions in credit
availability from $100,000 to $50,500 in the aggregate (b) reductions in the
percentage of eligible accounts receivable that qualify for the U.S. and United
Kingdom borrowing base which affect the Company's ability to incur debt under
the revolving credit facility, (c) the change in the maturity date to March 31,
2000, (d) the reduction of the Supplemental Commitment from $30,000 to $15,000
and (e) the amendment of the EBITDA covenant and the elimination of the interest
coverage ratio covenant. Amounts outstanding related to the Supplemental
Commitment and Revolving Credit Facility were repaid subsequent to December 31,
1999 with borrowings incurred pursuant to the New Revolver.
NEW REVOLVER. On March 31, 2000, the Company borrowed against a new
Loan and Security Agreement (the "New Revolver") with Congress Financial
Corporation (Western), a subsidiary of First Union Bank (the "Lender"). The
three-year New Revolver provides for maximum borrowings of $90,000 and is
comprised of three separate agreements, one in each of the United States,
Canada and the United Kingdom. This facility replaces the credit facility in
place at December 31, 1999 by and among the Company and ING (U.S.) Capital
Corporation and the lenders party thereto. The Company expects that the New
Revolver will provide a sufficient level of flexibility and capacity to allow
for the completion of the aforementioned restructuring. In addition, the
significant reduction in associated fees and borrowing costs in comparison to
the existing facility will assist the Company in achieving improved financial
performance.
The three agreements making up the New Revolver involve four
borrowers in the United States and the operating companies in both the United
Kingdom and Canada. The four borrowers in the United States are comprised of
Bekins Worldwide Solutions, Bekins Van Lines, GeoLogistics Services and
GeoLogistics Americas. The individual agreement credit levels are $50,000 in
the United States, $15,000 in Canada and $25,000 in the United Kingdom. The
agreements allow for a maximum increase or decrease of $5,000 in the United
States facility with a corresponding decrease or increase in the Canadian
facility. Such adjustments are limited to once per quarter. The maximum
amount that can be borrowed is equal to 85% of eligible billed receivables
plus 65% of eligible unbilled or accrued receivables as defined in the
agreement plus 100% of the face amount of letters of credit provided by
affiliates of stockholders.
Interest rate spreads are set according to levels of the Company's
EBITDA on a trailing twelve-month basis. These spreads are set at 0.25% over
prime for such borrowings and 2.75% over LIBOR for eurodollar borrowings until
the first such test period which will be the twelve months ended September 30,
2000 and quarterly thereafter. Applicable spreads can range from 0% to 0.5% on
prime borrowings and from 2.5% to 3.0% for eurodollar borrowings.
Collateral liens on accounts receivable as well as general and specific
liens on other assets of the Company are provided to the Lender. Financial
covenant tests will be restricted to minimum net worth tests for GeoLogistics
Corporation and the Borrower group taken as a whole.
The facility has a letter of credit sub-limit of $30,000 and places
certain restrictions on the Company and its borrower subsidiaries in the areas
of asset sales, additional liens, additional indebtedness, investments,
dividends and affiliate transactions. Management does not believe that these
restrictions will impair the Company's ability to perform or reach
71
<PAGE>
GEOLOGISTICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
performance goals.
Additional information on the Company's borrowings is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1999 1998
-------- --------
<S> <C> <C>
Average balance outstanding............................ $206,446 $158,229
Maximum balance outstanding............................ 245,518 185,178
Weighted average interest rate......................... 9.87% 9.42%
</TABLE>
8. INCOME TAXES
The Company and its U.S. subsidiaries file their federal income tax return on a
consolidated basis. At December 31, 1999, the Company's U.S. net operating loss
("NOL") carryforwards available to offset future taxable income were
approximately $55,000, which expire in 2009 through 2019. The availability of
tax benefits of such NOL carryforwards to reduce the Company's federal income
tax liabilities is subject to various limitations under the Internal Revenue
Code of 1986, as amended (the "Code"). In addition, at December 31, 1999,
various foreign subsidiaries of the Company have aggregate NOL carryforwards for
foreign income tax purposes of approximately $150,000, which are subject to
significant restrictive provisions in certain countries. Approximately $18,000
of the foreign NOL's expire between 2000 and 2006 and $132,000 have an
indefinite life. Management believes that the realization of the entire net
deferred tax asset is uncertain and has established a valuation allowance due to
such uncertainty.
No provision was made at December 31, 1999 for accumulated earnings of
certain overseas subsidiaries because it is expected that such earnings will be
reinvested overseas indefinitely.
Domestic loss from operations before income taxes, minority
interests and extraordinary loss was approximately $12,800, $38,500 and
$27,700 for the years ended December 31, 1999, 1998, and 1997 respectively.
Foreign income (loss) before income taxes, minority interests and
extraordinary loss was $(8,200), $9,100 and $3,000 for the years ended
December 31, 1999, 1998, and 1997, respectively.
The following summarizes 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 loss carryforwards comprising the net deferred tax
asset are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1999 1998
-------- --------
<S> <C> <C>
Deferred tax assets:
Net operating loss carry-forwards............................................. $ 89,791 $ 85,362
Insurance reserves............................................................ 3,674 4,477
Allowance for doubtful accounts............................................... 3,443 4,884
Property and equipment........................................................ 3,959 1,343
Other assets.................................................................. 12,953 8,598
-------- --------
Gross deferred tax assets........................................................ 113,820 104,664
-------- --------
Deferred tax liabilities:
Property and equipment........................................................ 1,567 462
Other intangible assets....................................................... 6,853 930
Other liabilities............................................................. 1,752 764
-------- --------
Gross deferred tax liabilities................................................... 10,172 2,156
Valuation allowance.............................................................. (102,740) (76,095)
-------- --------
Net deferred tax assets.......................................................... $ 908 $ 26,413
======== ========
</TABLE>
72
<PAGE>
GEOLOGISTICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
In determining the deferred tax valuation allowance at December 31,
1998, the Company has utilized certain tax planning strategies that it
considered to be prudent and feasible.
Income tax expense (benefit), exclusive of the extraordinary losses,
was comprised of:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
1999 1998 1997
------- ------- --------
<S> <C> <C> <C>
Current
Federal........................... $ (339) $ - $ -
State............................. 60 343 559
Foreign........................... 2,032 6,867 1,091
------- ------ --------
Total current tax expense 1,753 7,210 1,650
Deferred
Federal........................... 17,024 - (8,403)
State............................. 2,524 - (2,039)
Foreign........................... 5,957 519 372
------- ------ --------
Total deferred tax expense
(benefit).................... 25,505 519 (10,070)
------- ------ --------
Total tax expense
(benefit), net................... $27,258 $7,729 $ (8,420)
======= ====== ========
</TABLE>
Reconciliation of income tax expense (benefit), exclusive of the extraordinary
losses, to the statutory corporate Federal tax rate of 35% were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1999 1998 1997
-------- -------- ---------
<S> <C> <C> <C>
Statutory tax benefit............... $ (7,341) $(10,281) $ (9,026)
Effects of:
Non-deductible expenses.......... 925 725 851
Foreign income taxed at
various rates.................... 6,296 801 (370)
State income taxes, net of
Federal benefit.................. (70) 223 (1,388)
Increase in valuation allowance.. 25,505 14,148 -
Other, net.......................... 1,943 2,113 1,513
-------- -------- --------
$ 27,258 $ 7,729 $ (8,420)
======== ======== ========
</TABLE>
9. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES. The Company leases facilities and equipment under
noncancelable operating leases which expire at various dates through 2017. Net
rental expense for the years ended December 31, 1999, 1998 and 1997 was
approximately $34,400, $33,900 and $18,400, respectively.
Future minimum rental payments due under non-cancelable operating leases at
December 31, 1999 were as follows:
73
<PAGE>
GEOLOGISTICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
<S> <C>
2000.................................................................. $ 31,515
2001.................................................................. 21,251
2002.................................................................. 14,189
2003.................................................................. 9,568
2004.................................................................. 8,191
Thereafter............................................................ 30,488
--------
Total...................................................... $115,202
========
</TABLE>
LITIGATION AND CONTINGENT LIABILITIES. At December 31, 1999, the
Company is contesting a claim made by Danish Customs and Excise for payment
of customs duties and excise taxes of approximately $5,500 related to alleged
irregularities in connection with a number of historical LIW shipments of
freight out of Denmark. The Company and certain of its subsidiaries are also
defendants in legal proceedings arising in the ordinary course of business
and are subject to unasserted claims. The Company believes it has
established adequate reserves for the total alleged liabilities. Although the
outcome of these proceedings cannot be determined, it is the opinion of
management, based upon consultation with legal counsel, that the litigation
reserves recorded at December 31, 1999 and 1998 are sufficient to cover
losses which are probable to occur.
10. PENSION PLAN, POST RETIREMENT BENEFITS AND OTHER BENEFITS
DEFINED BENEFIT PLANS. The Company has a number of defined benefit
pension plans that cover a substantial number of foreign employees. Retirement
benefits are provided based on compensation as defined in the plans. The
Company's policy is to fund these plans in accordance with local practice and
contributions are made in accordance with actuarial valuations.
A reconciliation of the benefit obligation of the foreign plans is as follows:
<TABLE>
<CAPTION>
December 31,
-------------------------
CHANGE IN BENEFIT OBLIGATION 1999 1998
--------- ---------
<S> <C> <C>
Benefit obligation at beginning of year $ 97,290 $ 91,385
Service cost 3,235 3,607
Interest cost 5,523 6,079
Participant contributions 202 202
Amendments 502 --
Actuarial (gains) losses (199) 2,200
Benefits paid (8,109) (4,555)
Foreign exchange (5,413) (1,628)
--------- ---------
Benefit obligation at end of year $ 93,031 $ 97,290
========= =========
</TABLE>
A reconciliation of the plan assets is as
follows:
<TABLE>
<CAPTION>
CHANGE IN PLAN ASSETS
December 31,
------------------------
1999 1998
--------- ---------
<S> <C> <C>
Fair value of plan assets at beginning of year $ 95,734 $ 82,935
Actual return on plan assets 13,439 13,002
Company contributions 2,827 2,911
Benefits paid (7,274) (3,746)
Foreign exchange (3,021) 632
--------- ---------
Fair value of plan assets at end of year $ 101,705 $ 95,734
========= =========
</TABLE>
74
<PAGE>
GEOLOGISTICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<S> <C> <C>
Funded status of the plan $ 8,674 $ (1,556)
Unrecognized net actuarial gain (16,282) (9,604)
Unrecognized prior service cost 516 1,178
Unrecognized net transition obligation 128 --
--------- ---------
Accrued benefit cost, net $ (6,964) $ (9,982)
========= =========
</TABLE>
The components of net periodic pension cost and the significant assumptions for
the foreign plans were as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Service cost $ 3,235 $ 3,607 $ 756
Interest cost 5,523 6,079 1,443
Expected return on plan assets (6,305) (7,297) (1,487)
Net amortization and deferral (110) 460 323
------- ------- -------
Benefits cost $ 2,343 $ 2,849 $ 1,035
======= ======= =======
Weighted-average assumptions as of: December 31,
--------------------------------
1999 1998 1997
---- ---- ----
Discount rate 5.98% 6.96% 7.50%
Expected return on plan assets 6.95% 8.40% 7.50%
Rate of compensation increase 3.48% 4.29% 3.75%
</TABLE>
One foreign pension plan is unfunded and benefits are paid as incurred.
The projected benefit obligation and accumulated benefit obligation for that
plan was $17,905 and $17,509, respectively as of December 31, 1999, and $18,671
and $18,182, respectively, as of December 31, 1998.
Retirement savings plans are available to substantially all North
American 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 were
approximately $1,100, $1,200, and $700, respectively for the years ended
December 31, 1999, 1998 and 1997.
DEFERRED COMPENSATION PLAN. On July 1, 1996, the Company initiated a
nonqualified deferred compensation plan (the "Plan") for certain key
employees to supplement the retirement savings plans. Under the 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 was
approximately $100, $200, and $100 in 1999, 1998 and 1997, respectively.
Employee deferrals and Company match funds have been deposited with a
trustee. The Company has established a trust to hold and invest amounts
contributed pursuant to the Plan. The Company may from time to time, at its
sole discretion, direct the trustee to purchase shares of the Company's common
75
<PAGE>
GEOLOGISTICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
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 December 31, 1999 and 1998, 680 and 3,168 Plan
Shares were held by the Trustee on behalf of participants under the 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.
11. STOCKHOLDERS' EQUITY
PREFERRED STOCK. On July 13, 1998, the Company sold 11,000 and 4,000
shares of preferred stock to OCM Principal Opportunities Fund L.P., and
Logistical Simon, L.L.C., respectively (the "Investors"), for aggregate
consideration of $14,550. The preferred stock has a liquidation value of $1,000
per share and was sold to the Investors for $970 per share. The holders of the
preferred stock are entitled to payment of quarterly dividends when, as and if
declared by the board of directors of the Company in amounts ranging from $30.00
per share per quarter to $45.00 per share per quarter, which amount shall be
determined based upon the occurrence of certain events that are specified in the
Certificate of Designation relating to the preferred stock. Dividends on the
preferred stock will accrue and be fully cumulative (whether or not declared)
and will bear interest at rates ranging from 14% per annum to 18% per annum,
depending upon the occurrence of certain events that are specified in the
Certificate of Designation. Upon redemption of the preferred stock or
liquidation of the Company, the holders of preferred stock will be entitled to
receive the following for each share of the preferred stock held by such holder:
(i)(a) $1,000, representing the liquidation preference of the preferred stock
plus (b) all accrued and unpaid dividends, whether or not declared multiplied by
(c) the applicable liquidation or redemption premium, and (ii) either ten shares
of common stock of the Company or the amount of the fair market value of ten
shares of common stock of the Company. The preferred stock has no mandatory
redemption feature, and ranks senior to the common stock of the Company for
payment of dividends and upon liquidation, and generally does not have any
voting rights. At December 31, 1999 and 1998, accrued but unpaid dividends were
$3,063 and $963, respectively.
WARRANTS During the year ended December 31, 1997, fixed price warrants
for the purchase of 333,500 shares of common stock were issued to certain
employees, at exercise prices 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 at an exercise price of $45 per share. During the year ended
December 31, 1998, 15,000 warrants were issued to certain employees at an
exercise price of $45 per share. During 1999, 10,000 warrants were issued to one
employee at exercise prices ranging from $52 to $60 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 1996 financings and
acquisition-related activities vested 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 presents the warrant activity for the three year
period ending December 31, 1999 in addition to exercisable warrants at December
31, 1999:
76
<PAGE>
GEOLOGISTICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
WARRANTS EXERCISE PRICE
-------- --------------
<S> <C> <C>
Outstanding at December 31, 1996 .... 403,889 $ 26.25
Granted in 1997 ..................... 352,545 51.69
Canceled/forfeited in 1997 .......... (30,000) 55.67
--------
Outstanding at December 31, 1997 .... 726,434 $ 37.38
Granted in 1998 ..................... 15,000 45.00
Canceled/forfeited in 1998 .......... (45,000) 60.00
--------
Outstanding at December 31, 1998 .... 696,434 36.98
Granted in 1999 ..................... 10,000 55.67
Canceled/forfeited in 1999 .......... (302,500) 39.67
--------
Outstanding at December 31, 1999 .... 403,934 $ 36.54
========
Exercisable at:
December 31, 1999 ................ 324,369 $ 34.61
========
</TABLE>
The following table presents information relating to warrants
outstanding and exercisable at December 31, 1999, using various ranges of
exercise prices:
<TABLE>
<CAPTION>
RANGE OF WEIGHTED AVERAGE WEIGHTED AVERAGE
EXERCISE PRICES OUTSTANDING EXERCISABLE EXERCISE PRICE REMAINING YEARS
--------------- ----------- ----------- -------------- ---------------
<S> <C> <C> <C> <C>
$20-$33 208,206 183,206 $25.48 3.7
$37-$45 127,728 102,495 $43.82 7.9
$52-$60 68,000 38,668 $53.50 7.4
</TABLE>
ACCOUNTING FOR STOCK BASED COMPENSATION. The Company has adopted the
disclosure-only provisions of SFAS No.123 "Accounting for Stock Based
Compensation", for purposes of warrants issued to employees. Accordingly, no
compensation expense has been recognized for the stock warrants. Had
compensation costs been determined based on the fair value at the grant date
consistent with the provisions of SFAS No.123, the Company's net loss would have
been increased to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Net Loss applicable to common stock-as reported.... $51,811 $38,996 $19,658
Net Loss applicable to common stock-pro forma...... 51,885 39,111 19,798
Net Loss common per share-as reported.............. 24.31 18.39 9.59
Net Loss common per share-pro forma................ 24.34 18.45 9.66
</TABLE>
The fair value of each warrant was estimated on the date of grant using
the minimum value method as a result of the Company's non-public status, zero
volatility of its stock and using risk free interest rates of 5.75% to 6.45%,
expected life of four years and a dividend yield of zero. The proforma effects
presented above are not indicative of future amounts. The Company expects to
grant additional awards in future years.
EMPLOYEE STOCK PURCHASE PLANS. The Company's Employee Stock Purchase
Plans (the "Purchase Plans") provide 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 158,500 shares of
common stock of the Company at purchase prices ranging from $20.00 per share to
$30.00 per share. The right to acquire shares of common stock under the Purchase
Plans has terminated. A total of 62 employees purchased an aggregate of 110,417
shares of common stock pursuant to the Purchase Plans.
77
<PAGE>
GEOLOGISTICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
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 as of the most recently completed fiscal quarter prior to
termination and the number of shares of common stock outstanding and subject
to warrants to the extent such warrants are in the money.
LONG TERM INCENTIVE PLAN. During 1999, the Company granted 25,000
shares to an employee pursuant to the 1999 Long Term Incentive Plan. During
the term of the plan, grants of up to 100,000 shares can be made at the
discretion of the Board. Vesting periods for granted shares are based on
individual award agreements.
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 1997, the Company
sold 7,000 shares of common stock to an officer of the Company in exchange
for cash of $52 and a note of $157 and 3,333 shares of common stock to a
management employee of the Company in exchange for $50 cash and a note
receivable of $50. The aforementioned notes were recorded as a reduction of
stockholders' equity and were secured by the issued common stock. As of
December 31, 1999, all notes were paid in full.
EMPLOYEE STOCK OWNERSHIP. In addition to shares of common stock
issued to employees under the Purchase Plans and the Deferred Compensation
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. As of December 31, 1999, the Company had
agreements to purchase an aggregate of 36,500 shares of common stock for
aggregate consideration of $1,953 at various dates through May 1, 2001.
Moreover, the Company had agreements to acquire certain employee warrants and
subsequent to December 31, 1999, the Company paid $1,095 for warrants to
purchase these 42,361 shares of common stock.
12. SEGMENT INFORMATION
The Company operates in a single business segment providing
worldwide logistics solutions to meet customer's specific requirements for
transportation and related services by arranging and monitoring all aspects
of material flow activities utilizing advanced information technology
systems. No customer accounted for ten percent or more of consolidated
revenue.
The Company manages its business primarily on a geographic basis.
The Company's reportable geographic segments are comprised of North America,
Europe and Asia. Each geographic segment provides products and services
previously described.
Accounting policies for each geographic segment are the same as
those described in Note 2, "Summary of Significant Accounting Policies". The
Company evaluates the performance of each geographic segment primarily based
on EBITDA. EBITDA represents earnings before interest, taxes, depreciation
and amortization, asset impairment charges and restructuring and other
non-recurring charges. Corporate expenses are excluded from geographic
segment EBITDA. Corporate expenses are comprised primarily of marketing
costs, incremental information technology costs and other general and
administrative expenses which are separately managed. Geographic segment
assets exclude corporate assets. Corporate assets
78
<PAGE>
GEOLOGISTICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
include cash and cash equivalents, capitalized software development costs and
intangible assets.
Summary information by geographic segment is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
North America:
Total revenues .............. $ 698,021 $ 742,242 $ 755,116
Transactions between regions 51,684 58,626 26,918
--------- --------- ---------
Revenues from customers ..... 646,337 683,616 728,198
Net revenues ................ 148,095 157,991 157,160
Restructuring and other non-
recurring charges ......... 12,086 -- --
Asset impairment charges .... 10,280 -- --
Depreciation and amortization 14,545 13,806 29,472
Interest expense ............ 22,445 16,543 8,458
Operating loss ........ ..... (63,525) (25,093) (19,721)
Europe:
Total revenue ............... $ 721,919 $ 734,915 $ 267,883
Transactions between regions 89,490 113,018 70,895
--------- --------- ---------
Revenues from customers ..... 632,429 621,897 196,988
Net revenues ................ 149,091 157,901 46,051
Restructuring and other non-
recurring charges ......... 6,911 -- --
Asset impairment charges .... 1,608 -- --
Depreciation and amortization 3,469 3,088 777
Interest expense ............ 420 481 118
Operating income (loss) ..... (10,982) 6,287 1,798
Asia:
Total revenue ............... $ 369,572 $ 293,209 $ 92,849
Transactions between regions 90,134 71,969 39,786
--------- --------- ---------
Revenues from customers ..... 279,438 221,240 53,063
Net revenues ................ 65,708 56,328 15,989
Depreciation and amortization 2,007 1,232 149
Interest expense (income) ... 221 (40) --
Operating income ............ 8,447 6,632 1,992
</TABLE>
79
<PAGE>
GEOLOGISTICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
A reconciliation of the Company's geographic segment revenues, net
revenues, EBITDA and assets to the corresponding consolidated amounts as of and
for the years ended December 31, is as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
North America .............. $ 698,021 $ 742,242 $ 755,116
Europe ..................... 721,919 734,915 267,883
Asia ....................... 369,572 293,209 92,849
Eliminations ............... (231,308) (243,613) (137,599)
----------- ----------- -----------
Consolidated ............... $ 1,558,204 $ 1,526,753 $ 978,249
=========== =========== ===========
Net revenues:
North America .............. $ 148,095 $ 157,991 $ 157,160
Europe ..................... 149,091 157,901 46,051
Asia ....................... 65,708 56,328 15,989
----------- ----------- -----------
Consolidated ............... $ 362,894 $ 372,220 $ 219,200
=========== =========== ===========
EBITDA (before restructuring and
other non-recurring charges and
asset impairment charges for 1999):
North America .............. $ (26,614) $ (11,287) $ 9,751
Europe ..................... 1,006 9,375 2,575
Asia ....................... 10,454 7,864 2,141
----------- ----------- -----------
Consolidated ............... $ (15,154) $ 5,952 $ 14,467
=========== =========== ===========
Long lived assets:
North America .............. $ 23,528 $ 27,358 $ 14,538
Europe ..................... 42,255 48,628 33,349
Asia ....................... 6,908 6,244 6,407
Corporate .................. 3,292 13,024 5,525
----------- ----------- -----------
Consolidated ............... $ 75,983 $ 95,254 $ 59,819
=========== =========== ===========
Assets:
North America .............. $ 181,231 $ 260,694 $ 228,694
Europe ..................... 256,876 263,481 249,783
Asia ....................... 100,792 86,119 119,861
Corporate .................. 423,434 482,429 470,638
Eliminations ............... (514,677) (543,545) (583,210)
----------- ----------- -----------
Consolidated ............... $ 447,656 $ 549,178 $ 485,766
=========== =========== ===========
</TABLE>
For the year ended December 31, 1999, 1998 and 1997, United States revenues
were $605,683, $651,624 and $661,219, respectively. For the year ended
December 31, 1999 and 1998, revenues from the United Kingdom were $225,919
and $223,111, respectively. Long-lived assets for the United States and
United Kingdom as of December 31, 1999 were $64,894 and $5,851, respectively.
Long lived assets for the United States and United Kingdom as of December 31,
1998 were $101,401 and $5,178, respectively. No other countries represented
more than 10% of consolidated revenues in each of 1999, 1998 and 1997.
13. RELATED PARTY TRANSACTIONS
The Company has entered into agreements with affiliates of its largest
shareholders to
80
<PAGE>
provide the Company with management and financial advisory services relating to
the structuring of the Company's debt agreements and various acquisitions made
by the Company during the past three years. In conjunction with these
activities, the Company paid WESS and OCM affiliates approximately $400 and $300
in 1999, $300 and $400 in 1998, and $1,600 and $1,300 in 1997, respectively.
14. SUBSEQUENT EVENTS
On March 31, 2000, the Company borrowed against a new Loan and
Security Agreement (the "New Revolver") with Congress Financial Corporation
(Western), a subsidiary of First Union Bank (the "Lender"). (See Note 7).
81
<PAGE>
GEOLOGISTICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
15. SUMMARY QUARTERLY FINANCIAL INFORMATION (UNAUDITED) (IN THOUSANDS)
The following table summarizes the Company's quarterly financial information:
<TABLE>
<CAPTION>
QUARTERS ENDED
MARCH 31, JUNE 30,
----------------------- ---------------------
1999 1998 1999 1998
--------- --------- -------- --------
<S> <C> <C> <C> <C>
Revenues $ 365,329 $ 365,664 395,770 $371,211
Net revenues 92,036 89,038 94,766 93,357
Selling, general &
administrative expense 94,708 87,905 95,569 86,725
Restructuring and other
non-recurring
charges (C) - - 990 -
Asset impairment
charges (C) - - - -
Depreciation and
amortization 4,642 3,813 5,059 3,900
--------- --------- -------- --------
Operating profit (loss) (7,314) (2,680) (6,852) 2,732
Income (loss) before
income taxes and
minority interests (13,033) (6,127) (12,729) (1,012)
Income tax provision
(benefit) 1,800 (1,957) (769) (279)
--------- --------- -------- --------
Loss before minority
interest (14,833) (4,170) (11,960) (733)
Minority interest (155) (158) (432) (215)
--------- --------- -------- --------
Net loss (14,988) (4,328) (12,392) (948)
Preferred stock
dividend 525 - 525 -
--------- --------- -------- --------
Loss applicable to
common stock $ (15,513) $ (4,328) $(12,917) $ (948)
========= ========= ======== ========
Net loss per common
share- basic and diluted $ (7.30) $ (2.06) $ (6.10) $ (.45)
========= ========= ======== ========
SEPTEMBER 30, DECEMBER 31,
----------------------- -----------------------
1999(A) 1998 1999 1998(B)
-------- -------- --------- ---------
<S> <C> <C> <C> <C>
Revenues $400,020 $387,968 $ 397,085 $ 401,910
Net revenues 93,875 95,113 82,217 94,712
Selling, general &
administrative expense 94,693 91,020 93,078 100,618
Restructuring and other
non-recurring
charges (C) 10,144 - 7,863 -
Asset impairment
charges (C) 12,060 - (172) -
Depreciation and
amortization 5,128 3,847 5,192 6,566
-------- -------- --------- ---------
Operating profit (loss) (28,150) 246 (23,744) (12,472)
Income (loss) before
income taxes and
minority interests 34,097 (4,547) (29,310) (17,686)
Income tax provision
(benefit) 34,230 (2,267) (8,003) 12,232
-------- -------- --------- ---------
Loss before minority
interest (133) (2,280) (21,307) (29,918)
Minority interest (371) (213) (520) (346)
-------- -------- --------- ---------
Net loss (504) (2,493) (21,827) (30,264)
Preferred stock
dividend 525 438 525 525
-------- -------- --------- ---------
Loss applicable to
common stock $ (1,029) $ (2,931) $ (22,352) $ (30,789)
======== ======== ========= =========
Net loss per common
share- basic and diluted $ (.49) $ (1.38) $ (10.42) $ (14.51)
======== ======== ========= =========
</TABLE>
(A) The third quarter of 1999 includes a gain on sale of GLAS Assets of
$68,920.
(B) The fourth quarter of 1998 includes approximately $11,400 of adjustments in
Americas relating principally to cartage accruals, the write-off of
uncollectible accounts receivable and changes in reserve estimates. In
addition, the fourth quarter was affected by the reversal of tax benefits
which had been recorded during the first three quarters of 1998 as a result
of the Company's adjustment of the deferred tax asset valuation allowance.
(C) The year ended December 31, 1999 included restructuring and other
non-recurring charges and asset impairment charges of $18,997 and $11,888,
respectively. No such charges were incurred in 1998. (See Note 4).
82
<PAGE>
GEOLOGISTICS CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
Additions
Balance at --------------------------------
DESCRIPTION Beginning of Charged to Balance at
Year Income Acquisitions Deductions End of Year
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1999:
Allowance for doubtful accounts 21,862 8,100 21 (8,951) 21,032
Year ended December 31, 1998:
Allowance for doubtful accounts 17,710 12,197 - (8,045) 21,862
Year ended December 31, 1997
Allowance for doubtful accounts 3,675 4,028 13,845 (3,838) 17,710
</TABLE>
83
<PAGE>
Exhibit 3.4
AMENDED AND RESTATED
BYLAWS
OF
GEOLOGISTICS CORPORATION
January 27, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
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.......................................................2
Section 2.6 Proxies......................................................3
Section 2.7 List of Stockholders.........................................3
Section 2.8 Written Consent of Stockholders in Lieu of Meeting...........3
Article III Directors................................................................4
Section 3.1 Number of Directors..........................................4
Section 3.2 Election and Term of Directors...............................5
Section 3.3 Vacancies and Newly Created Directorships....................5
Section 3.4 Resignation..................................................6
Section 3.5 Removal......................................................6
Section 3.6 Meetings.....................................................6
Section 3.7 Quorum and Voting............................................6
Section 3.8 Written Consent of Directors in Lieu of a Meeting............7
Section 3.9 Compensation.................................................7
Section 3.10 Committees of the Board of Directors........................7
Article IV Officers, Agents and Employees...........................................8
Section 4.1 Appointment and Term of Office...............................8
Section 4.2 Resignation and Removal......................................8
Section 4.3 Compensation and Bond........................................9
Section 4.4 Chairman of the Board........................................9
Section 4.5 Chief Executive Officer and President........................9
Section 4.6 Vice Presidents..............................................9
Section 4.7 Treasurer....................................................9
Section 4.8 Secretary....................................................9
Section 4.9 Assistant Treasurers........................................10
Section 4.10 Assistant Secretaries......................................10
Section 4.11 Delegation of Duties.......................................10
Article V Indemnification and Insurance...........................................10
Section 5.1 Right to Indemnification....................................10
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C> <C>
Section 5.2 Right to Advancement of Expenses............................11
Section 5.3 Right of Indemnitee to Bring Suit...........................11
Section 5.4 Non-Exclusivity of Rights...................................11
Section 5.5 Insurance...................................................12
Section 5.6 Indemnification of Employees and Agents of the Company......12
Section 5.7 Contract Rights.............................................12
Article VI Common Stock............................................................12
Section 6.1 Certificates................................................12
Section 6.2 Transfers of Stock..........................................12
Section 6.3 Lost, Stolen or Destroyed Certificates......................12
Section 6.4 Stockholder Record Date.....................................13
Article VII Seal....................................................................13
Section 7.1 Seal........................................................13
Article VIII Waiver of Notice........................................................14
Section 8.1 Waiver of Notice............................................14
Article IX Checks, Notes, Drafts, Etc..............................................14
Section 9.1 Checks, Notes, Drafts, Etc..................................14
Article X Amendments..............................................................14
Section 10.1 Amendments.................................................14
Article XI Definitions.............................................................15
</TABLE>
-ii-
<PAGE>
AMENDED AND RESTATED
BYLAWS
OF
GEOLOGISTICS CORPORATION
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, 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
<PAGE>
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 seventy-five percent (75%) 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
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
seventy-five percent (75%) 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 of Common Stock 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
-2-
<PAGE>
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, 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
-3-
<PAGE>
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.
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 five (5)
members. OCM shall have the right, at its election, to appoint one (1) member 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") and WES&S shall have the right, at its election,
to appoint two (2) members of the Board of Directors of the Company (a "WES&S
DIRECTOR").
The fifth 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
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)
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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) 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 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
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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 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,
four (4) of the members of the Board of 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 four (4) members of the Board of Directors of the Company.
Upon a Voting Termination Event, a whole
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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 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, 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 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 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 a WES&S Executive Director or to fill a vacancy caused by the
resignation, removal or death of such WES&S Executive Director.
(b) The Board of Directors may, by resolution passed by a majority of
the Whole Board, 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 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
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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.
(c) 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 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.
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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 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 shall have charge of the stock ledger and such
other
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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 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.
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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 (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.
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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 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
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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.
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 or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock,
or for the purpose of any other lawful action, the Board of Directors may fix a
record date, which record date shall not precede the date on which the
resolution fixing the record date in adopted by the Board of Directors, and
which shall not be more than sixty nor less than ten (10) day before the date of
such meeting, nor more than sixty (60) days prior to any other action.
If no record date is fixed by the Board of Directors, (1) the record
date for determining stockholders entitled to notice of or to vote at a meeting
of stockholders shall be at the close of business on the day next preceding the
date on which notice is given, or, if notice is waived, at the close of business
on the day next preceding the day on which the meeting is held, (2) the record
date for determining stockholders entitled to express consent to corporate
action in writing without a meeting, when no prior action by the Board of
Directors is necessary, shall be at the close of business on the day on which
the first written consent is expressed by the filing thereof with the company as
provided in Section 2.8 of these Bylaws, and (3) the record date for determining
stockholders for any other purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating thereto.
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.
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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 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 seventy-five
percent (75%) 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. 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).
"OCM" means OCM Principal Opportunities Fund, L.P., a Delaware limited
partnership.
"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.
"OCM DIRECTORS" has the meaning assigned to such term in SECTION
3.1(A).
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<PAGE>
"OCM ENTITY" means either or both of TCW and OCM, as the context
indicates.
"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 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 the Stockholders
Agreement.
"OCM ENTITY SHARES" means all the Securities now and hereafter held by
OCM, and OCM Affiliate, TCW or a TCW Affiliate.
"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.
"SECURITIES" shall mean the shares of Common Stock and any securities
convertible or exercisable into shares of Common Stock.
"SELL-DOWN EVENT" means an event, subject to 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 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).
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<PAGE>
"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 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.
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<PAGE>
RESTRICTED SHARE AWARD AGREEMENT
PURSUANT TO THE
GEOLOGISTICS CORPORATION
1999 LONG-TERM INCENTIVE PLAN
* * * * *
PARTICIPANT: ROBERT AROVAS
GRANT DATE: March 1, 2000
NUMBER OF
RESTRICTED SHARES GRANTED: 25,000
* * * * *
THIS AWARD AGREEMENT (this "Agreement"), dated as of the Grant
Date specified above, is entered into by and between GeoLogistics Corporation
(the "Company"), and the Participant specified above, pursuant to the
GeoLogistics Corporation 1999 Long-Term Incentive Plan as in effect and as
amended from time to time (the "Plan"); and
WHEREAS, it has been determined under the Plan that it would
be in the best interests of the Company to grant the Restricted Shares provided
herein to the Participant (i) as an inducement to commence employment with, or
to remain in the employment of, the Company (and/or one of its Subsidiaries),
and (ii) as an incentive for increased effort during such service;
NOW, THEREFORE, in consideration of the mutual covenants and
premises hereinafter set forth and for other good and valuable consideration,
the parties hereto hereby mutually covenant and agree as follows:
1. INCORPORATION BY REFERENCE; PLAN DOCUMENT RECEIPT. This Agreement is
subject in all respects to the terms and provisions of the Plan (including,
without limitation, any amendments adopted at any time and from time to time and
which are expressly intended to apply to the grant of the award provided for
herein), all of which terms and provisions are made a part of and incorporated
in this Agreement as if they were expressly set forth herein. The Company
acknowledges and expressly agrees that no amendment or modification to the Plan
or this Agreement which materially and adversely affects the rights of the
Participant hereunder shall be effective without the written consent of the
Participant. Any capitalized term not defined in this Agreement shall have the
same meaning as is ascribed thereto in the Plan. The Participant hereby
acknowledges receipt of a true copy of the Plan and that the Participant has
<PAGE>
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read the Plan carefully and fully understands its content. In the event of a
conflict between the terms of this Agreement and the terms of the Plan, the
terms of the Plan shall control.
2. GRANT OF RESTRICTED SHARE AWARD.
2.1 The Company hereby grants to the Participant, as of the
Grant Date specified above, the number of Restricted Shares specified above. In
the event of any change in capitalization affecting the Common Stock of the
Company, including without limitation, any distribution, stock split, reverse
stock split, recapitalization, consolidation, subdivision, split-up, spin-off,
combination or exchange of shares or other reorganization or recapitalization,
the number of Restricted Shares subject to this Agreement shall be increased or
decreased, as appropriate, to reflect such change in capitalization of the
Common Stock of the Company to the same extent as other shares of Common Stock
of the Company were affected by such change in capitalization. Except as
otherwise provided herein by Section 10.2 of the Plan, the Participant agrees
and understands that nothing contained in this Agreement provides, or is
intended to provide, the Participant with any protection against potential
future dilution of the Participant's stockholder interest in the Company for any
reason.
2.2 Pursuant to Section 6.5 and Section 7 of the Plan,
Participant shall have, with respect to shares of Common Stock underlying the
Restricted Shares subject to this Agreement, the right to receive, at such time
as the Restricted Shares become unrestricted and vested pursuant to the terms of
this Agreement, any dividends paid in respect of Restricted Shares prior to the
time such Restricted Shares become unrestricted and vested; provided however,
that the Participant's right to receive any such dividends or distributions paid
in respect of the Restricted Shares shall terminate if the Restricted Shares are
forfeited or lapse pursuant to the terms of this Agreement.
3. VESTING.
3.1 The Restricted Shares subject to this grant shall become
unrestricted and vested immediately upon the earliest to occur of (a) the
termination of the Participant's employment with the Company without Cause (as
defined in that certain Employment Agreement between the Company and the
Participant, dated as of the date hereof) (the "Employment Agreement"), (b) the
termination of the Participant's employment with the Company due to the
Participant's resignation for Good Reason (as defined in the Employment
Agreement), (c) an Initial Public Offering that is consummated no later than the
date that is three (3) years from the Grant Date, (d) a Change of Control that
is consummated no later than the date that is three (3) years from the Grant
Date or (e) the date that is three (3) years from the Grant Date (each of
clauses (a), (b), (c), (d) and (e) of this Section 3.1 shall be referred to
herein as a "Vesting Event"); provided that, except as expressly provided in
Section 3.1.1 hereof, with respect to the Vesting Events described in clauses
(c), (d) and (e) of this Section 3.1, the Participant must be employed by the
Company or a Subsidiary on the date of such Vesting
<PAGE>
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Event. Notwithstanding any provision of the Plan to the contrary, the Restricted
Shares may become vested and unrestricted prior to the date that is six (6)
months following the Grant Date, and with respect to the vesting of the
Restricted Shares, this Section 3 shall control.
3.1.1 If the Participant's employment with the
Company and/or its Subsidiaries terminates due to the Participant's
death or Disability (as defined in the Employment Agreement) prior to
the occurrence of a Vesting Event with respect to the Restricted
Shares, then the Participant (or the Participant's estate, designated
beneficiary or other legal representative) shall forfeit any rights or
interests in the number of the Restricted Shares (and such number of
the Restricted Shares shall immediately be cancelled) calculated as the
product of (i) 25,000 and (ii) a fraction, the numerator of which is
(x) the number of full calendar months remaining between the date of
such termination and June 15, 2002 and (y) the denominator of which is
thirty-six (36). The Participant (or the Participant's estate,
designated beneficiary or other legal representative) shall retain the
rights or interests in the number of Restricted Shares (the "Retained
Restricted Shares") not forfeited pursuant to the preceding sentence of
this Section 3.1.1, and such Retained Restricted Shares shall become
unrestricted and vested only upon the occurrence of a Change of Control
or Initial Public Offering pursuant to the terms of Sections 3.4 and
3.5 of this Agreement so long as such Change of Control or Initial
Public Offering has occurred no later than three (3) years from the
Grant Date, and if such Change of Control or Initial Public Offering
shall not have occurred prior to the date that is three (3) years from
the Grant Date, then such Retained Restricted Shares shall immediately
be cancelled and the Participant (and such Participant's estate,
designated beneficiary or other legal representative) shall forfeit any
rights or interests in and with respect to any such Retained Restricted
Shares. Notwithstanding the provisions of this Section 3.1.1, all
Restricted Shares subject to this grant shall become unrestricted and
vested upon the happening of a Change of Control or Initial Public
Offering within ninety calendar (90) days of the termination of the
Participant's employment with the Company and/or its Subsidiaries due
to the Participant's death or Disability so long as such Change of
Control or Initial Public Offering has occurred no later than three (3)
years from the Grant Date.
3.2 TERMINATION AS A RESULT OF A CHANGE OF CONTROL. Anything
in this Agreement or in the Plan to the contrary notwithstanding, if a Change of
Control occurs and if the Participant's employment is terminated before such
Change of Control and it is reasonably demonstrated by the Participant that such
employment termination (a) was at the request, directly or indirectly, of a
third party who has taken steps reasonably calculated to effect the Change of
Control, or (b) otherwise arose in connection with or in anticipation of the
Change of Control, then for purposes of this Section 3, the Change of Control
shall be deemed to have occurred immediately prior to such Participant's
employment termination.
<PAGE>
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3.3 CERTIFICATES AFTER VESTING EVENT. Notwithstanding anything
to the contrary in this Agreement or in the Plan, within thirty (30) days after
the happening of a Vesting Event, the holder of an Award of Restricted Shares
vested under Section 3.1 or 3.2 above shall receive a new certificate for such
shares without the legend set forth in Section 6 of the Plan.
3.4 CHANGE OF CONTROL. For the purpose of this Agreement,
"Change of Control" shall mean:
3.4.1 (a) The acquisition, after the Grant Date
specified above with respect to the Restricted Shares, by an individual, entity
or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange
Act) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of 50% or more of either (i) the shares of the Common Stock,
or (ii) the combined voting power of the voting securities of the Company
entitled to vote generally in the election of directors (the "Voting
Securities") at a per share valuation of the Common Stock at the Target Price or
(b) the sale of all or substantially all of the assets of the Company at a price
that, after taking into effect the Company's fixed and contingent debts,
liabilities and obligations and all amounts payable by the Company with respect
to the aggregate liquidation preference and accrued and unpaid dividends on
outstanding shares of preferred stock would result in a per share valuation of
the Common Stock at the Target Price; provided, however, that the following
acquisitions shall not constitute a Change of Control: (1) any acquisition by
any individual or entity (including any entity the investment adviser or general
partner of which is either William E. Simon & Sons, LLC or Oaktree Capital
Management, LLC) who, on the effective date of the Plan beneficially owned 10%
or more of the Common Stock, (2) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by the Company or any Subsidiary, (3)
any acquisition by any underwriter in connection with any firm commitment
underwriting of securities to be issued by the Company, or (4) any acquisition
by any corporation if, immediately following such acquisition, more than 50% of
the then outstanding shares of common stock of such corporation and the combined
voting power of the then outstanding voting securities of such corporation
(entitled to vote generally in the election of directors), is beneficially
owned, directly or indirectly, by all or substantially all of the individuals
and entities who, immediately prior to such acquisition, were the beneficial
owners of the Common Stock and the Voting Securities; or
3.4.2 Consummation by the Company of a
reorganization, merger or consolidation at a value per share of Common Stock of
the Company at the Target Price, other than a reorganization, merger or
consolidation with respect to which all or substantially all of the individuals
and entities who were the beneficial owners, immediately prior to such
reorganization, merger or consolidation, of the Common Stock and Voting
Securities beneficially own, directly or indirectly, immediately after such
reorganization, merger or consolidation more than 50% of the then outstanding
common stock and voting securities (entitled to vote generally in the election
of directors) of the corporation resulting from such
<PAGE>
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reorganization, merger or consolidation. As used herein, "Target Price" shall
mean a value per share of Common Stock of the Company equal to or greater than
$30.00.
3.5 INITIAL PUBLIC OFFERING. For the purpose of this
Agreement, "Initial Public Offering" shall mean a completed underwritten initial
public offering by the Company of Common Stock pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), other than a public offering registered on Form S-8 or Form
S-4 under the Securities Act or a successor form thereto, that results in net
proceeds of at least $30.0 million to the Company. As used herein, "net
proceeds" shall mean the proceeds received by the Company from an Initial Public
Offering after deducting underwriting discounts, commissions and the expenses
incurred by the Company related to such offering.
4. REPURCHASE PROVISIONS APPLICABLE TO RESTRICTED SHARES.
4.1 REPURCHASE RIGHT IN CASE OF TERMINATION. If
the Participant's employment with the Company and its Subsidiaries terminates
for any reason whatsoever, including, without limitation, death, Disability,
resignation, Retirement or termination with or without cause and the Restricted
Shares are or become vested pursuant to the terms of this Agreement, the Company
or its designee(s) (which designee(s) may be any person or entity that shall
have been approved by the Board) shall have the exclusive and irrevocable option
(a "call"), exercisable in its sole discretion, to repurchase, in whole or in
part, the Restricted Shares that are then owned and have not been forfeited by
the Participant. The Company may exercise the call for all or any portion of the
Restricted Shares subject to such repurchase hereunder by delivering written
notice (a "Repurchase Notice"), to the Participant, within sixty (60) days of
the later of the Participant's date of termination or the event giving rise to
the vesting of the Restricted Shares. The Repurchase Notice will set forth the
number of Restricted Shares to be acquired from the Participant, the aggregate
consideration to be paid for such shares and the time and place for the closing
of the transaction, which shall not be earlier than the date of such notice. The
Participant shall be obligated to resell the Restricted Shares as provided in
this Section 4 in response to an exercise by the Company of its call under this
Section 4.
The consummation of the repurchase of such Restricted 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 thirty (30) days after the delivery of the Repurchase
Notice; provided, however, that the Company may consummate its repurchase of
such Restricted Shares pursuant to its exercise of its call by delivering
payment for such Restricted Shares being repurchased by it along with the
Repurchase Notice. The Company will pay for the Restricted Shares to be
repurchased by it pursuant to the exercise of a call by delivery of a certified
check in an amount equal to the applicable repurchase price for the Restricted
Shares being repurchased. The Company will, in connection with such repurchase,
be entitled to receive customary representations and warranties from the
Participant regarding such sale and to require that the Participant's signatures
be guaranteed.
<PAGE>
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4.2 REPURCHASE PRICE. The purchase price per
share for any Restricted Shares purchased pursuant to Section 4.1 above shall be
equal to the Fair Market Value of such Restricted Shares. If Participant objects
to the determination of Fair Market Value by the Board, the Participant may
cause the Company to obtain a determination of Fair Market Value by an
independent investment bank selected by the Company, subject to the
Participant's approval, which approval shall not be unreasonably withheld or
delayed. If (a) the independent investment bank's determination of the fair
market value of the Restricted Shares exceeds the Fair Market Value as
determined by the Board (such excess being the "Excess Amount") by more than ten
(10) percent and (b) the fees, expenses and other costs (the "Appraisal Cost")
of the independent investment bank's determination are less than the Excess
Amount, then the Appraisal Costs shall be borne by the Company; in all other
instances, the Appraisal Costs shall be borne by the Participant.
5. DELIVERY OF RESTRICTED SHARES; FORFEITURE EVENTS.
5.1 Subject to Section 6.4 of the Plan, after the lapse of the
restrictions in respect of a grant of Restricted Shares, the Participant shall
be entitled to receive unrestricted shares of Common Stock.
5.2 Unless otherwise provided in this Agreement, this
Restricted Share Award shall terminate and be of no force or effect if the
Participant's employment with the Company and/or its Subsidiaries terminates as
a result of resignation (other than for Good Reason), Retirement or termination
with Cause (as such terms are defined in the Employment Agreement) prior to the
satisfaction and/or lapse of the restrictions and/or other terms and conditions
applicable to a grant of Restricted Shares, such Restricted Shares shall
immediately be cancelled and the Participant (and such Participant's estate,
designated beneficiary or other legal representative) shall forfeit any rights
or interests in and with respect to any such Restricted Shares.
6. NON-TRANSFERABILITY. Restricted Shares, and any rights and interests
with respect thereto, issued under this Agreement and the Plan shall not, prior
to vesting, be sold, exchanged, transferred, assigned or otherwise disposed of
in any way by the Participant (or any beneficiary(ies) of the Participant),
other than by testamentary disposition by the Participant or the laws of descent
and distribution. Any such Restricted Shares, and any rights and interests with
respect thereto, shall not, prior to vesting, be pledged, encumbered or
otherwise hypothecated in any way by the Participant (or any beneficiary(ies) of
the Participant) and shall not, prior to vesting, be subject to execution,
attachment or similar legal process. Any attempt to sell, exchange, transfer,
assign, pledge, encumber or otherwise dispose of or hypothecate in any way any
of the Restricted Shares, or the levy of any execution, attachment or similar
legal process upon the Restricted Shares, contrary to the terms and provisions
of this Agreement and/or the Plan shall be null and void and without legal force
or effect.
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7. ENTIRE AGREEMENT; AMENDMENT. This Agreement contains the entire
agreement between the parties hereto with respect to the subject matter
contained herein, and supersedes all prior agreements or prior understandings,
whether written or oral, between the parties relating to such subject matter.
This Agreement may only be modified or amended by a writing signed by both the
Company and the Participant.
8. NOTICES. Any notice which may be required or permitted under this
Agreement shall be in writing and shall be delivered in person, or via facsimile
transmission, overnight courier service or certified mail, return receipt
requested, postage prepaid, properly addressed as follows:
If such notice is to the Company, to the attention of the
Secretary of GeoLogistics Corporation, 13952 Denver West Parkway, Suite 150,
Golden, Colorado 80401, or at such other address as the Company, by notice to
the Participant, shall designate in writing from time to time; and
If such notice is to the Participant, at his or her address as
shown on the Company's records, or at such other address as the Participant, by
notice to the Company, shall designate in writing from time to time, with a copy
to the Participant's legal counsel at such address as the Participant, by notice
to the Company, shall designate in writing from time to time.
9. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without reference to the
principles of conflict of laws thereof.
10. COMPLIANCE WITH LAWS. The issuance of the Restricted Shares or
Common Stock pursuant to this Agreement shall be subject to, and shall comply
with, any applicable requirements of any federal and state securities laws,
rules and regulations (including, without limitation, the provisions of the
Securities Act, the Exchange Act and the respective rules and regulations
promulgated thereunder) and any other law or regulation applicable thereto. The
Company shall not be obligated to issue any of the Restricted Shares or Common
Stock pursuant to this Agreement if such issuance would violate any such
requirements.
11. BINDING AGREEMENT; ASSIGNMENT. This Agreement shall inure to the
benefit of, be binding upon, and be enforceable by the Company and its
successors and assigns. The Participant shall not assign any part of this
Agreement without the prior express written consent of the Company.
12. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same instrument.
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13. HEADINGS. The titles and headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be a part of this Agreement.
14. FURTHER ASSURANCES. Each party hereto shall do and perform (or
shall cause to be done and performed) all such further acts and shall execute
and deliver all such other agreements, certificates, instruments and documents
as any other party hereto reasonably may request in order to carry out the
intent and accomplish the purposes of this Agreement and the Plan and the
consummation of the transactions contemplated thereunder. The Company
acknowledges and agrees that the Participant's obligations under this Section 14
shall be limited to the obligations of a participant in the Plan set forth in
Section 9 and 12.6 of the Plan.
15. SEVERABILITY. The invalidity or unenforceability of any provisions
of this Agreement in any jurisdiction shall not affect the validity, legality or
enforceability of the remainder of this Agreement in such jurisdiction or the
validity, legality or enforceability of any provision of this Agreement in any
other jurisdiction, it being intended that all rights and obligations of the
parties hereunder shall be enforceable to the fullest extent permitted by law.
IN WITNESS WHEREOF, the Company has caused this Agreement to
be executed by its duly authorized officer, and the Participant has hereunto set
his hand, all as of the Grant Date specified above.
GEOLOGISTICS CORPORATION
By: _____________________________
Name:
Title:
_____________________________
<PAGE>
Exhibit 10.26
JOINT ESCROW INSTRUCTION AND RELEASE AGREEMENT
This Joint Escrow Instruction and Release Agreement is entered into
this 17th day of February 2000 by and among FedEx Global Logistics, Inc.
(formerly FDX Global Logistics, Inc. and FDX Logistics, Inc.), a Delaware
corporation ("FedEx Logistics"), FedEx Corporation (formerly FDX Corporation), a
Delaware corporation ("Parent"), GeoLogistics Corporation, a Delaware
corporation ("GeoLogistics"), and GeoLogistics Americas Inc., on its own behalf
and as successor by merger to GeoLogistics Air Services Inc. ("Americas").
Defined terms used herein shall have the meanings ascribed thereto in that
certain Asset Purchase Agreement dated as of August 6, 1999 (the "Purchase
Agreement") by and among Parent, FedEx Logistics, GeoLogistics, Americas and
GeoLogistics Air Services Inc. ("GLAS").
WHEREAS, the parties to the Purchase Agreement consummated the
transactions contemplated by the Purchase Agreement on September 10, 1999 and
pursuant to the terms of the Purchase Agreement, the parties deposited an
aggregate of $10,000,000 in an escrow account (the "Escrow Account") with U.S.
Bank Trust, National Association, as escrow agent (the "Escrow Agent");
WHEREAS, pursuant to Section 13.1.2 of the Purchase Agreement,
GeoLogistics, Americas and GLAS jointly and severally agreed to indemnify and
hold harmless the Purchaser Indemnitees certain amounts with respect to unpaid
150-Day Receivables ("Overdue 150-Day Receivables"); and
WHEREAS, the parties desire to amend the provisions of the Purchase
Agreement with respect to indemnification for Overdue 150-Day Receivables to
provide that such receivables shall be retained by FedEx Logistics in
consideration for payment in the amount of $2,000,000 by GeoLogistics to FedEx
Logistics from amounts on deposit with the Escrow Agent pursuant to the Escrow
Agreement (the "Escrow Funds") in respect of such receivables and to amend the
provisions of the Purchase Agreement and that certain Escrow Agreement dated as
of September 10, 1999 by and among GeoLogistics, FedEx Logistics and the Escrow
Agent to provide that the Escrow Funds shall be released forthwith in the manner
and amounts described below.
NOW, THEREFORE, for good and valuable consideration, the sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:
1. In consideration for the payment by GeoLogistics to FedEx Logistics
of $2,000,000 as set forth below and the retention by FedEx Logistics of the
Overdue 150-Day Receivables, FedEx Logistics and GeoLogistics agree that on
February 18, 2000, $2,000,000 of the Escrow Amount shall be wire transferred by
the Escrow Agent to FedEx Logistics to the account set forth below and all
remaining funds constituting the Escrow Amount, including all accrued interest
on the Escrow Amount, shall be wire transferred by the Escrow Agent to
GeoLogistics to the account set forth below. FedEx Logistics and GeoLogistics
hereby jointly instruct the Escrow Agent to wire transfer on February 18, 2000 a
sum of $2,000,000 to the following account:
<PAGE>
FedEx Logistics account:
FedEx Corporation
Citibank, N.A.
Account No.
ABA #
FedEx Logistics and GeoLogistics hereby jointly instruct the Escrow Agent to
wire transfer on February 18, 2000, all remaining amounts on deposit in the
Escrow Account to the following account:
GeoLogistics account:
GeoLogistics Corporation
GeoLogistics, Americas, Parent and FedEx Logistics further acknowledge and agree
that notwithstanding any provision of the Escrow Agreement or the Purchase
Agreement to the contrary, neither GeoLogistics nor Americas (on its own behalf
and as successor by merger to GLAS) shall have any further obligation to
maintain or deposit funds in the Escrow Account.
2. The parties hereto further agree that, upon receipt by FedEx Logistics of the
wire transfer referred to in paragraph 1, neither GeoLogistics nor Americas (on
its own behalf and as successor by merger to GLAS) shall have any liability to
FedEx Logistics with respect to the Overdue 150-Day Receivables, including any
liability pursuant to Section 13.1.2 of the Purchase Agreement or any liability
for claims that may have been asserted as to breach of the representations and
warranties made with respect to the Overdue 150-Day Receivables pursuant to
Section 6.14 or any other provision of the Purchase Agreement. In consideration
for the payments to be made to FedEx Logistics pursuant to the terms hereof and
the retention of the Overdue 150-Day Receivables, each of FedEx Logistics and
Parent, on their own behalf and on behalf of each other Purchaser Indemnitee,
hereby releases GeoLogistics and Americas (on its own behalf and as successor by
merger to GLAS) from all liabilities and claims with respect to the Overdue
150-Day Receivables, including without limitation any claims that may have been
asserted pursuant to Section 13.1.2 of the Purchase Agreement and any claims
that may have been asserted as to breach of the representations and warranties
made with respect to the Overdue 150-Day Receivables pursuant to Section 6.14 or
any other provision of the Purchase Agreement, and hereby releases and forever
discharges GeoLogistics and Americas (on its own behalf and as successor by
merger to GLAS), and each of their respective individual, joint or mutual, past,
present, and future Affiliates, stockholders and successors and assigns, from
any and all claims, demands, proceedings, causes of action, court orders,
obligations, contracts agreements (express or implied), debts and liabilities
whatsoever, whether known or unknown, suspected or unsuspected, both in law and
in equity relating to the Overdue 150-Day
2
<PAGE>
Receivables. For purposes of clarification, Section 13.1.2 of the Purchase
Agreement shall be deemed to be deleted in its entirety from the Purchase
Agreement.
3. Except as expressly amended hereby, each of the Purchase Agreement and the
Escrow Agreement shall remain in full force and effect and nothing contained
herein shall be deemed to constitute a waiver of any other provision of either
the Purchase Agreement or the Escrow Agreement or otherwise limit, in any way,
any remedy of FedEx Logistics or Parent under the Purchase Agreement.
[SIGNATURE PAGE FOLLOWS]
3
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Joint
Escrow Instruction and Release Agreement to be executed by its duly authorized
officer.
GEOLOGISTICS AMERICAS INC.
By: /s/ Ronald Jackson
---------------------------------------
Name: Ronald Jackson
Title: Vice President and Assistant
Secretary
GEOLOGISTICS CORPORATION
By: /s/ Janet Helvey
---------------------------------------
Name: Janet Helvey
Title: Senior Vice President - Finance
FEDEX GLOBAL LOGISTICS, INC.
By: /s/ Debra A. Gray
---------------------------------------
Name: Debra A. Gray
Title: Vice President and Chief
Financial Officer
FEDEX CORPORATION
By: /s/ Alan B. Graf, Jr.
---------------------------------------
Name: Alan B. Graf, Jr.
Title: Executive Vice President and
Chief Financial Officer
4
<PAGE>
Acknowledged and agreed this 18th day of
February 2000.
U.S. BANK TRUST, NATIONAL ASSOCIATION,
As Escrow Agent
By: /s/ Thomas M. Gronlund
-----------------------------------
Name: Thomas M. Gronlund
Title: Vice President
5
<PAGE>
Exhibit 10.27
SIXTH AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
This SIXTH AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
(this "AGREEMENT") is made and entered into as of Janaury 27, 2000, by and
between GeoLogistics Corporation, 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 or Preferred Stock (each 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.
"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
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.
<PAGE>
"BUSINESS DAY" means a day other than Saturday, Sunday or any
other day on which banks located in the State of Colorado are authorized or
obligated to close.
"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).
"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 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.
<PAGE>
"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.
"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.
"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.
<PAGE>
"OCM TRANSFER SECURITIES" has the meaning assigned to such
term in SECTION (3)(A).
"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; and (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.
"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.
"PREFERRED STOCK" shall mean the Company's Series A
Participating Preferred Stock, par value $.001 per share.
"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, 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).
"RE-OFFER NOTICE" has the meaning assigned to such term in
SECTION 4(D).
"REFUSAL NOTICE" has the meaning assigned to such term in
SECTION 4(A).
<PAGE>
"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
Preferred Stock and any securities convertible or exercisable into shares of
Common Stock or Preferred 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 COMMON HOLDERS" has the meaning assigned to it in
SECTIONS 6(B).
"SELLING HOLDERS" has the meaning assigned to it in SECTION 7.
"SELLING PREFERRED HOLDERS" has the meaning assigned to it in
SECTIONS 6(C).
"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.
"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
<PAGE>
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.
"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) 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), 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.
<PAGE>
"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).
"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 SECURITIES" has the meaning assigned to such
term in SECTION 3(B).
"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
<PAGE>
(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 any change in record ownership of the Securities pursuant
to any such attempted Transfer.
(c) 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.
(d) PLEDGE AND HYPOTHECATION PROHIBITED. In the case of
Securities other than Preferred Stock, no Holder (other than any Persons not a
party to this Agreement who acquire such Securities pursuant to a registration
statement ("PUBLIC TRANSFEREES")) shall, prior to a Qualified Public Offering,
in any manner pledge, hypothecate or encumber, or grant options with respect to,
any such 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. No Holder of Preferred Stock (other than
any Public Transferee) shall, in any manner pledge, hypothecate or encumber, or
grant options with respect to any shares of Preferred Stock 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 other than Preferred Stock ("OCM TRANSFER
SECURITIES"), may Transfer or grant participation in any or all of the OCM
Transfer Securities 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
Transfer Securities so transferred shall not exceed thirty percent (30%) of the
aggregate number of OCM Transfer Securities purchased by the OCM Entities, in
the aggregate, from the Company on the Closing Date and subsequent thereto. Any
OCM Transfer Securities, or interest therein, so transferred may subsequently be
transferred back to an OCM Entity and upon such reacquisition such OCM Transfer
Securities shall be subject to this Agreement; PROVIDED, HOWEVER, that any OCM
Transfer Securities so reacquired by an OCM Entity shall not be subject to this
Agreement to the extent that an OCM Entity purchased such OCM Transfer
Securities pursuant to a registration statement or from a Public Transferee.
<PAGE>
(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 other than Preferred Stock ("WES&S TRANSFER SECURITIES") may Transfer or
grant participation in any or all of the WES&S Transfer Securities 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 Transfer Securities, or interest therein, so transferred may subsequently
be transferred back to WES&S and upon such reacquisition such WES&S Transfer
Securities shall be subject to this Agreement; PROVIDED, HOWEVER, that any WES&S
Transfer Securities so reacquired by WES&S shall not be subject to this
Agreement to the extent that WES&S purchased such WES&S Transfer Securities
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.
(e) CERTAIN TRANSFERS OF PREFERRED STOCK. Any Holder may
Transfer not less than 3,000 shares of Preferred Stock to any Person and such
Transfer shall not be subject to the provisions of Section 4 hereof.
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.
(a) REFUSAL NOTICE. A Holder that desires in good faith to
Transfer any Securities that are subject to the provisions of Section 4(b), (c)
or (d) (the "TRANSFEROR") shall deliver a written notice of such intent (the
"REFUSAL NOTICE") to each Offeree as required pursuant to Section 4(b), (c) or
(d). 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.,
<PAGE>
Preferred Stock, 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 Transfer Securities 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 OCM Transfer 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 Transfer
Securities 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.
(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 Transfer
Securities 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 WES&S Transfer Securities to be so purchased shall be allocated to
each OCM Entity on such basis as may be agreed upon by the OCM Entities.
Transfers of WES&S Transfer 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
<PAGE>
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 Transfer Securities 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. 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
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) 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 Preferred Stock
owned by each such entity as of such date in the event of a Re-Offer Acceptance
Notice relating to Preferred Stock and the relative number of Securities other
than Preferred Stock owned by each such entity as of said date in the event of a
Re-Offer Acceptance Notice relating to Securities other than Preferred Stock.
<PAGE>
(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.
SECTION 5. INTENTIONALLY OMITTED
SECTION 6. DRAG-ALONG. (a) QUALIFIED SALE. If prior to a
Qualified Public Offering, (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
Transferees), shall be deemed to have consented to such Qualified Sale and shall
execute such documents to confirm such consent.
(b) COMMON STOCK SALE. If, at any time prior to the
consummation of a Qualified Public Offering, the Holders holding shares in
excess of eighty percent (80%) of the issued and outstanding Common Stock (the
"SELLING COMMON HOLDERS") elect to sell such shares of Common Stock to the
Company or a third party (other than an OCM Entity, WES&S, an OCM Affiliate, a
TCW Affiliate or a WES&S Affiliate) (an "ACQUIROR"), then the Acquiror shall
have the right, at its option, to purchase from the Holders other than the
Selling Common Holders and any Public Transferees (the "NON-SELLING COMMON
HOLDERS"), the same Pro-Rata portion of Securities (other than Preferred Stock)
as is being acquired from the Selling Common Holders at the same price per
Security (other than Preferred Stock), 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.
(c) PREFERRED STOCK SALE. If at any time the Holders holding
shares in excess of eighty percent (80%) of the issued and outstanding shares of
Preferred Stock (the "SELLING
<PAGE>
PREFERRED HOLDERS") elect to sell such shares of Preferred
Stock to an Acquiror, then the Acquiror shall have the right, at its option, to
purchase from the Holders other than the Selling Preferred Holders and any
Public Transferees (the "NON-SELLING PREFERRED HOLDERS"), the same Pro-Rata
portion of Preferred Stock as is being acquired from the Selling Preferred
Holders at the same price per share of Preferred Stock, with the same form of
consideration and upon the same terms and conditions as set forth in the
Transfer Notice (as defined below).
(d) EXERCISE OF RIGHTS. To exercise this drag-along right, the
Selling Common Holders or Selling Preferred Holders shall provide written notice
(a "TRANSFER NOTICE") to each Non-Selling Common Holder or Non-Selling Preferred
Holder, respectively, ten (10) Business Days following any such Transfer of
Common Stock or Preferred Stock, respectively, explaining the terms of such
offer and identifying the name and address of the Acquiror. If the Acquiror
exercises its right to purchase a portion, but not all, of the Securities owned
by the Non-Selling Common Holders or Non-Selling Preferred Holder, as
applicable, then such Acquiror shall purchase a Pro Rata portion of the
Securities from each such Non-Selling Common Holder or Non-Selling Preferred
Holder, respectively, within twenty (20) Business Days following the sale of
Securities by the Selling Common Holder or Selling Preferred Holder, as
applicable.
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 other than
Preferred Stock 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 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 five
(5) 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
<PAGE>
the Company shall at all times, until a Voting Termination Event, consist of
five (5) members, of which one (1) member shall be designated by OCM (an "OCM
DIRECTOR"), one (1) member shall be designated by TCW (a "TCW DIRECTOR"), two
(2) members shall designated by WES&S (a "WES&S DIRECTOR") and one (1) member
shall be the Chief Executive Officer of the Company.
(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 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 and (C) 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,
effective as soon as practicable following the date of this Agreement, shall
consist of the following members:
<TABLE>
<S> <C>
Stephen A. Kaplan (TCW Director)
Vincent J. Cebula (OCM Director)
(OCM Executive Director)
William E. Simon, Jr. (WES&S Director)
Michael B. Lenard (WES&S Director)
(WES&S Executive Director)
Robert Arovas (Chief Executive Officer)
</TABLE>
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
<PAGE>
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 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. 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,
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 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
<PAGE>
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 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 and WES&S pursuant to
this SECTION 8 shall not be transferable to any transferee; PROVIDED, HOWEVER,
that each of OCM, TCW and
<PAGE>
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 four (4) 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 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
<PAGE>
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
seventy-five percent (75%) 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.
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 ________,] [Preferred Stock Purchase
Agreement, 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] [Preferred Stock Purchase Agreement] 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
<PAGE>
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."
(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
13952 Denver West Parkway
Golden, Colorado 80401
Facsimile No.: (303) 704-4410
Attention: Chief Executive Officer
(B) with copies to OCM, TCW and WES&S, at
the respective addresses set forth below
(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
<PAGE>
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: Deborah R. Baumgart, 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.
(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,
<PAGE>
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.
(f) AMENDMENT OR TERMINATION. Prior to a Voting Termination
Event, (i) the provisions of this Agreement relating exclusively to Common Stock
or Securities other than Preferred Stock 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 seventy-five percent (75%) of the issued and
outstanding shares of Common Stock, (ii) the provisions of this Agreement
relating exclusively to Preferred Stock 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
Preferred Stock, and (iii) the provisions of this Agreement relating to Common
Stock, Securities other than Preferred Stock and Preferred Stock may be amended
or terminated only by an instrument in writing signed by the Company and Holders
of seventy-five percent (75%) of the issued and outstanding shares of Common
Stock and eighty percent (80%) of the issued and outstanding shares of Preferred
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, upon receiving the unanimous
written consent of each of the OCM Entities and WES&S, the
<PAGE>
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.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Sixth Amended and Restated Stockholders Agreement as of the day and year first
above written.
The Company: GEOLOGISTICS CORPORATION
By: /s/ Robert Arovas
---------------------------------
Robert Arovas
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
[signature page continues]
<PAGE>
LOGISTICAL SIMON, L.L.C.
By: WESINVEST, Inc.
its Manager
By: /s/ Michael B. Lenard
----------------------------------------
Michael B. Lenard
President
[signature page continues]
<PAGE>
EXHIBIT A
<TABLE>
<S> <C> <C>
HOLDERS COMMON STOCK WARRANTS
</TABLE>
[table continued on next page]
<PAGE>
EXHIBIT B
[table continued on next page]
<PAGE>
Exhibit 10.28
GEOLOGISTICS CORPORATION.
1999 LONG-TERM INCENTIVE PLAN
* * * * *
1. PURPOSE. The purpose of the 1999 Long-Term Incentive Plan (the
"Plan") is to further and promote the interests of GeoLogistics Corporation (the
"Company"), its Subsidiaries and its shareholders by enabling the Company and
its Subsidiaries to attract, retain and motivate employees and officers or those
who will become employees or officers, and to align the interests of those
individuals and the Company's shareholders. To do this, this Plan offers
equity-based opportunities providing such employees and officers with a
proprietary interest in maximizing the growth, profitability and overall success
of the Company and its Subsidiaries.
2. DEFINITIONS. For purposes of this Plan, the following terms shall
have the meanings set forth below:
2.1 "AWARD" means an award or grant made to a Participant under
Section 6 of this Plan.
2.2 "AWARD AGREEMENT" means the agreement executed by a
Participant pursuant to Sections 3.2 and Section 6.1 of this Plan in connection
with the granting of an Award.
2.3 "BOARD" means the Board of Directors of the Company, as
constituted from time to time.
2.4 "CODE" means the Internal Revenue Code of 1986, as in effect
and as amended from time to time, or any successor statute thereto, together
with any rules, regulations and interpretations promulgated thereunder or with
respect thereto.
2.5 "COMMITTEE" means the committee of the Board established to
administer this Plan, as described in Section 3 of this Plan.
2.6 "COMMON STOCK" means the Common Stock, par value $.001 per
share, of the Company or any security of the Company issued by the Company in
substitution or exchange therefor.
2.7 "COMPANY" means GeoLogistics Corporation, a Delaware
corporation, or any successor corporation to GeoLogistics Corporation.
2.8 "DISABILITY" means disability as defined in the Participant's
then effective employment agreement, or if the participant is not then a party
to an effective employment agreement with the Company which defines disability,
"Disability" means disability as
<PAGE>
-2-
determined by the Committee in accordance with standards and procedures similar
to those under the Company's long-term disability plan, if any. Subject to the
first sentence of this Section 2.8, at any time that the Company does not
maintain a long-term disability plan, "Disability" shall mean any physical or
mental incapacity which prevents a participant from performing the essential
functions of his or her position and which has lasted or is determined by a
physician selected in good faith by the Company to be expected to last at least
ninety (90) days.
2.9 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
in effect and as amended from time to time, or any successor statute thereto,
together with any rules, regulations and interpretations promulgated thereunder
or with respect thereto.
2.10 "FAIR MARKET VALUE" means the fair market value of a share of
the Common Stock as determined in good faith by the Board.
2.11 "PARTICIPANT" means any individual who is selected from time
to time under Section 5 to receive an Award under this Plan.
2.12 "PLAN" means the GeoLogistics Corporation 1999 Long-Term
Incentive Plan, as set forth herein and as in effect and as amended from time to
time (together with any rules and regulations promulgated by the Committee with
respect thereto).
2.13 "RESTRICTED SHARES" means the restricted shares of Common
Stock granted pursuant to the provisions of Section 6 of this Plan and the
relevant Award Agreement.
2.14 "RETIREMENT" means the voluntary retirement by the
Participant from active employment with the Company and its Subsidiaries on or
after the attainment of (i) age 65, or (ii) 60, with the consent of the Board.
2.15 "SUBSIDIARY" means any corporation (other than the Company)
in an unbroken chain of corporations, including and beginning with the Company,
if each of such corporations, other than the last corporation in the unbroken
chain, owns, directly or indirectly, more than fifty percent (50%) of the voting
stock in one of the other corporations in such chain.
3. ADMINISTRATION.
3.1 THE COMMITTEE. The Plan shall be administered by the
Committee. The Committee shall be appointed from time to time by the Board and
shall be composed of not less than two (2) of the then members of the Board who
are Non-Employee Directors (within the meaning of SEC Rule 16b-3(b)(3)) of the
Company. No member of the Committee shall be eligible to receive Awards under
this Plan. Consistent with the Bylaws of the Company, members of the Committee
shall serve at the pleasure of the Board, and the Board, subject to the
immediately preceding sentence, may at any time remove any member from, or add a
member to, the Committee.
<PAGE>
-3-
3.2 PLAN ADMINISTRATION AND PLAN RULES. The Committee is
authorized to construe and interpret this Plan and to promulgate, amend and
rescind rules and regulations relating to the implementation, administration and
maintenance of this Plan. Subject to the terms and conditions of this Plan, the
Committee shall make all determinations necessary or advisable for the
implementation, administration and maintenance of this Plan including, without
limitation, (a) selecting this Plan's Participants, (b) making Awards in such
amounts and form as the Committee shall determine, (c) imposing such
restrictions and/or other terms and conditions upon such Awards as the Committee
shall deem appropriate, (d) correcting any technical defect(s) or technical
omission(s), (e) specifying the terms and conditions upon which the Awards to
individual Participants become unrestricted and vested, (f) establishing
repurchase procedures for vested Awards, (g) reconciling any technical
inconsistencies in this Plan and/or any Award Agreement or (h) electing to vest
any or all of a Participant's Restricted Shares at any time and for any reason,
in each case as the Committee deems appropriate. The Committee may designate
persons other than members of the Committee to carry out the day-to-day
administration of this Plan under such conditions and limitations as it may
prescribe, except that the Committee shall not delegate its authority with
regard to the selection of any employee or officer for participation in this
Plan and/or the granting of any Awards to Participants. The Committee may also,
in its sole discretion, delegate its authority to one or more senior executive
officers for the purpose of making Awards to Participants who are not subject to
Section 16 of the Exchange Act. The Committee's determinations under this Plan
need not be uniform and may be made selectively among Participants, whether or
not such Participants are similarly situated. Any determination, decision or
action of the Committee in connection with the construction, interpretation,
administration, implementation or maintenance of this Plan shall be final,
conclusive and binding upon all Participants and any person(s) claiming under or
through any Participants. The Company shall effect the granting of Awards under
this Plan, in accordance with the determinations made by the Committee, by
execution of written agreements and/or other instruments in such form as is
approved by the Committee.
3.3 LIABILITY LIMITATION. Neither the Board nor the Committee,
nor any member of either, shall be liable for any act, omission, interpretation,
construction or determination made in good faith in connection with this Plan
(or any Award Agreement), and the members of the Board and the Committee shall
be entitled to indemnification and reimbursement by the Company in respect of
any claim, loss, damage or expense (including, without limitation, reasonable
attorneys' fees) arising or resulting therefrom to the fullest extent permitted
by law and/or under any directors and officers liability insurance coverage
which may be in effect from time to time.
4. TERM OF PLAN/COMMON STOCK SUBJECT TO PLAN.
4.1 TERM. The Plan shall terminate on December 31, 2009, except
with respect to Awards then outstanding. After such date no further Awards shall
be granted under this Plan.
<PAGE>
-4-
4.2 COMMON STOCK. The maximum number of shares of Common Stock in
respect of which Awards may be granted or paid out under this Plan, subject to
adjustment as provided in Section 10.2 of this Plan, shall not exceed 100,000
shares. In the event of a change in the Common Stock of the Company that is
limited to a change in the designation thereof to "Capital Stock" or other
similar designation, or to a change in the par value thereof, or from par value
to no par value, without increase or decrease in the number of issued shares,
the shares resulting from any such change shall be deemed to be the Common Stock
for purposes of this Plan. Common Stock which may be issued under this Plan may
be either authorized and unissued shares or issued shares which have been
reacquired by the Company (in the open-market or in private transactions) and
which are being held as treasury shares. No fractional shares of Common Stock
shall be issued under this Plan.
4.3 COMPUTATION OF AVAILABLE SHARES. For the purpose of computing
the total number of shares of Common Stock available for Awards under this Plan,
there shall be counted against the limitations set forth in Section 4.2 of this
Plan the number of shares of Common Stock issued under grants of Restricted
Shares pursuant to Section 6 of this Plan, determined as of the date on which
such Awards are granted. If any Awards expire unexercised or are forfeited,
surrendered, cancelled, terminated or settled in cash in lieu of Common Stock,
the shares of Common Stock which were theretofore subject (or potentially
subject) to such Awards shall again be available for Awards under this Plan to
the extent of such expiration, forfeiture, surrender, cancellation, termination
or settlement of such Awards.
5. ELIGIBILITY. Individuals eligible for Awards under this Plan shall
consist of key employees and officers, or those who will become key employees or
officers, of the Company and/or its Subsidiaries whose performance or
contribution, in the sole discretion of the Committee, benefits or will benefit
the Company or any Subsidiary.
6. RESTRICTED SHARES.
6.1 AWARD AGREEMENTS. Each Participant receiving an Award under
this Plan shall enter into an Award Agreement with the Company in a form
specified by the Committee. Each such Participant shall agree to the
restrictions and/or other terms and conditions of the Award set forth therein
and in this Plan.
6.2 TERMS AND CONDITIONS. Grants of Restricted Shares shall be
subject to the terms and conditions set forth in this Section 6 and any
additional terms and conditions, not inconsistent with the express terms and
provisions of this Plan, as the Committee shall set forth in the relevant Award
Agreement. Subject to the terms of this Plan, the Committee shall determine the
number of Restricted Shares to be granted to a Participant, and the Committee
may provide or impose different terms and conditions on any particular
Restricted Share grant made to any Participant. With respect to each Participant
receiving an Award of Restricted Shares, there shall be issued a stock
certificate (or certificates) in respect of such Restricted Shares. Such stock
certificate(s) shall be registered in the name of such Participant, shall be
accompanied
<PAGE>
-5-
by a stock power duly executed by such Participant, and shall bear, among other
required legends, the following legend:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions
(including, without limitation, forfeiture events) contained in
the GeoLogistics Corporation 1999 Long-Term Incentive Plan and an
Award Agreement entered into between the registered owner hereof
and GeoLogistics Corporation. Copies of such Plan and Award
Agreement are on file in the office of the Secretary of
GeoLogistics Corporation. GeoLogistics Corporation will furnish to
the recordholder of the certificate, without charge and upon
written request at its principal place of business, a copy of such
Plan and Award Agreement. GeoLogistics Corporation reserves the
right to refuse to record the transfer of this certificate until
all such restrictions are satisfied, all such terms are complied
with and all such conditions are satisfied."
Such stock certificate evidencing such shares shall, in the sole discretion of
the Committee, be deposited with and held in custody by the Company until the
restrictions thereon shall have lapsed and all of the terms and conditions
applicable to such grant shall have been satisfied.
6.3 RESTRICTED SHARE GRANTS. A grant of Restricted Shares is an
Award of shares of Common Stock granted to a Participant, subject to such
restrictions and/or other terms and conditions as the Committee deems
appropriate, including, without limitation, (a) restrictions on the sale,
assignment, transfer, hypothecation or other disposition of such shares, (b) the
requirement that the Participant deposit such shares with the Company while such
shares are subject to such restrictions, and (c) the requirement that such
shares be forfeited upon termination of employment for specified reasons within
a specified period of time or for other reasons (including, without limitation,
the failure to achieve designated performance goals).
6.4 RESTRICTION PERIOD. In accordance with Sections 6.2 and 6.3
of this Plan, and unless otherwise determined by the Committee (in its sole
discretion) at any time and from time to time, Restricted Shares shall only
become unrestricted and vested in the Participant in accordance with such
vesting schedule relating to such Restricted Shares, if any, as the Committee
may establish in the relevant Award Agreement (the "Restriction Period").
Notwithstanding the preceding sentence, in no event shall the Restriction Period
be less than six (6) months after the date of grant except as otherwise provided
in the relevant Award Agreement. During the Restriction Period, such stock shall
be and remain unvested and a Participant may not sell, assign, transfer, pledge,
encumber or otherwise dispose of or hypothecate such Award. Upon satisfaction of
the vesting schedule and any other applicable restrictions and/or other terms
and conditions, the Participant shall be entitled to receive payment of the
Restricted Shares or a portion thereof, as the case may be, as provided in
Section 6.5 of this Plan.
<PAGE>
-6-
6.5 PAYMENT OF RESTRICTED SHARE GRANTS. After the satisfaction
and/or lapse of the restrictions and/or other terms and conditions established
by the Committee in respect of a grant of Restricted Shares, a new certificate,
without the legend set forth in Section 6.2 of this Plan, for the number of
shares of Common Stock which are no longer subject to such restrictions and/or
terms and conditions shall, as soon as practicable thereafter, be delivered to
the Participant.
6.6 SHAREHOLDER RIGHTS. A Participant shall have, with respect to
the shares of Common Stock underlying a grant of Restricted Shares, all of the
rights of a shareholder of such stock (except as such rights are limited or
restricted under this Plan or in the relevant Award Agreement). Any stock
dividends paid in respect of unvested Restricted Shares shall be treated as
additional Restricted Shares and shall be subject to the same restrictions and
other terms and conditions that apply to the unvested Restricted Shares in
respect of which such stock dividends are issued.
7. DIVIDEND EQUIVALENTS. In addition to the provisions of Section 6.6
of this Plan, Awards may, in the sole discretion of the Committee and if
provided for in the relevant Award Agreement, earn dividend equivalents. In
respect of any such Award which is outstanding on a dividend record date for
Common Stock, the Participant shall be credited with an amount equal to the
amount of cash or stock dividends that would have been paid on the shares of
Common Stock covered by such Award had such covered shares been issued and
outstanding on such dividend record date. The Committee shall establish such
rules and procedures governing the crediting of such dividend equivalents,
including, without limitation, the amount, the timing, form of payment and
payment contingencies and/or restrictions of such dividend equivalents, as it
deems appropriate or necessary.
8. TERMINATION OF EMPLOYMENT. Except as is otherwise provided in the
relevant Award Agreement as determined by the Committee (in its sole
discretion), or in the Participant's then effective employment agreement, if
any, if a Participant's employment with the Company and/or its Subsidiaries
terminates for any reason whatsoever, including, without limitation, death,
Disability, resignation, Retirement or termination with or without Cause (as
that term is defined in any agreement or any plan, policy, or practice
applicable to the Participant) prior to the satisfaction and/or lapse of the
restrictions and/or other terms and conditions applicable to a grant of
Restricted Shares, such Restricted Shares shall immediately be cancelled and the
Participant (and such Participant's estate, designated beneficiary or other
legal representative) shall forfeit any rights or interests in and with respect
to any such Restricted Shares. Notwithstanding anything to the contrary in this
Section 8, the Committee, in its sole discretion, may determine within ninety
(90) days after the date of such termination that all or a portion of any such
Participant's Restricted Shares shall become fully vested, rather than being so
cancelled and forfeited.
9. NON-TRANSFERABILITY OF AWARDS. Unless otherwise provided in the
Award Agreement, no Award under this Plan or any Award Agreement, and no rights
or interests herein or therein, may be assigned, transferred, sold, exchanged,
encumbered, pledged, or otherwise hypothecated or disposed of by a Participant
or any beneficiary of any Participant, except by
<PAGE>
-7-
testamentary disposition by the Participant or the laws of intestate succession.
No such interest shall be subject to execution, attachment or similar legal
process, including, without limitation, seizure for the payment of the
Participant's debts, judgments, alimony or separate maintenance.
10. CHANGES IN CAPITALIZATION AND OTHER MATTERS.
10.1 NO CORPORATE ACTION RESTRICTION. The existence of this Plan
or any Award Agreement and/or the fact that Awards have been granted hereunder
shall not limit, affect or restrict in any way the right or power of the Board
or the shareholders of the Company to make or authorize (a) any adjustment,
recapitalization, reorganization or other change in the Company's or any
Subsidiary's capital structure or its business, (b) any merger, consolidation or
change in the ownership of the Company or any Subsidiary, (c) any issuance of
bonds, debentures, capital, preferred or prior preference stocks ahead of or
affecting the Company's or any Subsidiary's capital stock or the rights thereof,
(d) any dissolution or liquidation of the Company or any Subsidiary, (e) any
sale or transfer of all or any part of the Company's or any Subsidiary's assets
or business, or (f) any other corporate act or proceeding by the Company or any
Subsidiary. No Participant, beneficiary or any other person shall have any claim
against any member of the Board or the Committee, the Company or any Subsidiary,
or any employees, officers or agents of the Company or any subsidiary, as a
result of any such action. Notwithstanding anything herein contained to the
contrary, any Award granted hereunder shall be cancelled immediately prior to
the effective time of a transaction between the Company and another party
pursuant to a written agreement whereby the consummation of the transaction is
conditioned upon the availability of "pooling of interests" accounting treatment
(within the meaning of A.P.B. No. 16 or any successor thereto); provided,
however, that no such Awards may be cancelled unless:
(i) the existence of the Awards would (in the opinion of
the firm of independent certified public accountants regularly engaged
to audit the Company's financial statements) render the transaction
ineligible for pooling of interests accounting treatment;
(ii) the cancellation of the Awards would (in the opinion of
the firm of independent certified public accountants regularly engaged
to audit the Company's financial statements) render the transaction
eligible for pooling of interests accounting treatment;
(iii) the transaction is, in fact, consummated; and
(iv) the written agreement providing for the transaction
provides for each Participant to whom an Award has been granted and
whose Award must be cancelled in accordance with this provision to
receive, upon the effective date of such transaction, property or cash
with a fair market value at least equal to the monetary payment that
would be made upon exercise of such Award.
<PAGE>
-8-
10.2 RECAPITALIZATION ADJUSTMENTS. Except as otherwise provided in
the relevant Award Agreement, in the event of any change in capitalization
affecting the Common Stock of the Company, including, without limitation, a
distribution, stock split, reverse stock split, recapitalization, consolidation,
subdivision, split-up, spin-off, split-off, combination or exchange of shares or
other form of reorganization or recapitalization, or any other change affecting
the Common Stock, the Board shall authorize and make such adjustments, if any,
as the Board deems appropriate to reflect such change, including, without
limitation, with respect to the aggregate number of shares of the Common Stock
for which Awards in respect thereof may be granted under this Plan, the maximum
number of shares of the Common Stock which may be granted or awarded to any
Participant, and the number of shares of the Common Stock covered by each
outstanding Award. Notwithstanding the foregoing, in the event of a stock
dividend, the adjustments described in this Section 10.2 shall occur
automatically, without any Board action being required.
11. AMENDMENT, SUSPENSION AND TERMINATION.
11.1 IN GENERAL. The Board may suspend or terminate this Plan (or
any portion thereof) at any time and may amend this Plan at any time in such
respects as the Board may deem advisable to insure that any and all Awards
conform to or otherwise reflect any change in applicable laws or regulations, or
to permit the Company or the Participants to benefit from any change in
applicable laws or regulations, or in any other respect the Board may deem to be
in the best interests of the Company or any Subsidiary. No such amendment,
suspension or termination shall materially adversely effect the rights of any
Participant under any outstanding Restricted Share grants, without the consent
of such Participant.
11.2 AWARD AGREEMENT MODIFICATIONS. The Committee may (in its sole
discretion) amend or modify at any time the restrictions and/or other terms and
conditions of any outstanding Restricted Share grants in any manner, to the
extent that the Committee under this Plan or any Award Agreement could have
initially established the restrictions and/or other terms and conditions of such
Restricted Share grants, including, without limitation, changing or accelerating
the date or dates as of which such Restricted Share grants shall become vested.
No such amendment or modification shall, however, materially adversely affect
the rights of any Participant under any such Award without the consent of such
Participant.
12. MISCELLANEOUS.
12.1 TAX WITHHOLDING. The Company shall have the right to deduct
from any payment or settlement under this Plan, including, without limitation,
the delivery, transfer or vesting of any Restricted Shares, any federal, state,
local or other taxes of any kind which the Committee, in its sole discretion,
deems necessary to be withheld to comply with the Code and/or any other
applicable law, rule or regulation. Shares of Common Stock may be used to
satisfy any such tax withholding. Such Common Stock shall be valued based on the
Fair Market Value of such stock as of the date the tax withholding is required
to be made, such date to be determined by the Committee.
<PAGE>
-9-
12.2 NO RIGHT TO EMPLOYMENT. Neither the adoption of this Plan,
the granting of any Award, nor the execution of any Award Agreement shall confer
upon any employee of the Company or any Subsidiary any right to continued
employment with the Company or any Subsidiary, nor shall it interfere in any way
with the right, if any, of the Company or any Subsidiary to terminate the
employment of any employee at any time for any reason.
12.3 OTHER COMPANY BENEFIT AND COMPENSATION PROGRAMS. Payments and
other benefits received by a Participant under an Award made pursuant to this
Plan shall not be deemed a part of a Participant's compensation for purposes of
the determination of benefits under any other employee welfare or benefit plans
or arrangements, if any, provided by the Company or any Subsidiary unless
expressly provided in such other plans or arrangements, or except where the
Board expressly determines in writing that an Award or portion of an Award
should be included to accurately reflect competitive compensation practices or
to recognize that an Award has been made in lieu of a portion of competitive
annual base salary or other cash compensation. Awards under this Plan may be
made in addition to, in combination with, or as alternatives to, grants, awards
or payments under any other plans or arrangements of the Company or its
Subsidiaries. The existence of this Plan notwithstanding, the Company or any
Subsidiary may adopt such other compensation plans or programs and additional
compensation arrangements as it deems necessary to attract, retain and motivate
employees.
12.4 LISTING, REGISTRATION AND OTHER LEGAL COMPLIANCE. No Awards
or shares of the Common Stock shall be required to be issued or granted under
this Plan unless legal counsel for the Company shall be satisfied that such
issuance or grant will be in compliance with all applicable federal and state
securities laws and regulations and any other applicable laws or regulations.
The Committee may require, as a condition of any payment or share issuance, that
certain agreements, undertakings, representations, certificates, and/or
information, as the Committee may deem necessary or advisable, be executed or
provided to the Company to assure compliance with all such applicable laws or
regulations. Certificates for shares of the Restricted Shares and/or Common
Stock delivered under this Plan may be subject to such stock-transfer orders and
such other restrictions as the Committee may deem advisable under the rules,
regulations, or other requirements of the Securities and Exchange Commission,
any stock exchange or automated quotation system upon which the Common Stock is
then listed or designated for quotation, and any applicable federal or state
securities law. In addition, if, at any time specified herein (or in any Award
Agreement or otherwise) for (a) the making of any Award, (b) the issuance or
other distribution of Restricted Shares and/or Common Stock or (c) the payment
of amounts to or through a Participant with respect to any Award, any law, rule,
regulation or other requirement of any governmental authority or agency shall
require either the Company, any Subsidiary or any Participant (or any estate,
designated beneficiary or other legal representative thereof) to take any action
in connection with any such shares to be issued or distributed, or any such
payment, as the case may be, shall be deferred until such required action is
taken. With respect to persons subject to Section 16 of the Exchange Act,
transactions under this Plan are intended to comply with all applicable
conditions of SEC Rule 16b-3. To the extent any provision of this Plan or any
action by the administrators of this Plan fails to so comply with such rule, it
shall be deemed null and void, to the extent permitted by law and deemed
advisable by the Committee.
<PAGE>
-10-
12.5 DESIGNATION OF BENEFICIARY. Each Participant to whom an Award
has been made under this Plan may designate a beneficiary or beneficiaries to
receive any payment which under the terms of this Plan and the relevant Award
Agreement may become payable on or after the Participant's death. At any time,
and from time to time, any such designation may be changed or cancelled by the
Participant without the consent of any such beneficiary. Any such designation,
change or cancellation must be on a form provided for that purpose by the
Committee and shall not be effective until received by the Committee. If no
beneficiary has been designated by a deceased Participant, or if the designated
beneficiaries have predeceased the Participant, the beneficiary shall be the
Participant's estate. If the Participant designates more than one beneficiary,
any payments under this Plan to such beneficiaries shall be made in equal shares
unless the Participant has expressly designated otherwise, in which case the
payments shall be made in the shares designated by the Participant.
12.6 LEAVES OF ABSENCE/TRANSFERS. The Committee shall have the
power to promulgate rules and regulations and to make determinations, as it
deems appropriate, under this Plan in respect of any leave of absence from the
Company or any Subsidiary granted to a Participant. Without limiting the
generality of the foregoing, the Committee may determine whether any such leave
of absence shall be treated as if the Participant has terminated employment with
the Company or any such Subsidiary. If a Participant transfers within the
Company, or to or from any Subsidiary, such Participant shall not be deemed to
have terminated employment as a result of such transfers.
12.7 LOANS. Subject to applicable law, the Committee may provide,
pursuant to Plan rules, for the Company or any Subsidiary to make loans to
Participants to finance the withholding obligation under Section 12.1 of this
Plan and/or the estimated or actual taxes payable by the Participant as a result
the delivery, transfer or vesting of such Restricted Shares and the Committee
may prescribe the terms and conditions of any such loan.
12.8 GOVERNING LAW. The Plan and all actions taken thereunder
shall be governed by and construed in accordance with the laws of the State of
Delaware, without reference to the principles of conflict of laws thereof. Any
titles and headings herein are for reference purposes only, and shall in no way
limit, define or otherwise affect the meaning, construction or interpretation of
any provisions of this Plan.
12.9 EFFECTIVE DATE. The Plan shall be effective upon its approval
by the Board and adoption by the Company.
IN WITNESS WHEREOF, this Plan is adopted by the Company on this 1 day
of March, 2000.
GEOLOGISTICS CORPORATION
By:
---------------------------
Name:
Title:
<PAGE>
Loan Agreement
by and between
CONGRESS FINANCIAL CORPORATION (CANADA)
as Lender
and
GEOLOGISTICS, CO.
as Borrower
Dated as of March 23, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Section 1 - DEFINITIONS...........................................................................................1
1.1 "Accounts"........................................................................................2
1.2 "Adjusted Eurodollar Rate"........................................................................2
1.3 "Agent/Contractor Receivables"....................................................................2
1.4 "Availability Reserves"...........................................................................2
1.5 "BIA".............................................................................................3
1.6 "Blocked Accounts"................................................................................3
1.7 "Business Day"....................................................................................3
1.9 "Canadian Daily Excess Availability"..............................................................3
1.8 "Canadian Dollar Amount"..........................................................................3
1.10 "Canadian Excess Availability"....................................................................3
1.11 "Canadian Prime Rate".............................................................................4
1.12 "Canadian Prime Rate Loans".......................................................................4
1.13 "Canadian Reference Bank".........................................................................4
1.14 "Capital Lease"...................................................................................4
1.15 "CDOR Rate".......................................................................................4
1.16 "CCAA"............................................................................................4
1.17 "Collateral"......................................................................................4
1.18 "Contractor"......................................................................................4
1.19 "Dilution"........................................................................................4
1.20 "EBITDA"..........................................................................................4
1.21 "Eligible Accounts"...............................................................................5
1.22 "Eligible Billed Accounts"........................................................................6
1.23 "Eligible Unbilled Accounts"......................................................................7
1.24 "Environmental Laws"..............................................................................7
1.25 "Equipment".......................................................................................7
1.26 "Eurodollar Rate".................................................................................7
1.27 "Eurodollar Rate Loans"...........................................................................7
1.28 "Event of Default"................................................................................7
1.29 "Financing Agreements"............................................................................7
1.30 "GAAP"............................................................................................8
1.31 "General Security Agreement"......................................................................8
1.32 "GIFL"............................................................................................8
1.33 "GLC".............................................................................................8
1.34 "GL UK"...........................................................................................8
1.35 "Hazardous Materials".............................................................................8
1.36 "Hypothec"........................................................................................8
1.37 "Information Certificate".........................................................................8
1.38 "Interest Expense"................................................................................8
1.39 "Interest Period".................................................................................8
1.40 "Interest Rate"...................................................................................9
1.41 "Inventory"......................................................................................10
1.42 "L/C Sublimit"...................................................................................10
1.43 "Letter of Credit Accommodations"................................................................10
1.44 "Loans"..........................................................................................11
1.45 "Maximum Credit".................................................................................11
<PAGE>
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1.46 "Net Amount of Eligible Billed Accounts".........................................................11
1.47 "Net Amount of Eligible Unbilled Accounts".......................................................11
1.48 "Net Income".....................................................................................11
1.49 "Obligations"....................................................................................11
1.50 "Obligor"........................................................................................11
1.51 "Participant"....................................................................................12
1.52 "Payment Account"................................................................................12
1.53 "Pension Plans"..................................................................................12
1.54 "Permitted Acquisition"..........................................................................12
1.55 "Person"or "person"..............................................................................12
1.56 "PPSA"...........................................................................................12
1.57 "Prime Rate Loans"...............................................................................12
1.58 "Priority Payables Reserve"......................................................................13
1.59 "Provision for Taxes"............................................................................13
1.60 "Records"........................................................................................13
1.61 "Renewal Date"...................................................................................13
1.62 "Representative Agency Agreement"................................................................13
1.63 "Representative Agent"...........................................................................14
1.64 "Revolving Loans"................................................................................14
1.65 "Securities".....................................................................................14
1.66 "Senior Notes"...................................................................................14
1.67 "Sponsor"........................................................................................14
1.68 "Spot Rate"......................................................................................14
1.69 "Subsidiary".....................................................................................14
1.70 "Total Daily Excess Availability"................................................................14
1.71 "Total Excess Availability"......................................................................14
1.72 "UK Facility"....................................................................................14
1.73 "UK Lender"......................................................................................14
1.74 "UK Letter of Credit Accommodations".............................................................14
1.75 "UK Loan Agreement"..............................................................................15
1.76 "US Borrowers"...................................................................................15
1.77 "US Facility"....................................................................................15
1.78 "US Lender"......................................................................................15
1.79 "US Letter of Credit Accommodations".............................................................15
1.80 "US Loan and Security Agreement".................................................................15
1.82 "US Prime Rate"..................................................................................15
1.83 "US Prime Rate Loans"............................................................................15
1.84 "US Reference Bank"..............................................................................15
Section 2 -CREDIT FACILITIES.....................................................................................16
2.1 Revolving Loans..................................................................................16
2.2 Letter of Credit Accommodations..................................................................17
2.3 Availability Reserves............................................................................18
Section 3 -INTEREST AND FEES.....................................................................................20
3.1 Interest.........................................................................................20
3.2 Closing and Syndication Fee......................................................................22
3.3 Loan Servicing Fee...............................................................................22
3.4 Unused Line Fee..................................................................................22
<PAGE>
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3.5 Payments.........................................................................................22
3.6 Compensation Adjustment..........................................................................22
3.7 Changes in Laws and Increased Costs of Loans.....................................................23
3.8 Duplication......................................................................................24
SECTION 4 -CONDITIONS PRECEDENT..................................................................................24
4.1 Conditions Precedent to Initial Loans and Letter of Credit Accommodations........................24
4.2 Conditions Precedent to All Loans and Letter of Credit Accommodations............................26
SECTION 5 -INTENTIONALLY DELETED.................................................................................26
SECTION 6 -COLLECTION AND ADMINISTRATION.........................................................................26
6.1 Borrower's Loan Account..........................................................................26
6.2 Statements.......................................................................................26
6.3 Collection of Accounts...........................................................................27
6.4 Payments.........................................................................................28
6.5 Authorization to Make Loans......................................................................28
6.6 Use of Proceeds..................................................................................29
SECTION 7 -COLLATERAL REPORTING AND COVENANTS....................................................................29
7.1 Collateral Reporting.............................................................................29
7.2 Accounts Covenants...............................................................................30
7.3 Equipment Covenants..............................................................................32
7.4 Power of Attorney................................................................................32
7.5 Right to Cure....................................................................................34
7.6 Access to Premises...............................................................................34
SECTION 8 -REPRESENTATIONS AND WARRANTIES........................................................................34
8.1 Corporate Existence, Power and Authority; Subsidiaries...........................................34
8.2 Financial Statements; No Material Adverse Change.................................................35
8.3 Chief Executive Office; Collateral Locations.....................................................35
8.4 Priority of Liens ; Title to Properties..........................................................35
8.5 Tax Returns......................................................................................35
8.6 Litigation.......................................................................................36
8.7 Compliance with Other Agreements and Applicable Laws.............................................36
8.8 Bank Accounts....................................................................................36
8.9 Environmental Compliance.........................................................................36
8.10 Status of Pension Plans..........................................................................37
8.11 Year 2000 Compliance.............................................................................37
8.12 Accuracy and Completeness of Information.........................................................38
8.13 Survival of Warranties; Cumulative...............................................................38
SECTION 9 -AFFIRMATIVE AND NEGATIVE COVENANTS....................................................................38
9.1 Maintenance of Existence.........................................................................38
9.2 New Collateral Locations.........................................................................38
9.3 Compliance with Laws, Regulations, Etc...........................................................39
9.4 Payment of Taxes and Claims......................................................................40
9.5 Insurance........................................................................................40
9.6 Financial Statements and Other Information.......................................................40
9.7 Sale of Assets, Consolidation, Amalgamation, Dissolution, Etc....................................42
9.8 Encumbrances.....................................................................................44
<PAGE>
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9.9 Indebtedness.....................................................................................45
9.10 Loans, Investments, Guarantees, Etc..............................................................46
9.11 Dividends and Redemptions........................................................................48
9.12 Transactions with Affiliates.....................................................................49
9.13 Additional Bank Accounts.........................................................................49
9.14 Intellectual Property............................................................................49
9.15 Applications under the Companies'Creditors Arrangement Act.......................................49
9.16 Operation of Pension Plans.......................................................................49
9.17 Costs and Expenses...............................................................................50
9.18 Further Assurances...............................................................................51
SECTION 10 -EVENTS OF DEFAULT AND REMEDIES.......................................................................51
10.1 Events of Default................................................................................51
10.2 Remedies.........................................................................................53
SECTION 11 -JURY TRIAL WAIVER, OTHER WAIVERS AND CONSENTS, GOVERNING LAW.........................................55
11.1 Governing Law; Choice of Forum, Service of Process; Jury Trial Waiver............................55
11.2 Waiver of Notices................................................................................56
11.3 Amendments and Waivers...........................................................................56
11.4 Waiver of Counterclaims..........................................................................57
11.5 Indemnification..................................................................................57
SECTION 12 - TERM OF AGREEMENT; MISCELLANEOUS....................................................................57
12.1 Term.............................................................................................57
12.2 Notices..........................................................................................59
12.3 Partial Invalidity...............................................................................59
12.4 Successors.......................................................................................59
12.5 Entire Agreement.................................................................................59
12.6 Confidential Information.........................................................................60
12.7 Headings.........................................................................................60
12.8 Judgment Currency................................................................................61
12.9 Execution in Counterparts........................................................................61
12.10 Facsimile........................................................................................61
12.11 Choice of Language...............................................................................61
Schedule 8.1-Corporate Existence, Power and Authority, Subsidiaries
Schedule 8.4 -Priorities of Liens
Schedule 8.8 -Bank Accounts
Schedule 8.9 -Environmental Compliance
Schedule 9.9 -Indebtedness
Schedule 9.10(h) -Permitted Loans or Advances to GLC
</TABLE>
<PAGE>
LOAN AGREEMENT
This Loan Agreement dated as of March 23, 2000 is entered into by and
between Congress Financial Corporation (Canada), an Ontario corporation
("Lender") and GeoLogistics, Co., a Nova Scotia unlimited liability company
("Borrower").
W I T N E S S E T H:
WHEREAS, Borrower has requested that Lender enter into certain
financing arrangements with Borrower pursuant to which Lender may make loans and
provide other financial accommodations to Borrower; and
WHEREAS, Lender is willing to make such loans and provide such
financial accommodations on the terms and conditions set forth herein; and
WHEREAS, US Borrowers have requested that Congress Financial
Corporation (Western), a Californian corporation ("US Lender") enter into
certain financing arrangements with each US Borrower pursuant to which US Lender
may make loans and provide other financial accommodations to each US Borrower;
and
WHEREAS, US Lender is willing to make such loans and provide such
financial accommodations on the terms and conditions set forth in the US Loan
and Security Agreement;
WHEREAS, GL UK has also requested that Burdale Financial Limited, a
company organized under the laws of England ("UK Lender") enter into certain
financing arrangements with GL UK pursuant to which UK Lender may make loans and
provide other financial accommodations to GL UK; and
WHEREAS, UK Lender is willing to make such loans and provide such
financial accommodations on the terms and conditions set forth in the UK Loan
Agreement.
NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
SECTION 1 - DEFINITIONS
All terms used herein which are defined in the PERSONAL PROPERTY
SECURITY ACT (Ontario) shall have the meanings given therein unless otherwise
defined in this Agreement. All references to the plural herein shall also mean
the singular and to the singular shall also mean the plural unless the context
otherwise requires. All references to Borrower, US Borrowers, GL UK and Lender,
US Lender and UK Lender pursuant to the definitions set forth herein, or to any
other person herein, shall include their respective successors and assigns. The
words "hereof", "herein", "hereunder", "this Agreement" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not any particular provision of this Agreement and as this Agreement now exists
or may hereafter be amended, modified, supplemented, extended, renewed, restated
or replaced. The word "including" when used in this Agreement shall mean
"including, without limitation".
<PAGE>
- 2 -
References herein to any statute or any provision thereof include such
statute or provision as amended, revised, re-enacted, and/or consolidated
from time to time and any successor statute thereto. An Event of Default
shall exist or continue or be continuing until such Event of Default is
waived in accordance with Section 11.3 or is cured in a manner satisfactory
to Lender, if such Event of Default is capable of being cured as determined
by Lender. Any accounting term used herein unless otherwise defined in this
Agreement shall have the meanings customarily given to such term in
accordance with GAAP. Canadian Dollars and the sign "$" mean lawful money of
Canada. "US Dollars" and the sign "US$" mean lawful money of the United
States of America. For purposes of this Agreement, the following terms shall
have the respective meanings given to them below:
1.1 "ACCOUNTS" shall mean all present and future rights of Borrower to
payment for goods sold or leased or for services rendered, whether or not
evidenced by instruments or chattel paper, and whether or not earned by
performance.
1.2 "ADJUSTED EURODOLLAR RATE" shall mean, with respect to each Interest Period
for any Eurodollar Rate Loan, the rate per annum (rounded upwards, if necessary,
to the next one-sixteenth (1/16) of one (1%) percent) determined by dividing (a)
the Eurodollar Rate for such Interest Period by (b) a percentage equal to: (i)
one (1) minus (ii) the Reserve Percentage. For purposes hereof, "Reserve
Percentage" shall mean the reserve percentage, expressed as a decimal,
prescribed by the Board of Governors of the Federal Reserve System for
determining the reserve requirement which is or would be applicable to deposits
of United States dollars in a non-United States or an international banking
office of US Reference Bank used to fund a Eurodollar Rate Loan or any
Eurodollar Rate Loan made with the proceeds of such deposit, whether or not the
US Reference Bank actually holds or has made any such deposits or loans. The
Adjusted Eurodollar Rate shall be adjusted on and as of the effective day of any
change in the Reserve Percentage.
1.3 "AGENT/CONTRACTOR RECEIVABLES" shall mean any and all Accounts of Borrower
which are to be or have been collected from the customer on behalf of Borrower
by a Representative Agent or Contractor and have not yet been remitted to
Borrower, and any 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
Borrower.
1.4 "AVAILABILITY RESERVES" shall mean, as of any date of determination, such
amounts as Lender may from time to time establish, without duplication, and
revise in good faith reducing the amount of Revolving Loans and Letter of Credit
Accommodations which would otherwise be available to Borrower under the lending
formula(s) provided for herein: (a) to reflect events, conditions, contingencies
or risks which, as reasonably determined by Lender in good faith, do or may
affect either (i) the Collateral or any other property which is security for the
Obligations or its value, (ii) in any materially adverse respect, the assets,
business condition (financial or other) of Borrower or any Obligor or (iii) the
security interests and other rights of Lender in the Collateral (including the
enforceability, perfection and priority thereof) or (b) to reflect Lender's
reasonable good faith belief that any collateral report or financial information
furnished by or on behalf of Borrower or any Obligor to Lender is or may have
been incomplete, inaccurate or misleading in any material respect or (c) to
reflect Lender's good faith estimate of the amount of any Priority Payables
Reserve (d) to reflect any state of facts which Lender reasonably determines in
good faith constitutes an Event of Default or may, with notice or passage of
time or both, constitute an Event of Default. Without limiting the generality of
the foregoing, an Availability Reserve shall be established by Lender from
<PAGE>
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time to time in such amounts as Lender may reasonably determine to reflect:
(a) that Dilution as of any date with respect to the Accounts of Borrower for
the immediately preceding twelve (12) month period or for the immediately
preceding three (3) month period (whichever percentage is higher) exceeds
five percent (5%); (b) any variances in the agings of accounts receivable
provided to Lender pursuant to Section 7.1 hereof; and (c) any unapplied cash
which has not yet been applied to the Accounts, and (d) any pass through
receivables or collections for shipping charges and cost of goods owed to
Borrower by the receiving party of such goods and owed by Borrower to the
shipping party of such goods.
1.5 "BIA" shall mean the BANKRUPTCY AND INSOLVENCY ACT (Canada).
1.6 "BLOCKED ACCOUNTS" shall have the meaning set forth in Section 6.3 hereof.
1.7 "BUSINESS DAY" shall mean a day (other than a Saturday, a Sunday or
statutory holiday in Ontario, Illinois or New York) on which Lender's Toronto
office, the Canadian Reference Bank's main Toronto office and banks in Chicago
and New York City are open for business in the normal course, except that if a
determination of a Business Day shall relate to any Eurodollar Rate Loans, the
term Business Day shall also exclude any day on which banks are closed for
dealings in US Dollar deposits in the London interbank market or other
applicable Eurodollar Rate market.
1.8 "CANADIAN DAILY EXCESS AVAILABILITY" shall mean the amount in US Dollars, as
determined by Lender, calculated at any time using the Spot Rate for US Dollars
to the extent necessary to effect any currency conversion in calculating such
amount, equal to: (a) the lesser of: (i) the amount of the Revolving Loans
available to Borrower as of such time (based on the applicable advance rates set
forth in Section 2.1(1) hereof and the limits set forth in Section 2.1(2)
hereof), subject to the sublimits and Availability Reserves from time to time
established by Lender hereunder, and (ii) the Maximum Credit, MINUS (b) the
amount of all then outstanding and unpaid Obligations. Notwithstanding the
foregoing, in calculating Canadian Daily Excess Availability, the limit set
forth in Section 2.1(2)(a)(iii) hereof on Revolving Loans available to Borrower
shall not be included in such calculation.
1.9 "CANADIAN DOLLAR AMOUNT" shall mean, at any time, (a) as to any amount
denominated in Canadian Dollars, the amount thereof at such time, and (b) as to
any amount denominated in any other currency, the equivalent amount in Canadian
Dollars as determined by Lender at such time on the basis of the Spot Rate for
the purchase of Canadian Dollars with such currency.
1.10 "CANADIAN EXCESS AVAILABILITY" shall mean the amount in US Dollars, as
determined by Lender, calculated at any time using the Spot Rate for US Dollars
to the extent necessary to effect any currency conversion in calculating such
amount, equal to:
(a) the lesser of (i) the aggregate amount of the Revolving Loans
available to Borrower as of such time (based on the applicable
advance rates set forth in Section 2.1(1) hereof and the
limits set forth in Section 2.1(2) hereof), subject to the
sublimits and Availability Reserves from time to time
established by Lender hereunder and (ii) the Maximum Credit,
minus
(b) the sum of (i) the amount of all then outstanding and unpaid
Obligations, (ii) the aggregate amount of all trade and
operating lease payables of Borrower which are more than sixty
(60) days past due as of the last day of the immediately
preceding
<PAGE>
- 4 -
calendar month (except that for purposes of Section
4.1(8), trade and operating lease payables which are more than
sixty (60) days past due shall be determined as of the date of
determination) and (iii) the aggregate amount of capital lease
and note payables of Borrower which are more than fifteen (15)
days past due as of the date of determination.
1.11 "CANADIAN PRIME RATE" shall mean, at any time, the greater of (i) the
annual rate of interest from time to time publicly announced by the Canadian
Reference Bank as its prime rate in effect for determining interest rates on
Canadian Dollar denominated commercial loans in Canada, and (ii) the annual rate
of interest equal to the sum of (A) the CDOR Rate at such time and (B) one (1%)
percent per annum.
1.12 "CANADIAN PRIME RATE LOANS" shall mean any Loans or portion thereof
denominated in Canadian Dollars and on which interest is payable based on the
Canadian Prime Rate in accordance with the terms hereof.
1.13 "CANADIAN REFERENCE BANK" shall mean Bank of Montreal, or its successors
and assigns, or such other major Schedule I Canadian chartered bank as Lender
may from time to time designate.
1.14 "CAPITAL LEASE" shall mean, as applied to any Person, any lease of (or any
agreement conveying the right to use) any property (whether real, personal or
mixed) by such Person as lessee that in accordance with US GAAP, as applicable,
is required to be reflected as a liability on the balance sheet of such Person.
1.15 "CDOR RATE" shall mean, on any day, the annual rate of interest which is
the rate based on an average 30 day rate applicable to Canadian Dollar bankers'
acceptances appearing on the "Reuters Screen CDOR Page" (as defined in the
International Swap Dealer Association, Inc, definitions, as modified and amended
from time to time) as of 10:00 a.m. on such day; provided that if such rate does
not appear on the Reuters Screen CDOR Page as contemplated, then the CDOR Rate
on any day shall be the 30 day rate applicable in Canadian Dollar bankers'
acceptances quoted by any major Schedule I chartered bank selected by Lender as
of 10:00 a.m. on such day.
1.16 "CCAA" shall mean the COMPANIES' CREDITORS ARRANGEMENT ACT (Canada).
1.17 "COLLATERAL" shall mean, collectively, Collateral as such term is defined
in the General Security Agreement and Collateral as such term is defined in the
Hypothec.
1.18 "CONTRACTOR" shall mean 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
Borrower for the purposes of providing moving and related services to customers
of Borrower.
1.19 "DILUTION" shall mean, with respect to Borrower for any period, the ratio
(expressed as a percentage) of (a) the aggregate amount of reductions in the
Accounts of Borrower for such period other than as a result of payments in cash
to (b) the aggregate amount of total sales of Borrower for such period.
1.20 "EBITDA" shall mean, as to any Person, with respect to any period, an
amount equal to: (a) the Net Income of such Person and its Subsidiaries for such
period on a consolidated basis
<PAGE>
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determined in accordance with US GAAP, plus (b) depreciation, amortization
and other non-cash charges (including, but not limited to, imputed interest
and deferred compensation) of such Person and its Subsidiaries for such
period (to the extent deducted in the computation of Net Income), all in
accordance with US GAAP, plus (c) Interest Expense of such Person and its
Subsidiaries for such period (to the extent deducted in the computation of
Net Income), plus (d) the Provision for Taxes for such period (to the extent
deducted in the computation of Net Income), plus (e) all extraordinary losses
and unusual losses related to the restructuring of the business of such
Person and its Subsidiaries and costs associated with the refinancing
transaction contemplated by this Agreement.
1.21 "ELIGIBLE ACCOUNTS" shall mean Accounts created by Borrower which are and
continue to be acceptable to Lender based on the criteria set forth below. In
general, Accounts shall be Eligible Accounts if:
(1) such Accounts comply with the terms and conditions contained in Section
7.2(2) of this Agreement;
(2) such Accounts do not arise from sales on consignment, guaranteed sale, sale
and return, sale on approval, or other terms under which payment by the account
debtor may be conditional or contingent;
(3) the chief executive office of the account debtor with respect to such
Accounts is located in Canada or the United States of America, or, the Account
is payable in Canadian Dollars or US Dollars unless, if either: (i) the account
debtor has delivered to Borrower an irrevocable letter of credit issued or
confirmed by a bank satisfactory to Lender and payable only in Canada in the
currency in which the Account is denominated, sufficient to cover such Account,
in form and substance satisfactory to Lender and, if required by Lender, the
original of such letter of credit has been delivered to Lender or Lender's agent
and the issuer thereof notified of the assignment of the proceeds of such letter
of credit to Lender, or (ii) such Account is subject to credit insurance payable
to Lender issued by an insurer and on terms and in an amount acceptable to
Lender, or (iii) such Account is otherwise acceptable in all respects to Lender
(subject to such lending formula with respect thereto as Lender may determine);
(4) such Accounts do not consist of progress billings, bill and hold invoices or
retainage invoices, except as to bill and hold invoices, if Lender shall have
received an agreement in writing from the account debtor, in form and substance
satisfactory to Lender, confirming the unconditional obligation of the account
debtor to take the goods or services related thereto and pay such invoice;
(5) the account debtor with respect to such Accounts has not asserted a
counterclaim, cargo claim, defense or dispute and does not have, and has not
engaged in transactions which may reasonably be expected to give rise to, any
right of setoff against such Accounts (but the portion of the Accounts of such
account debtor in excess of the amount at any time and from time to time owed by
Borrower to such account debtor or claimed owed by such account debtor may be
deemed Eligible Accounts);
(6) there are no facts, events or occurrences which would impair the validity,
or enforceability of or otherwise the legal right to collect such Accounts or
would give the account debtor of such Accounts the legal right to reduce the
amount payable or delay payment thereunder;
<PAGE>
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(7) such Accounts are subject to the first priority, valid and perfected
security interest of Lender except for any prior or pari passu ranking liens for
which a Priority Payables Reserve has been established and any goods giving rise
thereto are not, and were not at the time of the sale thereof, subject to any
liens, except for liens permitted under this Agreement;
(8) neither the account debtor nor any officer or employee of the account debtor
with respect to such Accounts is an officer, employee or agent of or affiliated
with Borrower directly or indirectly by virtue of family membership, ownership,
control, management or otherwise;
(9) the account debtors with respect to such Accounts are not any foreign
government, the federal government of Canada, any Province, political
subdivision, department, agency or instrumentality thereof unless (i) no more
than the Canadian Dollar Amount of Two Million Five Hundred Thousand US Dollars
(US$2,500,000) of Loans advanced against such Accounts and "Loans" (as defined
and determined under the US Loan and Security Agreement) advanced against those
"Eligible Accounts" referred to in Section 1.24(j) of the US Loan and Security
Agreement (but excluding any such "Eligible Accounts" as to which the relevant
US Borrower has complied with the FEDERAL ASSIGNMENT OF CLAIMS ACT OF 1940, as
amended, or any similar state or local law in a manner satisfactory to US
Lender), in the aggregate, are outstanding or (ii) the FINANCIAL ADMINISTRATION
ACT (Canada) or any similar foreign, provincial or local law, if applicable, has
been complied with by Borrower in a manner satisfactory to Lender;
(10) such Accounts of a single account debtor or its affiliates do not
constitute more than ten (10%) percent of all otherwise Eligible Accounts (but
the portion of the Accounts not in excess of such percentage may be deemed
Eligible Accounts);
(11) such Accounts are not owed by an account debtor who has Accounts unpaid
more than ninety (90) days after the date of the original invoice for them which
constitute more than fifty (50%) percent of the total Accounts of such account
debtor;
(12) such Accounts are owed by an account debtor whose total indebtedness to
Borrower does not exceed the credit limit with respect to such account debtor as
determined by Lender from time to time and communicated in writing to Borrower
prior to the date of determination of Eligible Accounts (but the portion of the
Accounts not in excess of such credit limit may still be deemed Eligible
Accounts);
(13) such Accounts do not consist of Agent/Contractor Receivables;
(14) such Accounts do not arise from the rendition of services by a Person other
than Borrower or on behalf of Borrower; and
(15) such Accounts are owed by account debtors deemed creditworthy at all times
by Lender, as determined by Lender.
Any Accounts which are not Eligible Accounts shall nevertheless be part of the
Collateral.
1.22 "ELIGIBLE BILLED ACCOUNTS" shall mean, with respect to Borrower, Eligible
Accounts which arise from the actual and bona fide rendition of services by
Borrower in the ordinary course of its business, which services are completed in
accordance with the terms and provisions contained in any documents related
thereto and for which invoices have been generated by Borrower and billed to the
account debtor thereof; PROVIDED THAT, no such Eligible Account shall be deemed
an Eligible Billed
<PAGE>
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Account if such Account remains unpaid more than ninety (90)
days after the date of the original invoice for it. Any Accounts which are not
Eligible Billed Accounts shall nevertheless be part of the Collateral.
1.23 "ELIGIBLE UNBILLED ACCOUNTS" shall mean, with respect to Borrower, Eligible
Accounts which arise from the actual and bona fide rendition of services by
Borrower in the ordinary course of its business which services are completed in
accordance with the terms and provisions contained in any documents related
thereto and for which the invoices have not yet been generated by Borrower and
billed to the account debtor thereof; PROVIDED THAT, no such Eligible Account
shall be deemed an Eligible Unbilled Account if such Account remains unbilled
more than thirty (30) days after the completion of the services giving rise
thereto. Any Accounts which are not Eligible Unbilled Accounts shall
nevertheless be part of the Collateral.
1.24 "ENVIRONMENTAL LAWS" shall mean with respect to any Person all federal
(United States of America and Canada), state, provincial, district, local,
municipal and foreign laws, statutes, rules, regulations, ordinances, orders,
directives, permits, licenses and consent decrees relating to health, safety,
hazardous, dangerous or toxic substances, waste or material, pollution and
environmental matters, as now or at any time hereafter in effect, applicable to
such Person and/or its business and facilities (whether or not owned by it),
including laws relating to emissions, discharges, releases or threatened
releases of pollutants, contamination, chemicals, or hazardous, toxic or
dangerous substances, materials or wastes into the environment (including,
without limitation, ambient air, surface water, ground water, land surface or
subsurface strata) or otherwise relating to the generation, manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, chemicals, or hazardous, toxic or
dangerous substances, materials or wastes.
1.25 "EQUIPMENT" shall mean all of Borrower's now owned and hereafter acquired
equipment, machinery, computers and computer hardware and software (whether
owned or licensed), vehicles, tools, furniture, fixtures, all attachments,
accessions and property now or hereafter affixed thereto or used in connection
therewith, and substitutions and replacements thereof, wherever located.
1.26 "EURODOLLAR RATE" shall mean with respect to the Interest Period for a
Eurodollar Rate Loan, the interest rate per annum equal to the arithmetic
average of the rates of interest per annum at which US Reference Bank is offered
deposits of United States dollars in the London interbank market (or other
Eurodollar Rate market selected by Borrower and approved by Lender) on or about
9:00 a.m. (New York time) two (2) Business Days prior to the commencement of
such Interest Period in amounts substantially equal to the principal amount of
the Eurodollar Rate Loans requested by and available to Borrower in accordance
with this Agreement, with a maturity of comparable duration to the Interest
Period selected by Borrower.
1.27 "EURODOLLAR RATE LOANS" shall mean any Loans or portion thereof on which
interest is payable based on the Adjusted Eurodollar Rate in accordance with the
terms hereof.
1.28 "EVENT OF DEFAULT" shall mean the occurrence or existence of any event or
condition described in Section 10.1 hereof.
1.29 "FINANCING AGREEMENTS" shall mean, collectively, this Agreement, the
General Security Agreement and the Hypothec and all notes, guarantees, security
agreements and other agreements, documents and instruments now or at any time
hereafter executed and/or delivered by Borrower or
<PAGE>
- 8 -
any Obligor in connection with this Agreement, as the same now exist or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.
1.30 "GAAP" shall mean generally accepted accounting principles in Canada as in
effect from time to time as set forth in the opinions and pronouncements of the
relevant Canadian public and private accounting boards and institutes which are
applicable to the circumstances as of the date of determination consistently
applied.
1.31 "GENERAL SECURITY AGREEMENT" shall mean the general security agreement
dated on or about the date hereof given by Borrower in favour of Lender in
respect of the Obligations.
1.32 "GIFL" shall mean GeoLogistics International Finance Ltd., a limited
company organized under the laws of Ireland.
1.33 "GLC" shall mean, GeoLogistics Corporation, a Delaware corporation.
1.34 "GL UK" shall mean GeoLogistics Limited, a limited company registered in
England and Wales.
1.35 "HAZARDOUS MATERIALS" shall mean any hazardous, toxic or dangerous
substances, materials and wastes, including, without limitation, hydrocarbons
(including naturally occurring or man-made petroleum and hydrocarbons),
flammable explosives, asbestos, urea formaldehyde insulation, radioactive
materials, biological substances, polychlorinated biphenyls, pesticides,
herbicides and any other kind and/or type of pollutants or contaminants
(including, without limitation, materials which include hazardous constituents),
sewage, sludge, industrial slag, solvents and/or any other similar substances,
materials, or wastes and including any other substances, materials or wastes
that are or become regulated under any Environmental Law (including, without
limitation any that are or become classified as hazardous or toxic under any
Environmental Law).
1.36 "HYPOTHEC" shall mean the hypothec on a universality of property dated on
or about the date hereof given by Borrower in favour of Lender in respect of the
Obligations.
1.37 "INFORMATION CERTIFICATE" shall mean the Information Certificate of
Borrower constituting Exhibit A hereto containing material information with
respect to Borrower, its business and assets provided by or on behalf of
Borrower to Lender in connection with the preparation of this Agreement and the
other Financing Agreements and the financing arrangements provided for herein.
1.38 "INTEREST EXPENSE" shall mean, for any period, as to any Person and its
Subsidiaries, all of the following as determined in accordance with US GAAP,
total interest expense, whether paid or accrued (including the interest
component of Capital Leases for such period), including, without limitation, all
bank fees, commissions, discounts and other fees and charges owed with respect
to letters of credit, banker's acceptances or similar instruments, but excluding
(a) amortization of discount and amortization of deferred financing fees and
closing costs paid in cash in connection with the transactions contemplated
hereby, (b) interest paid in property other than cash and (c) any other interest
expense not payable in cash.
1.39 "INTEREST PERIOD" shall mean for any Eurodollar Rate Loan, a period of
approximately one (1), two (2), or three (3) months duration as Borrower may
elect, the exact duration to be determined in accordance with the customary
practice in the applicable Eurodollar Rate market; provided, that,
<PAGE>
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Borrower may not elect an Interest Period which will end after the last day
of the then-current term of this Agreement.
1.40 "INTEREST RATE" shall mean, as to Canadian Prime Rate Loans, a rate of
one-quarter of one percent (0.25%) per annum in excess of the Canadian Prime
Rate and, as to US Prime Rate Loans, a rate of one-quarter of one percent
(0.25%) per annum in excess of the US Prime Rate and, as to the Eurodollar Rate
Loan, a rate of two and three-quarters percent (2.75%) per annum in excess of
the Adjusted Eurodollar Rate (based on the Eurodollar Rate applicable for the
Interest Period collectively selected by Borrower and commencing three (3)
Business Days after the date of receipt by Lender of the request of Borrower for
such Eurodollar Rate Loans in accordance with the terms hereof, whether such
rate is higher or lower than any rate previously quoted to Borrower); provided
that:
(a) effective as of the first day of the month after Lender's
receipt of the financial statements of GLC for any fiscal
quarter of GLC (commencing with the third fiscal quarter of
GLC's fiscal year 2000) delivered to Lender, subject to
paragraph (b) below, the Interest Rate shall be increased or
decreased, as the case may be, to the rate equal to the
applicable margin set forth below in excess of the Canadian
Prime Rate as to Canadian Prime Rate Loans, the US Prime Rate
for US Prime Rate Loans, and the applicable margin set forth
below in excess of the Adjusted Eurodollar Rate as to
Eurodollar Rate Loans, based on the EBITDA of GLC for the
consecutive four fiscal quarter period ended such fiscal
quarter calculated based on such financial statements for such
quarter as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Applicable Margin as to
Canadian Prime Rate Loans or Applicable Margin as to
US Prime Rate Loans Eurodollar Rate Loans EBITDA of GLC
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Equal to or less than
(i) 0.5% 3.0% US$10,000,000
- -----------------------------------------------------------------------------------------------------------------
Greater than US$10,000,000,
but equal to or less than
(ii) 0.25% 2.75% US$30,000,000
- -----------------------------------------------------------------------------------------------------------------
(iii) -0- 2.50% Greater than US$30,000,000
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
provided, that the EBITDA amounts set forth above shall be
reduced by that portion of the EBITDA for the four (4) fiscal
quarter period ended any such fiscal quarter that is
attributable to any Subsidiary of GLC that has been sold or
disposed of pursuant to a sale or disposition permitted by
this Agreement, the US Loan and Security Agreement or the UK
Loan Agreement; and
(b) notwithstanding anything to the contrary contained herein, the
Interest Rate shall be two percent (2.0%) above the rate that
would otherwise prevail pursuant to this
<PAGE>
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Section 1.40, at Lender's option, without notice, (i)
either (A) for the period from and after the date of
termination or non-renewal hereof until such time as Lender
has received final payment and satisfaction in full of all
Obligations (notwithstanding entry of a judgment against
Borrower), or (B) for the period from and after the date of
the occurrence of any Event of Default, and for so long as
such Event of Default is continuing, and (ii) on the
Revolving Loans at any time outstanding in excess of the
amounts available to Borrower under Section 2.1 (whether or
not such excess(es) arise or are made with or without
Lender's knowledge and whether made before or after an
Event of Default).
1.41 "INVENTORY" shall mean all of Borrower's now owned and hereafter existing
or acquired raw materials, work in process, finished goods and all other
inventory of whatsoever kind or nature, wherever located.
1.42 "L/C SUBLIMIT" shall mean, with reference to the Letter of Credit
Accommodations, the Canadian Dollar Amount of Thirty Million US Dollars (US$
30,000,000), less the then outstanding Canadian Dollar Amount of the US Letter
of Credit Accommodations and the UK Letter of Credit Accommodations and all
other commitments and obligations made or incurred by the US Lender and the UK
Lender in connection therewith.
1.43 "LETTER OF CREDIT ACCOMMODATIONS" shall mean the letters of credit,
merchandise purchase or other guarantees denominated in Canadian Dollars or US
Dollars which are from time to time either (a) issued or opened by Lender for
the account of Borrower or any Obligor or (b) with respect to which Lender has
agreed to indemnify the issuer or guaranteed to the issuer the performance by
Borrower of its obligations to such issuer.
1.44 "LOANS" shall mean the Revolving Loans.
1.45 "MAXIMUM CREDIT" shall mean, with reference to the Revolving Loans and the
Letter of Credit Accommodations, the Canadian Dollar Amount of Fifteen Million
US Dollars (US$15,000,000) ; provided however, upon five (5) Business Days prior
written notice by Borrower to Lender and so long as no Event of Default, or
event which with notice or passage of time or both would constitute an Event of
Default, exists or has occurred and is continuing, immediately prior to and
after giving effect to any of the following adjustments to the Maximum Credit,
Borrower may elect to:
(a) increase the Maximum Credit to the Canadian Dollar Amount of
Twenty Million US Dollars (US$20,000,000), provided that the
maximum amount of loans and other financial accommodations
available under the US Facility is simultaneously reduced to
Forty-Five Million US Dollars (US$45,000,000) or
(b) decrease the Maximum Credit to the Canadian Dollar Amount of
Ten Million US Dollars (US$10,000,000), provided that the
maximum amount of loans and other financial accommodations
available under the US Facility is simultaneously increased to
Fifty-Five Million US Dollars (US$55,000,000) or
(c) after any such increase or decrease to the Maximum Credit,
readjust the Maximum Credit to the Canadian Dollar Amount of
Fifteen Million US Dollars (US$15,000,000), provided that the
maximum amount of loans and other financial
<PAGE>
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accommodations available under the US Facility is
simultaneously readjusted to Fifty Million Dollars
(US$50,000,000). Borrower may elect to make no more than
one (1) such adjustment to the Maximum Credit in any three
(3) month period.
1.46 "NET AMOUNT OF ELIGIBLE BILLED ACCOUNTS" shall mean the gross Canadian
Dollar Amount of Eligible Billed Accounts less (a) unpaid sales, excise or
similar taxes and duties included in the amount thereof and (b) returns,
discounts, claims, credits and allowances of any nature at any time issued,
owing, granted, outstanding, available or claimed with respect to such Eligible
Accounts; PROVIDED that the amount deducted under (a) shall not duplicate items
for which Availability Reserves have been established by Lender.
1.47 "NET AMOUNT OF ELIGIBLE UNBILLED ACCOUNTS" shall mean, the gross amount of
Eligible Unbilled Accounts of Borrower less (a) unpaid sales, excise or similar
taxes and duties included in the amount thereof and (b) returns, discounts,
claims, credits and allowances of any nature at any time issued, occurring,
granted, outstanding, available or claimed with respect thereto; PROVIDED that
the amount deducted under (a) shall not duplicate items for which Availability
Reserves have been established by Lender.
1.48 "NET INCOME" shall mean, with respect to any Person, for any period, the
aggregate of the net income (loss) of such Person and its Subsidiaries, on a
consolidated basis, for such period (excluding to the extent included therein
any extraordinary or onetime gains or losses) after deducting all charges which
should be deducted before arriving at the net income (loss) for such period and
after deducting the Provisions for Taxes for such period, all as determined in
accordance with US GAAP, provided that the effect of any change in accounting
principles adopted by such Person or its Subsidiaries after the date hereof
shall be excluded. For the purpose of this definition, net income excludes any
gain or loss, together with any related Provision for Taxes for such gain or
loss realized upon the sale or other disposition of any assets that are not sold
in the ordinary course of business (including, without limitation, dispositions
pursuant to sale and leaseback transactions), or of any Securities of such
Person or a Subsidiary of such Person and any net income realized as a result of
changes in accounting principles or the application thereof to such Person.
1.49 "OBLIGATIONS" shall mean any and all Revolving Loans, Letter of Credit
Accommodations and all other obligations, liabilities and indebtedness of every
kind, nature and description owing by Borrower to Lender and/or its affiliates,
including principal, interest, charges, fees, costs and expenses, however
evidenced, whether as principal, surety, endorser, guarantor or otherwise,
whether arising under this Agreement or otherwise, whether now existing or
hereafter arising, whether arising before, during or after the initial or any
renewal term of this Agreement or after the commencement of any proceeding with
respect to Borrower or any Obligor under the BIA, the CCAA, or any similar
statute in any jurisdiction (including, without limitation, the payment of
interest and other amounts which would accrue and become due but for the
commencement of such proceeding, whether or not such amounts are allowed or
allowable in whole or in part in such proceeding), whether direct or indirect,
absolute or contingent, joint or several, due or not due, primary or secondary,
liquidated or unliquidated, secured or unsecured, and however acquired by
Lender.
1.50 "OBLIGOR" shall mean GLC, US Borrowers or any other guarantor, endorser,
acceptor, surety or other person liable on or with respect to the Obligations or
who is the owner of any property which is security for the Obligations, other
than Borrower.
<PAGE>
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1.51 "PARTICIPANT" shall mean any person which at any time participates with
Lender in respect of Loans, the Letter of Credit Accommodations or other
Obligations or any portion thereof.
1.52 "PAYMENT ACCOUNT" shall have the meaning set forth in Section 6.3 hereof.
1.53 "PENSION PLANS" means each of the pension plans, if any, registered in
accordance with the INCOME TAX Act (Canada) which Borrower sponsors or
administers or into which Borrower makes contributions.
1.54 "PERMITTED ACQUISITION" shall mean any transaction, or any series of
related transactions by which Borrower directly or indirectly acquires a
Subsidiary or any going business or all or substantially all the assets of
another Person and which meets each of the following criteria:
(a) the aggregate consideration to be paid by Borrower in
connection with such transaction or transactions, together
with all other consideration paid by Borrower in connection
with any other Permitted Acquisition and by US Borrowers and
GL UK in connection with any transaction, or any series of
related transactions by which US Borrowers or GL UK, as the
case may be, directly or indirectly has acquired a Subsidiary
or any going business or all or substantially all of the
assets of another person during the terms of this Agreement,
does not exceed Canadian Dollar Amount of Five Million US
Dollars (US$5,000,000);
(b) no Event of Default exists or has occurred and is continuing
immediately prior to and after giving effect to such
transaction or transactions; and
(c) Total Excess Availability is not less than Ten Million US
Dollars (US$10,000,000) after giving effect to such
transaction or transactions. Notwithstanding anything to the
contrary set forth herein, Lender shall have no obligations to
include any Account acquired pursuant to a Permitted
Acquisition as an Eligible Account.
1.55 "PERSON" OR "PERSON" shall mean any individual, sole proprietorship,
partnership, limited partnership, corporation, limited liability company,
business trust, unincorporated association, joint stock corporation, trust,
joint venture or other entity or any government or any agency or instrumentality
or political subdivision thereof.
1.56 "PPSA" shall mean the PERSONAL PROPERTY SECURITY ACT (Ontario).
1.57 "PRIME RATE LOANS" shall mean any Loans or portion thereof on which
interest is payable based on the Canadian Prime Rate or US Prime Rate in
accordance with the terms thereof.
1.58 "PRIORITY PAYABLES RESERVE" shall mean, at any time, the full amount of the
liabilities at such time which have a trust imposed to provide for payment or
security interest, lien or charge ranking or capable of ranking senior to or
pari passu with security interests, liens or charges securing the Obligations on
any of the Collateral under federal, provincial, state, county, municipal, or
local law including, but not limited, each of the following:
(a) the amount of all claims for unremitted and accelerated rents,
taxes, duties, wages, workers' compensation obligations,
government royalties or pension fund obligations, subject to
the limitation that a reserve for any claims referred to in
this Section 1.58(a)
<PAGE>
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shall not be established to the extent that a reserve for
the amount of such claim has been established under Section
1.58(c),
(b) the amount of Eighty Four Thousand Dollars ($84,000) in
respect of the security interest registered under the PPSA by
Palron Holdings Inc. and the amount of One Hundred and Twenty
Five Thousand Dollars ($125,000) in respect of rent payable by
Borrower to 405 The West Mall Portfolio Inc. and Taradown
Holdings Inc., and
(c) with respect to each calendar month, an amount equal to Three
Million Five Hundred Thousand Dollars ($3,500,000) (the
"MINIMUM RESERVE AMOUNT"), which amount shall increase by
Three Million Five Hundred Thousand Dollars ($3,500,000) on
the second, third and fourth Monday of each month up to a
maximum of Fourteen Million Dollars ($14,000,000), subject to
the limitations that,
(i) the Priority Payables Reserve referred to in this
Section 1.58(c) shall be reduced from time to time to
an amount not less than the Minimum Reserve Amount
(as defined above) in accordance with the provisions
of Section 2.3(2) hereof, and
(ii) the Lender may, in its sole discretion, increase or
decrease from time to time the Minimum Reserve Amount
and the other amounts referred to in this Section
1.58(c) to reflect Lender's determination, that the
Priority Payables Reserve established under this
Section 1.58(c) does not accurately reflect
Borrower's obligations and liabilities for taxes and
duties which are or will be required to be remitted
by or on behalf of Borrower to the governmental
authority responsible for the collection of such
taxes and duties.
1.59 "PROVISION FOR TAXES" shall mean, with respect to any Person, for any
period, an amount equal to all taxes imposed on or measured by net income,
whether Federal, provincial or municipal, and whether foreign or domestic, that
are paid or payable by such Person and its Subsidiaries in respect of such
period on a consolidated basis in accordance with GAAP or US GAAP , as
applicable.
1.60 "RECORDS" shall mean all of Borrower's present and future books of account
of every kind or nature, purchase and sale agreements, invoices, ledger cards,
bills of lading and other shipping evidence, statements, correspondence,
memoranda, credit files and other data relating to the Collateral or any account
debtor, together with the tapes, disks, diskettes and other data and software
storage media and devices, file cabinets or containers in or on which the
foregoing are stored (including any rights of Borrower with respect to the
foregoing maintained with or by any other person).
1.61 "RENEWAL DATE" shall have the meaning set forth in Section 12.1(1) hereof.
1.62 "REPRESENTATIVE AGENCY AGREEMENT" shall mean any of the agreements,
substantially in the form provided to Lender by Borrower, pursuant to which a
Person agrees to act as an agent of Borrower for the purposes of providing
interstate or intrastate moving and related services to customers of Borrower
within the United States of America.
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1.63 "REPRESENTATIVE AGENT" shall mean any freight forwarder, moving and storage
company, warehouseman or other Person who has entered into a Representative
Agency Agreement with Borrower.
1.64 "REVOLVING LOANS" shall mean the loans now or hereafter made by Lender to
or for the benefit of Borrower on a revolving basis (involving advances,
repayments and readvances) as set forth in Section 2.1 hereof.
1.65 "SECURITIES" shall mean, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of such
Person's securities, partnership interests or limited liability company
interests at any time outstanding, and any and all rights, warrants or options
exchangeable for or convertible into such securities or other interests (but
excluding any debt security that is exchangeable for or convertible into such
securities).
1.66 "SENIOR NOTES" shall mean GLC's 9 3/4% Senior Notes due 2007.
1.67 "SPONSOR" shall mean Alham, Inc., a Delaware corporation and OCM Principal
Opportunities Fund, LP, a Delaware limited partnership.
1.68 "SPOT RATE" shall mean, with respect to a currency, the rate quoted by the
Canadian Reference Bank as the spot rate for the purchase by the Canadian
Reference Bank of such currency with another currency at approximately 10:00
a.m. (Toronto time) on the date two (2) Business Days prior to the date as of
which the foreign exchange computation is made.
1.69 "SUBSIDIARY" shall mean, with respect to any Person, any corporation,
limited or general partnership, limited liability company, trust, association or
other business entity of which more than fifty percent (50%) of the voting
shares or other voting equity interests (in the case of a business entity other
than a corporation) is owned or controlled directly or indirectly by such
Person, or one or more Subsidiaries of such Person, or a combination thereof.
1.70 "TOTAL DAILY EXCESS AVAILABILITY" shall mean, as of any date, the Canadian
Daily Excess Availability as of such date, plus "US Daily Excess Availability"
as of such date of US Borrowers as defined and determined under the US Loan &
Security Agreement, PLUS "UK Daily Excess Availability" as of such date of GL UK
as defined and determined under the UK Loan Agreement.
1.71 "TOTAL EXCESS AVAILABILITY" shall mean, as of any date, the Canadian Excess
Availability as of such date, plus "US EXCESS AVAILABILITY" as of such date of
US Borrowers as defined and determined under the US Loan and Security Agreement,
PLUS "UK EXCESS AVAILABILITY" as of such date of GL UK as defined and determined
under the UK Loan Agreement.
1.72 "UK FACILITY" shall mean the credit facility in the maximum amount of
Twenty-Five Million US Dollars (US$25,000,000) or the equivalent thereof
provided by UK Lender to GL UK pursuant to the UK Loan Agreement.
1.73 "UK LENDER" shall mean Burdale Financial, a limited company registered in
England and Wales.
1.74 "UK LETTER OF CREDIT ACCOMMODATIONS" shall mean the letters of credit or
other guaranties which are from time to time either (a) issued, opened or
provided by the UK Lender for the account
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of GL UK or any other obligor under the UK Loan Agreement or (b) with respect
to which the UK Lender has agreed to indemnify the issuer or guaranteed to
the issuer the performance by GL UK of its obligations to such issuer.
1.75 "UK LOAN AGREEMENT" shall mean that certain agreement dated as of March 23,
2000 between UK Lender and GL UK, as the same no exists or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced.
1.76 "US BORROWERS" shall mean Bekins Worldwide Solutions, Inc., Bekins Van
Lines, LLC, GeoLogistics Services, Inc., and GeoLogistics Americas, Inc.
1.77 "US FACILITY" shall mean the credit facility in the initial maximum amount
of Fifty Million US Dollars (US$50,000,000) provided by US Lender to US
Borrowers pursuant to the US Loan and Security Agreement.
1.78 "US LENDER" shall mean Congress Financial Corporation (Western), a
California corporation.
1.79 "US LETTER OF CREDIT ACCOMMODATIONS" shall mean the letters of credit or
other guaranties which are from time to time either (a) issued, opened or
provided by the US Lender for the account of any US Borrower or any obligor
under the US Loan and Security Agreement or (b) with respect to which the US
Lender has agreed to indemnify the issuer or guaranteed to the issuer the
performance by any US Borrower of its obligations to such issuer.
1.80 "US LOAN AND SECURITY AGREEMENT" shall mean that certain loan and security
agreement dated March 23, 2000 between US Lender and US Borrowers as same now
exists or may hereafter be amended, modified, supplemented, extended, renewed,
restated or replaced.
1.81 "US GAAP" shall mean generally accepted accounting principles in the United
States of America as in effect from time to time as set forth in the opinions
and pronouncements of the Accounting Principles Board and the American Institute
of Certified Public Accountants and the statements and pronouncements of the
Financial Accounting Standards Boards which are applicable to the circumstances
as of the date of determination consistently applied.
1.82 "US PRIME RATE" shall mean the rate announced by First Union National Bank,
or its successors, from time to time as its prime rate, whether or not such
announced rate is the best rate available at such bank.
1.83 "US PRIME RATE LOANS" shall mean any Loan or portion thereof denominated in
US Dollars and on which interest is payable based on the US Prime Rate in
accordance with the terms hereof.
1.84 "US REFERENCE BANK" shall mean First Union National Bank, or any successor.
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SECTION 2 - CREDIT FACILITIES
2.1 REVOLVING LOANS.
(1) Subject to, and upon the terms and conditions contained herein, Lender
agrees to make Revolving Loans to Borrower from time to time in amounts
requested by Borrower up to the Canadian Dollar Amount equal to the sum of:
(a) eighty-five percent (85%) of the aggregate Net Amount of
Eligible Billed Accounts; PLUS
(b) only with the prior written approval of Lender, sixty-five
percent (65%) of the aggregate Net Amount of Eligible Unbilled
Accounts of Borrower; MINUS
(c) the then aggregate undrawn Canadian Dollar Amounts of
outstanding Letter of Credit Accommodations for the account of
Borrower as provided for in Section 2.2(3); MINUS
(d) any Availability Reserves.
(2) Except in Lender's discretion,
(a) the aggregate amount of the Loans, the Letter of Credit
Accommodations and other Obligations outstanding at any time
shall not exceed the least of,
(i) the Maximum Credit, or
(ii) the aggregate available under the lending formulas
set forth in Section 2.1(1) hereof; or
(iii) if (1) as of the last day of any calendar week, the
average daily Total Daily Excess Availability for the
week then ended is Five Million US Dollars
(US$5,000,000) or less or (2) as of the last day of
any calendar week, average daily Total Daily Excess
Availability for the week then ended is more than
Five Million US Dollars (US$5,000,000) but is the Ten
Million US Dollars (US$10,000,000) or less and as of
the last day of the immediately following calendar
week, average daily Total Daily Excess Availability
for the week then ended remains Ten Million US
Dollars (US$10,000,000) or less, the aggregate amount
collected in the Payment Account as payments from
account debtors on the Accounts or the accounts
receivable of any Subsidiary of GLC during the
trailing five (5) week period ended on the last day
of such calendar week; PROVIDED THAT, such five (5)
week period may be increased by Lender in its
reasonable discretion based on financial information
provided by Borrower to Lender from time to time, or
(b) no Loans shall be advanced against the Eligible Unbilled
Accounts of Borrower unless the prior written approval of
Lender has been obtained.
In the event that the outstanding Canadian Dollar Amount of any
component of the Loans and Letter of Credit Accommodations, or the aggregate
Canadian Dollar Amount of the outstanding
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Loans and Letter of Credit Accommodations and other Obligations, exceeds the
amounts available under the lending formulas set forth in Section 2.1(1) and
Section 2.1(2) hereof, any amount approved by Lender for Eligible Unbilled
Accounts under this Section 2.1(2), the sublimits for Letter of Credit
Accommodations set forth in Section 2.2(4) or the Maximum Credit, as
applicable, such event shall not limit, waive or otherwise affect any rights
of Lender in that circumstance or on any future occasions and Borrower shall,
upon demand by Lender, which may be made at any time or from time to time,
immediately repay to Lender the entire amount of any such excess(es) for
which payment is demanded (other than such excess(es) which have been
permitted by Lender in writing in its discretion).
2.2 LETTER OF CREDIT ACCOMMODATIONS.
(1) Subject to, and upon the terms and conditions contained herein, at the
request of Borrower, Lender agrees to provide or arrange for Letter of Credit
Accommodations for the account of Borrower containing terms and conditions
acceptable to Lender and the issuer thereof. Any payments made by Lender to any
issuer thereof and/or related parties for any drawings or payments under the
Letter of Credit Accommodations shall constitute additional Revolving Loans to
Borrower pursuant to this Section 2.
(2) In addition to any charges, fees or expenses charged by any bank or issuer
in connection with the Letter of Credit Accommodations, Borrower shall pay to
Lender a letter of credit fee at a rate equal to one and one-quarter percent
(1.25%) per annum on the daily outstanding balance of the Letter of Credit
Accommodations for the immediately preceding month (or part thereof), payable in
arrears as of the first day of each succeeding month, PROVIDED, HOWEVER, that
such letter of credit fee shall be increased, at Lender's option, without
notice, to a rate equal to three and one-quarter percent (3.25%) per annum for
the period on or after the date of termination or non-renewal of this Agreement,
or for the period from and after the date of the occurrence of an Event of
Default, and for so long as such Event of Default is continuing. Such letter of
credit fee shall be calculated on the basis of a three hundred sixty five (365)
day year and actual days elapsed and the obligation of Borrower to pay such fee
shall survive the termination or non-renewal of this Agreement.
(3) No Letter of Credit Accommodations shall be available to Borrower unless, on
the date of the proposed issuance of any Letter of Credit Accommodations, the
Revolving Loans available to Borrower (subject to the Maximum Credit and any
Availability Reserves) are equal to or greater than an amount equal to one
hundred percent (100%) of the face amount thereof and all other commitments and
obligations made or incurred by Lender with respect thereto. Effective on the
issuance of each Letter of Credit Accommodation, the amount of Revolving Loans
which might otherwise be available to Borrower shall be reduced by the
applicable amount set forth in this Section 2.2(3).
(4) Except in Lender's discretion, the Canadian Dollar Amount of all outstanding
Letter of Credit Accommodations and all other commitments and obligations made
or incurred by Lender in connection therewith, shall not at any time exceed the
L/C Sublimit. At any time an Event of Default exists or has occurred and is
continuing, upon Lender's request, Borrower will either furnish cash collateral
to secure the reimbursement obligations to the issuer in connection with any
Letter of Credit Accommodations or furnish cash collateral to Lender for the
Letter of Credit Accommodations, and in either case, the Revolving Loans
otherwise available to Borrower shall not be reduced as provided in Section
2.2(3) to the extent of such cash collateral.
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(5) Borrower shall indemnify and hold Lender harmless from and against any and
all losses, claims, damages, liabilities, costs and expenses which Lender may
suffer or incur in connection with any Letter of Credit Accommodations and any
documents, drafts or acceptances relating thereto, including, but not limited
to, any losses, claims, damages, liabilities, costs and expenses due to any
action taken by any issuer or correspondent with respect to any Letter of Credit
Accommodation. Borrower assumes all risks with respect to the acts or omissions
of the drawer under or beneficiary of any Letter of Credit Accommodation and for
such purposes the drawer or beneficiary shall be deemed Borrower's agent.
Borrower assumes all risks for, and agrees to pay, all foreign, federal,
provincial and local taxes, duties and levies relating to any goods subject to
any Letter of Credit Accommodations or any documents, drafts or acceptances
thereunder. Borrower hereby releases and holds Lender harmless from and against
any acts, waivers, errors, delays or omissions, whether caused by Borrower, by
any issuer or correspondent or otherwise, unless caused by the gross negligence
or wilful misconduct of the Lender with respect to or relating to any Letter of
Credit Accommodation. The provisions of this Section 2.2(5) shall survive the
payment of Obligations and the termination or non-renewal of this Agreement.
(6) Nothing contained herein shall be deemed or construed to grant Borrower any
right or authority to pledge the credit of Lender in any manner. Lender shall
have no liability of any kind with respect to any Letter of Credit Accommodation
provided by an issuer other than Lender unless Lender has duly executed and
delivered to such issuer the application or a guarantee or indemnification in
writing with respect to such Letter of Credit Accommodation. Borrower shall be
bound by any interpretation made in good faith by Lender, or any other issuer or
correspondent under or in connection with any Letter of Credit Accommodation or
any documents, drafts or acceptances thereunder, notwithstanding that such
interpretation may be inconsistent with any instructions of Borrower. Lender
shall have the sole and exclusive right and authority to, and Borrower shall
not:
(a) at any time an Event of Default exists or has occurred and is
continuing,
(i) approve or resolve any questions of non-compliance of
documents;
(ii) give any instructions as to acceptance or rejection
of any documents or goods; or
(iii) execute any and all applications for steamship or
airway guaranties, indemnities or delivery orders;
and
(b) at all times,
(i) grant any extensions of the maturity of, time of
payment for, or time of presentation of, any drafts,
acceptances, or documents; and
(ii) agree to any amendments, renewals, extensions,
modifications, changes or cancellations of any of the
terms or conditions of any of the applications,
Letter of Credit Accommodations, or documents, drafts
or acceptances thereunder or any letters of credit
included in the Collateral.
Lender may take such actions either in its own name or in Borrower's name.
2.3 AVAILABILITY RESERVES.
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(1) All Loans otherwise available to Borrower pursuant to the lending formulas
and subject to the Maximum Credit and other applicable limits hereunder shall be
subject to Lender's continuing right to establish and revise Availability
Reserves.
(2) Subject to the provisions of this Agreement and any applicable law, rule,
regulation or order of a foreign, federal, provincial or local government
authority, Lender shall reduce from time to time any Priority Payable Reserve
established pursuant to Section 1.58(c) in respect of the Borrower's liabilities
and obligations for taxes and duties which are or will be required to be
remitted by or on behalf of Borrower to the governmental authority responsible
for collecting such taxes and duties (the "Appropriate Governmental Authority")
in either of the circumstances described below, without duplication,
(a) the amount of the Priority Payable Reserve established under
Section 1.58(c) in respect of a particular calendar month
shall be reduced by the amount of the taxes and duties paid by
Borrower in respect of such month from sources other than Loan
proceeds upon receipt by Lender of satisfactory evidence that
such taxes and duties have been duly remitted by or on behalf
of Borrower to the Appropriate Governmental Authority; and
(b) if Borrower requires a Loan to pay any taxes and duties then
due and for which a Priority Payables Reserve has been
established under Section 1.58(c), Lender shall reduce the
amount of such Priority Payable Reserve to the extent
necessary to permit a Loan to be made to permit Borrower to
remit to the Appropriate Governmental Authority the amount of
such taxes and duties and, notwithstanding the occurrence of
any Event of Default, Lender shall make such Loan available
subject to the limitation that
(i) the condition precedent to the making of such Loan
set forth in Section 4.2(3) has been satisfied, and
(ii) Lender has received evidence satisfactory to it that
such Loan will be used solely for the purpose of
payment of such taxes and duties and arrangements
satisfactory to Lender have been made to ensure
receipt by the Appropriate Governmental Authority of
the proceeds of the Loan made for that purpose;
PROVIDED THAT, in either case, Lender shall be satisfied that the amount of the
Priority Payable Reserve established pursuant to Section 1.58(c) remaining after
such reduction is not less than the then applicable Minimum Reserve Amount (as
defined in Section 1.58(c)) and is an amount sufficient to satisfy Lender's good
faith estimate of Borrower's liabilities and obligations (after giving effect to
such payment) with respect to taxes and duties which are or will be required to
be remitted by or on behalf of Borrower to the Appropriate Governmental
Authority.
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SECTION 3 - INTEREST AND FEES
3.1 INTEREST.
(1) Borrower shall pay to Lender interest on the outstanding principal amount of
the non-contingent Obligations at the applicable Interest Rate. All interest
accruing hereunder on or after the date of any Event of Default or termination
or non-renewal hereof shall be payable on demand.
(2) Borrower may from time to time request that US Prime Rate Loans be converted
to Eurodollar Rate Loans or that any existing Eurodollar Rate Loans continue for
an additional Interest Period. Such request from Borrower shall specify the
amount of the US Prime Rate Loans which will constitute Eurodollar Rate Loans
(subject to the limits set forth below) and the Interest Period to be applicable
to such Eurodollar Rate Loans. Subject to the terms and conditions contained
herein, three (3) Business Days after receipt by Lender of such a request from
Borrower, such US Prime Rate Loans shall be converted to Eurodollar Rate Loans
or such Eurodollar Rate Loans shall continue, as the case may be, provided,
that, (a) no Event of Default, or event which with notice or passage of time or
both would constitute an Event of Default exists or has occurred and is
continuing, (b) no party hereto shall have sent any notice of termination or
non-renewal of this Agreement, (c) Borrower shall have complied with such
customary procedures as are established by Lender and specified by Lender to
Borrower from time to time for requests by Borrower for Eurodollar Rate Loans,
(d) no more than four (4) Interest Periods may be in effect at any one time, (e)
the aggregate amount of the Eurodollar Rate Loans must be in an amount not less
than Three Million Five Hundred Thousand US Dollars (US$3,500,000) or an
integral multiple of One Million US Dollars (US$1,000,000) in excess thereof,
(f) the maximum amount of the Eurodollar Rate Loans at any time requested by
Borrower shall not exceed the amount equal to ninety (90%) percent of the lowest
principal amount of the Loans which it is anticipated will be outstanding during
the applicable Interest Period, in each case as determined by Lender (but with
no obligation of Lender to make such Loans) and (vii) Lender shall have
determined that the Interest Period or Adjusted Eurodollar Rate is available to
Lender through the US Reference Bank and can be readily determined as of the
date of the request for such Eurodollar Rate Loan by Borrower. Any request by
Borrower, if complied with by Lender, to convert US Prime Rate Loans to
Eurodollar Rate Loans or to continue any existing Eurodollar Rate Loans shall be
irrevocable. Notwithstanding anything to the contrary contained herein, Lender
and US Reference Bank shall not be required to purchase United States Dollar
deposits in the London interbank market or other applicable Eurodollar Rate
market to fund any Eurodollar Rate Loans, but the provisions hereof shall be
deemed to apply as if Lender and US Reference Bank had purchased such deposits
to fund the Eurodollar Rate Loans.
(3) Any Eurodollar Rate Loans shall automatically convert to US Prime Rate Loans
upon the last day of the applicable Interest Period, unless Lender has received
a request which complies with the terms and provisions of this Agreement to
continue such Eurodollar Rate Loan at least three (3) Business Days prior to
such last day in accordance with the terms hereof. Any Eurodollar Rate Loans
shall, at Lender's option, upon notice by Lender to Borrower, convert to US
Prime Rate Loans in the event that (a) an Event of Default or event which, with
the notice or passage of time, or both, would constitute shall exist and remain
unwaived by Lender for a period of ten (10) Business Days, (b) this Agreement
shall terminate or not be renewed, or (c) the aggregate principal amount of the
US Prime Rate Loans which have previously been converted to Eurodollar Rate
Loans or existing Eurodollar Rate Loans continued, as the case may be, at the
beginning of an Interest Period shall at any time during such Interest Period
exceed either (A) the aggregate principal amount of the Loans
<PAGE>
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then outstanding, or (B) the Revolving Loans then available to Borrowers
under Section 2 hereof. Borrower shall pay to Lender, upon demand by Lender
(or Lender may, at its option, charge any loan account of Borrower) any
amounts required to compensate Lender, the US Reference Bank or any
participant with Lender for any loss (including loss of anticipated profits),
cost or expense incurred by such person, as a result of the conversion of
Eurodollar Rate Loans to US Prime Rate Loans pursuant to any of the foregoing.
(4) Interest shall be payable by Borrower to Lender monthly in arrears not later
than the first day of each calendar month and shall be calculated on the basis
of a three hundred sixty five (365) day year in the case of Canadian Prime Rate
Loans and a three hundred and sixty (360) day year in the case of US Prime Rate
Loans and Eurodollar Loans, as applicable, and actual days elapsed. The interest
rate on non-contingent Obligations (other than Eurodollar Rate Loans) shall
increase or decrease by an amount equal to each increase or decrease in the
Canadian Prime Rate or US Prime Rate, as applicable, effective on the first day
of the month after any change in such Prime Rate is announced. The increase or
decrease shall be based on the Canadian Prime Rate or US Prime Rate, as
applicable, in effect on the last day of the month in which any such change
occurs. All interest accruing hereunder on and after an Event of Default or
termination or non-renewal hereof shall be payable on demand. In no event shall
charges constituting interest payable by Borrower to Lender exceed the maximum
amount or the rate permitted under any applicable law or regulation, and if any
part or provision of this Agreement is in contravention of any such law or
regulation, such part or provision shall be deemed amended to conform thereto.
(5) For purposes of disclosure under the INTEREST ACT (Canada), where interest
is calculated pursuant hereto at a rate based upon a 360 or 365 day year (the
"First Rate"), it is hereby agreed that the rate or percentage of interest on a
yearly basis is equivalent to such First Rate multiplied by the actual number of
days in the year divided by 360 or 365, as applicable.
(6) Notwithstanding the provisions of this Section 3 or any other provision of
this Agreement, in no event shall the aggregate "interest" (as that term is
defined in Section 347 of the CRIMINAL CODE (Canada)) exceed the effective
annual rate of interest on the "credit advanced" (as defined therein) lawfully
permitted under Section 347 of the CRIMINAL CODE (Canada). The effective annual
rate of interest shall be determined in accordance with generally accepted
actuarial practices and principles over the term of the applicable Loan, and in
the event of a dispute, a certificate of a Fellow of the Canadian Institute of
Actuaries appointed by Lender will be conclusive for the purposes of such
determination.
(7) A certificate of an authorized signing officer of Lender as to each amount
and/or each rate of interest payable hereunder from time to time shall be
conclusive evidence of such amount and of such rate, absent manifest error.
(8) For greater certainty, whenever any amount is payable under this Agreement
or any Financing Agreement by Borrower as interest or as a fee which requires
the calculation of an amount using a percentage per annum, each party to this
Agreement acknowledges and agrees that such amount shall be calculated as of the
date payment is due without application of the "deemed reinvestment principle"
or the "effective yield method". As an example, when interest is calculated and
payable monthly, the rate of interest payable per month is 1/12 of the stated
rate of interest per annum.
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3.2 CLOSING AND SYNDICATION FEE . Borrower, shall pay to Lender as a closing and
syndication fee for the transactions contemplated hereunder the amount of One
Hundred Twelve Thousand Five Hundred US Dollars (US$112,500), which shall be
fully earned as of and payable on the date hereof.
3.3 LOAN SERVICING FEE. Borrower shall pay to Lender monthly a loan servicing
fee in an amount equal to One Thousand US Dollars (US$1,000), plus out-of-pocket
costs and expenses, in respect of Lender's services for each month (or part
thereof) while this Agreement remains in effect and for so long thereafter as
any of the Obligations are outstanding, which fee shall be fully earned as of
and payable in advance on the date hereof and on the first day of each month
hereafter.
3.4 UNUSED LINE FEE. Borrower shall pay to Lender monthly an unused line fee at
a rate equal to three-eighths of one percent (.375%) percent per annum
calculated upon the amount by which the Maximum Credit exceeds the Canadian
Dollar Amount equal to average daily principal balance of the outstanding
Revolving Loans and Letter of Credit Accommodations during the immediately
preceding month (or part thereof) while this Agreement is in effect and for so
long thereafter as any of the Obligations are outstanding, which fee shall be
payable on the first day of each month in arrears.
3.5 PAYMENTS. Unless otherwise specified by Lender, all interest, fees and other
payments by Borrower hereunder shall be in the currency in which such
Obligations are denominated.
3.6 COMPENSATION ADJUSTMENT
(1) If after the date of this Agreement the introduction of, or any change in,
any law or any governmental rule, regulation, policy, guideline or directive
(whether or not having the force of law), or any interpretation thereof, or
compliance by Lender or any Participant therewith:
(a) subjects Lender or any Participant to any tax, duty, charge or
withholding on or from payments due from Borrower (excluding
franchise taxes imposed upon, and taxation of the overall net
income or capital of, Lender or any Participant), or changes
the basis of taxation of payments, in either case in respect
of amounts due it hereunder, or
(b) imposes or increases or deems applicable any reserve
requirement or other reserve, assessment, insurance charge,
special deposit or similar requirement against assets of,
deposits with or for the account of, or credit extended by
Lender or any Participant (other than any reserves included in
the determination of the Eurodollar Rate), or
(c) imposes any other condition the result of which is to increase
the cost to Lender or any Participant of making, funding or
maintaining the Loans or Letter of Credit Accommodations or
reduces any amount receivable by Lender or any Participant in
connection with the Loans or Letter of Credit Accommodations,
or requires Lender or any Participant to make payment
calculated by references to the amount of loans held or
interest received by it, by an amount deemed material by
Lender or any Participant, or
(d) imposes or increases any capital requirement or affects the
amount of capital required or expected to be maintained by
Lender or any Participant or any corporation controlling
Lender or any Participant, and Lender or any Participant
determines that such imposition or increase in capital
requirements or increase in the amount of capital
<PAGE>
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expected to be maintained is based upon the existence of
this Agreement or the Loans or Letter of Credit
Accommodations hereunder, all of which may be determined by
Lender's reasonable allocation of the aggregate of its
impositions or increases in capital required or expected to
be maintained, and the result of any of the foregoing is to
increase the cost to Lender or any Participant of making,
renewing or maintaining the Loans or Letter of Credit
Accommodations, or to reduce the rate of return to Lender
or any Participant on the Loans or Letter of Credit
Accommodations,
then upon demand by Lender, Borrower shall pay to Lender, and continue to
make periodic payments to Lender or any Participant, such additional amounts
as may be necessary to compensate Lender or any Participant for any such
additional cost incurred or reduced rate of return realized.
(2) A certificate of Lender claiming entitlement to compensation as set forth
above will be conclusive in the absence of manifest error. Such certificate
will set forth the nature of the occurrence giving rise to such compensation,
the additional amount or amounts to be paid and the compensation and the
method by which such amounts were determined. Each demand for compensation
under this Section 3.6 shall be given within ninety (90) days of Lender's
first learning of the basis for such compensation and its ability to
calculate the amount of such compensation. In determining any additional
amounts due from any Borrower under this Section 3.6, Lender shall act
reasonably and in good faith and will, to the extent that the increased
costs, reductions, or amounts received or receivable relate to the Lender's
or Participant's loans or commitments generally and are not specifically
attributable to the Loans and commitments hereunder, use averaging and
attribution methods which are reasonable and equitable and which cover all
loans and commitments under this Agreement by the Lender or such Participant,
as the case may be, whether or not the loan documentation for such other
loans and commitments permits the Lender or such Participant to receive
compensation costs of the type described in this Section 3.6.
3.7 CHANGES IN LAWS AND INCREASED COSTS OF LOANS
(1) Notwithstanding anything to the contrary contained herein, all Eurodollar
Rate Loans shall, upon notice by Lender to Borrower, convert to Prime Rate
Loans in the event that (i) any change in applicable law or regulation (or
the interpretation or administration thereof) shall either (A) make it
unlawful for Lender, US Reference Bank or any Participant to make or maintain
Eurodollar Rate Loans or to comply with the terms hereof in connection with
the Eurodollar Rate Loans, or (B) shall result in the increase in the costs
to Lender, US Reference Bank or any Participant of making or maintaining any
Eurodollar Rate Loans by an amount deemed by Lender to be material, or (C)
reduce the amounts received or receivable by Lender or any Participant in
respect thereof, by an amount deemed by Lender to be material or (ii) the
cost to Lender, US Reference Bank or any Participant of making or maintaining
any Eurodollar Rate Loans shall otherwise increase by an amount deemed by
Lender to be material. Such conversion shall occur at the end of the
applicable Interest Period for each such Eurodollar Rate Loan or, if it is
unlawful for Lender or any Participant to maintain any such Loan until such
date, on the latest date on which it remains lawful for Lender or any
Participant to maintain such Loan. Borrower shall pay to Lender, upon demand
by Lender (or Lender may, at its option, charge any loan account of Borrower)
any amounts required to compensate Lender, the US Reference Bank or any
Participant with Lender for any loss (including loss of anticipated profits),
cost or expense incurred by such person as a result of any such conversion,
including, without limitation, any such loss, cost or expense incurred by
reason of the liquidation or reemployment of deposits or other funds acquired
by such person to make or maintain the Eurodollar Rate Loans or
<PAGE>
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any portion thereof as a result of any payment of principal of any Eurodollar
Rate Loan made other than on the last day of the Interest Period for that
Loan. A certificate of Lender setting forth the basis for the determination
of such amount necessary to compensate Lender as aforesaid shall be delivered
to Borrower and shall be conclusive, absent manifest error.
(2) If any payments or prepayments in respect of the Eurodollar Rate Loans
are received by Lender other than on the last day of the applicable Interest
Period (whether pursuant to acceleration, upon maturity or otherwise),
including any payments pursuant to the application of collections under
Section 6.3 or any other payments made with the proceeds of Collateral,
Borrower shall pay to Lender upon demand by Lender (or Lender may, at its
option, charge any loan account of Borrower) any amounts required to
compensate Lender, the US Reference Bank or any Participant with Lender for
any additional loss, cost or expense incurred by such person as a result of
such prepayment or payment, including, without limitation, any loss, cost or
expense incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by such person to make or maintain such Eurodollar Rate
Loans or any portion thereof.
3.8 DUPLICATION. All amounts determined under any provision of Section 3.6 or
3.7 shall be without duplication with any amounts determined under any other
provision of those sections.
SECTION 4 - CONDITIONS PRECEDENT
4.1 CONDITIONS PRECEDENT TO INITIAL LOANS AND LETTER OF CREDIT
ACCOMMODATIONS. Each of the following is a condition precedent to Lender
making the initial Loans and providing the initial Letter of Credit
Accommodations hereunder:
(1) Lender shall have received, in form and substance satisfactory to Lender,
all releases, terminations and such other documents as Lender may request to
evidence and effectuate the termination of any interest in and to any assets
and properties of Borrower, duly authorized, executed and delivered by it or
each of them, including, but not limited to, PPSA discharge statements for
all PPSA financing statements and Lender shall have satisfied itself that it
has valid, perfected and first priority security interests in and liens upon
the Collateral and any other property which is intended as security for the
Obligations or the liability of any Obligor in respect thereto, subject only
to the security interests and liens permitted herein or in the other
Financing Agreements;
(2) all requisite corporate action and proceedings in connection with this
Agreement and the other Financing Agreements shall be satisfactory in form
and substance to Lender, and Lender shall have received all information and
copies of all documents, including, without limitation, records of requisite
corporate action and proceedings which Lender may have requested in
connection therewith, such documents where requested by Lender or its counsel
to be certified by appropriate corporate officers or governmental authorities;
(3) no material adverse change shall have occurred in the assets, business or
prospects of Borrower since the date of Lender's latest field examination and
no change or event shall have occurred which would impair the ability of
Borrower or any Obligor to perform its obligations hereunder or under any of
the other Financing Agreements to which it is a party or of Lender to enforce
the Obligations or realize upon the Collateral;
<PAGE>
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(4) Lender shall have completed a field review of the Records and of such
other financial information, projections, budgets, business plans, cash flows
as Lender shall reasonably request from time to time, including, but not
limited to, current agings of receivables, roll forwards of Accounts through
the date of closing and availability projections for Borrower's fiscal year
2000, prepared on a monthly basis, together with supporting documentation,
the results of which shall be satisfactory to Lender;
(5) Lender shall have received, in form and substance satisfactory to Lender,
all consents, waivers, acknowledgements and other agreements from third
persons which Lender may deem necessary or desirable in order to permit,
protect and perfect its security interests in and liens upon the Collateral
or to effectuate the provisions or purposes of this Agreement and the other
Financing Agreements, including acknowledgements by lessors, mortgagees and
warehousemen of Lender's security interests in the Collateral, waivers by
such persons of any security interests, liens or other claims by such persons
to the Collateral and agreements permitting Lender access to, and the right
to remain on, the premises to exercise its rights and remedies and otherwise
deal with the Collateral;
(6) Lender shall have received evidence of insurance and loss payee
endorsements required hereunder and under the other Financing Agreements, in
form and substance satisfactory to Lender, and certificates of insurance
policies and/or endorsements naming Lender as first loss payee and additional
insured;
(7) Lender shall have received, in form and substance satisfactory to Lender,
such opinion letters of counsel to Borrower and GLC with respect to the
Financing Agreements and such other matters as Lender may request;
(8) the Total Excess Availability as determined by Lender as of the date
hereof LESS the aggregate amount of all book overdrafts of Borrower, any US
Borrower and GL UK shall be not less than an amount that is satisfactory to
Lender after giving effect to the initial Loans made or to be made hereunder
and the payment of all fees and expenses payable upon the consummation of the
initial transactions contemplated by this Agreement;
(9) Lender shall have received, in form and substance satisfactory to Lender,
a continuing guarantee by GLC of the payment of all Obligations;
(10) Lender shall have received, in form and substance satisfactory to
Lender, a continuing guarantee by each of US Borrowers of the payment of all
Obligations and any security agreements and any other documents or
instruments evidencing the security interests of Lender on the assets of US
Borrowers and such other documents and agreements including legal opinions as
Lender may require.
(11) Lender shall have received evidence, in form and substance satisfactory
to Lender, that the initial loans under the US Facility and the UK Facility
will be advanced concurrently with or immediately upon the making of the
initial Loans hereunder;
(12) Lender shall have received, in form and substance satisfactory to
Lender, executed copies of a Blocked Accounts agreement(s), pursuant to
Section 6.3 hereof, among Lender, Borrower and Royal Bank of Canada or
another financial institution satisfactory to Lender, acting reasonably;
<PAGE>
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(13) the other Financing Agreements and all instruments and documents
hereunder and thereunder shall have been duly executed and delivered to
Lender, in form and substance satisfactory to Lender;
(14) Lender shall have received, in form and substance satisfactory to
Lender, a certificate of the chief financial officer of Borrower certifying
Borrower's accrued and unpaid excise tax and duty liabilities and the amount
of Borrower's cash on hand as of March 22, 2000; and
(15) Lender shall have received, in form and substance satisfactory to
Lender, a certificate of the senior vice president, finance of GLC,
certifying Borrower's accrued and unpaid excise tax and duty liabilities as
of March 28, 2000 and the amount of Borrower's cash on deposit as of March
27, 2000.
4.2 CONDITIONS PRECEDENT TO ALL LOANS AND LETTER OF CREDIT ACCOMMODATIONS.
Each of the following is an additional condition precedent to Lender making
Loans and/or providing Letter of Credit Accommodations to Borrower, including
the initial Loans and Letter of Credit Accommodations and any future Loans
and Letter of Credit Accommodations:
(1) all representations and warranties contained herein and in the other
Financing Agreements shall be true and correct in all material respects with
the same effect as though such representations and warranties had been made
on and as of the date of the making of each such Loan or providing each such
Letter of Credit Accommodation and after giving effect thereto;
(2) no Event of Default and no event or condition which, with notice or
passage of time or both, would constitute an Event of Default, shall exist or
have occurred and be continuing on and as of the date of the making of such
Loan or providing each such Letter of Credit Accommodation and after giving
effect thereto; and
(3) neither Lender nor any other Person has received a requirement from the
Minister of National Revenue for payment pursuant to Section 224 or any
successor section of the INCOME TAX ACT (Canada) or Section 317, or any
successor section of the EXCISE TAX ACT (Canada) or any comparable provision
of similar legislation in respect of Borrower or otherwise issued in respect
of Borrower and which requirement remains outstanding.
SECTION 5 - INTENTIONALLY DELETED
SECTION 6 - COLLECTION AND ADMINISTRATION
6.1 BORROWER'S LOAN ACCOUNT. Lender shall maintain one or more loan
account(s) on its books in which shall be recorded (a) all Loans, Letter of
Credit Accommodations and other Obligations and the Collateral, (b) all
payments made by or on behalf of Borrower and (c) all other appropriate
debits and credits as provided in this Agreement, including fees, charges,
costs, expenses and interest. All entries in the loan account(s) shall be
made in accordance with Lender's customary practices as in effect from time
to time.
6.2 STATEMENTS. Lender shall render to Borrower each month a statement
setting forth the balance in the Borrower's loan account(s) maintained by
Lender for Borrower pursuant to the provisions of this Agreement, including
principal, interest, fees, costs and expenses. Each such statement shall be
subject to subsequent adjustment by Lender but shall, absent manifest errors
or omissions, be considered correct and deemed accepted by Borrower and
conclusively binding upon
<PAGE>
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Borrower as an account stated except to the extent that Lender receives a
written notice from Borrower of any specific exceptions of Borrower thereto
within thirty (30) days after the date such statement has been mailed by
Lender. Until such time as Lender shall have rendered to Borrower a written
statement as provided above, the balance in Borrower's loan account(s) shall
be presumptive evidence of the amounts due and owing to Lender by Borrower.
6.3 COLLECTION OF ACCOUNTS.
(1) Borrower shall establish and maintain, at its expense, blocked accounts
or lockboxes and related blocked accounts (in either case, "Blocked
Accounts"), as Lender may specify, with such Canadian banks as are acceptable
to Lender into which Borrower shall, in accordance with Lender's
instructions, promptly, and any other Subsidiary of GLC may, deposit and
direct its account debtors that remit payments by electronic funds transfers
to directly remit, all payments on Accounts and all payments constituting
proceeds of Inventory or other Collateral or repayment of any loans or
advances made to GLC, GL UK, GIFL, or any US Borrower in the identical form
in which such payments are made, whether by cash, cheque or other manner. The
banks at which a Blocked Account is established shall enter into an
agreement, in form and substance satisfactory to Lender, providing (unless
otherwise agreed to by Lender) that all items received or deposited in such
Blocked Account (other than the proceeds of accounts receivable or other
property of any Subsidiary of GLC that is not Borrower or Obligor) are the
Collateral of Lender, that the depository bank has no lien upon, or right to
setoff against the Blocked Account, the items received for deposit therein,
or the funds from time to time on deposit therein and that the depository
bank will wire, or otherwise transfer, in immediately available funds, on a
daily basis, all funds received or deposited into the Blocked Account or to
such other bank account of Lender as Lender may from time to time designate
for such purpose (the "Payment Account"). Borrower agrees that all amounts
deposited in the Blocked Account or other funds received and collected by
Lender, whether on the Accounts or as proceeds of Inventory or other
Collateral or otherwise (other than the proceeds of accounts receivable or
other property of any Subsidiary of GLC that is not Borrower or Obligor)
shall be the Collateral of Lender.
(2) For purposes of calculating interest on the Obligations, such payments or
other funds received will be applied (conditional upon final collection) to
the Obligations one (1) Business Day following the date of receipt of
immediately available funds by Lender in the Payment Account. For purposes of
calculating the amount of the Revolving Loans available to Borrower such
payments will be applied (conditional upon final collection) to the
Obligations on the Business Day of receipt by Lender in the Payment Account,
if such payments are received within sufficient time (in accordance with
Lender's usual and customary practices as in effect from time to time) to
credit Borrower's loan account on such day, and if not, then on the next
Business Day. If no monetary obligations by Borrower are outstanding on any
day, but monetary obligations under the US Facility or the UK Facility are
outstanding, or any Letter of Credit Accommodations, US Letter of Credit
Accommodations or UK Letter of Credit Accommodations are outstanding on such
day, Borrower shall pay interest at the applicable rate set forth in Section
3.1 on the amount of any payments or other funds that are received by Lender
(irrespective of the characterization of whether receipts are owned by Lender
or Borrower) for such day. If no monetary obligations under this Agreement,
the US Facility or the UK Facility are outstanding and no Letter of Credit
Accommodations, US Letter of Credit Accommodations or UK Letter of Credit
Accommodations are outstanding on any day, no interest shall be charged to
Borrower on the amount of any payments or other funds that are received by
Lender for such day. If Lender receives funds in a Payment Account at any
time at which no
<PAGE>
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Obligations, contingent or otherwise, are outstanding or in excess of such
outstanding Obligations, Lender shall transfer such funds to Borrower at such
account as Borrower may direct, provided that Borrower shall, at Lender's
request, deposit such funds to an account maintained at the bank at which the
Payment Accounts are maintained and, prior to such transfer, shall execute
and deliver to Lender a cash collateral agreement in form and substance
satisfactory to Lender providing to Lender a first priority Lien over such
account.
(3) Borrower and all of its affiliates, Subsidiaries, shareholders, directors,
employees or agents shall, holding the same in trust for Lender, receive, as the
property of Lender, any monies, cheques, notes, drafts or any other payment
relating to and/or proceeds of Accounts or other Collateral which come into
their possession or under their control and immediately upon receipt thereof,
shall deposit or cause the same to be deposited in the Blocked Accounts or the
Payment Accounts as applicable, or remit the same or cause the same to be
remitted, in kind, to Lender. In no event shall the same be commingled with
Borrower's own funds. Borrower agrees to reimburse Lender on demand for any
amounts owed or paid to any bank at which a Blocked Account or Payment Account
is established or any other bank or person involved in the transfer of funds to
or from the Blocked Accounts or the Payment Accounts arising out of Lender's
payments to or indemnification of such bank or person, unless such payment or
indemnification obligation of Lender was a result of Lender's gross negligence
or wilful misconduct. The obligation of Borrower to reimburse Lender for such
amounts pursuant to this Section 6.3 shall survive the termination or
non-renewal of this Agreement.
6.4 PAYMENTS. All Obligations shall be payable to the Payment Accounts as
provided in Section 6.3 or such other place in Canada as Lender may designate
from time to time. Lender may apply payments received or collected from
Borrower or for the account of Borrower (including the monetary proceeds of
collections or of realization upon any Collateral) to such of the
Obligations, whether or not then due, in such order and manner and using such
conversion rates as Lender determines. Payments and collections received in
any currency other than US Dollars or Canadian Dollars will be accepted
and/or applied at the sole discretion of Lender. At Lender's option, all
principal, interest, fees, costs, expenses and other charges provided for in
this Agreement or the other Financing Agreements may be charged directly to
the loan account(s) of Borrower. Borrower shall make all payments to Lender
on the Obligations free and clear of, and without deduction or withholding
for or on account of, any setoff, counterclaim, defense, duties, taxes,
levies, imposts, fees, deductions, withholding, restrictions or conditions of
any kind. If after receipt of any payment of, or proceeds of Collateral
applied to the payment of, any of the Obligations, Lender is required to
surrender or return such payment or proceeds to any Person for any reason,
then the Obligations intended to be satisfied by such payment or proceeds
shall be reinstated and continue and this Agreement shall continue in full
force and effect as if such payment or proceeds had not been received by
Lender. Borrower shall be liable to pay to Lender, and does hereby indemnify
and hold Lender harmless for the amount of any payments or proceeds
surrendered or returned. This Section 6.4 shall remain effective
notwithstanding any contrary action which may be taken by Lender in reliance
upon such payment or proceeds. This Section 6.4 shall survive the payment of
the Obligations and the termination or non-renewal of this Agreement.
6.5 AUTHORIZATION TO MAKE LOANS. Lender is authorized to make the Loans and
provide the Letter of Credit Accommodations based upon facsimile or other
instructions received from anyone purporting to be an officer of Borrower or
other authorized person or, at the discretion of Lender, if such Loans are
necessary to satisfy any Obligations. All requests for Loans or Letter of
Credit Accommodations hereunder shall specify the date on which the requested
advance is to be made or
<PAGE>
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Letter of Credit Accommodations established (which day shall be a Business
Day) and the amount of the requested Loan. Requests received after 10:30 a.m.
Toronto time on any day shall be deemed to have been made as of the opening
of business on the immediately following Business Day. All Loans and Letter
of Credit Accommodations under this Agreement shall be conclusively presumed
to have been made to, and at the request of and for the benefit of, Borrower
when deposited to the credit of Borrower or otherwise disbursed or
established in accordance with the instructions of Borrower or in accordance
with the terms and conditions of this Agreement.
6.6 USE OF PROCEEDS. Borrower shall use the initial proceeds of the Loans
provided by Lender to Borrower hereunder only for: (a) payments to each of
the persons listed in the disbursement direction letter furnished by Borrower
to Lender on or about the date hereof and (b) costs, expenses and fees in
connection with the preparation, negotiation, execution and delivery of this
Agreement and the other Financing Agreements. All other Loans made or Letter
of Credit Accommodations provided by Lender to Borrower pursuant to the
provisions hereof shall be used by Borrower only for general operating,
working capital and other proper corporate purposes of Borrower not otherwise
prohibited by the terms hereof.
SECTION 7 - COLLATERAL REPORTING AND COVENANTS
7.1 COLLATERAL REPORTING. Borrower shall provide Lender with the following
documents in a form satisfactory to Lender:
(a) on a weekly basis on, or before the Wednesday of such week for
the immediately preceding calendar week or more frequently as
Lender may request, reports respecting duties and taxes
collected, billed and or remitted for goods shipped by
Borrower, a schedule of Accounts of Borrower, sales made,
credits issued and cash received by Borrower;
(b) on a monthly basis, on or before the third (3rd) Business day
after the fifteenth (15th) day of such month for the first
fifteen (15) day period of such month or more frequently as
Lender may request, interim roll forwards of and detailed
information on unbilled Accounts of Borrower;
(c) on a monthly basis on or before the tenth (10th) Business Day
of such month for the immediately preceding month or more
frequently as Lender may request, separate agings of billed
and unbilled accounts receivable, detailed information on
unbilled Accounts, agings of accounts payable, lease payables
and other payables of Borrower;
(d) upon Lender's reasonable request,
(i) copies of customer statements and credit memos,
remittance advices and reports, and copies of deposit
slips and bank statements,
(ii) copies of shipping and delivery documents, and
(iii) copies of purchase orders, invoices and delivery
documents for Inventory and Equipment acquired by
Borrower; and
<PAGE>
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(e) such other reports as to the Collateral or other property
which is security for the Obligations as Lender shall
reasonably request from time to time.
If any of Borrower's records or reports of the Collateral or other property
which is security for the Obligations are prepared or maintained by an
accounting service, contractor, shipper or other agent, Borrower hereby
irrevocably authorizes such service, contractor, shipper or agent to deliver
such records, reports, and related documents to Lender and to follow Lender's
instructions with respect to further services at any time that an Event of
Default exists or has occurred and is continuing.
7.2 ACCOUNTS COVENANTS.
(1) Borrower shall notify Lender promptly of:
(a) any material delay in Borrower's performance of any of its
obligations to any account debtor or the assertion of any
claims, offsets, defenses or counterclaims by any account
debtor, or any disputes with account debtors, or any
settlement, adjustment or compromise thereof;
(b) all material adverse information relating to the financial
condition of any account debtor; and
(c) any event or circumstance which, to Borrower's knowledge would
cause Lender to consider any then existing Accounts as no
longer constituting Eligible Accounts.
No credit, discount, allowance or extension or agreement for any of the
foregoing shall be granted to any account debtor except in the ordinary
course of Borrower's business in accordance with its most recent past
practices and policies. So long as no Event of Default exists or has occurred
and is continuing, Borrower may settle, adjust or compromise any claim,
offset, counterclaim or dispute with any account debtor in the ordinary
course of Borrower's business in accordance with its most recent past
practices and policies. At any time that an Event of Default exists or has
occurred and is continuing, Lender shall, at its option, have the exclusive
right to settle, adjust or compromise any claim, offset, counterclaim or
dispute with account debtors or grant any credits, discounts or allowances
and Borrower shall not, upon Lender's request, issue any credits, discounts
or allowances with respect to or Account without Lender's prior written
consent.
(2) With respect to each Account:
(a) the amounts shown on any invoice delivered to Lender or
schedule thereof delivered to Lender shall be true and
complete;
(b) no payments shall be made thereon except payments delivered to
Lender pursuant to the terms of this Agreement;
(c) no credit, discount, allowance or extension or agreement for
any of the foregoing shall be granted to any account debtor
except as reported to Lender in accordance with this Agreement
and except for credits, discounts, allowances or extensions
made or given in the ordinary course of Borrower's business in
accordance with practices and policies previously disclosed to
Lender;
<PAGE>
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(d) there shall be no setoffs, deductions, contras, defences,
counterclaims or disputes existing or asserted with respect
thereto except as reported to Lender in accordance with the
terms of this Agreement;
(e) none of the transactions giving rise thereto will violate any
applicable federal or provincial laws or regulations, all
documentation relating thereto will be legally sufficient
under such laws and regulations and all such documentation
will be legally enforceable in accordance with its terms; and
(f) if such Account is an Eligible Unbilled Account, Borrower has
completed shipment of goods and/or the rendition of services
which give rise thereto in accordance with the terms and
provisions contained in any documents related thereto.
(3) Lender shall have the right at any time or times, in Lender's name or in the
name of a nominee of Lender, to verify the validity, amount or any other matter
relating to any Account or other Collateral, by mail, telephone, facsimile
transmission or otherwise.
(4) Borrower shall deliver or cause to be delivered to Lender, with appropriate
endorsement and assignment, with full recourse to Borrower, all chattel paper
and instruments which Borrower now owns or may at any time acquire immediately
upon Borrower's receipt thereof, except as Lender may otherwise agree.
(5) Lender may, at any time or times that an Event of Default exists:
(a) notify any or all account debtors that the Accounts have been
assigned to Lender and that Lender has a security interest or
lien therein and Lender may direct any or all account debtors
to make payments of Accounts directly to Lender;
(b) extend the time of payment of, compromise, settle or adjust
for cash, credit, return of merchandise or otherwise, and upon
any terms or conditions, any and all Accounts or other
obligations included in the Collateral and thereby discharge
or release the account debtor or any other party or parties in
any way liable for payment thereof without affecting any of
the Obligations;
(c) demand, collect or enforce payment of any Accounts or such
other obligations, but without any duty to do so, and Lender
shall not be liable for its failure to collect or enforce the
payment thereof nor for the negligence of its agents or
attorneys with respect thereto; and
(d) take whatever other action Lender may deem necessary or
desirable for the protection of its interests.
At any time that an Event of Default exists or has occurred and is
continuing, at Lender's request, all invoices and statements sent to any
account debtor shall state that the Accounts due from such account debtor and
such other obligations have been assigned to Lender and are payable directly
and only to Lender and Borrower shall deliver to Lender such originals of
documents evidencing the sale and delivery of goods or the performance of
services giving rise to any Accounts as Lender may require.
<PAGE>
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7.3 EQUIPMENT COVENANTS. With respect to the Equipment:
(a) upon Lender's request, Borrower shall, at its expense, at any
time or times as Lender may request on or after an Event of
Default, deliver or cause to be delivered to Lender written
reports or appraisals as to the Equipment in form, scope and
methodology acceptable to and by an appraiser acceptable to
Lender addressed to Lender or upon which Lender is expressly
permitted to rely;
(b) Borrower shall diligently and promptly do all acts reasonably
necessary to deliver to Lender the original certificates of
title of all motor vehicles of Borrower and to note Lender as
the first priority lienholder thereon, which acts shall
include curing any deficiency to any documents or instruments
necessary to evidence Lender's security interest within ten
(10) days after written notice of such deficiency by Lender;
(c) Borrower shall keep the Equipment in good order, repair,
running and marketable condition (ordinary wear and tear
excepted);
(d) Borrower shall use the Equipment with all reasonable care and
caution and in accordance with applicable standards of any
insurance and in conformity with all applicable laws;
(e) the Equipment is and shall be used in Borrower's business and
not for personal, family, household or farming use;
(f) Borrower shall not remove any Equipment from the locations set
forth or permitted herein, except to the extent necessary to
have any Equipment repaired or maintained in the ordinary
course of the business of Borrower or to move Equipment
directly from one location set forth or permitted herein to
another such location and except for the movement of motor
vehicles used by or for the benefit of Borrower in the
ordinary course of business;
(g) the Equipment is now and shall remain personal property and
Borrower shall not permit any of the Equipment to be or become
a part of or affixed to real property; and
(h) Borrower assumes all responsibility and liability arising from
the use of the Equipment.
7.4 POWER OF ATTORNEY. Borrower hereby irrevocably designates and appoints
Lender (and all persons designated by Lender) as Borrower's true and lawful
attorney-in-fact, and authorizes Lender, in Borrower's or Lender's name, to:
(a) at any time an Event of Default exists or has occurred and is
continuing
(i) demand payment on Accounts or on proceeds of other
Collateral;
(ii) enforce payment of Accounts or other Obligations
included in the Collateral by legal proceedings or
otherwise;
<PAGE>
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(iii) exercise all of Borrower's rights and remedies to
collect any Account or other Collateral;
(iv) sell or assign any Account upon such terms, for such
amount and at such time or times as the Lender deems
advisable;
(v) settle, adjust, compromise, extend or renew an
Account or other Obligations included in the
Collateral;
(vi) discharge and release any Account or other
Obligations included in the Collateral;
(vii) prepare, file and sign Borrower's name on any proof
of claim in bankruptcy or other similar document
against an account debtor;
(viii) notify the post office authorities to change the
address for delivery of Borrower's mail to an address
designated by Lender, and open and dispose of all
mail addressed to Borrower, and take any payments on
Accounts or other proceeds of Collateral contained in
such mail and promptly forward any other mail to
Borrower; and
(ix) do all acts and things which are necessary, in
Lender's determination, to fulfil Borrower's
obligations under this Agreement and the other
Financing Agreements; and
(b) at any time, subject to the terms of the agreements(s)
relating to the Blocked Account(s), if any, to
(i) take control in any manner of any item of payment or
proceeds thereof;
(ii) have access to any lockbox or postal box into which
Borrower's mail is deposited;
(iii) endorse Borrower's name upon any items of payment or
proceeds thereof and deposit the same in the Lender's
account for application to the Obligations;
(iv) endorse Borrower's name upon any chattel paper,
document, instrument, invoice, or similar document or
agreement relating to any Account or any goods
pertaining thereto or any other Collateral;
(v) sign Borrower's name on any verification of Accounts
and notices thereof to account debtors; and
(vi) execute in Borrower's name and file any PPSA or other
financing statements or amendments thereto.
Borrower hereby releases Lender and its officers, employees and
designees from any liabilities arising from any act or acts under this power
of attorney and in furtherance thereof, whether of omission or commission,
except as a result of Lender's own gross negligence or wilful misconduct as
determined pursuant to a final non-appealable order of a court of competent
jurisdiction.
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7.5 RIGHT TO CURE. Lender may, at its option:
(a) cure any monetary default by Borrower under any agreement with
a third party or pay or bond on appeal any judgment entered
against Borrower;
(b) discharge taxes, liens, security interests or other
encumbrances at any time levied on or existing with respect to
the Collateral; and
(c) pay any amount, incur any expense or perform any act which, in
Lender's judgment, is necessary or appropriate to preserve,
protect, insure or maintain the Collateral and the rights of
Lender with respect thereto.
Lender may add any amounts so expended to the Obligations and charge
Borrower's account therefor, such amounts to be repayable by Borrower on demand.
Lender shall be under no obligation to effect such cure, payment or bonding and
shall not, by doing so, be deemed to have assumed any obligation or liability of
Borrower. Any payment made or other action taken by Lender under this Section
shall be without prejudice to any right to assert an Event of Default hereunder
and to proceed accordingly.
7.6 ACCESS TO PREMISES. From time to time as requested by Lender:
(a) Lender or its designee shall have complete access to all of
Borrower's premises during normal business hours and after
notice to Borrower, or at any time and without notice to
Borrower if an Event of Default exists or has occurred and is
continuing, for the purposes of inspecting, verifying and
auditing the Collateral and all of Borrower's books and
records, including, without limitation, the Records;
(b) Borrower shall promptly furnish to Lender such copies of such
books and records or extracts therefrom as Lender may request;
and
(c) use during normal business hours such of Borrower's personnel,
equipment, supplies and premises as may be reasonably
necessary for the foregoing and if an Event of Default exists
or has occurred and is continuing for the collection of
Accounts and realization of other Collateral.
SECTION 8 - REPRESENTATIONS AND WARRANTIES
Borrower hereby represents and warrants to Lender the following (which shall
survive the execution and delivery of this Agreement), the truth and accuracy of
which are a continuing condition of the making of Loans and providing Letter of
Credit Accommodations by Lender to Borrower:
8.1 CORPORATE EXISTENCE, POWER AND AUTHORITY; SUBSIDIARIES. Borrower is a
corporation duly incorporated, validly existing and duly organized under the
laws of its jurisdiction of incorporation and is duly qualified or registered
as a foreign or extra-provincial corporation in all provinces, states or
other jurisdictions where the nature and extent of the business transacted by
it or the ownership of assets makes such qualification necessary, except for
those jurisdictions in which the failure to so qualify would not have a
material adverse effect on Borrower's financial condition, results of
operation or business or the rights of Lender in or to any of the Collateral.
To the best of Borrower's knowledge, attached as Schedule 8.1 hereto, is a
true and correct organizational chart of GLC and any
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Subsidiaries with assets in excess of the Canadian Dollar Amount Ten Thousand
US Dollars (US$10,000). The execution, delivery and performance of this
Agreement, the other Financing Agreements and the transactions contemplated
hereunder and thereunder are all within Borrower's corporate powers, have
been duly authorized and are not in contravention of law or the terms of
Borrower's memorandum and articles of association, by-laws, operating
agreements, or other organizational documentation, or any indenture,
agreement or undertaking to which Borrower is a party or by which Borrower or
its property are bound. This Agreement and the other Financing Agreements
constitute legal, valid and binding obligations of Borrower enforceable in
accordance with their respective terms. Borrower does not have any
Subsidiaries with assets in excess of Ten Thousand US Dollars (US$10,000)
except as set forth on Schedule 8.1 attached hereto.
8.2 FINANCIAL STATEMENTS; NO MATERIAL ADVERSE CHANGE. All financial statements
relating to Borrower or GLC which have been or may hereafter be delivered by
Borrower or GLC to Lender have been or will have been prepared in accordance
with GAAP or US GAAP, as applicable, and fairly present the financial condition
and the results of operation of Borrower and GLC as at the dates and for the
periods set forth therein. Except as disclosed in any interim financial
statements furnished by or on behalf of Borrower or by or on behalf of GLC to
Lender prior to the date of this Agreement or as otherwise disclosed in writing
to Lender, there has been no material adverse change in the assets, liabilities,
properties and condition, financial or otherwise, of Borrower or GLC, since the
date of the most recent audited financial statements furnished by or on behalf
of Borrower to Lender prior to the date of this Agreement.
8.3 CHIEF EXECUTIVE OFFICE; COLLATERAL LOCATIONS. The chief executive office of
Borrower and Borrower's Records concerning Accounts are located only at the
address set forth below Borrower's name on the signature page hereto and its
only other places of business and the only other locations of Collateral, if
any, are the addresses set forth in the Information Certificate, subject to the
right of Borrower to establish new locations in accordance with Section 9.2
below. The Information Certificate correctly identifies any of such locations
which are not owned by Borrower and sets forth the owners and/or operators
thereof and to the best of Borrower's knowledge, the holders of any mortgages on
such locations.
8.4 PRIORITY OF LIENS; TITLE TO PROPERTIES. The security interests and liens
granted to Lender under this Agreement and the other Financing Agreements
constitute valid and perfected first priority liens and security interests in
and upon the Collateral subject only to the liens indicated on Schedule 8.4
hereto and the other liens permitted under Section 9.8 hereof. Borrower has
good and marketable title to all of its properties and assets subject to no
liens, mortgages, pledges, security interests, hypothecs, encumbrances or
charges of any kind, except those granted to Lender and such others as are
specifically listed on Schedule 8.4 hereto or permitted under Section 9.8
hereof.
8.5 TAX RETURNS. Borrower has filed, or caused to be filed, in a timely manner
all tax returns, reports and declarations which are required to be filed by it
(without requests for extension except as previously disclosed in writing to
Lender). All information in such tax returns, reports and declarations is
complete and accurate in all material respects. Borrower has paid or caused to
be paid all taxes due and payable or claimed due and payable in any assessment
received by it, except taxes the validity of which are being contested in good
faith by appropriate proceedings diligently pursued and available to Borrower
and with respect to which adequate reserves have been set aside on its books.
Adequate provision has been made for the payment of all accrued and unpaid
federal,
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provincial, municipal, local, foreign and other taxes whether or not yet due
and payable and whether or not disputed.
8.6 LITIGATION. Except as set forth on the Information Certificate, there is
no present investigation by any governmental agency pending, or to the best
of Borrower's knowledge threatened, against or affecting Borrower, its assets
or business and there is no action, suit, proceeding or claim by any Person
pending, or to the best of Borrower's knowledge threatened, against Borrower
or its assets or goodwill, or against or affecting any transactions
contemplated by this Agreement, which has a material possibility (as
reasonably determined by Lender) of being adversely determined against
Borrower, and if adversely determined would result in any material adverse
change in the assets, business or condition (financial or otherwise) of
Borrower or would impair the ability of Borrower to perform its obligations
hereunder or under any of the other Financing Agreements to which it is a
party or of Lender to enforce any Obligations or realize upon any Collateral.
8.7 COMPLIANCE WITH OTHER AGREEMENTS AND APPLICABLE LAWS. Borrower is not in
default under, or in violation of any of the terms of, any agreement, contract,
instrument, lease or other commitment to which it is a party or by which it or
any of its assets are bound and Borrower is in compliance in all material
respects with all applicable provisions of laws, rules, regulations, licenses,
permits, approvals and orders of any foreign, federal, provincial or local
governmental authority where such default, violation or non-compliance would
result in a material adverse effect on the assets, business or condition
(financial or otherwise) of Borrower or would materially impair the ability of
Borrower to perform its obligations under the Financing Agreements to which it
is a party or of Lender to enforce any Obligations or realize upon the
Collateral.
8.8 BANK ACCOUNTS. All of the deposit accounts, investment accounts or other
accounts in the name of or used by Borrower maintained at any bank or other
financial institution are set forth on Schedule 8.8 hereto, subject to the right
of Borrower to establish new accounts in accordance with Section 9.13 below.
8.9 ENVIRONMENTAL COMPLIANCE.
(1) Except as set forth on Schedule 8.9 hereto, Borrower has not generated,
used, stored, treated, transported, manufactured, handled, produced or disposed
of any Hazardous Materials, on or off its premises (whether or not owned by it)
in any manner which at any time violates any applicable Environmental Law or any
license, permit, certificate, approval or similar authorization thereunder and
the operations of Borrower comply in all material respects with all
Environmental Laws and all licenses, permits, certificates, approvals and
similar authorizations thereunder.
(2) Except as set forth as Schedule 8.9 hereto, there has been no investigation,
proceeding, complaint, order, directive, claim, citation or notice by any
governmental authority or any other person nor is any pending or to the best of
Borrower's knowledge threatened, with respect to any non-compliance with or
violation of the requirements of any Environmental Law by Borrower or the
release, spill or discharge, threatened or actual, of any Hazardous Material or
the generation, use, storage, treatment, transportation, manufacture, handling,
production or disposal of any Hazardous Materials or any other environmental,
health or safety matter, which affects Borrower or its business, operations or
assets or any properties at which Borrower has transported, stored or disposed
of any Hazardous Materials.
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(3) Borrower has no material liability (contingent or otherwise) in
connection with a release, spill or discharge, threatened or actual, of any
Hazardous Materials or the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any
Hazardous Materials.
(4) Borrower has all licenses, permits, certificates, approvals or similar
authorizations required to be obtained or filed in connection with the
operations of Borrower under any Environmental Law and all of such licenses,
permits, certificates, approvals or similar authorizations are valid and in
full force and effect.
8.10 STATUS OF PENSION PLANS.
(1) The Pension Plans are duly registered under all applicable provincial
pension benefits legislation.
(2) All material obligations of Borrower (including fiduciary, funding,
investment and administration obligations) required to be performed in
connection with the Pension Plans or the funding agreements therefor have
been performed in a timely fashion. There are no outstanding disputes
concerning the assets held pursuant to any such funding agreement.
(3) All contributions or premiums required to be made by Borrower to the
Pension Plans have been made in a timely fashion in accordance with the terms
of the Pension Plans and applicable laws and regulations.
(4) All employee contributions to the Pension Plans required to be made by
way of authorized payroll deduction have been properly withheld by Borrower
and fully paid into the Pension Plans in a timely fashion.
(5) All material reports and disclosures relating to the Pension Plans
required by any applicable laws or regulations have been filed or distributed
in a timely fashion.
(6) There have been no improper withdrawals, or applications of, the assets
of any of the Pension Plans.
(7) No amount is owing by any of the Pension Plans under the INCOME TAX ACT
(Canada) or any provincial taxation statute.
(8) The Pension Plans are fully funded both on an ongoing basis and on a
solvency basis (using actuarial assumptions and methods which are consistent
with the valuations last filed with the applicable governmental authorities
and which are consistent with generally accepted actuarial principles).
(9) Borrower, after diligent enquiry, has neither any knowledge, nor any
grounds for believing, that any of the Pension Plans is the subject of an
investigation, any other proceeding, an action or a claim. There exists no
state of facts which after notice or lapse of time or both could reasonably
be expected to give rise to any such proceeding, action or claim.
8.11 YEAR 2000 COMPLIANCE. Any reprogramming required to permit the proper
functioning, in and following the year 2000, of (i) the computer systems of
the Borrower and (ii) equipment containing embedded microchips (including
systems and equipment supplied by others or with which
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the systems of the Borrower interface) and the testing of all such systems
and equipment, as so reprogrammed, has been completed in all material
respects. The computer and management information systems of the Borrower are
and, with ordinary course upgrading and maintenance, will continue for the
term of this Agreement to be, sufficient to permit the Borrower to conduct
their business without a material adverse effect on their assets, business or
condition (financial or other).
8.12 ACCURACY AND COMPLETENESS OF INFORMATION. All information furnished by
or on behalf of Borrower or GLC in writing to Lender in connection with this
Agreement or any of the other Financing Agreements or any transaction
contemplated hereby or thereby, including, without limitation, all
information on the Information Certificate is true and correct in all
material respects on the date as of which such information is dated or
certified and does not omit any material fact necessary in order to make such
information not misleading. No event or circumstance has occurred which has
had or could reasonably be expected to have a material adverse affect on the
business, assets or condition (financial or otherwise) of Borrower, which has
not been fully and accurately disclosed to Lender in writing.
8.13 SURVIVAL OF WARRANTIES; CUMULATIVE. All representations and warranties
contained in this Agreement or any of the other Financing Agreements shall
survive the execution and delivery of this Agreement and shall be deemed to
have been made again to Lender on the date of each additional borrowing or
other credit accommodation hereunder and shall be conclusively presumed to
have been relied on by Lender regardless of any investigation made or
information possessed by Lender. The representations and warranties set forth
herein shall be cumulative and in addition to any other representations or
warranties which Borrower shall now or hereafter give, or cause to be given,
to Lender pursuant to any Financing Agreement.
SECTION 9 - AFFIRMATIVE AND NEGATIVE COVENANTS
9.1 MAINTENANCE OF EXISTENCE. Borrower shall at all times preserve, renew and
keep in full, force and effect its corporate existence and rights and
franchises with respect thereto and maintain in full force and effect all
permits, licenses, trademarks, tradenames, approvals, authorizations, leases
and contracts necessary to carry on the business as presently or proposed to
be conducted; provided, however, that Borrower may (a) reincorporate or
re-form itself under the laws of any other province of Canada, (b) change its
form of organization from a an unlimited liability company to a limited
liability company or a corporation and (c) abandon any permit, license,
trademark, trade name, approval or authorization it no longer deems material
to its business. Borrower shall give Lender thirty (30) days prior written
notice of any proposed change in its name or structure, which notice shall
set forth the proposed new name or structure and Borrower shall deliver to
Lender a certified government copy of the amendment to the applicable
constituent document of Borrower providing for such name change immediately
as soon as it is available.
9.2 NEW COLLATERAL LOCATIONS. Borrower may open any new location within
Canada provided Borrower (a) gives Lender thirty (30) days prior written
notice of the intended opening of any such new location and (b) executes and
delivers, or causes to be executed and delivered, to Lender such agreements,
documents, and instruments as Lender may deem reasonably necessary or
desirable to protect its interests in the Collateral at such location,
including PPSA and other financing statements and such other evidence as
Lender may require of the perfection of Lender's first priority security
interests and liens where required by Lender and, if Borrower leases such
location, provides a favourable landlord waiver or subordination .
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9.3 COMPLIANCE WITH LAWS, REGULATIONS, ETC.
(1) Borrower shall, at all times, comply in all material respects with all
laws, rules, regulations, licenses, permits, approvals and orders applicable
to it and duly observe all requirements of any Federal, Provincial or local
governmental authority, including, without limitation, all statutes, rules,
regulations, orders, permits and stipulations relating to environmental
pollution and employee health and safety, including, without limitation, all
of the Environmental Laws where such non-compliance would result in a
material adverse effect on the assets, business or condition (financial or
otherwise) of Borrower or would materially impair the ability of Borrower to
perform its obligations under the Financing Documents to which it is a party
or of Lender to enforce any Obligations or realize upon the Collateral.
(2) Borrower shall take prompt and appropriate action to respond to any
non-compliance with any of the Environmental Laws in any material respect and
shall regularly report to Lender on such response.
(3) Borrower shall give both oral and written notice to Lender immediately
upon Borrower's receipt of any notice of, or Borrower's otherwise obtaining
knowledge of:
(a) the occurrence of any event involving the release, spill or
discharge, threatened or actual, of any Hazardous Material or
(b) any investigation, proceeding, complaint, order, directive,
claims, citation or notice with respect to:
(i) any non-compliance with or violation of any
Environmental Law by Borrower; or
(ii) the release, spill or discharge, threatened or
actual, of any Hazardous Material; or
(iii) the generation, use, storage, treatment,
transportation, manufacture, handling, production or
disposal of any Hazardous Materials; or
(iv) any other environmental, health or safety matter,
which affects any Borrower or its business,
operations or assets or any properties at which
Borrower transported, stored or disposed of any
Hazardous Materials.
(4) Borrower shall indemnify and hold harmless Lender, its directors,
officers, employees, agents, invitees, representatives, successors and
assigns, from and against any and all losses, claims, damages, liabilities,
costs, and expenses (including legal fees and expenses) directly or
indirectly arising out of or attributable to the use, generation,
manufacture, reproduction, storage, release, threatened release, spill,
discharge, disposal or presence of a Hazardous Material, including, without
limitation, the costs of any required or necessary repair, cleanup or other
remedial work with respect to any property of Borrower and the preparation
and implementation of any closure, remedial or other required plans. All
representations, warranties, covenants and indemnifications in this Section
9.3 shall survive the payment of the Obligations and the termination or
non-renewal of this Agreement.
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9.4 PAYMENT OF TAXES AND CLAIMS. Borrower shall duly pay and discharge all
taxes, assessments, contributions and governmental charges upon or against it or
its properties or assets, except for taxes the validity of which are being
contested in good faith by appropriate proceedings diligently pursued and
available to Borrower and with respect to which adequate reserves have been set
aside on its books. Borrower shall be liable for any tax or penalties imposed on
Lender as a result of the financing arrangements provided for herein and
Borrower agrees to indemnify and hold Lender harmless with respect to the
foregoing, and to repay to Lender on demand the amount thereof, and until paid
by Borrower such amount shall be added and deemed part of the Loans, PROVIDED,
THAT, nothing contained herein shall be construed to require Borrower to pay any
income or capital taxes of Lender from any amounts charged or paid hereunder to
Lender. The foregoing indemnity shall survive the payment of the Obligations and
the termination or non-renewal of this Agreement.
9.5 INSURANCE. Borrower shall, at all times, maintain with financially sound
and reputable insurers insurance with respect to the Collateral against loss
or damage and all other insurance of the kinds and in the amounts customarily
insured against or carried by corporations of established reputation engaged
in the same or similar businesses and similarly situated. Borrower shall
furnish certificates, policies or endorsements to Lender as Lender shall
require as proof of such insurance, and, if Borrower fails to do so, Lender
is authorized, but not required, to obtain such insurance at the expense of
Borrower. All policies shall provide for at least thirty (30) days prior
written notice to Lender of any cancellation of coverage. Borrower shall
cause Lender to be named as a loss payee and an additional insured (but
without any liability for any premiums) under such insurance policies and
Borrower shall obtain non-contributory lender's loss payable endorsements to
all casualty insurance policies in form and substance satisfactory to Lender.
Such lender's loss payable endorsements shall specify that the proceeds of
such insurance shall be payable to Lender as its interests may appear. At its
option, Lender may apply any insurance proceeds received by Lender at any
time to the cost of repairs or replacement of Collateral and/or to payment of
the Obligations, whether or not then due, in any order and in such manner as
Lender may determine or hold such proceeds as cash collateral for the
Obligations.
9.6 FINANCIAL STATEMENTS AND OTHER INFORMATION.
(1) Borrower shall keep proper books and records in which true and complete
entries shall be made of all dealings or transactions of or in relation to the
Collateral and the business of Borrower and its Subsidiaries (if any) in
accordance with GAAP and Borrower shall furnish or cause to be furnished to
Lender:
(a) within thirty (30) days after the end of each fiscal month,
monthly unaudited consolidated and consolidating financial
statements of Borrower (including in each case balance sheets,
statements of income and loss, statements of cash flow and
statements of shareholders' equity), all in reasonable detail,
fairly presenting the financial position and the results of
the operations of Borrower as of the end of and through such
fiscal month;
(b) within sixty (60) days after the end of each fiscal year
quarter, quarterly unaudited consolidated and consolidating
financial statements of Borrower (including in each case
balance sheets, statements of income and loss, statements of
cash flow and statements of shareholders' equity), all in
reasonable detail, fairly presenting the
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financial position and the results of the operations of
Borrower as of the end ofand through such fiscal quarter; and
(c) within one hundred twenty (120) days after the end of each
fiscal year, audited consolidated and consolidating financial
statements of Borrower (including in each case balance sheets,
statements of income and loss, statements of changes in
financial position and statements of shareholders' equity),
and the accompanying notes thereto, all in reasonable detail,
fairly presenting the financial position and the results of
the operations of Borrower and its subsidiaries as of the end
of and for such fiscal year, together with the unqualified
opinion of independent chartered accountants, which
accountants shall be a nationally recognized independent
accounting firm or, if not, another independent accounting
firm selected by Borrower reasonably acceptable to Lender,
that such financial statements have been prepared in
accordance with GAAP, and present fairly the results of
operations and financial condition of Borrower as of the end
of and for the fiscal year then ended.
(2) Borrower shall promptly notify Lender in writing of the details of
(a) any loss, damage, investigation, action, suit, proceeding or
claim relating to the Collateral or any other property which
is security for the Obligations which would result in any
material adverse change in Borrower's business, properties,
assets, goodwill or condition, financial or otherwise; and
(b) the occurrence of any Event of Default or event which, with
the passage of time or giving of notice or both, would
constitute an Event of Default.
(3) Borrower shall promptly after the sending or filing thereof furnish or
cause to be furnished to Lender copies of all reports which GLC sends to its
shareholders generally and copies of all reports and registration statements
which Borrower or GLC files with the Securities Exchange Commission, and
United States or Canadian national exchange or any provincial securities
commission or securities exchange.
(4) Within thirty (30) days after the date hereof, Borrower shall furnish or
cause to be furnished to Lender updated projected balance sheets and income
statements of GLC and its Subsidiaries after giving effect to the
transactions contemplated by this Agreement.
(5) Borrower shall furnish or cause to be furnished to Lender such budgets,
forecasts, projections and other information in respect of the Collateral and
the business of Borrower, as Lender may, from time to time, reasonably
request. Lender is hereby authorized to deliver a copy of any financial
statement or any other information relating to the business of Borrower to
any court or other government agency or to any participant or assignee or
prospective participant or assignee. Borrower hereby irrevocably authorizes
and directs all accountants or auditors to deliver to Lender, at Borrower's
expense, copies of the financial statements of Borrower and any reports or
management letters prepared by such accountants or auditors on behalf of
Borrower and to disclose to Lender such information as they may have
regarding the business of Borrower. Any information provided to Lender
pursuant to this Section 9.6(5) shall be subject to Section 12.6 hereof. Any
documents, schedules, invoices or other papers delivered to Lender may be
destroyed or otherwise disposed of by Lender one (1) year after the same are
delivered to Lender, except as otherwise designated by Borrower to Lender in
writing.
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(6) Borrower shall deliver to Lender within five (5) days after the applicable
due date for the payment thereof, a statement in form satisfactory to Lender
confirming the payment of rent and other amounts when due to owners and lessors
of real property used by Borrower, including, but not limited to amounts due
under a lease agreement to 405 The West Mall Portfolio Inc. and Taradown
Holdings Inc., certified by the chief financial officer of Borrower as true and
correct.
(7) Borrower shall deliver to Lender within five (5) days after the applicable
due date for the payment thereof, a statement in form satisfactory to Lender
confirming the remittance of such taxes and duties then due by Borrower to the
governmental authority responsible for collecting such taxes and duties
certified by the chief financial officer of Borrower as true and correct.
9.7 SALE OF ASSETS, CONSOLIDATION, AMALGAMATION, DISSOLUTION, ETC. Borrower
shall not, directly or indirectly:
(a) amalgamate with any other Person or permit any other Person to
amalgamate with it; other than an entity solely formed for the
purpose of a re-incorporation or re-formation of Borrower
permitted under Section 9.1 hereof or permit any other Person
other than an entity solely formed for the purpose of a
re-incorporation or re-formation of Borrower permitted under
Section 9.1 hereof to amalgamate with it provided that any
survivor of such amalgamation shall assume the Obligations of
the amalgamated Borrower and be subject to the terms and
conditions of this Agreement and the other Financing
Agreements;
(b) sell, assign, lease, transfer, abandon or otherwise dispose of
any shares or indebtedness to any other Person or any of its
assets to any other Person except for:
(i) sales of Inventory in the ordinary course of
business; and
(ii) the disposition of worn-out or obsolete Equipment or
Equipment no longer used in the business of Borrower
so long as:
(A) if an Event of Default exists or has
occurred and is continuing, any proceeds are
paid to Lender; and
(B) the fair market value of such Equipment,
together with the fair market value of all
worn-out or obsolete "Equipment" (as defined
in the US Loan and Security Agreement and
hereinafter referred to as "US Equipment")
or US Equipment no longer used in the
business of US Borrowers and sold by US
Borrowers, does not exceed the Canadian
Dollar Amount of One Million US Dollars (US$
1,000,000) for all such Equipment and US
Equipment disposed of in any fiscal year of
Borrower; and
(iii) in connection with the sale of all or substantially
all the assets of Borrower or a Subsidiary of
Borrower or the sale of all the Securities of
Borrower or a Subsidiary of Borrower, where such
sales, together with all sales of similar assets and
Securities referred to in Section 9.7(b)(iii) of the
US Loan and Security Agreement, have an aggregate
fair market value not to exceed the Canadian Dollar
Amount of Twenty Five Million US Dollars
(US$25,000,000)
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less the fair market value of any assets or
Securities previously sold by Borrower in
connection with the sale of all or substantially
all the assets of Borrower or a Subsidiary of
Borrower or the sale of all the Securities of a
Subsidiary of Borrower and/or the fair market
value of a previous sale of any similar assets or
Securities referred to in Section 9.7(b)(iii) of
the US Loan and Security Agreement during the term
of this Agreement, and PROVIDED THAT:
(A) no Event of Default, or an event which with
notice or passage of time or both would
constitute an Event of Default, exists or
has occurred and is continuing immediately
prior to and after giving effect to such
sale; and
(B) Borrower shall pay to Lender the greater of:
(1) fifty percent (50%) of the amount by
which the aggregate amount (net of taxes,
assumed liabilities and transaction costs)
received by Borrower from such sales exceeds
the Canadian Dollar Amount of Five Million
US Dollars (US$5,000,000) and one hundred
percent (100%) of the amount by which the
aggregate amount (net of taxes, assumed
liabilities and transaction costs) received
by Borrower from such sales exceeds the
Canadian Dollar Amount of Ten Million US
Dollars (US$10,000,000) or (2) the portion
of the amount of Loans then outstanding
advanced against any Accounts sold in
connection with any such sales (it being
agreed that any such payments to Lender
shall not reduce the Maximum Credit unless
made pursuant to Section 12.1(3) hereof and
shall not be included in calculating the
amount of Revolving Loans available pursuant
to Section 2.1(2)(a)(iii));
(iv) the transfer of all or part of the ownership of GIFL
to any wholly-owned subsidiary of GLC ;
(c) form Subsidiaries of Borrower, unless the aggregate amount of
all contributions made by Borrower to such Subsidiaries is
less than the Canadian Dollar Amount of Two Million US Dollars
(US$2,000,000) in the aggregate during the term of this
Agreement and PROVIDED THAT; (i) no Event of Default, or an
event which with notice or passage of time or both would
constitute an Event of Default, exists or has occurred and is
continuing immediately prior to and after giving effect to the
formation of each such Subsidiary, (ii) if any such Subsidiary
is formed on or prior to April 15, 2000, Total Excess
Availability exceeds Fifteen Million US Dollars
(US$15,000,000) immediately prior to and after giving effect
to such formation or if any such Subsidiary is formed after
April 15, 2000, Total Excess Availability exceeds Ten Million
US Dollars (US$10,000,000) immediately prior to and after
giving effect to such formation, (iii) any such Subsidiary
formed engages in a line of business compatible but not
competitively adverse with Borrower's line of business and
(iv) Borrower shall not contribute to any such Subsidiary any
non-cash Collateral with a fair market value exceeding in the
aggregate more than Ten Thousand US Dollars (US$10,000) during
the term of this Agreement or any proprietary information
except that a license to use such proprietary information on a
non-exclusive basis shall not be
<PAGE>
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deemed to be a contribution of proprietary information for
purposes of this Section 9.7(c).
(d) acquire the Securities of any Person in which such person
would become a Subsidiary of Borrower except for Permitted
Acquisitions;
(e) wind up, liquidate or dissolve except following the transfer
of all or substantially all of its assets in a transaction
permitted by clause (b)(iii) of this Section 9.7, or
(f) agree to do any of the foregoing.
9.8 ENCUMBRANCES. Borrower shall not create, incur, assume or suffer to exist
any security interest, mortgage, pledge, lien, charge or other encumbrance of
any nature whatsoever on any of its assets or properties, including the
Collateral, except:
(a) liens and security interests of Lender;
(b) liens securing the payment of taxes, either not yet overdue or
the validity of which are being contested in good faith by
appropriate proceedings diligently pursued and available to
Borrower and with respect to which adequate reserves have been
set aside on its books;
(c) security deposits in the ordinary course of business;
(d) non-consensual statutory liens (other than liens securing the
payment of taxes) arising in the ordinary course of Borrower's
business to the extent:
(i) such liens do not affect Accounts or are otherwise
not in imminent danger of foreclosure; or
(ii) such liens secure indebtedness relating to claims or
liabilities which are fully insured and being
defended at the sole cost and expense and at the sole
risk of the insurer (subject to applicable
deductibles) or being contested in good faith by
appropriate proceedings diligently pursued and
available to Borrower, in each case prior to the
commencement of foreclosure or other similar
proceedings and with respect to which adequate
reserves have been set aside on its books;
(e) zoning restrictions, easements, licenses, covenants and other
restrictions affecting the use of real property which do not
interfere in any material respect with the use of such real
property or ordinary conduct of the business of Borrower as
presently conducted thereon or materially impair the value of
the real property which may be subject thereto;
(f) purchase money security interests in Equipment (including
capital leases) and purchase money mortgages on real estate so
long as such security interests and mortgages do not apply to
any property of Borrower other than the Equipment or real
estate so acquired, and the indebtedness secured thereby does
not exceed the cost of the Equipment or real estate so
acquired, as the case may be; and
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(g) the security interests and liens set forth on Schedule 8.4
hereto or replacements therefor that do not extend to any
other property or increase the amounts secured.
9.9 INDEBTEDNESS. Borrower shall not incur, create, assume, become or be liable
in any manner with respect to, or permit to exist, any obligations for borrowed
money or indebtedness, EXCEPT:
(a) the Obligations;
(b) trade obligations and normal accruals in the ordinary course
of business not yet due and payable, or with respect to which
the Borrower is contesting in good faith the amount or
validity thereof by appropriate proceedings diligently pursued
and available to Borrower, and with respect to which adequate
reserves have been set aside on its books;
(c) purchase money indebtedness (including capital leases) to the
extent not incurred or secured by liens (including capital
leases) in violation of any other provision of this Agreement;
(d) the indebtedness set forth on Schedule 9.9 hereto; PROVIDED,
THAT,
(i) Borrower may only make regularly scheduled payments
of principal and interest in respect of such
indebtedness in accordance with the terms of the
agreement or instrument evidencing or giving rise to
such indebtedness as in effect on the date hereof;
(ii) Borrower shall not, directly or indirectly;
(A) amend, modify, alter or change the terms of
such indebtedness or any agreement, document
or instrument related thereto as in effect
on the date hereof; or
(B) redeem, retire, defease, purchase or
otherwise acquire such indebtedness, or set
aside or otherwise deposit or invest any
sums for such purpose; and
(iii) Borrower shall furnish to Lender all notices or
demands in connection with such indebtedness either
received by Borrower or on its behalf, promptly after
the receipt thereof, or sent by Borrower or on its
behalf, concurrently with the sending thereof, as the
case may be;
(e) indebtedness owing to any US Borrower, GL UK, GLC or GIFL;
PROVIDED THAT, no Event of Default, or an event which with
notice or passage of time or both would constitute an Event of
Default, exists or has occurred and is continuing immediately
prior to and after giving effect to the incurrence, creation
or assumption of such indebtedness; and
(f) other Indebtedness at any one time not exceeding the Canadian
Dollar Amount of Five Hundred Thousand US Dollars (US$500,000)
outstanding.
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9.10 LOANS, INVESTMENTS, GUARANTEES, ETC. Borrower shall not, directly or
indirectly, make any loans or advance money or property to any person, or invest
in (by capital contribution, dividend or otherwise) or purchase or repurchase
the shares or indebtedness or all or a substantial part of the assets or
property of any person, or guarantee, assume, endorse, or otherwise become
responsible for (directly or indirectly) the indebtedness, performance,
obligations or dividends of any Person or agree to do any of the foregoing,
except:
(a) the endorsement of instruments for collection or deposit in
the ordinary course of business;
(b) investments in:
(i) short-term direct obligations of the Canadian
Government;
(ii) negotiable certificates of deposit issued by any bank
satisfactory to Lender, payable to the order of the
Borrower or to bearer and delivered to Lender; and
(iii) commercial paper rated A1 or P1;
PROVIDED, THAT, as to any of the foregoing, unless
waived in writing by Lender, Borrower shall take such
actions as are deemed necessary by Lender to perfect
the security interest of Lender in such investments;
(c) the guarantees set forth in the Information Certificate of
Borrower;
(d) the guarantees issued or, to the extent required by the terms
of the indenture governing the Senior Notes as in effect on
the date of this Agreement or any indenture governing notes
issued in replacement of the Senior Notes; PROVIDED THAT, such
replacement notes do not provide for a higher interest rate, a
maturity date or any principal payments during the term of
this Agreement, and otherwise contain provisions reasonably
satisfactory to Lender and the holders of such replacement
notes have executed agreements providing for the subordination
of such notes to the Obligations on terms and conditions
reasonably satisfactory to Lender;
(e) Permitted Acquisitions and any transaction permitted by
Sections 9.1 or 9.7 hereof;
(f) loans or advances to, or investments in, or purchases or
repurchases of the Securities, assets or indebtedness of any
of the US Borrowers, or GL UK or guarantees or the assumption
of letter of credit obligations for the benefit of any US
Borrower or GL UK; PROVIDED THAT,
(i) no Event of Default, or an event which with notice or
passage of time or both would constitute an Event of
Default, exists or has occurred and is continuing
immediately prior to and after giving effect to any
such loan, advance, investment, purchase, repurchase,
guarantee or assumption of letter of credit
obligation,
(ii) such loans, advances, investments, purchases or
repurchases do not violate the capitalization
requirements of Borrower under applicable laws, and
<PAGE>
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(iii) such loans or advances are evidenced by a promissory
note or notes (which notes shall be secured by a
guarantee and pledge agreement dated March 23, 2000
by GeoLogistics Holdings (Bermuda) Limited) the
rights to which have been collaterally pledged to
Lender;
(g) loans or advances to GIFL or GLC; PROVIDED THAT,
(i) no Event of Default, or an event which with notice or
passage of time or both would constitute an Event of
Default, exists or has occurred and is continuing
immediately prior to and after giving effect to such
loans or advances,
(ii) such loans or advances do not violate the
capitalization requirements of Borrower, under
applicable laws,
(iii) all the proceeds of such loans or advances are
immediately loaned or advanced by GIFL or GLC, as the
case may be, to a US Borrower or GL UK, and
(iv) such loans or advances are evidenced by a promissory
note or notes (which notes shall be secured by a
guarantee and pledge agreement dated March 23, 2000
by GeoLogistics Holdings (Bermuda) Limited) the
rights to which have been collaterally pledged to
Lender;
(h) loans or advances to GLC (i) for the purpose of paying
interest due under the Senior Notes, (ii) for the purpose of
paying management fees to Sponsor or any of their affiliates
in an aggregate amount for Borrower not to exceed the Canadian
Dollar Amount of Seven Hundred Thousand US Dollars
(US$700,000) (such amount is not to include amounts in respect
of the one-time loan or advance by US Borrowers to GLC which
shall not to exceed One Hundred Seventy Five Thousand US
Dollars (US$175,000) for the purpose of paying unpaid
management fees to the Sponsors or any of their affiliates
earned during US Borrowers' 1999 fiscal year) less amounts
paid by US Borrowers or GL UK to GLC for such purpose in any
fiscal year of Borrower and (iii) for the other purposes set
forth in Schedule 9.10(h) attached hereto in an aggregate
amount for Borrower not to exceed the Canadian Dollar Amount
of Twenty One Million US Dollars (US$21,000,000) less amounts
paid by US Borrowers or GL UK to GLC for such purposes in any
fiscal year of Borrower, PROVIDED THAT,
(i) no Event of Default, or an event which with notice or
passage of time or both would constitute an Event of
Default, exists or has occurred and is continuing
immediately prior to and after giving effect to such
loans or advances,
(ii) such loans or advances do not violate the
capitalization requirements of Borrower under
applicable laws, and
(iii) such loans or advances are evidenced by a promissory
note or notes (which notes shall be secured by a
guarantee and pledge agreement dated March 23, 2000
by GeoLogistics Holdings (Bermuda) Limited) the
rights to which have been collaterally pledged to
Lender;
<PAGE>
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(i) loans or advances to, or guarantees or the assumption of
letter of credit obligations for the benefit of, GLC or a
Subsidiary of GLC (other than Borrower, a US Borrower or GL
UK); PROVIDED THAT,
(i) no Event of Default, or an event which with notice or
passage of time or both would constitute an Event of
Default, exists or has occurred and is continuing
immediately prior to and after giving effect to such
loans, advances, guarantees or assumption of letter
of credit obligations,
(ii) such loans, advances, guarantees or assumption of
letter of credit obligations do not violate the
capitalization requirements of Borrower under
applicable laws,
(iii) if such loans, advances, guarantees or assumption of
letter of credit obligations are made on or prior to
April 15, 2000, Total Excess Availability exceeds
Fifteen Million US Dollars (US$15,000,000)
immediately prior to and after giving effect to such
loans, advances guarantees or assumption of letter of
credit obligations or if such loans, advances,
guarantees or assumption of letter of credit
obligations are made after April 15, 2000, Total
Excess Availability exceeds Ten Million US Dollars
(US$10,000,000) immediately prior to and after giving
effect to such loans, advances, guarantees or
assumption of letter of credit obligations, and
(iv) such loans or advances are evidenced by a promissory
note or notes (which notes shall be secured by a
guarantee and pledge agreement dated March 23, 2000
by GeoLogistics Holdings (Bermuda) Limited) the
rights to which have been collaterally pledged to
Lender;
(j) other outstanding loans or advances by Borrower not to exceed
the Canadian Dollar Amount of Two Hundred and Fifty Thousand
US Dollars (US$250,000) in the aggregate at any time.
9.11 DIVIDENDS AND REDEMPTIONS. Borrower shall not, directly or indirectly,
declare or pay any dividends on account of any shares or membership interest of
Borrower now or hereafter outstanding, or set aside or otherwise deposit or
invest any sums for such purpose, or redeem, retire, defease, purchase or
otherwise acquire any shares of any class or membership interest, as the case
may be, (or set aside or otherwise deposit or invest any sums for such purpose)
for any consideration other than common shares or membership interest or apply
or set apart any sum, or make any other distribution (by reduction of capital or
otherwise) in respect of any such shares or membership interest or agree to do
any of the foregoing.
<PAGE>
- 49 -
9.12 TRANSACTIONS WITH AFFILIATES. Borrower shall not, directly or indirectly;
purchase, acquire or lease any property from, or sell, transfer or lease any
property to, any officer, director, agent or other person affiliated with
Borrower, except in the ordinary course of and pursuant to the reasonable
requirements of Borrower's business and upon fair and reasonable terms no less
favourable to the Borrower than Borrower would obtain in a comparable arm's
length transaction with an unaffiliated person. For this purpose, affiliate
shall not include Borrower's own Subsidiaries, US Borrowers and their respective
Subsidiaries, GL UK, GLC or GIFL.
9.13 ADDITIONAL BANK ACCOUNTS. Borrower shall not, directly or indirectly, open,
establish or maintain any deposit account, investment account or any other
account with any bank or other financial institution, other than the Blocked
Accounts and the accounts set forth in Schedule 8.8 hereto, except:
(a) as to any new or additional Blocked Accounts, if any, and
other such new or additional accounts which contain any
Collateral or proceeds thereof, with the prior written consent
of Lender and subject to such conditions thereto as Lender may
establish; and
(b) as to any accounts used by Borrower to make payments of
payroll, taxes or other obligations to third parties, after
prior written notice to Lender.
9.14 INTELLECTUAL PROPERTY. In the event Borrower obtains or applies for any
material intellectual property rights or obtains any material licenses with
respect thereto, Borrower shall immediately notify Lender thereof and shall
provide to Lender copies of all written materials including, but not limited to,
applications and licenses with respect to such intellectual property rights. At
Lender's request, Borrower shall promptly execute and deliver to Lender an
intellectual property security agreement granting to Lender a perfected security
interest in such intellectual property rights in form and substance satisfactory
to Lender.
9.15 APPLICATIONS UNDER THE COMPANIES' CREDITORS ARRANGEMENT ACT. Borrower
acknowledges that its business and financial relationships with Lender are
unique from its relationship with any other of its creditors. Borrower agrees
that it shall not file any plan of arrangement under the CCAA ("CCAA Plan")
which provides for, or would permit directly or indirectly, Lender to be
classified with any other creditor of Borrower for purposes of such CCAA Plan or
otherwise.
9.16 OPERATION OF PENSION PLANS.
(1) Borrower shall administer the Pension Plans in accordance with the
requirements of the applicable pension plan texts, funding agreements, the
INCOME TAX ACT (Canada) and applicable provincial pension benefits legislation.
(2) Borrower shall deliver to Lender an undertaking of the funding agent for
each of the Pension Plans stating that the funding agent will notify Lender
within 7 days of Borrower's failure to make any required contribution to the
applicable Pension Plan.
(3) Borrower shall not accept payment of any amount from any of the Pension
Plans without the prior written consent of Lender.
<PAGE>
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(4) Without the prior written consent of Lender, Borrower shall not terminate,
or cause to be terminated, any of the Pension Plans, if such plan would have a
solvency deficiency on termination.
(5) Borrower shall promptly provide Lender with any documentation relating to
any of the Pension Plans as Lender may reasonably request. Borrower shall notify
Lender within 30 days of
(a) a material increase in the liabilities of any of the Pension
Plans,
(b) the establishment of a new registered pension plan,
(c) commencing payment of contributions to a Pension Plan to which
Borrower had not previously been contributing.
9.17 COSTS AND EXPENSES. Borrower shall pay to Lender on demand all reasonable
costs, expenses, filing fees and taxes paid or payable in connection with the
preparation, negotiation, execution, delivery, recording, administration,
collection, liquidation, enforcement and defense of the Obligations, Lender's
rights in the Collateral, this Agreement, the other Financing Agreements and all
other documents related hereto or thereto, including any amendments, supplements
or consents which may hereafter be contemplated (whether or not executed) or
entered into in respect hereof and thereof, including, but not limited to:
(a) all costs and expenses of filing or recording (including PPSA
financing statement and other similar filing and recording
fees and taxes, documentary taxes, intangibles taxes and
mortgage recording taxes and fees, if applicable);
(b) all costs and expenses and fees for title opinions, insurance
premiums, environmental audits, surveys, assessments,
engineering reports and inspections, appraisal fees and search
fees ;
(c) costs and expenses of remitting loan proceeds, collecting
cheques and other items of payment, and establishing and
maintaining the Blocked Accounts, if any, and the Payment
Accounts, together with Lender's customary charges and fees
with respect thereto;
(d) charges, fees or expenses charged by any bank or issuer in
connection with the Letter of Credit Accommodations;
(e) costs and expenses of preserving and protecting the
Collateral;
(f) costs and expenses paid or incurred in connection with
obtaining payment of the Obligations, enforcing the security
interests and liens of Lender, selling or otherwise realizing
upon the Collateral, and otherwise enforcing the provisions of
this Agreement and the other Financing Agreements or defending
any claims made or threatened against Lender arising out of
the transactions contemplated hereby and thereby (including,
without limitation, preparations for and consultations
concerning any such matters);
(g) all out-of-pocket expenses and costs incurred by Lender or
Lender's examiners in the conduct of their periodic field
examinations of the Collateral and Borrower's
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operations, plus a per diem charge at the rate of Seven
Hundred and Fifty US Dollars (US$750) per person, per day
for Lender's examiners in the field and office; and
(h) the fees and disbursements of counsel (including legal
assistants) to Lender in connection with any of the foregoing.
9.18 FURTHER ASSURANCES. At the request of Lender at any time and from time to
time, Borrower shall, at its expense, duly execute and deliver, or cause to be
duly executed and delivered, such further agreements, documents and instruments,
and do or cause to be done such further acts as may be necessary or proper to
evidence, perfect, maintain and enforce the security interests and liens and the
priority thereof in the Collateral and to otherwise effectuate the provisions or
purposes of this Agreement or any of the other Financing Agreements. Lender may
at any time and from time to time request a certificate from an officer of
Borrower representing that all conditions precedent to the making of Loans and
providing Letter of Credit Accommodations contained herein are satisfied. In the
event of such request by Lender, Lender may, at its option, cease to make any
further Loans or provide any further Letter of Credit Accommodations until
Lender has received such certificate and, in addition, Lender has determined
that such conditions are satisfied. Where permitted by law, Borrower hereby
authorizes Lender to execute and file one or more PPSA or other financing
statements or notices signed only by Lender or Lender's representative.
SECTION 10 - EVENTS OF DEFAULT AND REMEDIES
10.1 EVENTS OF DEFAULT. The occurrence or existence of any one or more of the
following events are referred to herein individually as an "Event of Default",
and collectively as "Events of Default":
(1) Borrower fails to pay when due any of the Obligations (other than interest
or fees due hereunder);
(2) Borrower fails to pay any interest or fees within three (3) days after such
interest or fees become due hereunder; provided that such three (3) day period
shall not apply in the event that Borrower intentionally diverts payments on
Accounts or other proceeds of Collateral from the Blocked Account;
(3) Borrower fails to perform any of the terms, covenants, conditions or
provisions contained in this Agreement or any of the other Financing Agreements;
and such failure shall continue for ten (10) Business Days; provided that, such
ten (10) Business Day period shall not apply in the case of (i) any failure to
perform a term, covenant, condition or provision which results in the occurrence
of an Event of Default addressed in any other provision or paragraph of this
Section 10.1, (ii) any failure to perform any such term, covenant, condition or
provision that has been the subject of a two (2) previous failures within the
prior twelve (12) month period or (iii) an intentional breach by Borrower of
such term, covenant, condition or provision;
(4) any representation, warranty or statement of fact made by Borrower to Lender
in this Agreement, the other Financing Agreements or any other agreement,
schedule, confirmatory assignment or otherwise shall when made or deemed made be
false or misleading in any material respect;
<PAGE>
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(5) any Obligor revokes or terminates any of the terms, covenants, conditions or
provisions of any guarantee, endorsement or other agreement of such party in
favour of Lender;
(6) any judgment for the payment of money is rendered against Borrower or any
Obligor in excess of the Canadian Dollar Amount of Two Million Five Hundred
Thousand US Dollars (US$2,500,000) in any one case or against Borrower, any
Obligor, US Borrowers or any "Obligor" (as defined and determined under the US
Loan and Security Agreement) in excess of the Canadian Dollar Amount of Five
Million US Dollars (US$5,000,000) in the aggregate and shall remain undischarged
or unvacated for a period in excess of thirty (30) days or execution shall at
any time not be effectively stayed, or any material judgment other than for the
payment of money, or injunction, attachment, garnishment or execution is
rendered against Borrower or any Obligor or any of their assets;
(7) Borrower or any Obligor, which is a partnership, limited or unlimited
liability company, limited partnership, limited liability partnership or a
corporation, dissolves or suspends or discontinues doing business;
(8) Borrower or any Obligor becomes unable generally to pay its debts as they
become due, makes an assignment for the benefit of creditors proposes to make,
makes or sends notice of a bulk sale or calls a meeting of its creditors or
principal creditors (other then the holders of the Senior Notes);
(9) a petition, case or proceeding under the bankruptcy laws of Canada or
similar laws of any foreign jurisdiction now or hereafter in effect or under any
insolvency, arrangement, reorganization, moratorium, receivership, readjustment
of debt, dissolution or liquidation law or statute of any jurisdiction now or
hereafter in effect (whether at law or in equity) is filed or commenced against
Borrower or any Obligor or all or any part of its properties and such petition
or application is not dismissed or stayed within ninety (90) days after the date
of its filing or Borrower or any Obligor shall file any answer admitting or not
contesting such petition or application or indicates its consent to,
acquiescence in or approval of, any such action or proceeding or such petition
or application is not dismissed or stayed within ninety (90) days after the date
of its filing or the relief requested is granted sooner provided however,
notwithstanding anything to the contrary set forth herein, Lender shall have no
obligation to advance any Loans or provide any Letter of Credit Accommodations
during any period that such petition or application remains pending;
(10) a petition, case or proceeding under the bankruptcy laws of Canada or
similar laws of any foreign jurisdiction now or hereafter in effect or under any
insolvency, arrangement, reorganization, moratorium, receivership, readjustment
of debt, dissolution or liquidation law or statute of any jurisdiction now or
hereafter in effect (whether at a law or equity) is filed or commenced by
Borrower or any Obligor for all or any part of its property including, without
limitation, if Borrower or any Obligor shall:
(a) apply for or consent to the appointment of a receiver, trustee
or liquidator of it or of all or a substantial part of its
property and assets;
(b) be unable, or admit in writing its inability, to pay its debts
as they mature, or commit any other act of bankruptcy;
(c) make a general assignment for the benefit of creditors;
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(d) file a voluntary petition or assignment in bankruptcy or a
proposal seeking a reorganization, compromise, moratorium or
arrangement with its creditors;
(e) take advantage of any insolvency or other similar law
pertaining to arrangements, moratoriums, compromises or
reorganizations, or admit the material allegations of a
petition or application filed in respect of it in any
bankruptcy, reorganization or insolvency proceeding; or
(f) take any corporate action for the purpose of effecting any of
the foregoing;
(11) any default by Borrower or any Obligor under any agreement, document or
instrument relating to any indebtedness for borrowed money owing to any person
other than Lender, or any capitalized lease obligations, contingent indebtedness
in connection with any guarantee, letter of credit, indemnity or similar type of
instrument in favour of any person other than Lender, in any case in an amount
in excess of the Canadian Dollar Amount of Two Million Five Hundred Thousand US
Dollars (US$2,500,000), which default continues for more than the applicable
cure period;
(12) without providing prior written notice to Lender, concurrently with
providing notice to US Lender, GLC or any Subsidiary of GLC (other than
Borrower, US Borrowers or GL UK), in connection with sales of all or
substantially all the assets of a Subsidiary of GLC (other than Borrower, US
Borrowers or GL UK) or sales of all the Securities of a Subsidiary of GLC (other
than Borrower, US Borrower or GL UK), sells or agrees to sell assets or
Securities having a fair market value in excess of the Canadian Dollar Amount of
Twenty Five Million US Dollars (US$25,000,000) in the aggregate at any time
during the term of this Agreement;
(13) GLC ceases to hold, directly or indirectly, all of the Securities of
Borrower;
(14) charging of Borrower or any Obligor under any criminal statute, or
commencement or threatened commencement of criminal or civil proceedings against
Borrower or any Obligor, pursuant to which statute or proceedings the penalties
or remedies sought or available include forfeiture of any of any material
property of Borrower or such Obligor;
(15) any default by GL UK or any of the US Borrowers or an "Event of Default"
shall occur under the terms of the US Loan and Security Agreement or the UK Loan
Agreement or any other document, note and/or instrument executed or delivered in
connection therewith;
(16) there shall be a material adverse change in the business, assets or
condition (financial or otherwise) of Borrower or any Obligor after the date
hereof; or
(17) there shall be an event of default under any of the other Financing
Agreements.
10.2 REMEDIES.
(1) At any time an Event of Default exists or has occurred and is continuing,
Lender shall have all rights and remedies provided in this Agreement, the other
Financing Agreements, THE PERSONAL PROPERTY SECURITY ACT (Ontario) and other
applicable law, all of which rights and remedies may be exercised without notice
to or consent by Borrower or any Obligor, except as such notice or consent is
expressly provided for hereunder or required by applicable law. All rights,
remedies and powers granted to Lender hereunder, under any of the other
Financing Agreements, the PERSONAL PROPERTY
<PAGE>
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SECURITY ACT (Ontario) or other applicable law, are cumulative, not exclusive
and enforceable, in Lender's discretion, alternatively, successively, or
concurrently on any one or more occasions, and shall include, without
limitation, the right to apply to a court of equity for an injunction to
restrain a breach or threatened breach by Borrower of this Agreement or any
of the other Financing Agreements. Lender may, at any time or times, proceed
directly against Borrower or any Obligor to collect the Obligations without
prior recourse to the Collateral.
(2) Without limiting the foregoing, at any time an Event of Default exists or
has occurred and is continuing, Lender may, in its discretion and without
limitation,
(a) accelerate the payment of all Obligations and demand immediate
payment thereof to Lender (PROVIDED, THAT, upon the occurrence
of any Event of Default described in Sections 10.1(9) and
10.1(10), all Obligations shall automatically become
immediately due and payable);
(b) with or without judicial process or the aid or assistance of
others, enter upon any premises on or in which any of the
Collateral may be located and take possession of the
Collateral or complete processing, manufacturing and repair of
all or any portion of the Collateral and carry on the business
of Borrower;
(c) require Borrower, at Borrower's expense, to assemble and make
available to Lender any part or all of the Collateral at any
place and time designated by Lender;
(d) collect, foreclose, receive, appropriate, setoff and realize
upon any and all Collateral;
(e) remove any or all of the Collateral from any premises on or in
which the same may be located for the purpose of effecting the
sale, foreclosure or other disposition thereof or for any
other purpose;
(f) sell, lease, transfer, assign, deliver or otherwise dispose of
any and all Collateral (including, without limitation,
entering into contracts with respect thereto, public or
private sales at any exchange, broker's board, at any office
of Lender or elsewhere) at such prices or terms as Lender may
deem reasonable, for cash, upon credit or for future delivery,
with the Lender having the right to purchase the whole or any
part of the Collateral at any such public sale, all of the
foregoing being free from any right or equity of redemption of
Borrower, which right or equity of redemption is hereby
expressly waived and released by Borrower;
(g) borrow money and use the Collateral directly or indirectly in
carrying on Borrower's business or as security for loans or
advances for any such purposes;
(h) grant extensions of time and other indulgences, take and give
up security, accept compositions, grant releases and
discharges, and otherwise deal with Borrower, debtors of
Borrower, sureties and others as Lender may see fit without
prejudice to the liability of Borrower or Lender's right to
hold and realize the security interest created under any
Financing Agreement; and/or
(i) terminate this Agreement.
<PAGE>
- 55 -
If any of the Collateral is sold or leased by Lender upon credit terms or for
future delivery, the Obligations shall not be reduced as a result thereof until
payment therefor is finally collected by Lender. If notice of disposition of
Collateral is required by law, five (5) days prior notice by Lender to Borrower
designating the time and place of any public sale or the time after which any
private sale or other intended disposition of Collateral is to be made, shall be
deemed to be reasonable notice thereof and Borrower waives any other notice. In
the event Lender institutes an action to recover any Collateral or seeks
recovery of any Collateral by way of prejudgment remedy, Borrower waives the
posting of any bond which might otherwise be required.
(3) Lender may apply the cash proceeds of Collateral actually received by Lender
from any sale, lease, foreclosure or other disposition of the Collateral to
payment of the Obligations, in whole or in part and in such order as Lender may
elect, whether or not then due. Borrower shall remain liable to Lender for the
payment of any deficiency with interest at the highest rate provided for herein
and all costs and expenses of collection or enforcement, including legal costs
and expenses.
(4) Without limiting the foregoing, upon the occurrence of an Event of Default
or an event which with notice or passage of time or both would constitute an
Event of Default, Lender may, at its option, without notice, (i) cease making
Loans or arranging Letter of Credit Accommodations or reduce the lending
formulas or amounts of Revolving Loans and Letter of Credit Accommodations
available to Borrower and/or (ii) terminate any provision of this Agreement
providing for any future Loans or Letter of Credit Accommodations to be made by
Lender to Borrower.
(5) Lender may appoint, remove and reappoint any person or persons, including an
employee or agent of Lender to be a receiver (the "Receiver") which term shall
include a receiver and manager of, or agent for, all or any part of the
Collateral. Any such Receiver shall, as far as concerns responsibility for his
acts, be deemed to be the agent of Borrower and not of Lender, and Lender shall
not in any way be responsible for any misconduct, negligence or non-feasance of
such Receiver, his employees or agents. Except as otherwise directed by Lender,
all money received by such Receiver shall be received in trust for and paid to
Lender. Such Receiver shall have all of the powers and rights of Lender
described in this Section 10.2. Lender may, either directly or through its
agents or nominees, exercise any or all powers and rights of a Receiver.
(6) Borrower shall pay all reasonable costs, charges and expenses incurred by
Lender or any Receiver or any nominee or agent of Lender, whether directly or
for services rendered (including, without limitation, solicitor's costs on a
solicitor and his own client basis, auditor's costs, other legal expenses and
Receiver remuneration) in enforcing this Agreement or any other Financing
Agreement and in enforcing or collecting Obligations and all such expenses
together with any money owing as a result of any borrowing permitted hereby
shall be a charge on the proceeds of realization and shall be secured hereby.
SECTION 11 - JURY TRIAL WAIVER, OTHER WAIVERS AND CONSENTS, GOVERNING LAW
11.1 GOVERNING LAW; CHOICE OF FORUM, SERVICE OF PROCESS; JURY TRIAL WAIVER.
(1) The validity, interpretation and enforcement of this Agreement and the other
Financing Agreements and any dispute arising out of the relationship between the
parties hereto, whether in contract, tort, equity or otherwise, shall be
governed by the laws of the Province of Ontario and the
<PAGE>
- 56 -
federal laws of Canada applicable therein except to the extent that the law
of another jurisdiction is specified in a Financing Agreement to be the
governing law for that Financing Agreement.
(2) Borrower and Lender irrevocably consent and submit to the non-exclusive
jurisdiction of the Ontario Superior Court of Justice and waive any objection
based on venue or forum non conveniens with respect to any action instituted
therein arising under this Agreement or any of the other Financing Agreements or
in any way connected with or related or incidental to the dealings of the
parties hereto in respect of this Agreement or any of the other Financing
Agreements or the transactions related hereto or thereto, in each case whether
now existing or hereafter arising, and whether in contract, tort, equity or
otherwise, and agree that any dispute with respect to any such matters shall be
heard only in the courts described above (provided that nothing herein shall
preclude Lender from bringing any action or proceeding against Borrower or its
property in the courts of any other jurisdiction which Lender deems necessary or
appropriate in order to realize on the Collateral or to otherwise enforce its
rights against Borrower or its property).
(3) BORROWER AND LENDER EACH HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS AGREEMENT OR ANY
OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY CONNECTED WITH OR RELATED
OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT
OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED HERETO OR
THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN
CONTRACT, TORT, EQUITY OR OTHERWISE. BORROWER AND LENDER EACH HEREBY AGREES AND
CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED
BY COURT TRIAL WITHOUT A JURY AND THAT BORROWER OR LENDER MAY FILE AN ORIGINAL
COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF
THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(4) Lender shall not have any liability to Borrower (whether in tort, contract,
equity or otherwise) for losses suffered by Borrower in connection with, arising
out of, or in any way related to the transactions or relationships contemplated
by this Agreement or any other Financing Agreement, or any act, omission or
event occurring in connection herewith, unless it is determined by a final and
non-appealable judgment or court order binding on Lender, that the losses were
the result of acts or omissions constituting gross negligence or wilful
misconduct.
11.2 WAIVER OF NOTICES. Borrower hereby expressly waives demand, presentment,
protest and notice of protest and notice of dishonour with respect to any and
all instruments and commercial paper, included in or evidencing any of the
Obligations or the Collateral, and any and all other demands and notices of any
kind or nature whatsoever with respect to the Obligations, the Collateral and
this Agreement, except such as are expressly provided for herein. No notice to
or demand on Borrower which Lender may elect to give shall entitle Borrower to
any other or further notice or demand in the same, similar or other
circumstances.
11.3 AMENDMENTS AND WAIVERS. Neither this Agreement nor any provision hereof
shall be amended, modified, waived or discharged orally or by course of conduct,
but only by a written agreement signed by an authorized officer of Lender, and
as to amendments, as also signed by an authorized officer of Borrower. Lender
shall not, by any act, delay, omission or otherwise be deemed
<PAGE>
- 57 -
to have expressly or impliedly waived any of its rights, powers and/or
remedies unless such waiver shall be in writing and signed by an authorized
officer of Lender. Any such waiver shall be enforceable only to the extent
specifically set forth therein. A waiver by Lender of any right, power and/or
remedy on any one occasion shall not be construed as a bar to or waiver of
any such right, power and/or remedy which Lender would otherwise have on any
future occasion, whether similar in kind or otherwise.
11.4 WAIVER OF COUNTERCLAIMS. Borrower waives all rights to interpose any
claims, deductions, setoffs or counterclaims of any nature (other than
compulsory counterclaims) in any action or proceeding with respect to this
Agreement, the Obligations, the Collateral or any matter arising therefrom or
relating hereto or thereto.
11.5 INDEMNIFICATION. Borrower shall indemnify and hold Lender, and its
directors, agents, employees and counsel, harmless from and against any and all
losses, claims, damages, liabilities, costs or expenses imposed on, incurred by
or asserted against any of them in connection with any litigation,
investigation, claim or proceeding commenced or threatened related to the
negotiation, preparation, execution, delivery, enforcement, performance or
administration of this Agreement, any other Financing Agreements, or any
undertaking or proceeding related to any of the transactions contemplated hereby
or any act, omission, event or transaction related or attendant thereto,
including, without limitation, amounts paid in settlement, court costs, and the
fees and expenses of counsel except as a result of Lender's gross negligence or
wilful misconduct as determined by a final and non-appealable judgment or court
order binding on Lender. To the extent that the undertaking to indemnify, pay
and hold harmless set forth in this Section may be unenforceable because it
violates any law or public policy, Borrower shall pay the maximum portion which
it is permitted to pay under applicable law to Lender in satisfaction of
indemnified matters under this Section. The foregoing indemnity shall survive
the payment of the Obligations and the termination or non-renewal of this
Agreement.
SECTION 12 - TERM OF AGREEMENT; MISCELLANEOUS
12.1 TERM.
(1) This Agreement and the other Financing Agreements shall become effective as
of the date set forth on the first page hereof and shall continue in full force
and effect for a term ending on the date three (3) years from the date hereof
(the "Renewal Date"), and from year to year thereafter, unless sooner terminated
pursuant to the terms hereof. NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH
HEREIN, THIS AGREEMENT AND THE OTHER FINANCING AGREEMENTS SHALL IMMEDIATELY
TERMINATE UPON THE TERMINATION OF EITHER THE UK FACILITY OR THE US FACILITY.
Borrower or Lender may, for any reason, terminate this Agreement and the other
Financing Agreements effective on the Renewal Date or on the anniversary of the
Renewal Date in any year, by giving to the other party at least sixty (60) days
written notice; PROVIDED THAT if the US Loan and Security Agreement shall be
extended or renewed, this Agreement shall be likewise extended or renewed,
unless an Event of Default shall have occurred and be continuing. Borrower may
terminate this Agreement prior to the end of the then current term, including
any renewal term for any reason prior to or on the first anniversary date of
this Agreement upon forty-five (45) days prior written notice to Lender and for
any reason thereafter upon thirty (30) days prior written notice to Lender - and
in each such case Borrower agrees to pay Lender the applicable early termination
fee provided for in Section 12.1(3) hereof. Regardless of the timing of
<PAGE>
- 58 -
termination, this Agreement and all other Financing Agreements must be
terminated simultaneously. Upon the effective date of termination or non-renewal
of the Financing Agreements, Borrower shall pay to Lender, in full, all
outstanding and unpaid Obligations and shall furnish cash collateral to Lender
in such amounts as Lender determines are reasonably necessary to secure Lender
from loss, cost, damage or expense, including legal fees and expenses, in
connection with any contingent Obligations, including issued and outstanding
Letter of Credit Accommodations and cheques or other payments provisionally
credited to the Obligations and/or as to which Lender has not yet received final
and indefeasible payment. Such payments in respect of the Obligations and cash
collateral shall be remitted by wire transfer in Canadian Dollars to such bank
account of Lender, as Lender may, in its discretion, designate in writing to
Borrower for such purpose. Interest shall be due until and including the next
Business Day, if the amounts so paid by Borrower to the bank account designated
by Lender are received in such bank account later than 12:00 noon, Toronto time.
(2) No termination of this Agreement or the other Financing Agreements shall
relieve or discharge Borrower of its respective duties, obligations and
covenants under this Agreement or the other Financing Agreements until Lender
has received release documentation satisfactory to it and all Obligations have
been fully and finally discharged and paid, and Lender's continuing security
interest in the Collateral and the rights and remedies of Lender hereunder,
under the other Financing Agreements and applicable law, shall remain in effect
until such release and documentation has been received and all such Obligations
have been fully and finally discharged and paid.
(3) If for any reason this Agreement is terminated prior to the end of the then
current term or renewal term of this Agreement or if prior to that time Borrower
reduces any part of unused Maximum Credit (which it may do from time to time
upon five (5) days notice to Lender), in view of the impracticality and extreme
difficulty of ascertaining actual damages and by mutual agreement of the parties
as to a reasonable calculation of Lender's lost profits as a result thereof,
Borrower agrees to pay to Lender, upon the effective date of such termination or
reduction, an early termination or reduction fee in the amount set forth below
if such termination or reduction is effective in the period indicated:
<TABLE>
<CAPTION>
AMOUNT PERIOD
<S> <C>
(i) 2.0% of the Maximum Credit in the event of a From the date of this Agreement to and
termination or of the reduced portion of the including the first anniversary of this
Maximum Credit in the event of a reduction Agreement
(ii) 1.0% of the Maximum Credit in the event of a From the day immediately succeeding the first
termination or of the reduced portion of the anniversary of this Agreement to and including
Maximum Credit in the event of a reduction the second anniversary of this Agreement
</TABLE>
<PAGE>
-59-
<TABLE>
<CAPTION>
Amount Period
------ ------
<S> <C> <C>
(iii) 0.5% of the Maximum Credit in the event of a From the day immediately succeeding the second
termination or of the reduced portion of the anniversary of this Agreement and thereafter,
Maximum Credit in the event of a reduction including any period during a renewal term, if any,
but excluding the Renewal Date or any
anniversary of the Renewal Date.
</TABLE>
Such early termination or reduction fee shall be presumed to be the amount of
damages sustained by Lender as a result of such early termination or
reduction and Borrower agrees that it is reasonable under the circumstances
currently existing. In addition, Lender shall be entitled to such early
termination or reduction fee upon the occurrence of any Event of Default
described in Sections 10.1(9) and 10.1(10) hereof, even if Lender does not
exercise its right to terminate this Agreement, but elects, at its option, to
provide financing to Borrower or permit the use of cash collateral under any
applicable reorganization or insolvency legislation. The early termination or
reduction fee provided for in this Section 12.1 shall be deemed included in
the Obligations.
12.2 NOTICES. All notices, requests and demands hereunder shall be in writing
and (a) made to Lender at its address set forth below and to Borrower at its
chief executive office set forth below, or to such other address as either party
may designate by written notice to the other in accordance with this provision,
and (b) deemed to have been given or made: if delivered in person, immediately
upon delivery; if by facsimile transmission, immediately upon sending and upon
confirmation of receipt; if by nationally recognized overnight courier service
with instructions to deliver the next business day, one (1) business day after
sending.
12.3 PARTIAL INVALIDITY. If any provision of this Agreement is held to be
invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.
12.4 SUCCESSORS. This Agreement, the other Financing Agreements and any other
document referred to herein or therein shall be binding upon and inure to the
benefit of and be enforceable by Lender, Borrower and their respective
successors and assigns, except that Borrower may not assign its rights under
this Agreement, the other Financing Agreements and any other document referred
to herein or therein without the prior written consent of Lender. Lender may,
after notice to Borrower, assign its rights and delegate its obligations under
this Agreement and the other Financing Agreements and further may assign, or
sell participations in, all or any part of the Loans, the Letter of Credit
Accommodations or any other interest herein to another financial institution or
other person, in which event, the assignee or participant shall have, to the
extent of such assignment or participation, the same rights and benefits as it
would have if it were the Lender hereunder, except as otherwise provided by the
terms of such assignment or participation.
12.5 ENTIRE AGREEMENT. This Agreement, the other Financing Agreements, any
supplements hereto or thereto, and any instruments or documents delivered or to
be delivered in connection
<PAGE>
-60-
herewith or therewith represents the entire agreement and understanding
concerning the subject matter hereof and thereof between the parties hereto,
and supersede all other prior agreements, understandings, negotiations and
discussions, representations, warranties, commitments, proposals, offers and
contracts concerning the subject matter hereof, whether oral or written. In
the event of any inconsistency between the terms of this Agreement and any
schedule or exhibit hereto, the terms of this Agreement shall govern.
12.6 CONFIDENTIAL INFORMATION. Lender agrees to hold, in accordance with its
customary procedures for handling confidential information and safe and sound
lending practices, any confidential information that it may receive from
Borrower or GLC pursuant to this Agreement in confidence, except for disclosure:
(a) to legal counsel, accountants, auditors and other professional
advisors to Borrower or GLC or Lender;
(b) to regulatory officials having jurisdiction over Lender;
(c) as required by applicable law or legal process (provided that
in the event Lender is so required to disclose any such
confidential information, that Lender shall endeavour promptly
to notify Borrower, so that Borrower may seek a protective
order or other appropriate remedy) or in connection with any
legal proceeding to which Lender or Borrower are adverse
parties;
(d) to another financial institution or its counsel in connection
with an assignment or disposition or proposed assignment or
disposition to that financial institution of all or part of
Lender's interests hereunder or a participation interest
herein, provided that such disclosure is made subject to an
appropriate confidentiality agreement on terms substantially
similar to this Section 12.6; and
(e) to prospective purchasers of any Collateral (other than
competitors of Borrower or GLC or its Subsidiaries unless all
Obligations are 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 Borrower or GLC, other than (x) information
previously filed with any governmental agency and available to the public, (y)
information previously published in any public medium from a source other than,
directly or indirectly, Lender, and (z) information previously disclosed by GLC
or any of its Subsidiaries to any Person not associated with GLC 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 Lender to GLC or it Subsidiaries.
12.7 HEADINGS. The division of this Agreement into Sections and the insertion of
headings and a table of contents are for convenience of reference only and shall
not affect the construction or interpretation of this Agreement.
<PAGE>
-61-
12.8 JUDGMENT CURRENCY. To the extent permitted by applicable law, the
obligations of Borrower in respect of any amount due under this Agreement shall,
notwithstanding any payment in any other currency (the "Other Currency")
(whether pursuant to a judgment or otherwise), be discharged only to the extent
of the amount in the currency in which it is due (the "Agreed Currency") that
Lender may, in accordance with normal banking procedures, purchase with the sum
paid in the Other Currency (after any premium and costs of exchange) on the
Business Day immediately after the day on which Lender receives the payment. If
the amount in the Agreed Currency that may be so purchased for any reason falls
short of the amount originally due, Borrower shall pay all additional amounts,
in the Agreed Currency, as may be necessary to compensate for the shortfall. Any
obligation of Borrower not discharged by that payment shall, to the extent
permitted by applicable law, be due as a separate and independent obligation
and, until discharged as provided in this Section, continue in full force and
effect.
12.9 EXECUTION IN COUNTERPARTS. This Agreement may be executed and delivered in
any number of counterparts, each of which when executed and delivered is an
original but all of which taken together constitute one and the same instrument.
12.10 FACSIMILE. This Agreement may be executed and delivered by facsimile
transmission and the parties may rely on all such facsimile signatures as though
such facsimile signatures were original signatures.
12.11 CHOICE OF LANGUAGE. The parties hereto confirm that they have requested
that this Agreement and all documents related hereto be drafted in English. Les
parties aux presentes ont exige que cette convention ainsi que tout document
connexe soient rediges en anglais.
[REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, Lender and Borrower have caused these presents to be duly
executed as of the day and year first above written.
CONGRESS FINANCIAL CORPORATION (CANADA)
By: ________________________________
Name:
Title:
ADDRESS:
141 Adelaide Street West
Suite 1500
Toronto, Ontario
M5H 3L9
Fax: (416) 364-3990
GEOLOGISTICS, CO.
By: ________________________________
Name: Peter Schwerdt
Title: President
By: ________________________________
Name: Ron Evinou
Title: Secretary, Treasurer and
Chief Financial Officer
CHIEF EXECUTIVE OFFICE:
401 The West Mall
Etobicoke, Ontario
M9C 5J5
Fax: (416) 620-5360
<PAGE>
SCHEDULE 8.1- CORPORATE EXISTENCE, POWER AND AUTHORITY, SUBSIDIARIES
8.1 - 1
<PAGE>
SCHEDULE 8.4 - PRIORITIES OF LIENS
8.4 - 1
<PAGE>
SCHEDULE 8.8 - BANK ACCOUNTS
8.8 - 1
<PAGE>
SCHEDULE 8.9 - ENVIRONMENTAL COMPLIANCE
8.9 - 1
<PAGE>
SCHEDULE 9.9 - INDEBTEDNESS
9.9 - 1
<PAGE>
SCHEDULE 9.10(h) - PERMITTED LOANS OR ADVANCES TO GLC
9.10(H) - 1
<PAGE>
LOAN AND SECURITY AGREEMENT
by and between
CONGRESS FINANCIAL CORPORATION (WESTERN)
as Lender
and
BEKINS WORLDWIDE SOLUTIONS, INC.,
BEKINS VAN LINES, LLC,
GEOLOGISTICS SERVICES, INC.,
and
GEOLOGISTICS AMERICAS INC.,
collectively, as Borrowers
Dated: March 23, 2000
<PAGE>
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement dated March 23, 2000 is entered into
by and between CONGRESS FINANCIAL CORPORATION (WESTERN), a California
corporation ("LENDER") and BEKINS WORLDWIDE SOLUTIONS, INC., a Delaware
corporation, formerly known as GeoLogistics Network Solutions, Inc. ("BWS"),
BEKINS VAN LINES, LLC, a Delaware limited liability company ("BVL"),
GEOLOGISTICS SERVICES, INC., a Delaware corporation ("GLS"), and GEOLOGISTICS
AMERICAS INC., a Delaware corporation ("GLA"), (BWS, BVL, GLS and GLA,
collectively referred to herein as "BORROWERS" and individually, a "BORROWER").
W I T N E S S E T H:
WHEREAS, Borrowers have requested that Lender enter into certain
financing arrangements with each Borrower pursuant to which Lender may make
loans and provide other financial accommodations to each Borrower; and
WHEREAS, BWS, BVL, GLS and GLA are wholly owned Subsidiaries of
GeoLogistics Corporation, a Delaware corporation ("GLC"), and Borrowers,
together with GLC, are inter-related entities which, collectively constitute an
integrated provider of logistics and transportation services; and
WHEREAS, the directors of BWS, BVL, GLS and GLA view the entities as
sufficiently dependent upon each other and so inter-related that any advance
made by Lender hereunder to any of the constituent entities would benefit all of
the constituent entities as a result of their consolidated operations and
identity of interests; and
WHEREAS, BWS, BVL, GLS and GLA have each requested that Lender treat
them as co-Borrowers hereunder, jointly and severally responsible for the
obligation hereunder of each other Borrower; and
WHEREAS, Lender is willing to make such loans and provide such
financial accommodations on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. DEFINITIONS.
All terms used herein related to the attachment, perfection, priority
or enforcement of the security interests granted hereby which are defined, or
used with a particular definition, in the California Commercial Code as in
effect on the date of this Agreement shall have the respective meanings given
therein unless otherwise defined in this Agreement. All references to the plural
herein shall also mean the singular and to the singular shall also mean the
plural. All references
<PAGE>
to a Borrower and Lender pursuant to the definitions set forth in the
recitals hereto, or to any other person herein, shall include their
respective successors and assigns. The words "hereof", "herein", "hereunder",
"this Agreement" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not any particular provision of
this Agreement and as this Agreement now exists or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced. An Event of
Default shall exist or continue or be continuing until such Event of Default
is waived in accordance with Section 11.3. Any accounting term used herein
unless otherwise defined in this Agreement shall have the meaning given to
such term in accordance with GAAP. For purposes of this Agreement, the
following terms shall have the respective meanings given to them below:
1.1 "ACCOUNTS" shall mean all present and future rights of any Borrower
to payment for goods sold or leased or for services rendered, which are not
evidenced by instruments or chattel paper, and whether or not earned by
performance.
1.2 "ADJUSTED EURODOLLAR RATE" shall mean, with respect to each
Interest Period for any Eurodollar Rate Loan, the rate per annum (rounded
upwards, if necessary, to the next one-sixteenth (1/16) of one (1%) percent)
determined by dividing (a) the Eurodollar Rate for such Interest Period by (b) a
percentage equal to: (i) one (1) minus (ii) the Reserve Percentage. For purposes
hereof, "RESERVE PERCENTAGE" shall mean the reserve percentage, expressed as a
decimal, prescribed by the Board of Governors of the Federal Reserve System for
determining the reserve requirement which is or would be applicable to deposits
of United States dollars in a non-United States or an international banking
office of Reference Bank used to fund a Eurodollar Rate Loan or any Eurodollar
Rate Loan made with the proceeds of such deposit, whether or not the Reference
Bank actually holds or has made any such deposits or loans. The Adjusted
Eurodollar Rate shall be adjusted on and as of the effective day of any change
in the Reserve Percentage.
1.3 "ADJUSTED NET WORTH" shall mean as to any Person, at any time, in
accordance with GAAP, on a consolidated basis for such Person and its
Subsidiaries (if any), the amount equal to: (a) the difference between: (i) the
aggregate net book value of all assets (tangible or intangible) of such Person
and its Subsidiaries, calculating the book value of inventory for this purpose
on a first-in-first-out basis, after deducting from such book values all
appropriate reserves in accordance with GAAP (including all reserves for
doubtful receivables, obsolescence, depreciation and amortization) and (ii) the
aggregate amount of the indebtedness and other liabilities of such Person and
its subsidiaries (including tax and other proper accruals) PLUS (b) indebtedness
of such Person and its Subsidiaries which is subordinated in right of payment to
the full and final payment of all of the Obligations on terms and conditions
acceptable to Lender. For purposes only of calculating the Adjusted Net Worth of
GLC under Sections 10.1(n) hereof, the Senior Notes and any guaranty issued by
any Subsidiary of GLC as to the Senior Notes shall not constitute subordinated
indebtedness under clause (b) above. To the extent that any loans or advances
made by Borrowers, GL Canada or GL UK to GLC or any of its Subsidiaries are for
accounting purposes classified as reductions to Adjusted Net Worth, such
deductions shall be excluded for the purpose of calculating Adjusted Net Worth
of the Borrowers, GL Canada or GL UK under Section 10.1(o) hereof.
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1.4 "AGENT/CONTRACTOR RECEIVABLES" shall mean any and all Accounts of
any Borrower which are to be or have been collected from the customer on behalf
of such Borrower by a Representative Agent or Contractor and have not yet been
remitted to any Borrower, and any 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 any Borrower.
1.5 "AVAILABILITY RESERVES" shall mean, as of any date of
determination, such amounts as Lender may from time to time establish and revise
in good faith reducing the amount of Revolving Loans and Letter of Credit
Accommodations which would otherwise be available to a Borrower under the
lending formula(s) provided for herein: (a) to reflect events, conditions,
contingencies or risks which, as reasonably determined by Lender in good faith,
do or may affect either (i) the Collateral or any other property which is
security for the Obligations or its value, (ii) in any materially adverse
respect, the assets, business or condition (financial or other) of such Borrower
or any Obligor or (iii) the security interests and other rights of Lender in the
Collateral (including the enforceability, perfection and priority thereof) or
(b) to reflect Lender's reasonable good faith belief that any collateral report
or financial information furnished by or on behalf of such Borrower or any
Obligor to Lender is or may have been incomplete, inaccurate or misleading in
any material respect or (c) to reflect any state of facts which Lender
reasonably determines in good faith constitutes an Event of Default or may, with
notice or passage of time or both, constitute an Event of Default. Without
limiting the generality of the foregoing, an Availability Reserve shall be
established by Lender from time to time in such amounts as Lender may reasonably
determine to reflect (a) that Dilution as of any date with respect to the
Accounts of all Borrowers for the immediately preceding twelve (12) month period
or for the immediately preceding three (3) month period (whichever percentage is
higher) exceeds five percent (5%), (b) any variances in the agings of accounts
receivable provided to Lender pursuant to Section 7.1 hereof, (c) any unapplied
cash which has not yet been applied to the Accounts, and (d) any pass through
receivables or collections for shipping charges and cost of goods owed to any
Borrower by the receiving party of such goods and owed by such Borrower to the
shipping party of such goods.
1.6 "BC" shall mean The Bekins Company, a Delaware corporation.
1.7 "BLOCKED ACCOUNT" shall have the meaning set forth in Section 6.3
hereof.
1.8 "BURDALE" shall mean Burdale Financial Limited, a limited company
registered in England and Wales.
1.9 "BUSINESS DAY" shall mean any day other than a Saturday, a Sunday,
or any other day on which commercial banks are authorized or required to close
under the laws of the State of New York, the State of California or the State of
North Carolina, or any day on which the Reference Bank and Lender are not open
for the transaction of business, except that if a determination of a Business
Day shall relate to any Eurodollar Rate Loans, the term Business Day shall also
exclude any day on which banks are closed for dealings in dollar deposits in the
London interbank market or other applicable Eurodollar Rate market.
1.10 "BVL" shall have the meaning set forth in the introduction hereto.
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1.11 "BWS" shall have the meaning set forth in the introduction hereto.
1.12 "CANADIAN FACILITY" shall mean the credit facility in the maximum
amount of Fifteen Million Dollars ($15,000,000) (which may be adjusted from time
to time in accordance with the terms hereof and in the Canadian Loan Agreement)
provided by Congress (Canada) to GL Canada pursuant to the Canadian Loan
Agreement.
1.13 "CANADIAN LETTER OF CREDIT ACCOMMODATIONS" shall mean the letters
of credit or other guaranties which are from time to time either (a) issued,
opened or provided by Congress (Canada) for the account of GL Canada or any
other obligor under the Canadian Loan Agreement or (b) with respect to which
Congress (Canada) has agreed to indemnify the issuer or guaranteed to the issuer
the performance by GL Canada of its obligations to such issuer.
1.14 "CANADIAN LOAN AGREEMENT" shall mean that certain Loan Agreement
dated March 23, 2000 between Congress (Canada) and GL Canada, as the same now
exists or may hereafter be amended, modified, supplemented, extended, renewed,
restated or replaced.
1.15 "CAPITAL LEASE" shall mean, as applied to any Person, any lease of
(or any agreement conveying the right to use) any property (whether real,
personal or mixed) by such Person as lessee that, in accordance with GAAP, is
required to be reflected as a liability on the balance sheet of such Person.
1.16 "CAPITAL STOCK" shall mean, with respect to any Person, any and
all shares, interests, participations or other equivalents (however designated)
of such Person's capital stock, partnership interests or limited liability
company interests at any time outstanding, and any and all rights, warrants or
options exchangeable for or convertible into such capital stock or other
interests (but excluding any debt security that is exchangeable for or
convertible into such capital stock).
1.17 "CODE" shall mean the Internal Revenue Code of 1986, as the same
now exists or may from time to time hereafter be amended, modified, recodified
or supplemented, together with all rules, regulations and interpretations
thereunder or related thereto.
1.18 "COLLATERAL" shall have the meaning set forth in Section 5 hereof.
1.19 "CONGRESS (CANADA)" shall mean Congress Financial Corporation
(Canada), a corporation organized under the laws of Ontario, Canada.
1.20 "CONTRACTOR" shall mean 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 a Borrower for the purpose of providing moving and related
services to customers of such Borrower.
1.21 "DILUTION" shall mean, with respect to all Borrowers for any
period, the ratio (expressed as a percentage) of (a) the aggregate amount of
reductions in the Accounts of all Borrowers for such period other than as a
result of payments in cash to (b) the aggregate amount of total sales of all
Borrowers for such period.
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1.22 "DOLLAR" and "$" means dollars in the lawful currency of the
United States.
1.23 "EBITDA" shall mean, as to any Person, with respect to any period,
an amount equal to: (a) the Net Income of such Person and its Subsidiaries for
such period on a consolidated basis determined in accordance with GAAP, PLUS (b)
depreciation, amortization and other non-cash charges (including, but not
limited to, imputed interest and deferred compensation) of such Person and its
Subsidiaries for such period (to the extent deducted in the computation of Net
Income), all in accordance with GAAP, PLUS (c) Interest Expense of such Person
and its Subsidiaries for such period (to the extent deducted in the computation
of Net Income), PLUS (d) the Provision for Taxes for such period (to the extent
deducted in the computation of Net Income), PLUS (e) all extraordinary losses
and unusual losses related to the restructuring of the business of such Person
and its Subsidiaries and costs associated with the refinancing transaction
contemplated by this Agreement.
1.24 "ELIGIBLE ACCOUNTS" shall mean, with respect to any Borrower,
Accounts created by such Borrower which are and continue to be acceptable to
Lender based on the criteria set forth below. In general, Accounts shall be
Eligible Accounts if:
(a) such Accounts comply with the terms and conditions
contained in Section 7.2(b) of this Agreement;
(b) such Accounts do not arise from sales on consignment,
guaranteed sale, sale and return, sale on approval, or other terms under which
payment by the account debtor may be conditional or contingent;
(c) the account debtor with respect to such Accounts is
located in the United States of America or (if payable in U.S. dollars) Canada
or Puerto Rico unless if either: (i) the account debtor has delivered to such
Borrower an irrevocable letter of credit issued or confirmed by a bank
satisfactory to Lender and payable only in the United States of America and in
U.S. dollars, sufficient to cover such Account, in form and substance
satisfactory to Lender and, if required by Lender, the original of such letter
of credit has been delivered to Lender or Lender's agent and the issuer thereof
notified of the assignment of the proceeds of such letter of credit to Lender,
or (ii) such Account is subject to credit insurance payable to Lender issued by
an insurer and on terms and in an amount acceptable to Lender, or (iii) such
Account is otherwise acceptable in all respects to Lender (subject to such
lending formula with respect thereto as Lender may determine);
(d) such Accounts do not consist of progress billings, bill
and hold invoices or retainage invoices, except as to bill and hold invoices, if
Lender shall have received an agreement in writing from the account debtor, in
form and substance satisfactory to Lender, confirming the unconditional
obligation of the account debtor to take the goods or services related thereto
and pay such invoice;
(e) the account debtor with respect to such Accounts has not
asserted a counterclaim, cargo claim, defense or dispute and does not have, and
has not engaged in transactions which may reasonably be expected to give rise
to, any right of setoff against such Accounts (but the portion of the Accounts
of such account debtor in excess of the amount at any
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time and from time to time owed by such Borrower to such account debtor or
claimed owed by such account debtor may be deemed Eligible Accounts);
(f) there are no facts, events or occurrences which would
impair the validity or enforceability of or otherwise the legal right to collect
such Accounts or would give the account debtor of such Accounts the legal right
to reduce the amount payable or delay payment thereunder;
(g) such Accounts are subject to the first priority, valid and
perfected security interest of Lender and any goods giving rise thereto are not,
and were not at the time of the sale thereof, subject to any liens except those
permitted in this Agreement;
(h) neither the account debtor nor any officer or employee of
the account debtor with respect to such Accounts is an officer, employee or
agent of or affiliated with any Borrower directly or indirectly by virtue of
ownership, control, management or otherwise;
(i) the account debtors with respect to such Accounts are not
any foreign government;
(j) the account debtors with respect to such Accounts are not
the United States of America, a State, political subdivision, department, agency
or instrumentality thereof unless no more than Two Million Five Hundred Thousand
Dollars ($2,500,000) of the aggregate amount of Loans advanced against such
Accounts are outstanding or the Federal Assignment of Claims Act of 1940, as
amended or any similar State or local law, if applicable, has been complied with
in a manner satisfactory to Lender;
(k) such Accounts of a single account debtor do not constitute
more than ten percent (10%) of all otherwise Eligible Accounts (but the portion
of the Accounts not in excess of such percentage may be deemed Eligible
Accounts);
(l) such Accounts are not owed by an account debtor who has
Accounts unpaid more than ninety (90) days after the date of the original
invoice for them which constitute more than fifty percent (50%) of the total
Accounts of such account debtor;
(m) such Accounts are owed by an account debtor whose total
indebtedness to such Borrower does not exceed the credit limit with respect to
such account debtor as determined by Lender from time to time and communicated
in writing to the Borrowers prior to the date of determination of Eligible
Accounts (but the portion of the Accounts not in excess of such credit limit may
be deemed Eligible Accounts);
(n) such Accounts do not consist of Agent/Contractor
Receivables;
(o) such Accounts do not arise from the rendition of services
by a Person other than such Borrower or on behalf of such Borrower; and
(p) such Accounts are owed by account debtors deemed
creditworthy at all times by Lender, as determined by Lender.
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Any Accounts which are not Eligible Accounts shall nevertheless be part of the
Collateral.
1.25 "ELIGIBLE BILLED ACCOUNTS" shall mean, with respect to any
Borrower, Eligible Accounts which arise from the actual and BONA FIDE rendition
of services by such Borrower in the ordinary course of its business which
services are completed in accordance with the terms and provisions contained in
any documents related thereto and for which invoices have been generated by
Borrower and billed to the account debtor thereof; PROVIDED THAT, no such
Eligible Account shall be deemed an Eligible Billed Account if such Account
remains unpaid more than ninety (90) days after the date of the original invoice
for it. Any Accounts which are not Eligible Billed Accounts shall nevertheless
be part of the Collateral.
1.26 "ELIGIBLE UNBILLED ACCOUNTS" shall mean, with respect to any
Borrower, Eligible Accounts which arise from the actual and BONA FIDE rendition
of services by such Borrower in the ordinary course of its business which
services are completed in accordance with the terms and provisions contained in
any documents related thereto and for which invoices have not yet been generated
by such Borrower and billed to the account debtor thereof; PROVIDED THAT, no
such Eligible Account shall be deemed an Eligible Unbilled Account if such
Account remains unbilled more than thirty (30) days after the completion of the
services giving rise thereto. Any Accounts which are not Eligible Unbilled
Accounts shall nevertheless be part of the Collateral.
1.27 "ENVIRONMENTAL LAWS" shall mean all federal, state, district,
local and foreign laws, rules, regulations, ordinances, and consent decrees
relating to health, safety, hazardous substances, pollution and environmental
matters, as now or at any time hereafter in effect, applicable to a Borrower's
business and facilities (whether or not owned by it), including laws relating to
emissions, discharges, releases or threatened releases of pollutants,
contamination, chemicals, or hazardous, toxic or dangerous substances, materials
or wastes into the environment (including, without limitation, ambient air,
surface water, ground water, land surface or subsurface strata) or otherwise
relating to the generation, manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of pollutants, contaminants,
chemicals, or hazardous, toxic or dangerous substances, materials or wastes.
1.28 "EQUIPMENT" shall mean all of any Borrower's now owned and
hereafter acquired equipment, machinery, computers and computer hardware and
software (whether owned or licensed), vehicles, tools, furniture, fixtures, all
attachments, accessions and property now or hereafter affixed thereto or used in
connection therewith, and substitutions and replacements thereof, wherever
located.
1.29 "ERISA" shall mean the United States Employee Retirement Income
Security Act of 1974, as the same now exists or may hereafter from time to time
be amended, modified, recodified or supplemented, together with all rules,
regulations and interpretations thereunder or related thereto.
1.30 "ERISA AFFILIATE" shall mean any person required to be aggregated
with any Borrower or any of its affiliates under Sections 414(b), 414(c), 414(m)
or 414(o) of the Code.
1.31 "EURODOLLAR RATE" shall mean with respect to the Interest Period
for a Eurodollar Rate Loan, the interest rate per annum equal to the arithmetic
average of the rates of interest per
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annum at which Reference Bank is offered deposits of United States dollars in
the London interbank market (or other Eurodollar Rate market selected
collectively by Borrowers and approved by Lender) on or about 9:00 a.m. (New
York time) two (2) Business Days prior to the commencement of such Interest
Period in amounts substantially equal to the principal amount of the
Eurodollar Rate Loans requested by and available to Borrowers in accordance
with this Agreement, with a maturity of comparable duration to the Interest
Period selected collectively by Borrowers.
1.32 "EURODOLLAR RATE LOANS" shall mean any Loans or portion thereof on
which interest is payable based on the Adjusted Eurodollar Rate in accordance
with the terms hereof.
1.33 "EVENT OF DEFAULT" shall mean the occurrence or existence of any
event or condition described in Section 10.1 hereof.
1.34 "FINANCING AGREEMENTS" shall mean, collectively, this Agreement
and all notes, guarantees, security agreements and other agreements, documents
and instruments now or at any time hereafter executed and/or delivered by any
Borrower or any Obligor in connection with this Agreement, as the same now exist
or may hereafter be amended, modified, supplemented, extended, renewed, restated
or replaced.
1.35 "GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time as set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Boards which are applicable to the
circumstances as of the date of determination consistently applied, except that,
for purposes of Sections 10.1(n) and 10.1(o) hereof, GAAP shall be determined on
the basis of such principles in effect on the date hereof and consistent with
those used in the preparation of the audited financial statements delivered to
Lender prior to the date hereof.
1.36 "GIFL" shall mean GeoLogistics International Finance Ltd., a
limited company organized under the laws of Ireland.
1.37 "GLA" shall have the meaning set forth in the introduction hereto.
1.38 "GLC" shall have the meaning set forth in the recitals hereto.
1.39 "GL CANADA" shall mean GeoLogistics, Co., an unlimited liability
company organized under the laws of Nova Scotia, Canada.
1.40 "GLS" shall have the meaning set forth in the introduction hereto.
1.41 "GL UK" shall mean GeoLogistics Limited, a limited company
registered in England and Wales.
1.42 "HAZARDOUS MATERIALS" shall mean any hazardous, toxic or dangerous
substances, materials and wastes, including, without limitation, hydrocarbons
(including naturally occurring or man-made petroleum and hydrocarbons),
flammable explosives, asbestos, urea formaldehyde insulation, radioactive
materials, biological substances, polychlorinated biphenyls, pesticides,
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herbicides and any other kind and/or type of pollutants or contaminants
(including, without limitation, materials which include hazardous constituents),
sewage, sludge, industrial slag, solvents and/or any other similar substances,
materials, or wastes and including any other substances, materials or wastes
that are or become regulated under any Environmental Law (including, without
limitation any that are or become classified as hazardous or toxic under any
Environmental Law).
1.43 "INFORMATION CERTIFICATE" shall mean, with respect to any
Borrower, the Information Certificate of such Borrower constituting a part of
EXHIBIT A hereto containing material information with respect to such Borrower,
its business and assets provided by or on behalf of such Borrower to Lender in
connection with the preparation of this Agreement and the other Financing
Agreements and the financing arrangements provided for herein.
1.44 "INTEREST EXPENSE" shall mean, for any period, as to any Person
and its Subsidiaries, all of the following as determined in accordance with
GAAP, total interest expense, whether paid or accrued (including the interest
component of Capital Leases for such period), including, without limitation, all
bank fees, commissions, discounts and other fees and charges owed with respect
to letters of credit, banker's acceptances or similar instruments, but excluding
(a) amortization of discount and amortization of deferred financing fees and
closing costs paid in cash in connection with the transactions contemplated
hereby, (i) interest paid in property other than cash and (b) any other interest
expense not payable in cash.
1.45 "INTEREST PERIOD" shall mean for any Eurodollar Rate Loan, a
period of approximately one (1), two (2), or three (3) months duration as
Borrowers may collectively elect, the exact duration to be determined in
accordance with the customary practice in the applicable Eurodollar Rate market;
PROVIDED, THAT, Borrowers may not elect an Interest Period which will end after
the last day of the then-current term of this Agreement.
1.46 "INTEREST RATE" shall mean, as to Prime Rate Loans, a rate of
one-quarter of one percent (0.25%) per annum in excess of the Prime Rate and, as
to Eurodollar Rate Loans, a rate of two and three-quarters percent (2.75%) per
annum in excess of the Adjusted Eurodollar Rate (based on the Eurodollar Rate
applicable for the Interest Period collectively selected by Borrowers and
commencing (3) Business Days after the date of receipt by Lender of the request
of Borrowers for such Eurodollar Rate Loans in accordance with the terms hereof,
whether such rate is higher or lower than any rate previously quoted to any
Borrower); PROVIDED, THAT:
(a) effective as of the first day of the month after Lender's
receipt of the financial statements of GLC for any fiscal quarter of GLC
(commencing with the third fiscal quarter of GLC's fiscal year 2000) delivered
to Lender in accordance with Section 9.6 hereof, subject to paragraph (b) below,
the Interest Rate shall be increased or decreased, as the case may be, to the
rate equal to the applicable margin set forth below in excess of the Prime Rate
as to Prime Rate Loans and the applicable margin set forth below in excess of
the Adjusted Eurodollar Rate as to Eurodollar Rate Loans, based on the EBITDA of
GLC for the consecutive four fiscal quarter period ended such fiscal quarter
calculated based on such financial statements for such quarter as follows:
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<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
APPLICABLE MARGIN AS TO PRIME APPLICABLE MARGIN AS TO
RATE LOANS EURODOLLAR RATE LOANS EBITDA OF GLC
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Equal to or less than
(i) 0.5% 3.0% $10,000,000
- ------------------------------------------------------------------------------------------------------------------
Greater than $10,000,000, but
equal to or less than
(ii) 0.25% 2.75% $30,000,000
- ------------------------------------------------------------------------------------------------------------------
(iii) -0- 2.50% Greater than $30,000,000
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
;PROVIDED, THAT the EBITDA amounts set forth above shall be reduced by that
portion of the EBITDA for the four (4) fiscal quarter period ended any such
fiscal quarter that is attributable to any Subsidiary of GLC that has been sold
or disposed of pursuant to a sale or disposition permitted by this Agreement,
the UK Loan Agreement or the Canadian Loan Agreement; and
(b) notwithstanding anything to the contrary contained herein,
the Interest Rate shall be two percent (2.0%) above the rate that would
otherwise prevail pursuant to this Section 1.46, at Lender's option, without
notice, (i) either (A) for the period from and after the date of termination or
non-renewal hereof until such time as Lender has received final payment and
satisfaction in full of all Obligations (notwithstanding entry of a judgment
against any Borrower), or (B) for the period from and after the date of the
occurrence of any Event of Default, and for so long as such Event of Default is
continuing, and (ii) on the Revolving Loans at any time outstanding in excess of
the amounts available to a Borrower under Section 2 (whether or not such
excess(es) arise or are made with or without Lender's knowledge and whether made
before or after an Event of Default).
1.47 "INVENTORY" shall mean all of any Borrower's now owned and
hereafter existing or acquired raw materials, work in process, finished goods
and all other inventory of whatsoever kind or nature, wherever located.
1.48 "L/C SUBLIMIT" shall mean, with reference to the Letter of Credit
Accommodations, the amount of Thirty Million Dollars ($30,000,000), less the
then outstanding amount of Canadian Letter of Credit Accommodations and UK
Letter of Credit Accommodations and all other commitments and obligations made
or incurred by Congress (Canada) and Burdale in connection therewith.
1.49 "LETTER OF CREDIT ACCOMMODATIONS" shall mean the letters of credit
or other guaranties which are from time to time either (a) issued, opened or
provided by Lender for the account of any Borrower or any Obligor or (b) with
respect to which Lender has agreed to indemnify the issuer or guaranteed to the
issuer the performance by any Borrower of its obligations to such issuer.
1.50 "LOANS" shall mean the Revolving Loans including, without
limitation, any Revolving Loans advanced for the purpose of providing cash
collateral to ING (U.S.) Capital,
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LLC or LaSalle Bank National Association with respect to any outstanding
letters of credit issued by such entities.
1.51 "MAXIMUM CREDIT" shall mean, with reference to the Revolving Loans
and the Letter of Credit Accommodations, the amount of Fifty Million Dollars
($50,000,000); PROVIDED HOWEVER, upon five (5) Business Days prior written
notice by Borrowers to Lender and so long as no Event of Default, or event which
with notice or passage of time or both would constitute an Event of Default,
exists or has occurred and is continuing, immediately prior to and after giving
effect to any of the following adjustments to the Maximum Credit, Borrowers may
collectively elect to (a) increase the Maximum Credit to Fifty Five Million
Dollars ($55,000,000), provided that the maximum amount of loans and other
financial accommodations available under the Canadian Facility is simultaneously
reduced to Ten Million Dollars ($10,000,000) or (b) decrease the Maximum Credit
to Forty Five Million Dollars ($45,000,000), provided that the maximum amount of
loans and other financial accommodations available under the Canadian Facility
is simultaneously increased to Twenty Million Dollars ($20,000,000) or (c) after
any such increase or decrease to the Maximum Credit, readjust the Maximum Credit
to Fifty Million Dollars ($50,000,000), provided that the maximum amount of
loans and other financial accommodations available under the Canadian Facility
is simultaneously readjusted to Fifteen Million Dollars ($15,000,000). Borrowers
may collectively elect to make no more than one (1) such adjustment to the
Maximum Credit in any three (3) month period.
1.52 "NET AMOUNT OF ELIGIBLE BILLED ACCOUNTS" shall mean, with respect
to any Borrower, the gross amount of Eligible Billed Accounts of such Borrower
less (a) unpaid sales, excise or similar taxes included in the amount thereof
and (b) returns, discounts, claims, credits and allowances of any nature at any
time issued, owing, granted, outstanding, available or claimed with respect
thereto.
1.53 "NET AMOUNT OF ELIGIBLE UNBILLED ACCOUNTS" shall mean, with
respect to any Borrower, the gross amount of Eligible Unbilled Accounts of such
Borrower less (a) unpaid sales, excise or similar taxes included in the amount
thereof and (b) returns, discounts, claims, credits and allowances of any nature
at any time issued, occurring, granted, outstanding, available or claimed with
respect thereto.
1.54 "NET INCOME" shall mean, with respect to any Person, for any
period, the aggregate of the net income (loss) of such Person and its
Subsidiaries, on a consolidated basis, for such period (excluding to the extent
included therein any extraordinary or one-time gains or losses) after deducting
all charges which should be deducted before arriving at the net income (loss)
for such period and after deducting the Provision for Taxes for such period, all
as determined in accordance with GAAP, provided, that the effect of any change
in accounting principles adopted by such Person or its Subsidiaries after the
date hereof shall be excluded. For the purpose of this definition, net income
excludes any gain or loss, together with any related Provision for Taxes for
such gain or loss realized upon the sale or other disposition of any assets that
are not sold in the ordinary course of business (including, without limitation,
dispositions pursuant to sale and leaseback transactions), or of any Capital
Stock of such Person or a Subsidiary of such Person and any net income realized
as a result of changes in accounting principles or the application thereof to
such Person.
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1.55 "OBLIGATIONS" shall mean any and all Revolving Loans, the Letter
of Credit Accommodations and all other obligations, liabilities and indebtedness
of every kind, nature and description owing by any Borrower to Lender and/or its
affiliates, including principal, interest, charges, fees, costs and expenses,
however evidenced, whether as principal, surety, endorser, guarantor or
otherwise, whether arising under this Agreement or otherwise, whether now
existing or hereafter arising, whether arising before, during or after the
initial or any renewal term of this Agreement or after the commencement of any
case with respect to any Borrower under the United States Bankruptcy Code or any
similar statute (including, without limitation, the payment of interest and
other amounts which would accrue and become due but for the commencement of such
case), whether direct or indirect, absolute or contingent, joint or several, due
or not due, primary or secondary, liquidated or unliquidated, secured or
unsecured, and however acquired by Lender.
1.56 "OBLIGOR" shall mean GLC or any other guarantor, endorser,
acceptor, surety or other person liable on or with respect to the Obligations or
who is the owner of any property which is security for the Obligations, other
than a Borrower.
1.57 "PARTICIPANT" shall mean any person which at any time participates
with Lender in respect of the Loans, the Letter of Credit Accommodations or
other Obligations or any portion thereof.
1.58 "PAYMENT ACCOUNT" shall have the meaning set forth in Section 6.3
hereof.
1.59 "PERMITTED ACQUISITION" shall mean any transaction, or any series
of related transactions by which any Borrower directly or indirectly acquires a
Subsidiary or any going business or all or substantially all the assets of
another Person and which meets each of the following criteria: (a) the aggregate
consideration to be paid by such Borrower in connection with such transaction or
transactions, together with all other consideration paid by all Borrowers in
connection with any other Permitted Acquisition and by GL Canada and GL UK in
connection with any transaction, or any series of related transactions by which
GL Canada or GL UK, as the case may be, directly or indirectly has acquired a
Subsidiary or any going business or all or substantially all the assets of
another Person during the term of this Agreement, does not exceed Five Million
Dollars ($5,000,000); (b) no Event of Default exists or has occurred and is
continuing immediately prior to and after giving effect to such transaction or
transactions; and (c) Total Excess Availability is not less than Ten Million
Dollars ($10,000,000) after giving effect to such transaction or transactions.
Notwithstanding anything to the contrary set forth herein, Lender shall have no
obligation to include any Account acquired pursuant to a Permitted Acquisition
as an Eligible Account.
1.60 "PERSON" or "PERSON" shall mean any individual, sole
proprietorship, partnership, corporation (including, without limitation, any
corporation which elects subchapter S status under the Code), limited liability
company, limited liability partnership, business trust, unincorporated
association, joint stock corporation, trust, joint venture or other entity or
any government or any agency or instrumentality or political subdivision
thereof.
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1.61 "PRIME RATE" shall mean the rate from time to time publicly
announced by First Union National Bank, or its successors, as its prime rate,
whether or not such announced rate is the best rate available at such bank.
1.62 "PRIME RATE LOANS" shall mean any Loans or portion thereof on
which interest is payable based on the Prime Rate in accordance with the terms
thereof.
1.63 "PROVISION FOR TAXES" shall mean, with respect to any Person, for
any period, an amount equal to all taxes imposed on or measured by net income,
whether Federal, State or local, and whether foreign or domestic, that are paid
or payable by such Person and its Subsidiaries in respect of such period on a
consolidated basis in accordance with GAAP.
1.64 "RECORDS" shall mean all of any Borrower's present and future
books of account of every kind or nature, purchase and sale agreements,
invoices, ledger cards, bills of lading and other shipping evidence, statements,
correspondence, memoranda, credit files and other data relating to the
Collateral or any account debtor, together with the tapes, disks, diskettes and
other data and software storage media and devices, file cabinets or containers
in or on which the foregoing are stored (including any rights of such Borrower
with respect to the foregoing maintained with or by any other person).
1.65 "REFERENCE BANK" shall mean First Union National Bank, or any
successor.
1.66 "RENEWAL DATE" shall have the meaning set forth in Section 12.1(a)
hereof.
1.67 "REPRESENTATIVE AGENCY AGREEMENT" shall mean any of the
agreements, substantially in the form provided to Lender by Borrowers, pursuant
to which a Person agrees to act as an agent of a Borrower for the purpose of
providing interstate or intrastate moving and related services within the United
States to customers of such Borrower.
1.68 "REPRESENTATIVE AGENT" shall mean any freight forwarder, moving
and storage company, warehouseman or other Person who has entered into a
Representative Agency Agreement with a Borrower.
1.69 "REVOLVING LOANS" shall mean the loans now or hereafter made by
Lender to or for the benefit of any Borrower on a revolving basis (involving
advances, repayments and readvances) as set forth in Section 2.1 hereof.
1.70 "SENIOR NOTES" shall mean GLC's 9 3/4% Senior Notes due 2007.
1.71 "SPONSOR LETTERS OF CREDIT" shall mean collectively that certain
irrevocable standby letter of credit issued on the date hereof by The Bank of
New York in favor of Lender for the account of OCM Principal Opportunities Fund,
LP, a Delaware limited partnership, in the original amount of Nine Million Seven
Hundred Fifty Thousand Dollars ($9,750,000), that certain irrevocable standby
letter of credit issued on the date hereof by Bankers Trust Company in favor of
Lender for the account of Alham, Inc., a Delaware corporation, in the original
amount of Three Million Two Hundred Fifty Thousand Dollars ($3,250,000) and any
other letters of credit issued from time to time in favor of Lender for the
account of the Sponsors by an issuer
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acceptable to Lender, as the same now exist or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced.
1.72 "SPONSORS" shall mean Alham, Inc., a Delaware corporation, and OCM
Principal Opportunities Fund, LP, a Delaware limited partnership.
1.73 "SUBSIDIARY" shall mean, with respect to any Person, any
corporation, limited or general partnership, limited liability company, trust,
association or other business entity of which more than fifty percent (50%) of
the voting stock or other voting equity interests (in the case of a business
entity other than a corporation) is owned or controlled directly or indirectly
by such Person, or one or more Subsidiaries of such Person, or a combination
thereof.
1.74 "TOTAL DAILY EXCESS AVAILABILITY" shall mean, as of any date, the
US Daily Excess Availability as of such date, PLUS "Canadian Daily Excess
Availability" as of such date of GL Canada as defined and determined under the
Canadian Loan Agreement, PLUS "UK Daily Excess Availability" as of such date of
GL UK as defined and determined under the UK Loan Agreement.
1.75 "TOTAL EXCESS AVAILABILITY" shall mean, as of any date, the US
Excess Availability as of such date, PLUS "Canadian Excess Availability" as of
such date of GL Canada as defined and determined under the Canadian Loan
Agreement, PLUS "UK Excess Availability" as of such date of GL UK as defined and
determined under the UK Loan Agreement.
1.76 "UK FACILITY" shall mean the credit facility in the maximum amount
of Twenty Five Million Dollars ($25,000,000) provided by Burdale Financial
Limited to GL UK pursuant to the UK Loan Agreement.
1.77 "UK LETTER OF CREDIT ACCOMMODATIONS" shall mean the letters of
credit or other guaranties which are from time to time either (a) issued, opened
or provided by Burdale for the account of GL UK or any other obligor under the
UK Loan Agreement or (b) with respect to which Burdale has agreed to indemnify
the issuer or guaranteed to the issuer the performance by GL UK of its
obligations to such issuer.
1.78 "UK LOAN AGREEMENT" shall mean that certain Facility Agreement
dated as of March 23, 2000, between Burdale Financial Limited and GL UK, as the
same now exists or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced.
1.79 "US DAILY EXCESS AVAILABILITY" shall mean the amount, as
determined by Lender, calculated at any time, equal to:
(a) the lesser of (i) the aggregate amount of the Revolving
Loans available to Borrowers as of such time (based on the applicable advance
rates set forth in Section 2.1(a) hereof and the limits set forth in Section
2.1(b) hereof), subject to the sublimits and Availability Reserves from time to
time established by Lender hereunder and (ii) the Maximum Credit, MINUS
(b) the amount of all then outstanding and unpaid Obligations.
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Notwithstanding the foregoing, in calculating US Daily Excess Availability, the
limit set forth in Section 2.1(b)(i)(C) hereof on Revolving Loans available to
Borrowers shall not be included in such calculation.
1.80 "US EXCESS AVAILABILITY" shall mean the amount, as determined by
Lender, calculated at any time, equal to:
(a) the lesser of (i) the aggregate amount of the Revolving
Loans available to Borrowers as of such time (based on the applicable advance
rates set forth in Section 2.1(a) hereof and the limits set forth in Section
2.1(b) hereof), subject to the sublimits and Availability Reserves from time to
time established by Lender hereunder and (ii) the Maximum Credit, MINUS
(b) the sum of (i) the amount of all then outstanding and
unpaid Obligations, (ii) the aggregate amount of all trade and operating lease
payables of all Borrowers which are more than sixty (60) days past due as of the
last day of the immediately preceding calendar month (except that for purposes
of Section 4.2(h), trade and operating lease payables which are more than sixty
(60) days past due shall be determined as of the date of determination) and
(iii) the aggregate amount of all capital lease and note payables of all
Borrowers which are more than fifteen (15) days past due as of the date of
determination.
SECTION 2. CREDIT FACILITIES.
2.1 REVOLVING LOANS.
(a) Subject to, and upon the terms and conditions contained
herein, Lender agrees to make Revolving Loans to Borrowers from time to time in
amounts requested by Borrowers up to the amount equal to the sum of:
(i) eighty-five percent (85%) of the aggregate Net
Amount of Eligible Billed Accounts of all Borrowers, PLUS
(ii) sixty-five percent (65%) of the aggregate Net
Amount of Eligible Unbilled Accounts of all Borrowers, PLUS
(iii) one-hundred percent (100%) of the then
aggregate amount available to be drawn by Lender under the Sponsor Letters of
Credit; MINUS
(iv) the then aggregate undrawn amounts of
outstanding Letter of Credit Accommodations as provided for in Section 2.2(c)
hereof; MINUS
(v) any Availability Reserves.
(b) Except in Lender's discretion:
(i) the aggregate amount of the Loans, the Letter of
Credit Accommodations and other Obligations outstanding at any time shall not
exceed the least of (A) the Maximum Credit, or (B) the aggregate amount
available under the lending formulas set forth
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in Section 2.1(a) hereof or (C) if (1) as of the last day of any calendar
week, the average daily Total Daily Excess Availability for the week then
ended is Five Million Dollars ($5,000,000) or less or (2) as of the last day
of any calendar week, average daily Total Daily Excess Availability for the
week then ended is more than Five Million Dollars ($5,000,000) but is Ten
Million Dollars ($10,000,000) or less and as of the last day of the
immediately following calendar week, average daily Total Daily Excess
Availability for the week then ended remains Ten Million Dollars
($10,000,000) or less, the aggregate amount collected in the Payment Account
as payments from account debtors on the Accounts or the accounts receivable
of any Subsidiary of GLC during the trailing five (5) week period ended on
the last day of such calendar week, PLUS the aggregate amount available to be
drawn by Lender under the Sponsor Letters of Credit as of such date; PROVIDED
that, such five (5) week period may be increased by Lender in its reasonable
discretion based on financial information provided by Borrowers to Lender
from time to time, or
(ii) the aggregate amount of the Loans outstanding
advanced against the Eligible Unbilled Accounts of all Borrowers shall not at
any time exceed Twenty Million Dollars ($20,000,000), or
(iii) subject to clause (i) of this Section 2.1(b),
the aggregate amount of the Loans, the Letter of Credit Accommodations and other
Obligations outstanding at any time for the account of any one Borrower shall
not exceed five percent (5%) in excess of the amount that would be available to
such Borrower if the lending formulas set forth in Section 2.1(a) hereof were
applied separately to each Borrower.
In the event that the outstanding amount of any component of the Loans and
Letter of Credit Accommodations, or the aggregate amount of the outstanding
Loans and Letter of Credit Accommodations and other Obligations, exceeds the
amounts available under the lending formulas set forth in Sections 2.1(a) and
2.1(b) hereof in the aggregate or for an individual Borrower as set forth in
this Section 2.1(b), the sublimit for Eligible Unbilled Accounts set forth in
this Section 2.1(b), the L/C Sublimit or the Maximum Credit, as applicable, such
event shall not limit, waive or otherwise affect any rights of Lender in that
circumstance or on any future occasions and Borrowers shall, upon demand by
Lender, which may be made at any time or from time to time, immediately repay to
Lender the entire amount of any such excess(es) for which payment is demanded
(other than such excess(es) which have been permitted by Lender in writing in
its discretion).
(c) Upon completion of an initial audit of each Borrower
conducted by Lender to Lender's reasonable satisfaction after the initial Loans
are made hereunder, if Total Excess Availability exceeds Fifteen Million Dollars
($15,000,000) as calculated based on the results of such initial audit, Lender
shall promptly take all actions reasonably necessary to reduce the aggregate
face amount of the Sponsor Letters of Credit by the amount of such excess or to
have replacement Sponsor Letters of Credit issued with identical terms in an
aggregate amount equal to the existing aggregate face amount less the amount of
such excess.
(d) If, (i) as of July 31, 2000 or as of the last day of any
calendar month thereafter, the average daily Total Excess Availability for the
calendar month then ended exceeds Ten Million Dollars ($10,000,000), (ii) Total
Excess Availability on each immediately preceding five (5) Business Days exceeds
Ten Million Dollars ($10,000,000) and (iii) Borrowers'
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aggregate Net Income for the year to date period is at least eighty percent
(80%) of the projected aggregate Net Income of Borrowers as set forth in the
projections of Borrowers attached hereto as EXHIBIT B, Lender shall promptly
take all actions reasonably necessary to reduce the aggregate face amount of
the Sponsor Letters of Credit by an amount equal to the amount that the
average daily Excess Availability exceeds Ten Million Dollars ($10,000,000)
during such calendar month; PROVIDED that, (x) no such reduction shall reduce
the aggregate face amount of the Sponsor Letters of Credit by more than fifty
percent (50%) of the aggregate face amount immediately prior to such
reduction unless the aggregate face amount is less than One Million Dollars
($1,000,000) and (y) immediately prior to and after giving effect to any such
reduction, no Event of Default, or event which with notice or passage of time
or both would constitute an Event of Default, exists or has occurred and is
continuing. For purposes of this Section 2.1(d) only, Net Income of Borrowers
shall be determined prior to giving effect to any Provision for Taxes.
Borrowers may from time to time arrange for additional Sponsor Letters of
Credit to be issued to Lender.
2.2 LETTER OF CREDIT ACCOMMODATIONS.
(a) Subject to, and upon the terms and conditions contained
herein, at the request of any Borrower, Lender agrees to provide or arrange for
Letter of Credit Accommodations for the account of such Borrower containing
terms and conditions acceptable to Lender and the issuer thereof. Any payments
made by Lender to any issuer thereof and/or related parties for any drawings or
payments under the Letter of Credit Accommodations shall constitute additional
Revolving Loans to such Borrower pursuant to this Section 2.
(b) In addition to any charges, fees or expenses charged by
any bank or issuer in connection with the Letter of Credit Accommodations,
Borrowers shall pay to Lender a letter of credit fee at a rate equal to one and
one-quarter percent (1.25%) per annum on the daily outstanding balance of the
Letter of Credit Accommodations for the immediately preceding month (or part
thereof), payable in arrears as of the first day of each succeeding month;
PROVIDED, HOWEVER, that such letter of credit fee shall be increased, at
Lender's option without notice, to three and one-quarter percent (3.25%) per
annum for the period on or after the date of termination or non-renewal of this
Agreement, or for the period from and after the date of the occurrence of an
Event of Default, and for so long as such Event of Default is continuing. Such
letter of credit fee shall be calculated on the basis of a three hundred sixty
(360) day year and actual days elapsed and the obligation of Borrowers to pay
such fee shall survive the termination or non-renewal of this Agreement.
(c) No Letter of Credit Accommodations shall be available to a
Borrower unless, on the date of the proposed issuance of any Letter of Credit
Accommodations, the Revolving Loans available to such Borrower (subject to the
Maximum Credit and any Availability Reserves) are equal to or greater than an
amount equal to one hundred percent (100%) of the face amount thereof and all
other commitments and obligations made or incurred by Lender with respect
thereto. Effective on the issuance of each Letter of Credit Accommodation, the
amount of Revolving Loans which might otherwise be available to Borrower shall
be reduced by the applicable amount set forth in this Section 2.2(c).
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(d) Except in Lender's discretion, the amount of all
outstanding Letter of Credit Accommodations and all other commitments and
obligations made or incurred by Lender in connection therewith shall not at any
time exceed the L/C Sublimit. At any time an Event of Default exists or has
occurred and is continuing, upon Lender's request, each Borrower will either
furnish cash collateral to secure the reimbursement obligations to the issuer in
connection with any Letter of Credit Accommodations or furnish cash collateral
to Lender for the Letter of Credit Accommodations, and in either case, the
Revolving Loans otherwise available to such Borrower shall not be reduced as
provided in Section 2.2(c) to the extent of such cash collateral.
(e) Each Borrower shall indemnify and hold Lender harmless
from and against any and all losses, claims, damages, liabilities, costs and
expenses which Lender may suffer or incur in connection with any Letter of
Credit Accommodations and any documents, drafts or acceptances relating thereto,
including, but not limited to, any losses, claims, damages, liabilities, costs
and expenses due to any action taken by any issuer or correspondent with respect
to any Letter of Credit Accommodation. Each Borrower assumes all risks with
respect to the acts or omissions of the drawer under or beneficiary of any
Letter of Credit Accommodation and for such purposes the drawer or beneficiary
shall be deemed such Borrower's agent. Each Borrower assumes all risks for, and
agrees to pay, all foreign, Federal, State and local taxes, duties and levies
relating to any goods subject to any Letter of Credit Accommodations or any
documents, drafts or acceptances thereunder. Each Borrower hereby releases and
holds Lender harmless from and against any acts, waivers, errors, delays or
omissions, whether caused by such Borrower, by any issuer or correspondent or
otherwise, unless caused by the gross negligence or willful misconduct of
Lender, with respect to or relating to any Letter of Credit Accommodation. The
provisions of this Section 2.2(e) shall survive the payment of Obligations and
the termination or non-renewal of this Agreement.
(f) Nothing contained herein shall be deemed or construed to
grant any Borrower any right or authority to pledge the credit of Lender in any
manner. Lender shall have no liability of any kind with respect to any Letter of
Credit Accommodation provided by an issuer other than Lender unless Lender has
duly executed and delivered to such issuer the application or a guarantee or
indemnification in writing with respect to such Letter of Credit Accommodation.
Each Borrower shall be bound by any interpretation made in good faith by Lender,
or any other issuer or correspondent under or in connection with any Letter of
Credit Accommodation or any documents, drafts or acceptances thereunder,
notwithstanding that such interpretation may be inconsistent with any
instructions of such Borrower. Lender shall have the sole and exclusive right
and authority to, and no Borrower shall: (i) at any time an Event of Default
exists or has occurred and is continuing, (A) approve or resolve any questions
of non-compliance of documents, (B) give any instructions as to acceptance or
rejection of any documents or goods or (C) execute any and all applications for
steamship or airway guaranties, indemnities or delivery orders, and (ii) at all
times, (A) grant any extensions of the maturity of, time of payment for, or time
of presentation of, any drafts, acceptances, or documents, and (B) agree to any
amendments, renewals, extensions, modifications, changes or cancellations of any
of the terms or conditions of any of the applications, Letter of Credit
Accommodations, or documents, drafts or acceptances thereunder or any letters of
credit included in the Collateral. Lender may take such actions either in its
own name or in a Borrower's name.
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SECTION 3. INTEREST AND FEES.
3.1 INTEREST.
(a) Each Borrower shall pay to Lender interest on the
outstanding principal amount of the non-contingent Obligations at the Interest
Rate. All interest accruing hereunder on and after the date of any Event of
Default or termination or non-renewal hereof shall be payable on demand.
(b) Borrowers may from time to time request that Prime Rate
Loans be converted to Eurodollar Rate Loans or that any existing Eurodollar Rate
Loans continue for an additional Interest Period. Such request from Borrowers
shall specify the amount of the Prime Rate Loans which will constitute
Eurodollar Rate Loans (subject to the limits set forth below) and the Interest
Period to be applicable to such Eurodollar Rate Loans. Subject to the terms and
conditions contained herein, three (3) Business Days after receipt by Lender of
such a request from Borrowers, such Prime Rate Loans shall be converted to
Eurodollar Rate Loans or such Eurodollar Rate Loans shall continue, as the case
may be, PROVIDED, THAT, (i) no Event of Default, or event which with notice or
passage of time or both would constitute an Event of Default exists or has
occurred and is continuing, (ii) no party hereto shall have sent any notice of
termination or non-renewal of this Agreement, (iii) each Borrower shall have
complied with such customary procedures as are established by Lender and
specified by Lender to Borrowers from time to time for requests by Borrowers for
Eurodollar Rate Loans, (iv) no more than four (4) Interest Periods may be in
effect at any one time, (v) the aggregate amount of the Eurodollar Rate Loans
must be in an amount not less than Three Million Five Hundred Thousand Dollars
($3,500,000) or an integral multiple of One Million Dollars ($1,000,000) in
excess thereof, (vi) the maximum amount of the Eurodollar Rate Loans at any time
requested by Borrowers shall not exceed the amount equal to ninety (90%) percent
of the lowest principal amount of the Loans which it is anticipated will be
outstanding during the applicable Interest Period, in each case as determined by
Lender (but with no obligation of Lender to make such Loans) and (vii) Lender
shall have determined that the Interest Period or Adjusted Eurodollar Rate is
available to Lender through the Reference Bank and can be readily determined as
of the date of the request for such Eurodollar Rate Loan by Borrowers. Any
request by any Borrower, if complied with by Lender, to convert Prime Rate Loans
to Eurodollar Rate Loans or to continue any existing Eurodollar Rate Loans shall
be irrevocable. Notwithstanding anything to the contrary contained herein,
Lender and Reference Bank shall not be required to purchase United States Dollar
deposits in the London interbank market or other applicable Eurodollar Rate
market to fund any Eurodollar Rate Loans, but the provisions hereof shall be
deemed to apply as if Lender and Reference Bank had purchased such deposits to
fund the Eurodollar Rate Loans.
(c) Any Eurodollar Rate Loans shall automatically convert to
Prime Rate Loans upon the last day of the applicable Interest Period, unless
Lender has received a request which complies with the terms and provisions of
this Agreement to continue such Eurodollar Rate Loan at least three (3) Business
Days prior to such last day in accordance with the terms hereof. Any Eurodollar
Rate Loans shall, at Lender's option, upon notice by Lender to Borrowers,
convert to Prime Rate Loans in the event that (i) an Event of Default or event
which, with the notice or passage of time, or both, would constitute an Event of
Default, shall exist and remain unwaived by Lender for a period of ten (10)
Business Days, (ii) this Agreement shall
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terminate or not be renewed, or (iii) the aggregate principal amount of the
Prime Rate Loans which have previously been converted to Eurodollar Rate
Loans or existing Eurodollar Rate Loans continued, as the case may be, at the
beginning of an Interest Period shall at any time during such Interest Period
exceed either (A) the aggregate principal amount of the Loans then
outstanding, or (B) the Revolving Loans then available to Borrowers under
Section 2 hereof. Each Borrower shall pay to Lender, upon demand by Lender
(or Lender may, at its option, charge any loan account of Borrower) any
amounts required to compensate Lender, the Reference Bank or any participant
with Lender for any loss (including loss of anticipated profits), cost or
expense incurred by such person, as a result of the conversion of Eurodollar
Rate Loans to Prime Rate Loans pursuant to any of the foregoing.
(d) Interest shall be payable by each Borrower to Lender
monthly in arrears not later than the first day of each calendar month and shall
be calculated on the basis of a three hundred sixty (360) day year and actual
days elapsed. The interest rate on non-contingent Obligations (other than
Eurodollar Rate Loans) shall increase or decrease by an amount equal to each
increase or decrease in the Prime Rate effective on the first day of the month
after any change in such Prime Rate is announced based on the Prime Rate in
effect on the last day of the month in which any such change occurs. In no event
shall charges constituting interest payable by any Borrower to Lender exceed the
maximum amount or the rate permitted under any applicable law or regulation, and
if any such part or provision of this Agreement is in contravention of any such
law or regulation, such part or provision shall be deemed amended to conform
thereto.
3.2 CLOSING AND SYNDICATION FEE. Borrowers shall pay to Lender as a
closing and syndication fee for the transactions contemplated hereunder the
amount of Three Hundred Seventy Five Thousand Dollars ($375,000), which fee
shall be fully earned as of and payable on the date hereof.
3.3 LOAN SERVICING FEE. Borrowers shall pay to Lender a monthly loan
servicing fee in an aggregate amount equal to Three Thousand Dollars ($3,000),
plus out-of-pocket costs and expenses, in respect of Lender's services for each
month (or part thereof) while this Agreement remains in effect and for so long
thereafter as any of the Obligations are outstanding, which fee shall be fully
earned as of and payable in advance on the date hereof and on the first day of
each month hereafter.
3.4 UNUSED LINE FEE. Borrowers shall pay to Lender monthly an unused
line fee equal to a rate equal to three-eighths of one percent (.375%) per annum
calculated upon the amount by which the Maximum Credit exceeds the average daily
principal balance of the outstanding Revolving Loans and Letter of Credit
Accommodations for all Borrowers and the during the immediately preceding month
while this Agreement is in effect and for so long thereafter as any of the
Obligations are outstanding, which fee shall be payable on the first day of each
month in arrears. Such unused line fee shall be allocated among Borrowers as
determined by Lender and payable by Borrowers in accordance with such
allocation.
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3.5 COMPENSATION ADJUSTMENT.
(a) If after the date of this Agreement the introduction of,
or any change in, any law or any governmental rule, regulation, policy,
guideline or directive (whether or not having the force of law), or any
interpretation thereof, or compliance by Lender or any Participant therewith:
(i) subjects Lender to any tax, duty, charge or
withholding on or from payments due from any Borrower (excluding franchise taxes
imposed upon, and taxation of the overall net income of, Lender or any
Participant), or changes the basis of taxation of payments, in either case in
respect of amounts due it hereunder, or
(ii) imposes or increases or deems applicable any
reserve requirement or other reserve, assessment, insurance charge, special
deposit or similar requirement against assets of, deposits with or for the
account of, or credit extended by Lender or any Participant (other than any
reserves included in the determination of the Eurodollar Rate), or
(iii) imposes any other condition the result of which
is to increase the cost to Lender or any Participant of making, funding or
maintaining the Loans or Letter of Credit Accommodations or reduces any amount
receivable by Lender or any Participant in connection with the Loans or Letter
of Credit Accommodations, or requires Lender or any Participant to make payment
calculated by references to the amount of loans held or interest received by it,
by an amount deemed material by Lender or any Participant, or
(iv) imposes or increases any capital requirement or
affects the amount of capital required or expected to be maintained by Lender or
any Participant or any corporation controlling Lender or any Participant, and
Lender or any Participant determines that such imposition or increase in capital
requirements or increase in the amount of capital expected to be maintained is
based upon the existence of this Agreement or the Loans or Letter of Credit
Accommodations hereunder, all of which may be determined by Lender's reasonable
allocation of the aggregate of its impositions or increases in capital required
or expected to be maintained, and the result of any of the foregoing is to
increase the cost to Lender or any Participant of making, renewing or
maintaining the Loans or Letter of Credit Accommodations, or to reduce the rate
of return to Lender or any Participant on the Loans or Letter of Credit
Accommodations, then upon demand by Lender, Borrowers shall pay to Lender, and
continue to make periodic payments to Lender or any Participant, such additional
amounts as may be necessary to compensate Lender or any Participant for any such
additional cost incurred or reduced rate of return realized.
(b) A certificate of Lender claiming entitlement to
compensation as set forth above will be conclusive in the absence of manifest
error. Such certificate will set forth the nature of the occurrence giving rise
to such compensation, the additional amount or amounts to be paid and the
compensation and the method by which such amounts were determined. Each demand
for compensation under this Section 3.5 shall be given within ninety (90) days
of Lender's first learning of the basis for such compensation and its ability to
calculate the amount of such compensation. In determining any additional amounts
due from any Borrower under this Section 3.5, Lender shall act reasonably and in
good faith and will, to the extent that the
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increased costs, reductions, or amounts received or receivable relate to the
Lender's or a Participant's loans or commitments generally and are not
specifically attributable to the Loans and commitments hereunder, use
averaging and attribution methods which are reasonable and equitable and
which cover all loans and commitments under this Agreement by the Lender or
such Participant, as the case may be, whether or not the loan documentation
for such other loans and commitments permits the Lender or such Participant
to receive compensation costs of the type described in this Section 3.5.
3.6 CHANGES IN LAWS AND INCREASED COSTS OF LOANS.
(a) Notwithstanding anything to the contrary contained herein,
all Eurodollar Rate Loans shall, upon notice by Lender to Borrowers, convert to
Prime Rate Loans in the event that (i) any change in applicable law or
regulation (or the interpretation or administration thereof) shall either (A)
make it unlawful for Lender, Reference Bank or any participant to make or
maintain Eurodollar Rate Loans or to comply with the terms hereof in connection
with the Eurodollar Rate Loans, or (B) shall result in the increase in the costs
to Lender, Reference Bank or any participant of making or maintaining any
Eurodollar Rate Loans by an amount deemed by Lender to be material, or (C)
reduce the amounts received or receivable by Lender in respect thereof, by an
amount deemed by Lender to be material or (ii) the cost to Lender, Reference
Bank or any participant of making or maintaining any Eurodollar Rate Loans shall
otherwise increase by an amount deemed by Lender to be material. Such conversion
shall occur at the end of the applicable Interest Period for each such
Eurodollar Rate Loan or, if it is unlawful for Lender to maintain any such Loan
until such date, on the latest date on which it remains lawful for Lender to
maintain such Loan. Borrowers shall pay to Lender, upon demand by Lender (or
Lender may, at its option, charge any loan account of any Borrower) any amounts
required to compensate Lender, the Reference Bank or any participant with Lender
for any loss (including loss of anticipated profits), cost or expense incurred
by such person as a result of any such conversion, including, without
limitation, any such loss, cost or expense incurred by reason of the liquidation
or reemployment of deposits or other funds acquired by such person to make or
maintain the Eurodollar Rate Loans or any portion thereof as a result of any
payment of principal of any Eurodollar Rate Loan made other than on the last day
of the Interest Period for that Loan. A certificate of Lender setting forth the
basis for the determination of such amount necessary to compensate Lender as
aforesaid shall be delivered to Borrowers and shall be conclusive, absent
manifest error.
(b) If any payments or prepayments in respect of the
Eurodollar Rate Loans are received by Lender other than on the last day of the
applicable Interest Period (whether pursuant to acceleration, upon maturity or
otherwise), including any payments pursuant to the application of collections
under Section 6.3 or any other payments made with the proceeds of Collateral,
Borrowers shall pay to Lender upon demand by Lender (or Lender may, at its
option, charge any loan account of any Borrower) any amounts required to
compensate Lender, the Reference Bank or any participant with Lender for any
additional loss, cost or expense incurred by such person as a result of such
prepayment or payment, including, without limitation, any loss, cost or expense
incurred by reason of the liquidation or reemployment of deposits or other funds
acquired by such person to make or maintain such Eurodollar Rate Loans or any
portion thereof.
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3.7 DUPLICATION. All amounts determined under any provision of Section
3.5 or 3.6 shall be without duplication with any amounts determined under any
other provision of those sections.
SECTION 4. CONDITIONS PRECEDENT.
4.1 CONDITIONS PRECEDENT TO INITIAL LOANS AND THE LETTER OF CREDIT
ACCOMMODATIONS. Each of the following is a condition precedent to Lender making
the initial Loans and providing the initial Letter of Credit Accommodations
hereunder:
(a) Lender shall have received, in form and substance
satisfactory to Lender, all releases, terminations and such other documents as
Lender may request to evidence and effectuate the termination of any interest in
and to any assets and properties of any Borrower, duly authorized, executed and
delivered by it or each of them, including, but not limited to, UCC termination
statements for all UCC financing statements and Lender shall have satisfied
itself that it has valid, perfected and first priority security interests in and
liens upon the Collateral and any other property which is intended as security
for the Obligations or the liability of any Obligor in respect thereto, subject
only to the security interests and liens permitted herein or in the other
Financing Agreements;
(b) all requisite corporate action and proceedings in
connection with this Agreement and the other Financing Agreements shall be
satisfactory in form and substance to Lender, and Lender shall have received all
information and copies of all documents, including, without limitation, records
of requisite corporate action and proceedings which Lender may have requested in
connection therewith, such documents where requested by Lender or its counsel to
be certified by appropriate corporate officers or governmental authorities;
(c) no material adverse change shall have occurred in the
assets, business or prospects of any Borrower since the date of Lender's latest
field examination and no change or event shall have occurred which would impair
the ability of any Borrower or any Obligor to perform its obligations hereunder
or under any of the other Financing Agreements to which it is a party or of
Lender to enforce the Obligations or realize upon the Collateral;
(d) Lender shall have completed a field review of the Records
and of such other financial information, projections, budgets, business plans,
cash flows as Lender shall reasonably request from time to time, including, but
not limited to, current agings of receivables, rollforwards of Accounts through
the date of closing and availability projections for Borrowers' fiscal year
2000, prepared on a monthly basis, together with supporting documentation, the
results of which shall be satisfactory to Lender;
(e) Lender shall have received, in form and substance
satisfactory to Lender, all consents, waivers, acknowledgments and other
agreements from third persons which Lender may deem necessary or desirable in
order to permit, protect and perfect its security interests in and liens upon
the Collateral or to effectuate the provisions or purposes of this Agreement and
the other Financing Agreements, including, without limitation, acknowledgments
by lessors, mortgagees and warehousemen of Lender's security interests in the
Collateral, waivers by such persons of any security interests, liens or other
claims by such persons to the Collateral and
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agreements permitting Lender access to, and the right to remain on, the
premises to exercise its rights and remedies and otherwise deal with the
Collateral;
(f) Lender shall have received evidence of insurance and loss
payee endorsements required hereunder and under the other Financing Agreements,
in form and substance satisfactory to Lender, and certificates of insurance
policies and/or endorsements naming Lender as loss payee;
(g) Lender shall have received, in form and substance
satisfactory to Lender, such opinion letters of counsel to each Borrower and GLC
with respect to the Financing Agreements and such other matters as Lender may
request;
(h) the Total Excess Availability as determined by Lender as
of the date hereof LESS the aggregate amount of all book overdrafts of any
Borrower, GL Canada and GL UK shall be not less than an amount that is
satisfactory to Lender after giving effect to the initial Loans made or to be
made hereunder and the payment of all fees and expenses payable upon the
consummation of the initial transactions contemplated by this Agreement;
(i) Lender shall have received, in form and substance
satisfactory to Lender and its counsel, the assignment of all of all Borrowers'
rights in registered patents, trademarks, service marks and copyrights, as
Collateral hereunder, on Lender's standard forms of Collateral Assignments;
(j) Lender shall have received, in form and substance
satisfactory to Lender, a continuing guarantee by GLC and BC of the payment of
all Obligations and any security agreements, pledge agreements, hypothecs,
mortgages and any other documents or instruments evidencing the security
interests of Lender on the assets of GLC as Lender may require, including,
without limitation, a pledge of all the issued and outstanding capital stock of
LIW Holdings Corp., a Delaware corporation, and the collateral assignment of all
of BC's rights in registered patents, trademarks, service marks and copyrights,
on Lender's standard forms of Collateral Assignments;
(k) Lender shall have received evidence, in form and substance
satisfactory to Lender, that the initial loans under the Canadian Facility and
the UK Facility will be advanced concurrently with or immediately upon the
making of the initial Loans hereunder;
(l) Lender shall have received the Sponsor Letters of Credit
and a participation and subordination agreement duly executed by each of the
Sponsors with respect to Borrowers' reimbursement obligations in connection with
the Sponsor Letters of Credit, each in form and substance satisfactory to
Lender;
(m) Lender shall have received, in form and substance
satisfactory to Lender, executed copies of Blocked Account agreements, pursuant
to Section 6.3(a) hereof, among Lender, each Borrower and Harris Bank; and
(n) the other Financing Agreements and all instruments and
documents hereunder and thereunder shall have been duly executed and delivered
to Lender, in form and substance satisfactory to Lender.
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4.2 CONDITIONS PRECEDENT TO ALL LOANS AND LETTER OF CREDIT
ACCOMMODATIONS. Each of the following is an additional condition precedent to
Lender making Loans and/or providing Letter of Credit Accommodations to any
Borrower, including the initial Loans and Letter of Credit Accommodations and
any future Loans and Letter of Credit Accommodations:
(a) all representations and warranties contained herein and in
the other Financing Agreements shall be true and correct in all material
respects with the same effect as though such representations and warranties had
been made on and as of the date of the making of each such Loan or providing
each such Letter of Credit Accommodation and after giving effect thereto; and
(b) no Event of Default and no event or condition which, with
notice or passage of time or both, would constitute an Event of Default, shall
exist or have occurred and be continuing on and as of the date of the making of
such Loan or providing each such Letter of Credit Accommodation and after giving
effect thereto.
SECTION 5. GRANT OF SECURITY INTEREST.
To secure payment and performance of all Obligations, each Borrower
hereby grants to Lender a continuing security interest in, a lien upon, and a
right of set off against, and hereby assigns to Lender as security, the
following property and interests in property of such Borrower, whether now owned
or hereafter acquired or existing, and wherever located (collectively, the
"COLLATERAL"):
5.1 all Accounts and other indebtedness owed to such Borrower;
5.2 all present and future contract rights, general intangibles
(including, but not limited to, tax and duty refunds, registered and
unregistered patents, trademarks, service marks, copyrights, trade names,
applications for the foregoing, trade secrets, goodwill, processes, drawings,
blueprints, customer lists, licenses, whether as licensor or licensee, choses in
action and other claims and existing and future leasehold interests in
equipment, real estate and fixtures), chattel paper, documents, instruments,
securities, investment property, letters of credit, proceeds of letters of
credit, bankers' acceptances and guaranties;
5.3 all present and future monies, securities, credit balances,
deposits, deposit accounts and other property of such Borrower now or hereafter
held or received by or in transit to Lender or its affiliates or at any other
depository or other institution from or for the account of such Borrower,
whether for safekeeping, pledge, custody, transmission, collection or otherwise,
and all present and future liens, security interests, rights, remedies, title
and interest in, to and in respect of Accounts and other Collateral, including,
without limitation, (a) rights and remedies under or relating to guaranties,
contracts of suretyship, letters of credit and credit and other insurance
related to the Collateral, (b) rights of stoppage in transit, replevin,
repossession, reclamation and other rights and remedies of an unpaid vendor,
lienor or secured party, (c) goods described in invoices, documents, contracts
or instruments with respect to, or otherwise representing or evidencing,
Accounts or other Collateral, including, without limitation, returned,
repossessed and reclaimed goods, and (d) deposits by and property of account
debtors or other persons securing the obligations of account debtors;
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5.4 all Inventory;
5.5 all Equipment;
5.6 all Records; and
5.7 all products and proceeds of the foregoing, in any form, including,
without limitation, insurance proceeds and any claims against third parties for
loss or damage to or destruction of any or all of the foregoing.
SECTION 6. COLLECTION AND ADMINISTRATION.
6.1 BORROWERS' LOAN ACCOUNT. Lender shall maintain one or more loan
account(s) on its books in which shall be recorded (a) all Loans, all Letter
of Credit Accommodations and all other Obligations and the Collateral, (b)
all payments made by or on behalf of a Borrower and (c) all other appropriate
debits and credits as provided in this Agreement, including, without
limitation, fees, charges, costs, expenses and interest. All entries in the
loan account(s) shall be made in accordance with Lender's customary practices
as in effect from time to time.
6.2 STATEMENTS. Lender shall render to Borrowers each month a statement
setting forth the balance in each Borrower's loan account(s) maintained by
Lender for Borrowers pursuant to the provisions of this Agreement, including
principal, interest, fees, costs and expenses. Each such statement shall be
subject to subsequent adjustment by Lender but shall, absent manifest errors or
omissions, be considered correct and deemed accepted by each Borrower and
conclusively binding upon each Borrower as an account stated except to the
extent that Lender receives a written notice from Borrowers of any specific
exceptions of Borrowers thereto within thirty (30) days after the date such
statement has been mailed by Lender. Until such time as Lender shall have
rendered to Borrowers a written statement as provided above, the balance in any
Borrower's loan account(s) shall be presumptive evidence of the amounts due and
owing to Lender by such Borrower.
6.3 COLLECTION OF ACCOUNTS.
(a) Each Borrower shall establish and maintain, at its
expense, a blocked account or lockboxes and related blocked accounts (in either
case, each a "BLOCKED ACCOUNT" and collectively the "BLOCKED ACCOUNTS"), as
Lender may specify, with such bank or banks as are acceptable to Lender into
which such Borrower shall promptly, and any other Subsidiary of GLC may, deposit
and direct its account debtors to directly remit all payments on Accounts and
all payments constituting proceeds of Inventory or other Collateral in the
identical form in which such payments are made, whether by cash, check or other
manner. Each bank at which a Blocked Account is established shall enter into an
agreement, in form and substance satisfactory to Lender, providing (unless
otherwise agreed to by Lender) that all items received or deposited in such
Blocked Account (other than the proceeds of accounts receivable or other
property of any Subsidiary of GLC that is not a Borrower or Obligor) are the
Collateral of Lender, that the depository bank has no lien upon, or right to
setoff against, the Blocked Accounts, the items received for deposit therein, or
the funds from time to time on deposit therein and that the depository bank will
wire, or otherwise transfer, in immediately available funds, on a daily basis,
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all funds received or deposited into such Blocked Account to such bank account
of Lender as Lender may from time to time designate for such purpose (the
"PAYMENT ACCOUNT"). Each Borrower agrees that all amounts deposited in the
Blocked Accounts or other funds received and collected by Lender, whether as
proceeds of Inventory, the collection of Accounts or other Collateral or
otherwise (other than the proceeds of accounts receivable or other property of
any Subsidiary of GLC that is not a Borrower or Obligor) shall be the Collateral
of Lender.
(b) For purposes of calculating interest on the
Obligations, such payments or other funds received will be applied
(conditional upon final collection) to the Obligations one (1) Business Day
following the date of receipt of immediately available funds by Lender in the
Payment Account. For purposes of calculating the amount of the Revolving
Loans available to a Borrower such payments will be applied (conditional upon
final collection) to the Obligations on the Business Day of receipt by Lender
in the Payment Account, if such payments are received within sufficient time
(in accordance with Lender's usual and customary practices as in effect from
time to time) to credit such Borrower's loan account on such day, and if not,
then on the next Business Day. If no monetary obligations by any Borrower are
outstanding on any day, but monetary obligations under the UK Facility or the
Canadian Facility are outstanding, or any Letter of Credit Accommodations,
Canadian Letter of Credit Accommodations or UK Letter of Credit
Accommodations are outstanding on such day, Borrowers shall pay interest at
the applicable rate set forth in Section 3.1 on the amount of any payments or
other funds that are received by Lender (irrespective of the characterization
of whether receipts are owned by Lender or any Borrower) for such day. If no
monetary obligations under this Agreement, the UK Facility or the Canadian
Facility are outstanding and no Letter of Credit Accommodations, Canadian
Letter of Credit Accommodations or UK Letter of Credit Accommodations are
outstanding on any day, no interest shall be charged to Borrowers on the
amount of any payments or other funds that are received by Lender for such
day.
(c) Each Borrower and all of its affiliates, Subsidiaries,
shareholders, directors, employees or agents shall, holding the same in trust
for Lender, receive, as the property of Lender, any monies, cash, checks, notes,
drafts or any other payment relating to and/or proceeds of Accounts or from
sales of Inventory or other Collateral which come into their possession or under
their control and immediately upon receipt thereof, shall deposit or cause the
same to be deposited in the Blocked Accounts, or remit the same or cause the
same to be remitted, in kind, to Lender. In no event shall any such monies,
checks, notes, drafts or other payments be commingled with any Borrower's own
funds. Each Borrower agrees to reimburse Lender on demand for any amounts owed
or paid to any bank at which a Blocked Account is established or any other bank
or person involved in the transfer of funds to or from the Blocked Accounts
arising out of Lender's payments to or indemnification of such bank or person,
unless such payment or indemnification obligation of Lender was a result of
Lender's gross negligence or willful misconduct. The obligation of each Borrower
to reimburse Lender for such amounts pursuant to this Section 6.3 shall survive
the termination or non-renewal of this Agreement.
6.4 PAYMENTS. All Obligations shall be payable to the Payment Account
as provided in Section 6.3 or such other place in the United States as Lender
may designate from time to time. Lender may apply payments received or collected
from any Borrower or for the account of any Borrower (including, without
limitation, the monetary proceeds of collections or of realization upon any
Collateral) to such of the Obligations, whether or not then due, in such order
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and manner as Lender determines. At Lender's option, all principal, interest,
fees, costs, expenses and other charges provided for in this Agreement or the
other Financing Agreements may be charged directly to the loan account(s) of any
Borrower. Each Borrower shall make all payments to Lender on the Obligations
free and clear of, and without deduction or withholding for or on account of,
any setoff, counterclaim, defense, duties, taxes, levies, imposts, fees,
deductions, withholding, restrictions or conditions of any kind. If after
receipt of any payment of, or proceeds of Collateral applied to the payment of,
any of the Obligations, Lender is required to surrender or return such payment
or proceeds to any Person for any reason, then the Obligations intended to be
satisfied by such payment or proceeds shall be reinstated and continue and this
Agreement shall continue in full force and effect as if such payment or proceeds
had not been received by Lender. Each Borrower shall be liable to pay to Lender,
and does hereby indemnify and hold Lender harmless for the amount of any
payments or proceeds surrendered or returned. This Section 6.4 shall remain
effective notwithstanding any contrary action which may be taken by Lender in
reliance upon such payment or proceeds. This Section 6.4 shall survive the
payment of the Obligations and the termination or non-renewal of this Agreement.
6.5 AUTHORIZATION TO MAKE LOANS. Lender is authorized to make the Loans
and provide the Letter of Credit Accommodations based upon telephonic or other
instructions received from anyone purporting to be an officer of a Borrower or
other authorized person or, at the discretion of Lender, if such Loans are
necessary to satisfy any Obligations. All requests for Loans or Letter of Credit
Accommodations hereunder shall specify the date on which the requested advance
is to be made or Letter of Credit Accommodations established (which day shall be
a Business Day) and the amount of the requested Loan. Requests received after
10:30 a.m. (Los Angeles time) on any day shall be deemed to have been made as of
the opening of business on the immediately following Business Day. All Loans and
Letter of Credit Accommodations under this Agreement shall be conclusively
presumed to have been made to, and at the request of and for the benefit of,
Borrowers when deposited to the credit of any Borrower or otherwise disbursed or
established in accordance with the instructions of any Borrower or in accordance
with the terms and conditions of this Agreement.
6.6 USE OF PROCEEDS. Each Borrower shall use the initial proceeds of
the Loans provided by Lender to any Borrower hereunder only for: (a) payments to
each of the persons listed in the disbursement direction letter furnished by
Borrowers to Lender on or about the date hereof and (b) costs, expenses and fees
in connection with the preparation, negotiation, execution and delivery of this
Agreement and the other Financing Agreements. All other Loans made or Letter of
Credit Accommodations provided by Lender to any Borrower pursuant to the
provisions hereof shall be used by each Borrower only for general operating,
working capital and other proper corporate purposes of such Borrower not
otherwise prohibited by the terms hereof. None of the proceeds will be used,
directly or indirectly, for the purpose of purchasing or carrying any margin
security or for the purposes of reducing or retiring any indebtedness which was
originally incurred to purchase or carry any margin security or for any other
purpose which might cause any of the Loans to be considered a "purpose credit"
within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System, as amended.
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SECTION 7. COLLATERAL REPORTING AND COVENANTS.
7.1 COLLATERAL REPORTING. Borrowers shall provide Lender with the
following documents in a form satisfactory to Lender:
(a) on a weekly basis, on or before the Wednesday of such week
for the immediately preceding calendar week or more frequently as Lender may
request, reports reflecting paid and unpaid excise and duty taxes for goods
shipped by each Borrower, a schedule of Accounts of each Borrower, sales made,
credits issued and cash received by each Borrower;
(b) on a monthly basis, on or before the third (3rd) Business
Day after the fifteenth (15th) day of such month for the first fifteen (15) day
period of such month or more frequently as Lender may request, interim
rollforwards of and detailed information on unbilled Accounts of each Borrower;
(c) on a monthly basis, on or before the tenth (10th) Business
Day of such month for the immediately preceding month or more frequently as
Lender may request, separate agings of billed and unbilled accounts receivable,
detailed information on unbilled Accounts, agings of accounts payable, lease
payables and other payables of each Borrower;
(d) upon Lender's reasonable request, (i) copies of customer
statements and credit memos, remittance advices and reports, and copies of
deposit slips and bank statements of each Borrower, (ii) copies of shipping and
delivery documents of each Borrower, and (iii) copies of purchase orders,
invoices and delivery documents for Equipment acquired by each Borrower; and
(e) such other reports as to the Collateral or other property
which is security for the Obligations as Lender shall reasonably request from
time to time.
If any of any Borrower's records or reports of the Collateral or other property
which is security for the Obligations are prepared or maintained by an
accounting service, contractor, shipper or other agent, each Borrower hereby
irrevocably authorizes such service, contractor, shipper or agent to deliver
such records, reports, and related documents to Lender and to follow Lender's
instructions with respect to further services at any time that an Event of
Default exists or has occurred and is continuing.
7.2 ACCOUNTS COVENANTS.
(a) Borrowers shall notify Lender promptly of: (i) any
material delay in any Borrower's performance of any of its obligations to any
account debtor or the assertion of any claims, offsets, defenses or
counterclaims by any account debtor, or any disputes with account debtors, or
any settlement, adjustment or compromise thereof, (ii) all material adverse
information relating to the financial condition of any account debtor and (iii)
any event or circumstance which, to any Borrower's knowledge would cause Lender
to consider any then existing Accounts as no longer constituting Eligible
Accounts. No credit, discount, allowance or extension or agreement for any of
the foregoing shall be granted to any account debtor except in the ordinary
course of a Borrower's business in accordance with its most recent past
practices and policies. So long as no Event of Default exists or has occurred
and is continuing, a Borrower
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may settle, adjust or compromise any claim, offset, counterclaim or dispute
with any account debtor in the ordinary course of such Borrower's business in
accordance with its most recent past practices and policies. At any time that
an Event of Default exists or has occurred and is continuing, Lender shall,
at its option, have the exclusive right to settle, adjust or compromise any
claim, offset, counterclaim or dispute with account debtors or grant any
credits, discounts or allowances and no Borrower shall, upon Lender's
request, issue any credits, discounts or allowances with respect to any
Account without Lender's prior written consent.
(b) With respect to each Account: (i) the amounts shown on any
invoice delivered to Lender or schedule thereof delivered to Lender shall be
true and complete, (ii) no payments shall be made thereon except payments
delivered to Lender pursuant to the terms of this Agreement, (iii) no credit,
discount, allowance or extension or agreement for any of the foregoing shall be
granted to any account debtor except as reported to Lender in accordance with
this Agreement and except for credits, discounts, allowances or extensions made
or given in the ordinary course of a Borrower's business in accordance with
practices and policies previously disclosed to Lender, (iv) there shall be no
setoffs, deductions, contras, defenses, counterclaims or disputes existing or
asserted with respect thereto except as reported to Lender in accordance with
the terms of this Agreement, (v) none of the transactions giving rise thereto
will violate any applicable State or Federal Laws or regulations, all
documentation relating thereto will be legally sufficient under such laws and
regulations and all such documentation will be legally enforceable in accordance
with its terms and (vi) if such Account is a Eligible Unbilled Account, a
Borrower has completed shipment of goods and/or the rendition of services which
gave rise thereto in accordance with the terms and provisions contained in any
documents related thereto.
(c) Lender shall have the right at any time or times, in
Lender's name or in the name of a nominee of Lender, to verify the validity,
amount or any other matter relating to any Account or other Collateral, by mail,
telephone, facsimile transmission or otherwise.
(d) Each Borrower shall deliver or cause to be delivered to
Lender, with appropriate endorsement and assignment, with full recourse to such
Borrower, all chattel paper and instruments which such Borrower now owns or may
at any time acquire immediately upon such Borrower's receipt thereof, except as
Lender may otherwise agree.
(e) Lender may, at any time or times that an Event of Default
exists, (i) notify any or all account debtors that the Accounts have been
assigned to Lender and that Lender has a security interest therein and Lender
may direct any or all account debtors to make payments of Accounts directly to
Lender, (ii) extend the time of payment of, compromise, settle or adjust for
cash, credit, return of merchandise or otherwise, and upon any terms or
conditions, any and all Accounts or other obligations included in the Collateral
and thereby discharge or release the account debtor or any other party or
parties in any way liable for payment thereof without affecting any of the
Obligations, (iii) demand, collect or enforce payment of any Accounts or such
other obligations, but without any duty to do so, and Lender shall not be liable
for its failure to collect or enforce the payment thereof or for the negligence
of its agents or attorneys with respect thereto and (iv) take whatever other
action Lender may deem necessary or desirable for the protection of its
interests. At any time that an Event of Default exists or has occurred and is
continuing, at Lender's request, all invoices and statements sent to any account
debtor shall state that the Accounts due from such account debtor and such other
obligations have been assigned to
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Lender and are payable directly and only to Lender and each Borrower shall
deliver to Lender such originals of documents evidencing the sale and
delivery of goods or the performance of services giving rise to any Accounts
as Lender may require.
7.3 EQUIPMENT COVENANTS. With respect to the Equipment:
(a) upon Lender's request, each Borrower shall, at its
expense, at any time or times as Lender may request on or after an Event of
Default, deliver or cause to be delivered to Lender written reports or
appraisals as to the Equipment in form, scope and methodology acceptable to
Lender by an appraiser acceptable to Lender, addressed to Lender or upon which
Lender is expressly permitted to rely;
(b) each Borrower shall diligently and promptly do all acts
reasonably necessary to deliver to Lender the original certificates of title of
all motor vehicles of such Borrower and to note Lender as the first priority
lienholder thereon, which acts shall include curing any deficiency to any
documents or instruments necessary to evidence Lender's security interest within
ten (10) days after written notice of such deficiency by Lender;
(c) each Borrower shall keep the Equipment in good order,
repair, running and marketable condition (ordinary wear and tear excepted);
(d) each Borrower shall use the Equipment with all reasonable
care and caution and in accordance with applicable standards of any insurance
and in conformity with all applicable laws;
(e) the Equipment is and shall be used in a Borrower's
business and not for personal, family, household or farming use;
(f) no Borrower shall remove any Equipment from the locations
set forth or permitted herein, except to the extent necessary to have any
Equipment repaired or maintained in the ordinary course of the business of a
Borrower or to move Equipment directly from one such location set forth or
permitted herein to another such location and except for the movement of motor
vehicles used by or for the benefit of a Borrower in the ordinary course of
business;
(g) the Equipment is now and shall remain personal property
and no Borrower shall permit any of the Equipment to be or become a part of or
affixed to real property; and
(h) each Borrower assumes all responsibility and liability
arising from the use of the Equipment.
7.4 POWER OF ATTORNEY. Each Borrower hereby irrevocably designates and
appoints Lender (and all persons designated by Lender) as such Borrower's true
and lawful attorney-in-fact, and authorizes Lender, in a Borrower's or Lender's
name, to:
(a) at any time an Event of Default exists or has occurred and
is continuing: (i) demand payment on Accounts or on proceeds of other
Collateral; (ii) enforce payment of Accounts or other Obligations included in
the Collateral by legal proceedings or otherwise; (iii) exercise all of such
Borrower's rights and remedies to collect any Account or proceeds of other
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Collateral; (iv) sell or assign any Account upon such terms, for such amount and
at such time or times as the Lender deems advisable; (v) settle, adjust,
compromise, extend or renew an Account; (vi) discharge and release any Account
or other Obligations included in the Collateral; (vii) prepare, file and sign
such Borrower's name on any proof of claim in bankruptcy or other similar
document against an account debtor; (viii) notify the post office authorities to
change the address for delivery of such Borrower's mail to an address designated
by Lender, open all mail addressed to Borrower, take any payments on Accounts or
other proceeds of Collateral contained in such mail and promptly forward any
other mail to Borrowers; and (ix) do all acts and things which are necessary, in
Lender's determination, to fulfill such Borrower's obligations under this
Agreement and the other Financing Agreements; and
(b) at any time, subject to the terms of the agreement(s)
relating to the Blocked Account(s) to: (i) take control in any manner of any
item of payment or proceeds thereof; (ii) have access to any lockbox or postal
box into which such Borrower's mail is deposited; (iii) endorse such Borrower's
name upon any items of payment or proceeds thereof and deposit the same in the
Lender's account for application to the Obligations; (iv) endorse such
Borrower's name upon any chattel paper, document, instrument, invoice, or
similar document or agreement relating to any Account or any goods pertaining
thereto or any other Collateral; (v) sign such Borrower's name on any
verification of Accounts and notices thereof to account debtors; and (vi)
execute in such Borrower's name and file any UCC financing statements or
amendments thereto.
Each Borrower hereby releases Lender and its officers, employees and designees
from any liabilities arising from any act or acts under this power of attorney
and in furtherance thereof, whether of omission or commission, except as a
result of Lender's own gross negligence or willful misconduct as determined
pursuant to a final non-appealable order of a court of competent jurisdiction.
7.5 RIGHT TO CURE. Lender may, at its option, (a) cure any monetary
default by any Borrower under any agreement with a third party or pay or bond on
appeal any judgment entered against any Borrower, (b) discharge taxes, liens,
security interests or other encumbrances at any time levied on or existing with
respect to the Collateral and (c) pay any amount, incur any expense or perform
any act which, in Lender's judgment, is necessary or appropriate to preserve,
protect, insure or maintain the Collateral and the rights of Lender with respect
thereto. Lender may add any amounts so expended to the Obligations and charge
any Borrower's account therefor, such amounts to be repayable by such Borrower
on demand. Lender shall be under no obligation to effect such cure, payment or
bonding and shall not, by doing so, be deemed to have assumed any obligation or
liability of any Borrower. Any payment made or other action taken by Lender
under this Section 7.5 shall be without prejudice to any right to assert an
Event of Default hereunder and to proceed accordingly.
7.6 ACCESS TO PREMISES. From time to time as requested by Lender, (a)
Lender or its designee shall have complete access to all of each Borrower's
premises during normal business hours and after notice to Borrowers, or at any
time and without notice to Borrowers if an Event of Default exists or has
occurred and is continuing, for the purposes of inspecting, verifying and
auditing the Collateral and all of any Borrower's books and records, including,
without limitation, the Records, and (b) each Borrower shall promptly furnish to
Lender such copies of
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such books and records or extracts therefrom as Lender may request, and (c)
use during normal business hours such of any Borrower's personnel, equipment,
supplies and premises as may be reasonably necessary for the foregoing and if
an Event of Default exists or has occurred and is continuing for the
collection of Accounts and realization of other Collateral.
SECTION 8. REPRESENTATIONS AND WARRANTIES.
Each Borrower hereby represents and warrants to Lender the following
(which shall survive the execution and delivery of this Agreement), the truth
and accuracy of which are a continuing condition of the making of Loans and the
providing of Letter of Credit Accommodations by Lender to any Borrower:
8.1 CORPORATE/COMPANY EXISTENCE, POWER AND AUTHORITY; SUBSIDIARIES.
Each of BWS, GLS and GLA is a corporation and BVL is a limited liability company
duly organized and in good standing under the laws of its state of incorporation
or organization, as the case may be, and is duly qualified as a foreign
corporation or limited liability company, as the case may be, and in good
standing in all states or other jurisdictions where the nature and extent of the
business transacted by it or the ownership of assets makes such qualification
necessary, except for those jurisdictions in which the failure to so qualify
would not have a material adverse effect on a Borrower's financial condition,
results of operation or business or the rights of Lender in or to any of the
Collateral. To the best of Borrowers' knowledge, attached as SCHEDULE 8.1
hereto, is a true and correct organizational chart of GLC and any Subsidiaries
with assets in excess of Ten Thousand Dollars ($10,000). The execution, delivery
and performance of this Agreement, the other Financing Agreements and the
transactions contemplated hereunder and thereunder are all within each
Borrower's corporate or company powers, have been duly authorized and are not in
contravention of law or the terms of such Borrower's certificate of
incorporation, by-laws, articles of formation, operating agreement or other
organizational documentation, as the case may be, or any indenture, agreement or
undertaking to which such Borrower is a party or by which such Borrower or its
property are bound. This Agreement and the other Financing Agreements constitute
legal, valid and binding obligations of each Borrower enforceable in accordance
with their respective terms. No Borrower has any Subsidiaries with assets in
excess of Ten Thousand Dollars ($10,000) except as set forth on SCHEDULE 8.1
attached hereto.
8.2 FINANCIAL STATEMENTS; NO MATERIAL ADVERSE CHANGE. All financial
statements relating to any Borrower or GLC which have been or may hereafter be
delivered by any Borrower or GLC to Lender have been or will have been prepared
in accordance with GAAP and fairly present the financial condition and the
results of operations of each Borrower and GLC as at the dates and for the
periods set forth therein. Except as disclosed in any interim financial
statements furnished by Borrowers or on behalf of any Borrower, or by GLC or on
behalf of GLC, to Lender prior to the date of this Agreement, there has been no
material adverse change in the assets, liabilities, properties and condition,
financial or otherwise, of any Borrower or GLC, since the date of the most
recent audited financial statements furnished by Borrowers or on behalf of any
Borrower, or by GLC or on behalf of GLC, to Lender prior to the date of this
Agreement.
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8.3 CHIEF EXECUTIVE OFFICE; COLLATERAL LOCATIONS. The chief executive
office of each Borrower and each Borrower's Records concerning Accounts are
located only at the address set forth below such Borrower's name on the
signature pages hereto and its only other places of business and the only other
locations of Collateral, if any, are the addresses set forth in the Information
Certificate of such Borrower, subject to the right of a Borrower to establish
new locations in accordance with Section 9.2 below. The Information Certificate
of each Borrower correctly identifies any of such locations which are not owned
by such Borrower and sets forth the owners and/or operators thereof and, to the
best of any Borrower's knowledge, the holders of any mortgages on such
locations.
8.4 PRIORITY OF LIENS; TITLE TO PROPERTIES. The security interests and
liens granted to Lender under this Agreement and the other Financing Agreements
constitute valid and perfected first priority liens and security interests in
and upon the Collateral subject only to the liens indicated on SCHEDULE 8.4
hereto and the other liens permitted under Section 9.8 hereof. Each Borrower has
good and marketable title to all of its properties and assets subject to no
liens, mortgages, pledges, security interests, encumbrances or charges of any
kind, except those granted to Lender and such others as are specifically listed
on SCHEDULE 8.4 hereto or permitted under Section 9.8 hereof.
8.5 TAX RETURNS. Each Borrower has filed, or caused to be filed, in a
timely manner all tax returns, reports and declarations which are required to be
filed by it (without requests for extension except as previously disclosed in
writing to Lender). All information in such tax returns, reports and
declarations is complete and accurate in all material respects. Each Borrower
has paid or caused to be paid all taxes due and payable or claimed due and
payable in any assessment received by it, except taxes the validity of which are
being contested in good faith by appropriate proceedings diligently pursued and
available to such Borrower and with respect to which adequate reserves have been
set aside on its books. Adequate provision has been made for the payment of all
accrued and unpaid Federal, State, county, local, foreign and other taxes
whether or not yet due and payable and whether or not disputed.
8.6 LITIGATION. Except as set forth on the Information Certificate of
such Borrower, there is no present investigation by any governmental agency
pending, or to the best of any Borrower's knowledge threatened, against or
affecting any Borrower, its assets or business and there is no action, suit,
proceeding or claim by any Person pending, or to the best of any Borrower's
knowledge threatened, against any Borrower or its assets or goodwill, or against
or affecting any transactions contemplated by this Agreement, which has a
material possibility (as reasonably determined by Lender) of being adversely
determined against any Borrower, and if adversely determined would result in any
material adverse change in the assets, business or condition (financial or
otherwise) of such Borrower or would impair the ability of such Borrower to
perform its obligations hereunder or under any of the other Financing Agreements
to which it is a party or of Lender to enforce any Obligations or realize upon
any Collateral.
8.7 COMPLIANCE WITH OTHER AGREEMENTS AND APPLICABLE LAWS. No Borrower
is in default under, or in violation of any of the terms of, any agreement,
contract, instrument, lease or other commitment to which it is a party or by
which it or any of its assets are bound and each Borrower is in compliance with
all applicable provisions of laws, rules, regulations, licenses, permits,
approvals and orders of any foreign, Federal, State or local governmental
authority
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where such default or noncompliance would result in a material adverse
effect on the assets, business or condition (financial or otherwise) of such
Borrower or would materially impair the ability of such Borrower to perform its
obligations under the Financing Agreements to which it is a party or of Lender
to enforce any Obligations or realize upon the Collateral.
8.8 BANK ACCOUNTS. All of the deposit accounts, investment accounts or
other accounts in the name of or used by any Borrower maintained at any bank or
other financial institution are set forth on SCHEDULE 8.8 hereto, subject to the
right of a Borrower to establish new accounts in accordance with Section 9.13
below.
8.9 ENVIRONMENTAL COMPLIANCE.
(a) Except as set forth on SCHEDULE 8.9 hereto, no Borrower
has generated, used, stored, treated, transported, manufactured, handled,
produced or disposed of any Hazardous Materials, on or off its premises (whether
or not owned by it) in any manner which at any time violates any applicable
Environmental Law or any license, permit, certificate, approval or similar
authorization thereunder and the operations of each Borrower complies in all
material respects with all Environmental Laws and all licenses, permits,
certificates, approvals and similar authorizations thereunder.
(b) Except as set forth on SCHEDULE 8.9 hereto, there has been
no investigation, proceeding, complaint, order, directive, claim, citation or
notice by any governmental authority or any other person nor is any pending or
to the best of any Borrower's knowledge threatened, with respect to any
non-compliance with or violation of the requirements of any Environmental Law by
any Borrower or the release, spill or discharge, threatened or actual, of any
Hazardous Material or the generation, use, storage, treatment, transportation,
manufacture, handling, production or disposal of any Hazardous Materials or any
other environmental, health or safety matter, which affects any Borrower or its
business, operations or assets or any properties at which any Borrower has
transported, stored or disposed of any Hazardous Materials.
(c) No Borrower has material liability (contingent or
otherwise) in connection with a release, spill or discharge, threatened or
actual, of any Hazardous Materials or the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any Hazardous
Materials.
(d) Each Borrower has all licenses, permits, certificates,
approvals or similar authorizations required to be obtained or filed in
connection with the operations of such Borrower under any Environmental Law and
all of such licenses, permits, certificates, approvals or similar authorizations
are valid and in full force and effect.
8.10 EMPLOYEE BENEFITS.
(a) No Borrower has engaged in any transaction in connection
with which such Borrower or any of its ERISA Affiliates could be subject to
either a civil penalty assessed pursuant to Section 502(i) of ERISA or a tax
imposed by Section 4975 of the Code, including any accumulated funding
deficiency described in Section 8.10(c) hereof and any deficiency with respect
to vested accrued benefits described in Section 8.10(d) hereof.
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(b) No liability to the Pension Benefit Guaranty Corporation
has been or is expected by any Borrower to be incurred with respect to any
employee pension benefit plan of such Borrower or any of its ERISA Affiliates.
There has been no reportable event (within the meaning of Section 4043(b) of
ERISA) or any other event or condition with respect to any employee pension
benefit plan of any Borrower or any of its ERISA Affiliates which presents a
risk of termination of any such plan by the Pension Benefit Guaranty
Corporation.
(c) Full payment has been made of all amounts which any
Borrower or any of its ERISA Affiliates is required under Section 302 of ERISA
and Section 412 of the Code to have paid under the terms of each employee
pension benefit plan as contributions to such plan as of the last day of the
most recent fiscal year of such plan ended prior to the date hereof, and no
accumulated funding deficiency (as defined in Section 302 of ERISA and Section
412 of the Code), whether or not waived, exists with respect to any employee
pension benefit plan, including any penalty or tax described in Section 8.10(a)
hereof and any deficiency with respect to vested accrued benefits described in
Section 8.10(c) hereof.
(d) The current value of all vested accrued benefits under all
employee pension benefit plans maintained by any Borrower that are subject to
Title IV of ERISA does not exceed the current value of the assets of such plans
allocable to such vested accrued benefits, including any penalty or tax
described in Section 8.10(a) hereof and any accumulated funding deficiency
described in Section 8.10(c) hereof. The terms "current value" and "accrued
benefit" have the meanings specified in ERISA.
(e) No Borrower nor any of their ERISA Affiliates is or has
ever been obligated to contribute to any "multiemployer plan" (as such term is
defined in Section 4001(a)(3) of ERISA) that is subject to Title IV of ERISA.
8.11 YEAR 2000 COMPLIANCE. Any reprogramming required to permit the
proper functioning, in and following the year 2000, of (i) the computer systems
of the Borrowers and (ii) equipment containing embedded microchips (including
systems and equipment supplied by others or with which the systems of the
Borrowers interface) and the testing of all such systems and equipment, as so
reprogrammed, has been completed in all material respects. The computer and
management information systems of the Borrowers are and, with ordinary course
upgrading and maintenance, will continue for the term of this Agreement to be,
sufficient to permit the Borrowers to conduct their business without a material
adverse effect on their assets, business or condition (financial or other).
8.12 ACCURACY AND COMPLETENESS OF INFORMATION. All information
furnished by or on behalf of any Borrower or GLC in writing to Lender in
connection with this Agreement or any of the other Financing Agreements or any
transaction contemplated hereby or thereby, including, without limitation, all
information on the Information Certificate of any Borrower is true and correct
in all material respects on the date as of which such information is dated or
certified and does not omit any material fact necessary in order to make such
information not misleading. No event or circumstance has occurred which has had
or could reasonably be expected to have a material adverse affect on the
business, assets or condition (financial or otherwise) of any Borrower, which
has not been fully and accurately disclosed to Lender in writing.
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8.13 SURVIVAL OF WARRANTIES; CUMULATIVE. All representations and
warranties contained in this Agreement or any of the other Financing Agreements
shall survive the execution and delivery of this Agreement and shall be deemed
to have been made again to Lender on the date of each additional borrowing or
other credit accommodation hereunder and shall be conclusively presumed to have
been relied on by Lender regardless of any investigation made or information
possessed by Lender. The representations and warranties set forth herein shall
be cumulative and in addition to any other representations or warranties which
any Borrower shall now or hereafter give, or cause to be given, to Lender
pursuant to any Financing Document.
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS.
9.1 MAINTENANCE OF EXISTENCE. Each Borrower shall at all times
preserve, renew and keep in full, force and effect its corporate or company
existence and rights and franchises with respect thereto and maintain in full
force and effect all permits, licenses, trademarks, trade names, approvals,
authorizations, leases and contracts necessary to carry on the business as
presently or proposed to be conducted; PROVIDED, HOWEVER, that any Borrower may
(a) reincorporate or re-form itself under the laws of any other state of the
United States, (b) change its form of organization from a corporation to a
limited liability company or from a limited liability company to a corporation
and (c) abandon any permit, license, trademark, trade name, approval or
authorization it no longer deems material to its business. Borrowers shall give
Lender thirty (30) days' prior notice of any proposed change of name or
structure of any Borrower, which notice shall set forth the proposed new name or
structure and Borrowers shall deliver to Lender a copy of the amendment to the
applicable constituent document of such Borrower providing for such change
certified by the Secretary of State of the jurisdiction of incorporation or
organization as soon as it is available.
9.2 NEW COLLATERAL LOCATIONS. A Borrower may open any new location
within the continental United States provided Borrowers: (a) give Lender thirty
(30) days prior written notice of the intended opening of any such new location
(other than the relocation of GAI's or GSI's new chief executive office to the
alternate address set forth below their respective signature below); and (b)
execute and deliver, or cause to be executed and delivered, to Lender such
agreements, documents, and instruments as Lender may deem reasonably necessary
or desirable to protect its interests in the Collateral at such location,
including, without limitation, UCC financing statements and, if such Borrower
leases such new location, provides a favorable landlord waiver or subordination.
9.3 COMPLIANCE WITH LAWS, REGULATIONS, ETC.
(a) Each Borrower shall, at all times, comply in all material
respects with all laws, rules, regulations, licenses, permits, approvals and
orders applicable to it and duly observe all requirements of any Federal, State
or local governmental authority, including, without limitation, the Employee
Retirement Security Act of 1974, as amended, the Occupational Safety and Hazard
Act of 1970, as amended, the Fair Labor Standards Act of 1938, as amended, and
all statutes, rules, regulations, orders, permits and stipulations relating to
environmental pollution and employee health and safety, including, without
limitation, all of the Environmental Laws where such noncompliance would result
in a material adverse effect on the assets, business or
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condition (financial or otherwise) of such Borrower or would materially
impair the ability of such Borrower to perform its obligations under the
Financing Agreements to which it is a party or of Lender to enforce any
Obligations or realize upon the Collateral.
(b) Each Borrower shall take prompt and appropriate action to
respond to any material non-compliance with any of the Environmental Laws and
shall report to Lender on such response.
(c) Borrowers shall give both oral and written notice to
Lender immediately upon any Borrower's receipt of any notice of, or any
Borrower's otherwise obtaining knowledge of:
(i) the occurrence of any event involving the
release, spill or discharge, threatened or actual, of any Hazardous Material; or
(ii) any investigation, proceeding, complaint,
order, directive, claims, citation or notice with respect to: (A) any
non-compliance with or violation of any Environmental Law by any Borrower;
(B) the release, spill or discharge, threatened or actual, of any Hazardous
Material; (C) the generation, use, storage, treatment, transportation,
manufacture, handling, production or disposal of any Hazardous Materials; or
(D) any other environmental, health or safety matter, which affects any
Borrower or its business, operations or assets or any properties at which any
Borrower transported, stored or disposed of any Hazardous Materials.
(d) Each Borrower shall indemnify and hold harmless Lender,
its directors, officers, employees, agents, invitees, representatives,
successors and assigns, from and against any and all losses, claims, damages,
liabilities, costs, and expenses (including attorneys' fees and legal expenses)
directly or indirectly arising out of or attributable to the use, generation,
manufacture, reproduction, storage, release, threatened release, spill,
discharge, disposal or presence of a Hazardous Material, including, without
limitation, the costs of any required or necessary repair, cleanup or other
remedial work with respect to any property of any Borrower and the preparation
and implementation of any closure, remedial or other required plans. All
representations, warranties, covenants and indemnifications in this Section 9.3
shall survive the payment of the Obligations and the termination or non-renewal
of this Agreement.
9.4 PAYMENT OF TAXES AND CLAIMS. Each Borrower shall duly pay and
discharge all taxes, assessments, contributions and governmental charges upon or
against it or its properties or assets, except for taxes the validity of which
are being contested in good faith by appropriate proceedings diligently pursued
and available to such Borrower and with respect to which adequate reserves have
been set aside on its books. Each Borrower shall be liable for any tax or
penalties imposed on Lender as a result of the financing arrangements provided
for herein and each Borrower agrees to indemnify and hold Lender harmless with
respect to the foregoing, and to repay to Lender on demand the amount thereof,
and until paid by such Borrower such amount shall be added and deemed part of
the Loans, PROVIDED, THAT, nothing contained herein shall be construed to
require any Borrower to pay any income or franchise taxes attributable to the
income of Lender from any amounts charged or paid hereunder to Lender. The
foregoing indemnity shall survive the payment of the Obligations and the
termination or non-renewal of this Agreement.
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9.5 INSURANCE. Each Borrower shall, at all times, maintain with
financially sound and reputable insurers insurance with respect to the
Collateral against loss or damage and all other insurance of the kinds and in
the amounts customarily insured against or carried by corporations of
established reputation engaged in the same or similar businesses and similarly
situated. Each Borrower shall furnish certificates, policies or endorsements to
Lender as Lender shall require as proof of such insurance, and, if any Borrower
fails to do so, Lender is authorized, but not required, to obtain such insurance
at the expense of such Borrower. All policies shall provide for at least thirty
(30) days prior written notice to Lender of any cancellation of coverage. Each
Borrower shall cause Lender to be named as a loss payee and an additional
insured (but without any liability for any premiums) under such insurance
policies and each Borrower shall obtain non-contributory lender's loss payable
endorsements to all casualty insurance policies in form and substance
satisfactory to Lender. Such lender's loss payable endorsements shall specify
that the proceeds of such insurance shall be payable to Lender as its interests
may appear. At its option, Lender may apply any insurance proceeds received by
Lender at any time to the cost of repairs or replacement of Collateral and/or to
payment of the Obligations, whether or not then due, in any order and in such
manner as Lender may determine or hold such proceeds as cash collateral for the
Obligations.
9.6 FINANCIAL STATEMENTS AND OTHER INFORMATION.
(a) Each Borrower shall keep proper books and records in which
true and complete entries shall be made of all dealings or transactions of or in
relation to the Collateral and the business of Borrower and its Subsidiaries (if
any) in accordance with GAAP and Borrowers shall furnish or cause to be
furnished to Lender: (i) within thirty (30) days after the end of each fiscal
month, monthly unaudited consolidated and consolidating financial statements of
GLC and its Subsidiaries (including in each case balance sheets, statements of
income and loss, statements of cash flow and statements of shareholders'
equity), all in reasonable detail, fairly presenting the financial position and
the results of the operations of GLC and its Subsidiaries as of the end of and
through such month, (ii) within sixty (60) days after the end of each fiscal
quarter, quarterly unaudited consolidated and consolidating financial statements
of GLC and its Subsidiaries (including in each case balance sheets, statements
of income and loss, statements of cash flow and statements of shareholders'
equity), all in reasonable detail, fairly presenting the financial position and
the results of the operations of GLC and its Subsidiaries as of the end of and
through such fiscal quarter, and (iii) within one hundred twenty (120) days
after the end of each fiscal year, audited consolidated and consolidating
financial statements of GLC and its Subsidiaries (including in each case balance
sheets, statements of income and loss, statements of cash flow and statements of
shareholders' equity), and the accompanying notes thereto, all in reasonable
detail, fairly presenting the financial position and the results of the
operations of GLC and its Subsidiaries as of the end of and for such fiscal
year, together with the opinion of independent certified public accountants,
which accountants shall be a nationally recognized independent accounting firm
or, if not, another independent accounting firm selected by GLC and reasonably
acceptable to Lender, that such financial statements have been prepared in
accordance with GAAP, and present fairly the results of operations and financial
condition of GLC and its Subsidiaries as of the end of and for the fiscal year
then ended.
(b) Borrowers shall promptly notify Lender in writing of the
details of (i) any loss, damage, investigation, action, suit, proceeding or
claim relating to the Collateral or any
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other property which is security for the Obligations or which would result in
any material adverse change in any Borrower's business, properties, assets,
or condition, financial or otherwise and (ii) the occurrence of any Event of
Default or event which, with the passage of time or giving of notice or both,
would constitute an Event of Default.
(c) Borrowers shall promptly after the sending or filing
thereof furnish or cause to be furnished to Lender copies of all financial
reports which GLC sends to its stockholders generally and copies of all reports
and registration statements which any Borrower or GLC files with the Securities
and Exchange Commission, any national securities exchange or the National
Association of Securities Dealers, Inc.
(d) Within thirty (30) days after the date hereof, Borrowers
shall furnish or cause to be furnished to Lender updated projected balance
sheets and income statements of GLC and its Subsidiaries after giving effect to
the transactions contemplated by this Agreement.
(e) Borrowers shall furnish or cause to be furnished to Lender
such budgets, forecasts, projections and other information in respect of the
Collateral and the business of any Borrower, as Lender may, from time to time,
reasonably request. Lender is hereby authorized to deliver a copy of any
financial statement or any other information relating to the business of any
Borrower to any court or other government agency or to any participant or
assignee or prospective participant or assignee. Each Borrower hereby
irrevocably authorizes and directs all accountants or auditors to deliver to
Lender, at Borrowers' expense, copies of the financial statements of any
Borrower and any reports or management letters prepared by such accountants or
auditors on behalf of any Borrower and to disclose to Lender such information as
they may have regarding the business of any Borrower. Any information provided
to Lender pursuant to this Section 9.6(e) shall be subject to the provisions of
Section 12.7 hereof. Any documents, schedules, invoices or other papers
delivered to Lender may be destroyed or otherwise disposed of by Lender one (1)
year after the same are delivered to Lender, except as otherwise designated by
Borrowers to Lender in writing.
9.7 SALE OF ASSETS, CONSOLIDATION, MERGER, DISSOLUTION, ETC. No
Borrower shall, directly or indirectly:
(a) merge into or with or consolidate with any other Person
(other than another Borrower or an entity solely formed for the purpose of a
re-incorporation or re-formation of a Borrower permitted under Section 9.1
hereof) or permit any other Person (other than another Borrower or an entity
solely formed for the purpose of a re-incorporation or re-formation of a
Borrower permitted under Section 9.1 hereof) to merge into or with or
consolidate with it; provided that any survivor of such merger or consolidation
not already a Borrower shall assume the Obligations of the merged or
consolidated Borrower and be subject to the terms and conditions of this
Agreement and the other Financing Agreements;
(b) sell, assign, lease, transfer, abandon or otherwise
dispose of any stock or indebtedness to any other Person or any of its assets to
any other Person (except for (i) sales of Inventory in the ordinary course of
business, (ii) the disposition of worn-out or obsolete Equipment or Equipment no
longer used in the business of such Borrower so long as (A) if an Event of
Default exists or has occurred and is continuing, any proceeds are paid to
Lender and
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(B) such sales do not involve Equipment having an aggregate fair market value
in excess of One Million Dollars ($1,000,000) for all such Equipment disposed
of in any fiscal year of Borrowers, (iii) sales of assets, stock or
indebtedness to another Borrower and (iv) in connection with the sale of all
or substantially all the assets of such Borrower or a Subsidiary of such
Borrower or the sale of all the Capital Stock of such Borrower or a
Subsidiary of such Borrower, sales of any such assets or Capital Stock having
an aggregate fair market value not to exceed Twenty Five Million Dollars
($25,000,000) less the fair market value of any assets or Capital Stock
previously sold by such Borrower in connection with the sale of all or
substantially all the assets of such Borrower or a Subsidiary of such
Borrower or the sale of all the Capital Stock of a Subsidiary of such
Borrower during the term of this Agreement, PROVIDED THAT (A) no Event of
Default, or an event which with notice or passage of time or both would
constitute an Event of Default, exists or has occurred and is continuing
immediately prior to and after giving effect to such sale and (B) Borrowers
shall pay to Lender the greater of (1) fifty percent (50%) of the amount by
which the aggregate amount (net of taxes, assumed liabilities and transaction
costs) received by Borrowers from all such sales exceeds Five Million Dollars
($5,000,000) and one hundred percent (100%) of the amount by which the
aggregate amount (net of taxes, assumed liabilities and transaction costs)
received by Borrowers from all such sales exceeds Ten Million Dollars
($10,000,000) or (2) the portion of the amount of Loans then outstanding
advanced against any Accounts sold in connection with any such sales (it
being agreed that any such payments to Lender shall not reduce the Maximum
Credit unless made pursuant to Section 12.1(c) hereof and shall not be
included in calculating the amount of Revolving Loans available pursuant to
Section 2.1(b)(i)(C)));
(c) form any Subsidiaries, unless the aggregate amount of
all contributions made by Borrowers to such Subsidiaries is less than Five
Million Dollars ($5,000,000) in the aggregate during the term of this
Agreement and PROVIDED THAT; (i) no Event of Default, or an event which with
notice or passage of time or both would constitute an Event of Default,
exists or has occurred and is continuing immediately prior to and after
giving effect to the formation of each such Subsidiary, (ii) if any such
Subsidiary is formed on or prior to April 15, 2000, Total Excess Availability
exceeds Fifteen Million Dollars ($15,000,000) immediately prior to and after
giving effect to such formation or if any such Subsidiary is formed after
April 15, 2000, Total Excess Availability exceeds Ten Million Dollars
($10,000,000) immediately prior to and after giving effect to such formation,
(iii) any such Subsidiary formed engages in a line of business compatible but
not competitively adverse with any Borrower's line of business and (iv) no
Borrower shall contribute to any such Subsidiary any Collateral with a fair
market value exceeding in the aggregate more than Ten Thousand Dollars
($10,000) during the term of this Agreement or any proprietary information
except that a license to use such proprietary information on a non-exclusive
basis shall not be deemed to be a contribution of proprietary information for
purposes of this Section 9.7(c);
(d) acquire the Capital Stock of any Person in which such
Person would become a Subsidiary of such Borrower except for Permitted
Acquisitions;
(e) wind up, liquidate or dissolve except following the
transfer of all or substantially all of its assets in a transaction permitted by
clauses (b)(iii) or (b)(iv) of this Section 9.7; or
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(f) agree to do any of the foregoing.
9.8 ENCUMBRANCES. No Borrower shall create, incur, assume or suffer to
exist any security interest, mortgage, pledge, lien, charge or other encumbrance
of any nature whatsoever on any of its assets or properties, including, without
limitation, the Collateral, EXCEPT:
(a) the liens and security interests of Lender or Congress
(Canada);
(b) liens securing the payment of taxes, either not yet
overdue or the validity of which are being contested in good faith by
appropriate proceedings diligently pursued and available to such Borrower and
with respect to which adequate reserves have been set aside on its books;
(c) security deposits in the ordinary course of business;
(d) non-consensual statutory liens (other than liens securing
the payment of taxes) arising in the ordinary course of such Borrower's business
to the extent:
(i) such liens do not affect Accounts or are
otherwise not in imminent danger of foreclosure; or
(ii) such liens secure indebtedness relating to
claims or liabilities which are fully insured and being defended at the sole
cost and expense and at the sole risk of the insurer (subject to applicable
deductibles) or being contested in good faith by appropriate proceedings
diligently pursued and available to such Borrower, in each case prior to the
commencement of foreclosure or other similar proceedings and with respect to
which adequate reserves have been set aside on its books;
(e) zoning restrictions, easements, licenses, covenants and
other restrictions affecting the use of real property which do not interfere in
any material respect with the use of such real property or ordinary conduct of
the business of such Borrower as presently conducted thereon or materially
impair the value of the real property which may be subject thereto;
(f) purchase money security interests in Equipment (including
capital leases) and purchase money mortgages on real estate not so long as such
security interests and mortgages do not apply to any property of such Borrower
other than the Equipment or real estate so acquired, and the indebtedness
secured thereby does not exceed the cost of the Equipment or real estate so
acquired, as the case may be; and
(g) the security interests and liens set forth on SCHEDULE 8.4
hereto or replacements therefor that do not extend to any other property or
increase the amounts secured.
9.9 INDEBTEDNESS. No Borrower shall incur, create, assume, become or be
liable in any manner with respect to, or permit to exist, any obligation for
borrowed money or indebtedness, EXCEPT:
(a) the Obligations;
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(b) trade obligations and normal accruals in the ordinary
course of business not yet due and payable, or with respect to which such
Borrower is contesting in good faith the amount or validity thereof by
appropriate proceedings diligently pursued and available to such Borrower, and
with respect to which adequate reserves have been set aside on its books;
(c) purchase money indebtedness (including capital leases) to
the extent not incurred or secured by liens (including capital leases) in
violation of any other provision of this Agreement;
(d) indebtedness set forth on the Information Certificate of
such Borrower; PROVIDED, that, (i) such Borrower may only make regularly
scheduled payments of principal and interest in respect of such indebtedness in
accordance with the terms of the agreement or instrument evidencing or giving
rise to such indebtedness as in effect on the date hereof, (ii) such Borrower
shall not, directly or indirectly, (A) amend, modify, alter or change the terms
of such indebtedness or any agreement, document or instrument related thereto as
in effect on the date hereof, or (B) except as otherwise permitted under this
Agreement, redeem, retire, defease, purchase or otherwise acquire such
indebtedness, or set aside or otherwise deposit or invest any sums for such
purpose, and (iii) Borrowers shall furnish to Lender all notices or demands in
connection with such indebtedness either received by any Borrower or on its
behalf, promptly after the receipt thereof, or sent by any Borrower or on its
behalf, concurrently with the sending thereof, as the case may be;
(e) indebtedness owing to another Borrower, GL Canada, GL UK,
GLC or GIFL; PROVIDED THAT, no Event of Default, or an event which with notice
or passage of time or both would constitute an Event of Default, exists or has
occurred and is continuing immediately prior to and after giving effect to the
incurrence, creation or assumption of such indebtedness; and
(f) other indebtedness together with other indebtedness of all
other Borrowers not otherwise permitted under Sections 9.1(a) through 9.9(e)
above at any one time not exceeding Two Million Dollars ($2,000,000) outstanding
in the aggregate.
9.10 LOANS, INVESTMENTS, GUARANTEES, ETC. No Borrower shall, directly
or indirectly, make any loans or advance money or property to any Person, or
invest in (by capital contribution, dividend or otherwise) or purchase or
repurchase the stock or indebtedness or all or a substantial part of the assets
or property of any Person, or guarantee, assume, endorse, or otherwise become
responsible for (directly or indirectly) the indebtedness, performance,
obligations or dividends of any Person or agree to do any of the foregoing,
EXCEPT:
(a) the endorsement of instruments for collection or deposit
in the ordinary course of business;
(b) investments in: (i) short-term direct obligations of the
United States Government; (ii) negotiable certificates of deposit issued by any
bank satisfactory to Lender, payable to the order of such Borrower or to bearer
and delivered to Lender; and (iii) commercial paper rated A1 or P1; PROVIDED,
THAT, as to any of the foregoing, unless waived in writing by
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Lender, each Borrower shall take such actions as are deemed necessary by
Lender to perfect the security interest of Lender in such investments;
(c) the guarantees set forth in the Information Certificate of
such Borrower;
(d) the guarantees issued or, to the extent required by the
terms of the indenture governing the Senior Notes as in effect on the date of
this Agreement or any indenture governing notes issued in replacement of the
Senior Notes; PROVIDED THAT, such replacement notes do not provide for a higher
interest rate, a maturity date or any principal payments during the term of this
Agreement, and otherwise contain provisions reasonably satisfactory to Lender
and the holders of such replacement notes have executed agreements providing for
the subordination of such notes to the Obligations on terms and conditions
reasonably satisfactory to Lender;
(e) Permitted Acquisitions and any transaction permitted by
Sections 9.1 or 9.7 hereof;
(f) the guarantees issued in favor of Congress (Canada) with
respect to the obligations of GL Canada under the Canadian Facility;
(g) loans or advances to, or investments in, or purchases or
repurchases of the stock, assets or indebtedness of another Borrower, GL Canada
or GL UK or guarantees or the assumption of letter of credit obligations for the
benefit of another Borrower, GL Canada or GL UK; PROVIDED THAT, (i) no Event of
Default, or an event which with notice or passage of time or both would
constitute an Event of Default, exists or has occurred and is continuing
immediately prior to and after giving effect to any such loan, advance,
investment, purchase, repurchase, guarantee or assumption of letter of credit
obligation and (ii) such loans, advances, investments, purchases or repurchases
do not violate the capitalization requirements of any Borrower, under applicable
laws;
(h) loans or advances to GIFL or GLC; PROVIDED THAT, (i) no
Event of Default, or an event which with notice or passage of time or both would
constitute an Event of Default, exists or has occurred and is continuing
immediately prior to and after giving effect to such loans or advances, (ii)
such loans or advances do not violate the capitalization requirements of any
Borrower, under applicable laws, and (iii) all the proceeds of such loans or
advances are immediately loaned or advanced by GIFL or GLC, as the case may be,
to GL Canada or GL UK;
(i) loans or advances to GLC (i) for the purpose of paying
interest due under the Senior Notes, (ii) for the purpose of paying management
fees to the Sponsors or any of their affiliates in an aggregate amount for all
Borrowers not to exceed Seven Hundred Thousand Dollars ($700,000) less amounts
paid by GL UK or GL Canada to GLC for such purpose in any fiscal year of
Borrowers (except that Borrowers may make an additional one-time loan or advance
to GLC in an amount not to exceed One Hundred Seventy Five Thousand Dollars
($175,000) for the purpose of paying unpaid management fees to the Sponsors or
any of their affiliates earned during Borrowers' 1999 fiscal year) and (iii) for
the other purposes set forth in SCHEDULE 9.10 attached hereto in an aggregate
amount for all Borrowers not to exceed Twenty One Million Dollars ($21,000,000)
less amounts paid by GL UK or GL Canada to GLC for such purposes in any fiscal
year of Borrowers; PROVIDED THAT, (i) no Event of Default, or an event
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which with notice or passage of time or both would constitute an Event of
Default, exists or has occurred and is continuing immediately prior to and
after giving effect to such loans or advances and (ii) such loans or advances
do not violate the capitalization requirements of any Borrower under
applicable laws;
(j) loans or advances to, or guarantees or the assumption of
letter of credit obligations for the benefit of, GLC or a Subsidiary of GLC
(other than a Borrower, GL Canada or GL UK); PROVIDED THAT, (i) no Event of
Default, or an event which with notice or passage of time or both would
constitute an Event of Default, exists or has occurred and is continuing
immediately prior to and after giving effect to such loans, advances, guarantees
or assumption of letter of credit obligations, (ii) such loans, advances,
guarantees or assumption of letter of credit obligations do not violate the
capitalization requirements of any Borrower under applicable laws, (iii) if such
loans, advances, guarantees or assumption of letter of credit obligations are
made on or prior to April 15, 2000, Total Excess Availability exceeds Fifteen
Million Dollars ($15,000,000) immediately prior to and after giving effect to
such loans, advances, guarantees or assumption of letter of credit obligations,
or if such loans, advances, guarantees or assumption of letter of credit
obligations are made after April 15, 2000, Total Excess Availability exceeds Ten
Million Dollars ($10,000,000) immediately prior to and after giving effect to
such loans, advances, guarantees or assumption of letter of credit obligations
and (iv) such loans or advances are evidenced by a promissory note or notes, the
rights to which have been collaterally pledged to Lender; and
(k) other outstanding loans or advances by all Borrowers not
to exceed One Million Dollars ($1,000,000) in the aggregate at any time.
9.11 DIVIDENDS AND REDEMPTIONS. No Borrower shall, directly or
indirectly, declare or pay any dividends on account of any shares of any class
of capital stock or membership interest, as the case may be, of such Borrower
now or hereafter outstanding, or set aside or otherwise deposit or invest any
sums for such purpose, or redeem, retire, defease, purchase or otherwise acquire
any shares of any class of capital stock or membership interest, as the case may
be, (or set aside or otherwise deposit or invest any sums for such purpose) for
any consideration other than common stock or membership interest or apply or set
apart any sum, or make any other distribution (by reduction of capital or
otherwise) in respect of any such shares or membership interest, as the case may
be, or agree to do any of the foregoing.
9.12 TRANSACTIONS WITH AFFILIATES. No Borrower shall enter into any
transaction for the purchase, sale or exchange of property or the rendering of
any service to or by any affiliate, except in the ordinary course of and
pursuant to the reasonable requirements of such Borrower's business and upon
fair and reasonable terms no less favorable to such Borrower than such Borrower
would obtain in a comparable arm's length transaction with an unaffiliated
person. For this purpose, affiliate shall not include any other Borrower, a
Borrower's own or another Borrower's Subsidiary, GL Canada, GL UK, GLC or GIFL.
9.13 ADDITIONAL BANK ACCOUNTS. No Borrower shall, directly or
indirectly, open, establish or maintain any deposit account, investment account
or any other account with any bank or other financial institution, other than
the Blocked Accounts and the accounts set forth in SCHEDULE 8.8 hereto, except:
(a) as to any new or additional Blocked Accounts and other such
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new or additional accounts which contain any Collateral or proceeds thereof,
with the prior written consent of Lender and subject to such conditions
thereto as Lender may establish and (b) as to any accounts used by such
Borrower to make payments of payroll, taxes or other obligations to third
parties, after prior written notice to Lender.
9.14 COMPLIANCE WITH ERISA. No Borrower shall with respect to any
"employee pension benefit plans" maintained by such Borrower or any of its ERISA
Affiliates:
(a) (i) terminate any of such employee pension benefit
plans so as to incur any liability to the Pension Benefit Guaranty Corporation
established pursuant to ERISA;
(ii) allow or suffer to exist any prohibited
transaction involving any of such employee pension benefit plans or any trust
created thereunder which would subject such Borrower or such ERISA Affiliate to
a tax or penalty or other liability on prohibited transactions imposed under
Section 4975 of the Code or ERISA;
(iii) fail to pay to any such employee pension
benefit plan any contribution which it is obligated to pay under Section 302 of
ERISA, Section 412 of the Code or the terms of such plan;
(iv) allow or suffer to exist any accumulated funding
deficiency, whether or not waived, with respect to any such employee pension
benefit plan;
(v) allow or suffer to exist any occurrence of a
reportable event or any other event or condition which presents a material risk
of termination by the Pension Benefit Guaranty Corporation of any such employee
pension benefit plan that is a single employer plan, which termination could
result in any liability to the Pension Benefit Guaranty Corporation; or
(vi) incur any withdrawal liability with respect to
any multiemployer pension plan.
(b) As used in this Section 9.14, the term "employee pension
benefit plans," "employee benefit plans", "accumulated funding deficiency" and
"reportable event" shall have the respective meanings assigned to them in ERISA,
and the term "prohibited transaction" shall have the meaning assigned to it in
Section 4975 of the Code and ERISA.
9.15 COSTS AND EXPENSES. Each Borrower shall pay to Lender on demand
all reasonable costs, expenses, filing fees and taxes paid or payable in
connection with the preparation, negotiation, execution, delivery, recording,
administration, collection, liquidation, enforcement and defense of the
Obligations, Lender's rights in the Collateral, this Agreement, the other
Financing Agreements and all other documents related hereto or thereto,
including any amendments, supplements or consents which may hereafter be
contemplated (whether or not executed) or entered into in respect hereof and
thereof, including, but not limited to:
(a) all costs and expenses of filing or recording (including
Uniform Commercial Code financing statement filing taxes and fees, documentary
taxes, intangibles taxes and mortgage recording taxes and fees, if applicable);
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(b) all costs and expenses and fees for title insurance and
other insurance premiums, environmental audits, surveys, assessments,
engineering reports and inspections, appraisal fees and search fees;
(c) costs and expenses of remitting loan proceeds, collecting
checks and other items of payment, and establishing and maintaining the Blocked
Accounts, together with Lender's customary charges and fees with respect
thereto;
(d) charges, fees or expenses charged by any bank or issuer in
connection with the Letter of Credit Accommodations;
(e) costs and expenses of preserving and protecting the
Collateral;
(f) costs and expenses paid or incurred in connection with
obtaining payment of the Obligations, enforcing the security interests and liens
of Lender, selling or otherwise realizing upon the Collateral, and otherwise
enforcing the provisions of this Agreement and the other Financing Agreements or
defending any claims made or threatened against Lender arising out of the
transactions contemplated hereby and thereby (including, without limitation,
preparations for and consultations concerning any such matters);
(g) all out-of-pocket expenses and costs incurred by Lender's
examiners in the conduct of their periodic field examinations of the Collateral
and any Borrower's operations, plus a per diem charge at the rate of Seven
Hundred Fifty Dollars ($750) per person, per day for Lender's examiners in the
field and office; and
(h) the fees and disbursements of counsel (including legal
assistants) to Lender in connection with any of the foregoing.
9.16 FURTHER ASSURANCES. At the request of Lender at any time and from
time to time, each Borrower shall, at its expense, duly execute and deliver, or
cause to be duly executed and delivered, such further agreements, documents and
instruments, and do or cause to be done such further acts as may be necessary or
proper to evidence, perfect, maintain and enforce the security interests and the
priority thereof in the Collateral and to otherwise effectuate the provisions or
purposes of this Agreement or any of the other Financing Agreements. Lender may
at any time and from time to time request a certificate from an officer of any
Borrower representing on behalf of such Borrower that all conditions precedent
to the making of Loans and providing Letter of Credit Accommodations contained
herein are satisfied. In the event of such request by Lender, Lender may, at its
option, cease to make any further Loans or provide any further Letter of Credit
Accommodations until Lender has received such certificate and, in addition,
Lender has determined that such conditions are satisfied. Where permitted by
law, each Borrower hereby authorizes Lender to execute and file one or more UCC
financing statements signed only by Lender.
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SECTION 10. EVENTS OF DEFAULT AND REMEDIES.
10.1 EVENTS OF DEFAULT. The occurrence or existence of any one or more
of the following events are referred to herein individually as an "EVENT OF
DEFAULT," and collectively as "EVENTS OF DEFAULT":
(a) any Borrower fails to pay when due any of the Obligations
(other than interest or fees due hereunder);
(b) any Borrower fails to pay any interest or fees within
three (3) days after such interest or fees become due hereunder; PROVIDED THAT
such three (3) day period shall not apply in the event that Borrower
intentionally diverts payments on Accounts or other proceeds of Collateral from
the Blocked Account;
(c) any Borrower fails to perform any of the terms, covenants,
conditions or provisions contained in this Agreement or any of the other
Financing Agreements and such failure shall continue for ten (10) Business Days;
PROVIDED THAT, such ten (10) Business Day period shall not apply in the case of
(i) any failure to perform a term, covenant, condition or provision which
results in the occurrence of an Event of Default addressed in any other
provision or paragraph of this Section 10.1, (ii) any failure to perform any
such term, covenant, condition or provision that has been the subject of two (2)
previous failures within the prior twelve (12) month period or (iii) an
intentional breach by any Borrower of such term, covenant, condition or
provision;
(d) any representation, warranty or statement of fact made by
any Borrower to Lender in this Agreement, the other Financing Agreements or any
other agreement, schedule, confirmatory assignment or otherwise shall when made
or deemed made be false or misleading in any material respect;
(e) any Obligor revokes or terminates any of the terms,
covenants, conditions or provisions of any guarantee, endorsement or other
agreement of such party in favor of Lender;
(f) any judgment for the payment of money is rendered against
any Borrower or any Obligor in excess of Two Million Five Hundred Thousand
Dollars ($2,500,000) in any one case or in excess of Five Million Dollars
($5,000,000) in the aggregate and shall remain undischarged or unvacated for a
period in excess of thirty (30) days or execution shall at any time not be
effectively stayed, or any material judgment other than for the payment of
money, or injunction, attachment, garnishment or execution is rendered against
any Borrower or any Obligor or any of their assets;
(g) any Borrower or any Obligor, which is a partnership,
limited liability company, or corporation, dissolves or suspends or discontinues
doing business;
(h) any Borrower or any Obligor becomes unable generally to
pay its debts as they become due, makes an assignment for the benefit of
creditors, makes or sends notice of a bulk transfer or calls a meeting of its
creditors or principal creditors (other than the holders of the Senior Notes);
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(i) a case or proceeding under the bankruptcy laws of the
United States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at law or
in equity) is filed against any Borrower or any Obligor or all or any part of
its properties and any Borrower or any Obligor shall file any answer admitting
or not contesting such petition or application or indicates its consent to,
acquiescence in or approval of, any such action or proceeding or such petition
or application is not dismissed within ninety (90) days after the date of its
filing or the relief requested is granted sooner; PROVIDED HOWEVER,
notwithstanding anything to the contrary set forth herein, Lender shall have no
obligation to advance any Loans or provide any Letter of Credit Accommodations
during any period that such petition or application remains pending;
(j) a case or proceeding under the bankruptcy laws of the
United States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at a law
or equity) is filed by any Borrower or for all or any Obligor or for all or any
part of its property;
(k) any default by any Borrower or any Obligor under any
agreement, document or instrument relating to any indebtedness for borrowed
money owing to any person other than Lender, or any capitalized lease
obligations, contingent indebtedness in connection with any guarantee, letter of
credit, indemnity or similar type of instrument in favor of any person other
than Lender, in any case in an amount in excess of Two Million Five Hundred
Thousand Dollars ($2,500,000), which default continues for more than the
applicable cure period, if any, with respect thereto;
(l) GLC ceases to hold, directly or indirectly, all of the
Capital Stock of any Borrower or any Person or group (as defined in Section
13(d) of the Securities Exchange Act of 1934, as amended) other than entities
owned or managed by Oaktree Capital Management LLC or William E. Simon & Sons
becomes the direct or indirect beneficial owner (as defined in Rules 13d-3 and
13d-5 of the Securities Exchange Act of 1934, as amended, provided that a Person
or group shall be deemed to have "beneficial ownership" of all securities that
such Person or group has the right to acquire, whether such right is exercisable
immediately or only after the passage of time) of a higher percentage of the
Capital Stock of GLC than the percentage then beneficially owned by entities
owned or managed by Oaktree Capital Management LLC and William E. Simon & Sons;
(m) the indictment or threatened indictment of any Borrower or
any Obligor under any criminal statute, or the commencement or threatened
commencement of criminal or civil proceedings against any Borrower or any
Obligor, pursuant to which statute or proceedings the penalties or remedies
sought or available include forfeiture of any of the material property of such
Borrower or such Obligor;
(n) GLC shall fail to maintain, at all times, Adjusted Net
Worth of not less than negative Eighty Two Million Dollars (-$82,000,000) and
such failure shall continue for fifteen (15) days after the earlier of the date
of receipt by Lender of monthly financial statements of GLC for such fiscal
month or the date that such financial statements are due to be delivered to
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Lender pursuant to Section 9.6(a) hereof; PROVIDED THAT, such fifteen (15) day
period shall not apply in the event of a failure by GLC to maintain such
Adjusted Net Worth in the prior twelve (12) month period; PROVIDED FURTHER THAT,
such dollar amount shall be increased or decreased on a dollar for dollar basis
by the amount that Adjusted Net Worth of GLC as set forth in its audited
financial statements for its 1999 fiscal year is adjusted based solely on any
non-cash items to exceed or be less than negative Fifty Two Million Eight
Hundred Thousand Dollars (-$52,800,000);
(o) Borrowers, GL Canada and GL UK shall fail to maintain in
the aggregate, as of the end of any fiscal year of Borrowers, Adjusted Net Worth
of not less than negative Six Million Dollars (-$6,000,000) and such failure
shall continue for fifteen (15) days after the earlier of the date of receipt by
Lender of the annual financial statements of GLC for such fiscal year or the
date that such financial statements are due to be delivered to Lender pursuant
to Section 9.6(a) hereof; PROVIDED THAT, such fifteen (15) day period shall not
apply in the event of a failure by Borrowers, GL Canada and GL UK to maintain
such Adjusted Net Worth in the prior twelve (12) month period; PROVIDED FURTHER
THAT, such dollar amount shall be increased or decreased on a dollar for dollar
basis by the amount that the aggregate Adjusted Net Worth of Borrowers, GL
Canada and GL UK as set forth in GLC's audited financial statements for its 1999
fiscal year is adjusted based solely on any non-cash items to exceed or be less
than Ten Million Seven Hundred Fifty Thousand Dollars ($10,750,000);
(p) any default by GL UK or GL Canada or an "Event of Default"
shall occur under the terms of the UK Loan Agreement or the Canadian Loan
Agreement or any other agreement, document, note and/or instrument executed or
delivered in connection therewith;
(q) without the prior written consent of Lender, which consent
shall not be unreasonably withheld, GLC or any Subsidiary of GLC (other than
Borrowers, GL UK or GL Canada), in connection with sales of all or substantially
all the assets of a Subsidiary of GLC (other than Borrowers, GL UK or GL Canada)
or sales of all the Capital Stock of a Subsidiary of GLC (other than Borrowers,
GL UK or GL Canada), sells or agrees to sell assets or Capital Stock having a
fair market value in excess of Twenty Five Million Dollars ($25,000,000) in the
aggregate at any time during the term of this Agreement;
(r) there shall be a material adverse change in the business,
assets or condition (financial or otherwise) of any Borrower or any Obligor
after the date hereof; or
(s) there shall be an event of default under any of the other
Financing Agreements.
10.2 REMEDIES.
(a) At any time an Event of Default exists or has occurred and
is continuing, Lender shall have all rights and remedies provided in this
Agreement, the other Financing Agreements, the Uniform Commercial Code and other
applicable law, all of which rights and remedies may be exercised without notice
to or consent by any Borrower or any Obligor, except as such notice or consent
is expressly provided for hereunder or required by applicable law. All rights,
remedies and powers granted to Lender hereunder, under any of the other
Financing
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Agreements, the Uniform Commercial Code or other applicable law, are
cumulative, not exclusive and enforceable, in Lender's discretion,
alternatively, successively, or concurrently on any one or more occasions,
and shall include, without limitation, the right to apply to a court of
equity for an injunction to restrain a breach or threatened breach by any
Borrower of this Agreement or any of the other Financing Agreements. Lender
may, at any time or times, proceed directly against any Borrower or any
Obligor to collect the Obligations without prior recourse to the Collateral.
(b) Without limiting the foregoing, at any time an Event of
Default exists or has occurred and is continuing, Lender may, in its discretion
and without limitation, (i) accelerate the payment of all Obligations and demand
immediate payment thereof to Lender (PROVIDED, THAT, upon the occurrence of any
Event of Default described in Sections 10.1(i) and 10.1(j) with respect to any
Borrower, all Obligations of such Borrower shall automatically become
immediately due and payable and the Obligations of all other Borrowers shall
become immediately due and payable upon demand by Lender), (ii) with or without
judicial process or the aid or assistance of others, enter upon any premises on
or in which any of the Collateral may be located and take possession of the
Collateral or complete processing, manufacturing and repair of all or any
portion of the Collateral, (iii) require any Borrower, at Borrowers' expense, to
assemble and make available to Lender any part or all of the Collateral at any
place and time designated by Lender, (iv) collect, foreclose, receive,
appropriate, setoff and realize upon any and all Collateral, (v) remove any or
all of the Collateral from any premises on or in which the same may be located
for the purpose of effecting the sale, foreclosure or other disposition thereof
or for any other purpose, (vi) sell, lease, transfer, assign, deliver or
otherwise dispose of any and all Collateral (including, without limitation,
entering into contracts with respect thereto, public or private sales at any
exchange, broker's board, at any office of Lender or elsewhere) at such prices
or terms as Lender may deem reasonable, for cash, upon credit or for future
delivery, with the Lender having the right to purchase the whole or any part of
the Collateral at any such public sale, all of the foregoing being free from any
right or equity of redemption of any Borrower, which right or equity of
redemption is hereby expressly waived and released by such Borrower and/or (vii)
terminate this Agreement. If any of the Collateral is sold or leased by Lender
upon credit terms or for future delivery, the Obligations shall not be reduced
as a result thereof until payment therefor is finally collected by Lender. If
notice of disposition of Collateral is required by law, five (5) days prior
notice by Lender to Borrowers designating the time and place of any public sale
or the time after which any private sale or other intended disposition of
Collateral is to be made, shall be deemed to be reasonable notice thereof and
each Borrower waives any other notice. In the event Lender institutes an action
to recover any Collateral or seeks recovery of any Collateral by way of
prejudgment remedy, each Borrower waives the posting of any bond which might
otherwise be required.
(c) Lender may apply the cash proceeds of Collateral actually
received by Lender from any sale, lease, foreclosure or other disposition of the
Collateral to payment of the Obligations, in whole or in part and in such order
as Lender may elect, whether or not then due. Borrowers shall remain liable to
Lender for the payment of any deficiency with interest at the highest rate
provided for herein and all costs and expenses of collection or enforcement,
including attorneys' fees and legal expenses.
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(d) Without limiting the foregoing, upon the occurrence of an
Event of Default or an event which with notice or passage of time or both would
constitute an Event of Default, Lender may, at its option, without notice, (i)
cease making Loans or arranging Letter of Credit Accommodations or reduce the
lending formulas or amounts of Loans and Letter of Credit Accommodations
available to any Borrower and/or (ii) terminate any provision of this Agreement
providing for any future Loans or Letter of Credit Accommodations to be made by
Lender to any Borrower.
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW.
11.1 GOVERNING LAW; CHOICE OF FORUM; SERVICE OF PROCESS; JURY TRIAL
WAIVER.
(a) The validity, interpretation and enforcement of this
Agreement and the other Financing Agreements and any dispute arising out of the
relationship between the parties hereto, whether in contract, tort, equity or
otherwise, shall be governed by the internal laws of the State of California
applicable to contracts made and performed in such State.
(b) Each Borrower and Lender irrevocably consent and submit to
the non-exclusive jurisdiction of the state courts of the County of Los Angeles,
State of California and of the United States District Court for the Central
District of California and waive any objection based on venue or FORUM NON
CONVENIENS with respect to any action instituted therein arising under this
Agreement or any of the other Financing Agreements or in any way connected with
or related or incidental to the dealings of the parties hereto in respect of
this Agreement or any of the other Financing Agreements or the transactions
related hereto or thereto, in each case whether now existing or hereafter
arising, and whether in contract, tort, equity or otherwise, and agree that any
dispute with respect to any such matters shall be heard only in the courts
described above (provided that nothing herein shall preclude Lender from
bringing any action or proceeding against any Borrower or its property in the
courts of any other jurisdiction which Lender deems necessary or appropriate in
order to realize on the Collateral or to otherwise enforce its rights against
such Borrower or its property).
(c) EACH BORROWER AND LENDER EACH HEREBY WAIVES ANY RIGHT TO
TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER
THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN
RESPECT OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE
TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. EACH
BORROWER AND LENDER EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND,
ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND
THAT SUCH BORROWER OR LENDER MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS
AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES
HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
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(d) Lender shall not have any liability to any Borrower
(whether in tort, contract, equity or otherwise) for losses suffered by any
Borrower in connection with, arising out of, or in any way related to the
transactions or relationships contemplated by this Agreement, or any act,
omission or event occurring in connection herewith, unless it is determined by a
final and non-appealable judgment or court order binding on Lender, that the
losses were the result of acts or omissions constituting gross negligence or
willful misconduct.
11.2 WAIVER OF NOTICES. Each Borrower hereby expressly waives demand,
presentment, protest and notice of protest and notice of dishonor with respect
to any and all instruments and commercial paper, included in or evidencing any
of the Obligations or the Collateral, and any and all other demands and notices
of any kind or nature whatsoever with respect to the Obligations, the Collateral
and this Agreement, except such as are expressly provided for herein. No notice
to or demand on any Borrower which Lender may elect to give shall entitle any
Borrower to any other or further notice or demand in the same, similar or other
circumstances.
11.3 AMENDMENTS AND WAIVERS. Neither this Agreement nor any provision
hereof shall be amended, modified, waived or discharged orally or by course of
conduct, but only by a written agreement signed by an authorized officer of
Lender and each Borrower. Lender shall not, by any act, delay, omission or
otherwise be deemed to have expressly or impliedly waived any of its rights,
powers and/or remedies unless such waiver shall be in writing and signed by an
authorized officer of Lender. Any such waiver shall be enforceable only to the
extent specifically set forth therein. A waiver by Lender of any right, power
and/or remedy on any one occasion shall not be construed as a bar to or waiver
of any such right, power and/or remedy which Lender would otherwise have on any
future occasion, whether similar in kind or otherwise.
11.4 WAIVER OF COUNTERCLAIMS. Each Borrower waives all rights to
interpose any claims, deductions, setoffs or counterclaims of any nature (other
than compulsory counterclaims) in any action or proceeding with respect to this
Agreement, the Obligations, the Collateral or any matter arising therefrom or
relating hereto or thereto.
11.5 INDEMNIFICATION. Each Borrower shall indemnify and hold Lender,
and its directors, agents, employees and counsel, harmless from and against any
and all losses, claims, damages, liabilities, costs or expenses imposed on,
incurred by or asserted against any of them in connection with any litigation,
investigation, claim or proceeding commenced or threatened related to the
negotiation, preparation, execution, delivery, enforcement, performance or
administration of this Agreement, any other Financing Agreements, or any
undertaking or proceeding related to any of the transactions contemplated hereby
or any act, omission, event or transaction related or attendant thereto,
including, without limitation, amounts paid in settlement, court costs, and the
fees and expenses of counsel except as a result of Lender's gross negligence or
willful misconduct. To the extent that the undertaking to indemnify, pay and
hold harmless set forth in this Section 11.5 may be unenforceable because it
violates any law or public policy, each Borrower shall pay the maximum portion
which it is permitted to pay under applicable law to Lender in satisfaction of
indemnified matters under this Section 11.5. The foregoing indemnity shall
survive the payment of the Obligations and the termination or non-renewal of
this Agreement.
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SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS.
12.1 TERM.
(a) This Agreement and the other Financing Agreements shall
become effective as of the date set forth on the first page hereof and shall
continue in full force and effect for a term ending on the date three (3) years
from the date hereof (the "RENEWAL DATE"), and from year to year thereafter,
unless sooner terminated pursuant to the terms hereof. NOTWITHSTANDING ANYTHING
TO THE CONTRARY SET FORTH HEREIN, THIS AGREEMENT AND THE OTHER FINANCING
AGREEMENTS SHALL IMMEDIATELY TERMINATE UPON THE TERMINATION OF EITHER THE UK
FACILITY OR THE CANADIAN FACILITY. Borrowers (collectively, but not
individually) or Lender may terminate this Agreement and the other Financing
Agreements effective on the Renewal Date or on the anniversary of the Renewal
Date in any year by giving to the other party at least sixty (60) days prior
written notice. Borrowers (collectively, but not individually) may terminate
this Agreement prior to the end of the then current term, including any renewal
term, for any reason prior to or on the first anniversary date of this Agreement
upon forty-five (45) days prior written notice to Lender and for any reason
thereafter upon thirty (30) days prior written notice to Lender, and in each
such case Borrowers agree to pay to Lender the applicable early termination fee
provided for in Section 12.1(c) hereof. Regardless of the timing of termination,
this Agreement and all other Financing Agreements must be terminated
simultaneously. Upon the effective date of termination or non-renewal of the
Financing Agreements, Borrowers shall pay to Lender, in full, all outstanding
and unpaid Obligations and shall furnish cash collateral to Lender in such
amounts as Lender determines are reasonably necessary to secure Lender from
loss, cost, damage or expense, including attorneys' fees and legal expenses, in
connection with any contingent Obligations, including issued and outstanding
Letter of Credit Accommodations and checks or other payments provisionally
credited to the Obligations and/or as to which Lender has not yet received final
and indefeasible payment. Such cash collateral shall be remitted by wire
transfer in Federal funds to such bank account of Lender, as Lender may, in its
discretion, designate in writing to Borrowers for such purpose. Interest shall
be due until and including the next Business Day, if the amounts so paid by
Borrowers to the bank account designated by Lender are received in such bank
account later than 10:30 a.m., Los Angeles time.
(b) No termination of this Agreement or the other Financing
Agreements shall relieve or discharge any Borrower of its respective duties,
obligations and covenants under this Agreement or the other Financing Agreements
until all Obligations have been fully and finally discharged and paid, and
Lender's continuing security interest in the Collateral and the rights and
remedies of Lender hereunder, under the other Financing Agreements and
applicable law, shall remain in effect until all such Obligations have been
fully and finally discharged and paid.
(c) If for any reason this Agreement is terminated prior to
the end of the then current term or a renewal term of this Agreement or if prior
to that time Borrowers reduce any part of the unused Maximum Credit (which they
may collectively do from time to time upon five (5) days notice to Lender), in
view of the impracticality and extreme difficulty of ascertaining actual damages
and by mutual agreement of the parties as to a reasonable calculation of
Lender's lost profits as a result thereof, Borrowers agree to pay to Lender,
upon the effective date of such
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<PAGE>
termination or reduction, an early termination or reduction fee in the amount
set forth below if such termination or reduction is effective in the period
indicated:
<TABLE>
<CAPTION>
AMOUNT PERIOD
<S> <C> <C>
(i) 2.0% of the Maximum Credit in the event of a from the date of this Agreement to and
termination or of the reduced portion of the including the first anniversary of this
Maximum Credit in the event of a reduction Agreement
(ii) 1.0% of the Maximum Credit in the event of a from the day immediately succeeding the first
termination or of the reduced portion of the anniversary of this Agreement to and including
Maximum Credit in the event of a reduction the second anniversary of this Agreement
(iii) 0.5% of the Maximum Credit in the event of a from the day immediately succeeding the second
termination or of the reduced portion of the anniversary of this Agreement and thereafter,
Maximum Credit in the event of a reduction including any period during a renewal term, if
any, but excluding the Renewal Date or any
anniversary of the Renewal Date.
</TABLE>
Such early termination or reduction fee shall be presumed to be the amount of
damages sustained by Lender as a result of such early termination or reduction
and each Borrower agrees that it is reasonable under the circumstances currently
existing. Lender shall be entitled to such early termination or reduction fee
upon the occurrence of any Event of Default described in Sections 10.1(i) and
10.1(j) hereof, even if Lender does not exercise its right to terminate this
Agreement, but elects, at its option, to provide financing to Borrowers or
permit the use of cash collateral under the United States Bankruptcy Code. Such
early termination or reduction fee shall be allocated among Borrowers as
determined by Lender and payable by Borrowers in accordance with such
allocation. The early termination or reduction fee provided for in this Section
12.1 shall be deemed included in the Obligations.
12.2 NOTICES. All notices, requests and demands hereunder shall be in
writing and (a) made to Lender at its address set forth below and to Borrowers
at their respective chief executive office set forth below, or to such other
address as either party may designate by written notice to the other in
accordance with this provision, and (b) deemed to have been given or made: if
delivered in person, immediately upon delivery; if by telex, telegram or
facsimile transmission, immediately upon sending and upon confirmation of
receipt; if by nationally recognized overnight courier service with instructions
to deliver the next Business Day, upon receipt.
12.3 PARTIAL INVALIDITY. If any provision of this Agreement is held to
be invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to
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<PAGE>
be invalid or unenforceable and the rights and obligations of the parties
shall be construed and enforced only to such extent as shall be permitted by
applicable law.
12.4 SUCCESSORS. This Agreement, the other Financing Agreements and any
other document referred to herein or therein shall be binding upon and inure to
the benefit of and be enforceable by Lender, each Borrower and their respective
successors and assigns, except that no Borrower may assign its rights under this
Agreement, the other Financing Agreements and any other document referred to
herein or therein without the prior written consent of Lender. Lender may, after
notice to Borrowers, assign its rights and delegate its obligations under this
Agreement and the other Financing Agreements and further may assign, or sell
participations in, all or any part of the Loans, the Letter of Credit
Accommodations or any other interest herein to another financial institution or
other person, in which event, the assignee or participant shall have, to the
extent of such assignment or participation, the same rights and benefits as it
would have if it were the Lender hereunder, except as otherwise provided by the
terms of such assignment or participation.
12.5 ENTIRE AGREEMENT. This Agreement, the other Financing Agreements,
any supplements hereto or thereto, and any instruments or documents delivered or
to be delivered in connection herewith or therewith represents the entire
agreement and understanding concerning the subject matter hereof and thereof
between the parties hereto, and supersede all other prior agreements,
understandings, negotiations and discussions, representations, warranties,
commitments, proposals, offers and contracts concerning the subject matter
hereof, whether oral or written.
12.6 PUBLICITY. Each Borrower consents to Lender publishing a tombstone
or similar advertising material relating to the financing transaction
contemplated by this Agreement provided that, Borrowers shall have had a
reasonable opportunity to review and comment thereon.
12.7 CONFIDENTIAL INFORMATION. Lender agrees to hold, in accordance
with its customary procedures for handling confidential information and safe and
sound lending practices, any confidential information that it may receive from
any Borrower or GLC pursuant to this Agreement in confidence, EXCEPT for
disclosure:
(a) to legal counsel, accountants, auditors and other
professional advisors to any Borrower or GLC or Lender;
(b) to regulatory officials having jurisdiction over Lender;
(c) as required by applicable law or legal process (PROVIDED
that in the event Lender is so required to disclose any such confidential
information, that Lender 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 Lender or the Borrowers are
adverse parties;
(d) to another financial institution or its counsel in
connection with an assignment or disposition or proposed assignment or
disposition to that financial institution of all or part of Lender's interests
hereunder or a participation interest herein, provided that such
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disclosure is made subject to an appropriate confidentiality agreement on
terms substantially similar to this Section; and
(e) to prospective purchasers of any Collateral (OTHER than
competitors of any Borrower or GLC or its Subsidiaries unless all Obligations
are 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 any Borrower or GLC, OTHER THAN (x) information
previously filed with any governmental agency and available to the public, (y)
information previously published in any public medium from a source other than,
directly or indirectly, Lender, and (z) information previously disclosed by GLC
or any of its Subsidiaries to any Person not associated with GLC 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 Lender to GLC or its Subsidiaries.
SECTION 13. JOINT AND SEVERAL LIABILITY AND SURETYSHIP WAIVERS.
13.1 INDEPENDENT OBLIGATIONS; SUBROGATION. The obligations of each
Borrower, as guarantor of another Borrower's Obligations hereunder are joint and
several. To the maximum extent permitted by law, each Borrower hereby waives any
claim, right or remedy which either may now have or hereafter acquire against
any other Borrower that arises hereunder including, without limitation, any
claim, remedy or right of subrogation, reimbursement, exoneration, contribution,
indemnification, or participation in any claim, right or remedy of Lender
against any Borrower or any Collateral which Lender now has or hereafter
acquires, whether or not such claim, right or remedy arises in equity, under
contract, by statute, under common law or otherwise until the Obligations are
fully paid and finally discharged. In addition, each Borrower hereby waives any
right to proceed against the other Borrower, now or hereafter, for contribution,
indemnity, reimbursement, and any other suretyship rights and claims, whether
direct or indirect, liquidated or contingent, whether arising under express or
implied contract or by operation of law, which any Borrower may now have or
hereafter have as against the other Borrower with respect to the Obligations
until the Obligations are fully paid and finally discharged. Each Borrower also
hereby waives any rights of recourse to or with respect to any asset of the
other Borrower until the Obligations are fully paid and finally discharged.
13.2 AUTHORITY TO MODIFY OBLIGATIONS AND SECURITY. Each Borrower
authorizes Lender, without notice or demand and without affecting any Borrower's
liability hereunder, from time to time, whether before or after any notice of
termination hereof or before or after any default in respect of the Obligations,
to: (i) renew, extend, accelerate, or otherwise change the time for payment of,
or otherwise change any other term or condition of, any document or agreement
evidencing or relating to any Obligations as such Obligations relate to the
other Borrower, including, without limitation, to increase or decrease the rate
of interest thereon; (ii) accept, substitute, waive, defease, increase, release,
exchange or otherwise alter any Collateral, in whole or in part, securing the
other Borrower's Obligations; (iii) apply any and all such Collateral and
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direct the order or manner of sale thereof as Lender, in its sole discretion,
may determine; (iv) deal with the other Borrower as Lender may elect; (v) in
Lender's sole discretion, settle, release on terms satisfactory to Lender, or
by operation of law or otherwise, compound, compromise, collect or otherwise
liquidate any of the other Borrower's Obligations and/or any of the
Collateral in any manner, and bid and purchase any of the collateral at any
sale thereof; (vi) apply any and all payments or recoveries from the other
Borrower as Lender, in its sole discretion, may determine, whether or not
such indebtedness relates to the Obligations; all whether such Obligations
are secured or unsecured or guaranteed or not guaranteed by others; and (vii)
apply any sums realized from Collateral furnished by the other Borrower upon
any of its indebtedness or obligations to Lender as Lender, in its sole
discretion, may determine, whether or not such indebtedness relates to the
Obligations; all without in any way diminishing, releasing or discharging the
liability of any Borrower hereunder.
13.3 WAIVER OF DEFENSES. Upon an Event of Default by any Borrower in
respect of any Obligations, Lender may, at its option and without notice to the
Borrowers, proceed directly against any Borrower to collect and recover the full
amount of the liability hereunder, or any portion thereof, and each Borrower
waives any right to require Lender to: (i) proceed against the other Borrower or
any other person whomsoever; (ii) proceed against or exhaust any Collateral
given to or held by Lender in connection with the Obligations; (iii) give notice
of the terms, time and place of any public or private sale of any of the
Collateral except as otherwise provided herein; or (iv) pursue any other remedy
in Lender's power whatsoever. A separate action or actions may be brought and
prosecuted against any Borrower whether or not action is brought against the
other Borrower and whether the other Borrower be joined in any such action or
actions; and each Borrower waives the benefit of any statute of limitations
affecting the liability hereunder or the enforcement hereof, and agrees that any
payment of any Obligations or other act which shall toll any statute of
limitations applicable thereto shall similarly operate to toll such statute of
limitations applicable to the liability hereunder.
13.4 EXERCISE OF LENDER'S RIGHTS. Each Borrower hereby authorizes and
empowers Lender in its sole discretion, without any notice or demand to such
Borrower whatsoever and without affecting the liability of such Borrower
hereunder, to exercise any right or remedy which Lender may have available to it
against the other Borrower.
13.5 ADDITIONAL WAIVERS. Each Borrower waives any defense arising by
reason of any disability or other defense of the other Borrower or by reason of
the cessation from any cause whatsoever of the liability of the other Borrower
or by reason of any act or omission of Lender or others which directly or
indirectly results in or aids the discharge or release of the other Borrower or
any Obligations or any Collateral by operation of law or otherwise. The
Obligations shall be enforceable against each Borrower without regard to the
validity, regularity or enforceability of any of the Obligations with respect to
any of the other Borrower or any of the documents related thereto or any
collateral security documents securing any of the Obligations. No exercise by
Lender of, and no omission of Lender to exercise, any power or authority
recognized herein and no impairment or suspension of any right or remedy of
Lender against any Borrower or any Collateral shall in any way suspend,
discharge, release, exonerate or otherwise affect any of the Obligations or any
Collateral furnished by the other Borrowers or give to the other Borrowers any
right of recourse against Lender. The Borrowers specifically agree that the
failure of Lender: (i) to perfect any lien on or security interest in any
property heretofore or
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<PAGE>
hereafter given by Borrowers to secure payment of the Obligations, or to
record or file any document relating thereto or (ii) to file or enforce a
claim against the estate (either in administration, bankruptcy or other
proceeding) of any Borrower shall not in any manner whatsoever terminate,
diminish, exonerate or otherwise affect the liability of any other Borrower
hereunder.
13.6 ADDITIONAL INDEBTEDNESS. Additional Obligations may be created
from time to time at the request of any Borrower and without further
authorization from or notice to any other Borrower even though the borrowing
Borrower's financial condition may deteriorate since the date hereof. Each
Borrower waives the right, if any, to require Lender to disclose to such
Borrower any information it may now have or hereafter acquire concerning the
other Borrower's character, credit, Collateral, financial condition or other
matters. Each Borrower has established adequate means to obtain from the other
Borrower on a continuing basis financial and other information pertaining to
such Borrower's business and affairs, and assumes the responsibility for being
and keeping informed of the financial and other conditions of the other Borrower
and of all circumstances bearing upon the risk of nonpayment of the Obligations
which diligent inquiry would reveal. Lender need not inquire into the powers of
any of the Borrowers or the authority of any of their respective officers,
directors, partners or agents acting or purporting to act in their behalf, and
any obligations created in reliance upon the purported exercise of such power or
authority is hereby guaranteed. All obligations of Borrowers to Lender
heretofore, now or hereafter created shall be deemed to have been granted at
Borrowers' special insistence and request and in consideration of and in
reliance upon this Agreement.
13.7 NOTICES, DEMANDS, ETC. Except as expressly provided by this
Agreement, Lender shall be under no obligation whatsoever to make or give to any
Borrower, and each Borrower hereby waives diligence, all rights of setoff and
counterclaim against Lender, all demands, presentments, protests, notices of
protests, notices of protests, notices of nonperformance, notices of dishonor,
and all other notices of every kind or nature, including notice of the
existence, creation or incurring of any new or additional Obligations.
13.8 REVIVAL. If any payments of money or transfers of property made to
Lender by any Borrower should for any reason subsequently be declared to be, or
in Lender's counsel's good faith opinion be determined to be, fraudulent (within
the meaning of any state or federal law relating to fraudulent conveyances),
preferential or otherwise voidable or recoverable in whole or in part for any
reason (hereinafter collectively called "VOIDABLE TRANSFERS") under the
Bankruptcy Code or any other federal or state law and Lender is required to
repay or restore, or in Lender's counsel's opinion may be so liable to repay or
restore, any such voidable transfer, or the amount or any portion thereof, then
as to any such voidable transfer or the amount repaid or restored and all
reasonable costs and expenses (including reasonable attorneys' fees) of Lender
related thereto, each other Borrower's liability hereunder shall automatically
be revived, reinstated and restored and shall exist as though such voidable
transfer had never been made to Lender.
13.9 UNDERSTANDING OF WAIVERS. Each Borrower warrants and agrees that
the waivers set forth in this Section 13 are made with full knowledge of their
significance and consequences. If any of such waivers are determined to be
contrary to any applicable law or public policy, such waivers shall be effective
only to the maximum extent permitted by law.
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<PAGE>
IN WITNESS WHEREOF, Lender and each Borrower have caused these presents
to be duly executed as of the day and year first above written.
<TABLE>
<CAPTION>
LENDER BORROWERS
- ------ ---------
<S> <C>
CONGRESS FINANCIAL CORPORATION (WESTERN), GEOLOGISTICS SERVICES, INC.,
a California corporation a Delaware corporation
By:________________________________________ By:__________________________________
Name:______________________________________ Name: Terry G. Clarke
Title:_____________________________________ Title: Assistant Treasurer
ADDRESS CHIEF EXECUTIVE OFFICE
- ------- ----------------------
251 South Lake Avenue, Suite 900 205 Whiting Street
Pasadena, California 91101 Alexandria, Virginia 22304
or, on and after ________, 2000:
330 South Mannheim Road
Hillside, Illinois 60162
BEKINS VAN LINES, LLC,
a Delaware limited liability company
By:___________________________________
Name: Terry G. Clarke
Title: Assistant Treasurer
CHIEF EXECUTIVE OFFICE
----------------------
330 South Mannheim Road
Hillside, Illinois 60162
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<PAGE>
BEKINS WORLDWIDE SOLUTIONS, INC.,
a Delaware corporation
By:___________________________________
Name: Terry G. Clarke
Title: Assistant Treasurer
CHIEF EXECUTIVE OFFICE
----------------------
330 South Mannheim Road
Hillside, Illinois 60162
GEOLOGISTICS AMERICAS INC.,
a Delaware corporation
By:___________________________________
Name: Terry G. Clarke
Title: Vice President
CHIEF EXECUTIVE OFFICE
----------------------
1251 East Dyer Road, Suite 250
Santa Ana, California 92705
</TABLE>
61
<PAGE>
EXHIBIT A
Information Certificate
<PAGE>
EXHIBIT B
Projections of GLC
<PAGE>
SCHEDULE 8.1
Organizational Chart of GLC
<PAGE>
SCHEDULE 8.4
Other Liens
<PAGE>
SCHEDULE 8.8
Bank Accounts
<PAGE>
SCHEDULE 8.9
Environmental Disclosures
Schedule 8.9
<PAGE>
SCHEDULE 9.10
Permitted Loans or Advances to GLC
<TABLE>
<CAPTION>
PURPOSE OF LOAN OR ADVANCE AMOUNT
<S> <C>
Payment of taxes of GLC $2,000,000
Capital Expenditures $5,000,000
Corporate Restructuring Expenses $2,500,000
Repurchase of stocks and warrants from current and former $3,000,000
employees of GLC to the extent required pursuant to
contractual requirements outstanding as of the date hereof.
General and Administrative Expenses $8,500,000
</TABLE>
Schedule 9.10
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 1. DEFINITIONS..........................................................................................1
SECTION 2. CREDIT FACILITIES...................................................................................15
2.1 Revolving Loans.....................................................................................15
2.2 Letter of Credit Accommodations.....................................................................17
SECTION 3. INTEREST AND FEES...................................................................................18
3.1 Interest............................................................................................18
3.2 Closing and Syndication Fee.........................................................................20
3.3 Loan Servicing Fee..................................................................................20
3.4 Unused Line Fee.....................................................................................20
3.5 Compensation Adjustment.............................................................................20
3.6 Changes in Laws and Increased Costs of Loans........................................................21
SECTION 4. CONDITIONS PRECEDENT................................................................................22
4.1 Conditions Precedent to Initial Loans and the Letter of Credit Accommodations.......................22
4.2 Conditions Precedent to All Loans and Letter of Credit Accommodations...............................24
SECTION 5. GRANT OF SECURITY INTEREST..........................................................................25
SECTION 6. COLLECTION AND ADMINISTRATION.......................................................................26
6.1 Borrowers' Loan Account.............................................................................26
6.2 Statements..........................................................................................26
6.3 Collection of Accounts..............................................................................26
6.4 Payments............................................................................................27
6.5 Authorization to Make Loans.........................................................................28
6.6 Use of Proceeds.....................................................................................28
SECTION 7. COLLATERAL REPORTING AND COVENANTS..................................................................28
7.1 Collateral Reporting................................................................................28
7.2 Accounts Covenants..................................................................................29
7.3 Equipment Covenants.................................................................................31
7.4 Power of Attorney...................................................................................31
7.5 Right to Cure.......................................................................................32
7.6 Access to Premises..................................................................................32
SECTION 8. REPRESENTATIONS AND WARRANTIES......................................................................33
8.1 Corporate/Company Existence, Power and Authority; Subsidiaries......................................33
i
<PAGE>
8.2 Financial Statements; No Material Adverse Change....................................................33
8.3 Chief Executive Office; Collateral Locations........................................................33
8.4 Priority of Liens; Title to Properties..............................................................34
8.5 Tax Returns.........................................................................................34
8.6 Litigation..........................................................................................34
8.7 Compliance with Other Agreements and Applicable Laws................................................34
8.8 Bank Accounts.......................................................................................34
8.9 Environmental Compliance............................................................................35
8.10 Employee Benefits...................................................................................35
8.12 Accuracy and Completeness of Information............................................................36
8.13 Survival of Warranties; Cumulative..................................................................36
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS..................................................................37
9.1 Maintenance of Existence............................................................................37
9.2 New Collateral Locations............................................................................37
9.3 Compliance with Laws, Regulations, Etc..............................................................37
9.4 Payment of Taxes and Claims.........................................................................38
9.5 Insurance...........................................................................................38
9.6 Financial Statements and Other Information..........................................................39
9.8 Encumbrances........................................................................................42
9.9 Indebtedness........................................................................................42
9.10 Loans, Investments, Guarantees, Etc.................................................................43
9.11 Dividends and Redemptions...........................................................................45
9.12 Transactions with Affiliates........................................................................45
9.13 Additional Bank Accounts............................................................................45
9.14 Compliance with ERISA...............................................................................46
9.15 Costs and Expenses..................................................................................46
9.16 Further Assurances..................................................................................47
SECTION 10. EVENTS OF DEFAULT AND REMEDIES......................................................................47
10.1 Events of Default...................................................................................47
10.2 Remedies............................................................................................50
ii
<PAGE>
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND
CONSENTS; GOVERNING LAW.............................................................................52
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver...............................52
11.2 Waiver of Notices...................................................................................53
11.3 Amendments and Waivers..............................................................................53
11.4 Waiver of Counterclaims.............................................................................53
11.5 Indemnification.....................................................................................53
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS....................................................................54
12.1 Term................................................................................................54
12.2 Notices.............................................................................................55
12.3 Partial Invalidity..................................................................................55
12.4 Successors..........................................................................................56
12.5 Entire Agreement....................................................................................56
12.6 Publicity...........................................................................................56
12.7 Confidential Information............................................................................56
SECTION 13. JOINT AND SEVERAL LIABILITY AND SURETYSHIP WAIVERS..................................................57
13.1 Independent Obligations; Subrogation................................................................57
13.2 Authority to Modify Obligations and Security........................................................57
13.3 Waiver of Defenses..................................................................................58
13.4 Exercise of Lender's Rights.........................................................................58
13.5 Additional Waivers..................................................................................58
13.6 Additional Indebtedness.............................................................................59
13.7 Notices, Demands, Etc...............................................................................59
13.8 Revival.............................................................................................59
13.9 Understanding of Waivers............................................................................59
</TABLE>
iii
<PAGE>
INDEX TO
EXHIBITS AND SCHEDULES
Exhibit A Information Certificate
Schedule 8.1 Organizational Chart of GLC
Schedule 8.4 Other Liens
Schedule 8.8 Bank Accounts
Schedule 8.9 Environmental Disclosures
Schedule 9.10 Permitted Loans or Advances
to GLC
iv
<PAGE>
DATED MARCH 31, 2000
GEOLOGISTICS LIMITED
and
BURDALE FINANCIAL LIMITED
- --------------------------------------------------------------------------------
FACILITY AGREEMENT
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
CONTENTS
<S> <C>
1. INTERPRETATION..........................................................................................1
2. CONDITIONS PRECEDENT...................................................................................13
3. THE FACILITY...........................................................................................14
4. RESTRICTIONS ON UTILISATIONS...........................................................................14
5. UTILISATION OF FACILITY................................................................................16
6. REPAYMENT AND PREPAYMENT...............................................................................19
7. INTEREST AND COMMISSION................................................................................21
8. RECEIVABLES, STOCK AND EQUIPMENT.......................................................................21
9. COLLECTION OF RECEIVABLES..............................................................................26
10. PAYMENTS AND TAXES.....................................................................................28
11. INCREASED COSTS........................................................................................30
12. ILLEGALITY AND MONETARY UNION..........................................................................31
13. GENERAL REPRESENTATIONS AND WARRANTIES.................................................................32
14. GENERAL UNDERTAKINGS...................................................................................34
15. EVENTS OF DEFAULT......................................................................................43
16. COSTS, EXPENSES AND FEES...............................................................................46
17. INDEMNITIES............................................................................................47
18. EVIDENCE OF INDEBTEDNESS...............................................................................49
19. NOTICES................................................................................................49
20. WAIVER, REMEDIES CUMULATIVE............................................................................49
21. INVALIDITY.............................................................................................50
22. ASSIGNMENT AND PARTICIPATION...........................................................................50
23. GOVERNING LAW AND JURISDICTION.........................................................................50
24. DISCLOSURE OF INFORMATION..............................................................................51
25. COUNTERPARTS...........................................................................................52
SCHEDULE 1...................................................................................................53
SCHEDULE 2...................................................................................................56
SCHEDULE 3...................................................................................................60
SCHEDULE 4...................................................................................................61
SIGNATORIES..................................................................................................63
</TABLE>
<PAGE>
THIS AGREEMENT is dated March 31, 2000
BETWEEN:
(1) GEOLOGISTICS LIMITED (Registered in England and Wales No. 00112456)
(the "COMPANY"); and
(2) BURDALE FINANCIAL LIMITED (Registered in England and Wales No.
2656007) ("BURDALE").
IT IS AGREED:
1. INTERPRETATION
1.1 DEFINITIONS
In this Agreement:
"ACCOUNT DEBTOR" means a debtor of the Company in respect of a
Receivable.
"ACCOUNT BANKS" means each bank at which a Charged Account is held
and which has been given and has acknowledged all notices required by
the Debenture.
"ACTUAL DAY OF PAYMENT" in relation to a Purchased Receivable means
the date on which full payment in respect of that Purchased
Receivable is made into the Blocked Accounts by the relevant Account
Debtor or the Company.
"AVAILABILITY LIMITS" means the Receivables Limit and the L/C Limit
and each other limit on Utilisations specified in Clause 4.
"AVAILABILITY PERIOD" means the period from the opening of business
in London on today's date until close of business in London on the
date falling five Business Days prior to the Final Repayment Date or
such later date as Burdale may agree.
"AVAILABILITY RESERVES" means, as of any date of determination, such
amounts as Burdale may from time to time establish and revise in good
faith reducing the amount for the purchase of Receivables or the
issuance, or procurement, of L/Cs which would otherwise be available
to the Company under the purchase formula(s) provided for herein: (a)
to reflect events, conditions, contingencies or risks which, as
reasonably determined by Burdale in good faith, do or may affect
either (i) the Collateral or any other property which is security for
the Obligations or its value, (ii) in any materially adverse respect,
the assets, business or condition (financial or other) of the Company
or any Obligor or (iii) the security interests and other rights of
Burdale in the Collateral (including the enforceability, perfection
and priority thereof) or (b) to reflect Burdale's reasonable good
faith belief that any collateral report or financial information
furnished by or on behalf of the Company or any Obligor to Burdale is
or may have been incomplete, inaccurate or misleading in any material
respect or (c) to reflect any state of facts which Burdale reasonably
determines in good faith constitutes an Event of
<PAGE>
Default or Default. Without limiting the generality of the foregoing,
an Availability Reserve shall be established by Burdale from time to
time in such amounts as Burdale may reasonably determine to reflect
(a) that Dilution Rate as of any date with respect to the Receivables
for the immediately preceding twelve (12) month period or for the
immediately preceding three (3) month period (whichever percentage is
higher) exceeds five percent (5%), (b) any variances in the ageings
of accounts receivable provided to Burdale pursuant to Clause
8.1(b)(i) of this Agreement, (c) any unapplied cash which has not yet
been applied to the Receivables, and (d) any pass through receivables
or collections for shipping charges and cost of goods owed to the
Company by the receiving party of such goods and owed by the Company
to the shipping party of such goods.
"BLOCKED ACCOUNT" means each of the Company's accounts with Barclays
Bank PLC, Broadgate CBC, 155 Bishopsgate EC2M 3XA, sort code
20-19-90, and being:
(a) account number 30904813; and
(b) account number 60669237,
(as the same may be redesignated, renumbered or renamed from time to
time), or such other account as previously approved by Burdale
(together, the "BLOCKED ACCOUNTS").
"BORROWERS" means each of GLNS, BVL, GLS and GLA.
"BVL" means Bekins Van Lines, LLC, a Delaware limited liability
company.
"BUSINESS DAY" means any day not being a Saturday, Sunday or Bank
holiday when banks are open for business in London.
"CANADIAN EXCESS AVAILABILITY" is defined in the Canadian Loan
Agreement.
"CANADIAN FACILITY" means the credit facility in the maximum amount
of Fifteen Million Dollars ($15,000,000) (which may be adjusted from
time to time in accordance with the terms of the Loan Agreement and
the Canadian Loan Agreement) provided by Congress Financial
Corporation (Canada) to GL Canada pursuant to the Canadian Loan
Agreement
"CANADIAN LOAN AGREEMENT" means a Loan Agreement dated on or about
today's date between Congress Financial Corporation (Canada) and GL
Canada, as the same now exists or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.
"CASH REQUEST" means a request for Burdale to pay to the Company an
amount of unpaid Purchase Price and/or the proceeds of a Loan in
substantially the form set out in Schedule 2 Part II.
"CHARGED ACCOUNTS" means the Blocked Accounts and the Other Accounts.
<PAGE>
"COLLATERAL" means any of the assets and undertaking of the Corporate
Obligors charged to Burdale pursuant to the Debenture.
"CONGRESS" means Congress Financial Corporation (Western), a
corporation under the laws of California in the United States of
America.
"CORPORATE OBLIGOR" means each Obligor which is not a natural person.
"DAILY RATE" means L500 per person per day.
"DEBENTURE" means the debenture executed or to be executed by the
Company in favour of Burdale.
"DEED OF PRIORITIES" means the deed of priorities dated on or about
the date of this Agreement made between the Company, Barclays Bank
PLC and Burdale.
"DEFAULT" means any Event of Default and any event which with the
giving of notice and/or lapse of time and/or as a result of any
Utilisation and/or determination of materiality and/or fulfilment of
any condition (or any combination of the foregoing) may constitute an
Event of Default.
"DEFAULT RATE" means the rate determined by Burdale to be 2% above
the Purchase Rate from time to time.
"DILUTION RATE" means for any period, the ratio (expressed as a
percentage) of (a) the aggregate amount of reductions in the
Receivables for such period other than as a result of payments in
cash to (b) the aggregate amount of total sales of the Company for
such period.
"DOLLAR" and "$" means dollars in the lawful currency of the United
States.
"EBITDA" is defined in the Loan Agreement.
"ELIGIBLE RECEIVABLES" means, at any time, any Receivables which are
and continue to be acceptable to Burdale at such time and which are
not Ineligible Receivables.
"ELIGIBLE UNBILLED RECEIVABLES" means, at any time, any Receivable:
(a) which is an Ineligible Receivable solely by virtue of the
criteria in paragraph (h) of the definition of Ineligible
Receivables; and
(b) in relation to which the provision of goods and services to
which such Receivable relates has been completed or is in the
process of completion in accordance with the terms and
provisions contained in any documents relating thereto; and
(c) which remains fully or partly unbilled no more than thirty
(30) days after the sale and delivery of the goods and/or the
completion of the services giving rise thereto.
<PAGE>
"END DATE" in relation to an L/C means the earlier of the expiry date
of such L/C and the date on which the L/C is drawn in full.
"ENCUMBRANCE" means any mortgage or deed of trust, pledge,
hypothecation, assignment, deposit arrangements, lien, charge,
security interest, easement or encumbrance or other security
agreement or preferential arrangement of any kind or nature
whatsoever (including, without limitation, any agreement to sell or
otherwise dispose of any assets on terms whereby any such asset may
be leased to or reacquired or acquired by any Obligor or any title
retention agreement having substantially the same economic effect as
any of the foregoing).
"EQUIPMENT" means all the Company's present and future equipment,
machinery, computers and computer hardware and software (whether
owned or licensed), vehicles, tools, furniture and fixtures and all
attachments, accessories and property now or in future relating to
them or used in connection with them and replacements and
substitutions for them wherever located.
"EVENT OF DEFAULT" means any of the events specified in Clause 15.1.
"EXCHANGE RATE" means the prevailing spot rate of exchange of such
bank as Burdale may select for the purpose, at or around 11.00 a.m.
on the date on which any conversion of currency is to be made under
this Agreement.
"FACILITY" means the Receivables Finance Facility.
"FACILITY LIMIT" means the greater of L15,000,000 or $25,000,000
(calculated at the Exchange Rate).
"FINAL REPAYMENT DATE" means the third anniversary of today's date
provided that if the term of the Loan Agreement shall be renewed,
continued or extended pursuant to Section 12.1 of the Loan Agreement,
the Final Repayment Date shall automatically be extended to the same
day.
"FINANCING AGREEMENTS" is defined in the Loan Agreement.
"FINANCE DOCUMENTS" means this Agreement, the Security Documents, the
Deed of Priorities and/or all other agreements, documents and
instruments at any time executed and/or delivered by any Obligor or
any Related Company in favour of Burdale (each a "FINANCE DOCUMENT").
"FOREIGN CURRENCY" means any currency other than Sterling which is
freely available and transferable.
"GAAP" means accounting principles, standards and practices generally
accepted in the United Kingdom as in effect from time to time.
"GIFL" means GeoLogistics International Finance Ltd., a limited
liability company organised under the laws of Ireland.
<PAGE>
"GLA" means GeoLogistics Americas, Inc., a Delaware corporation.
"GLC" means GeoLogistics Corporation, a Delaware Corporation.
"GLC GUARANTEE" means the guarantee and indemnity executed or to be
executed by GLC in favour of Burdale in relation to the obligations
of the Company to Burdale.
"GL BERMUDA" means GeoLogistics Holdings (Bermuda) Limited, a company
incorporated in Bermuda.
"GL CANADA" shall mean GeoLogistics, Co., an unlimited liability
company under the laws of Nova Scotia, Canada.
"GLNS" means Bekins Worldwide Solutions, Inc., a Delaware
corporation.
"GLS" means GeoLogistics Services, Inc., a Delaware corporation.
"INELIGIBLE RECEIVABLES" means any Receivable:
(a) which does not arise from the actual and bona fide sale and
delivery of goods by the Company or rendering of services by
the Company in the ordinary course of its business which
transactions are completed in accordance with the terms and
provisions contained in any documents relating to such
transactions;
(b) which remains fully or partly unpaid after its Maturity Date
or such longer period as may be agreed by Burdale;
(c) owing by a single Account Debtor if Receivables representing
50% or more of the aggregate balance owing by such Account
Debtor to the Company are not Eligible Receivables by reason
of the operation of paragraph (b) above;
(d) with respect to which the Account Debtor is a director,
officer, employee, Subsidiary or affiliate of the Company;
(e) with respect to which the Account Debtor has or has asserted a
counterclaim or has a right of set off, to the extent of such
counterclaim or set off;
(f) with respect to which Burdale does not have a valid, equitable
assignment under the Finance Documents;
(g) as to which performance has not been completed by the Company
or as to which all goods and services in connection with such
Receivable have not been delivered to or performed for the
Account Debtor or which is not fully assignable;
(h) which has not been invoiced;
<PAGE>
(i) with respect to which the Account Debtor is the subject of any
bankruptcy or insolvency proceeding in any jurisdiction or has
made an assignment for the benefit of creditors or whose
assets have been conveyed to a receiver, administrator,
trustee or other insolvency official;
(j) with respect to which the Account Debtor's obligation to pay
the Receivable is conditional upon the Account Debtor's
approval or is otherwise subject to any repurchase obligation
or right of return, as with sales made on a bill-and-hold,
guaranteed sale, sale-and-return, sale on approval (except
with respect to Receivables in connection with which Account
Debtors are entitled to return goods on the basis of the
quality of those goods) or consignment basis;
(k) with respect to which any of the representations and
warranties contained in Clause 8.3 proves to be incorrect in
any respect;
(l) owed by an Account Debtor incorporated or resident outside the
United Kingdom, unless such Receivable is subject to valid and
enforceable credit insurance payable to Burdale issued by an
insurer on terms and in an amount acceptable to Burdale as
determined by it in good faith and the aggregate invoice
values owed by that relevant Account Debtor are within the
insured limit;
(m) owed by an Account Debtor whose total indebtedness to the
Company, as determined by the Company in good faith, exceeds
any credit limit set by Burdale from time to time with respect
to that Account Debtor and communicated to the Company in
writing prior to the date of determination to the extent such
Receivable breaches that credit limit provided that any
reduction in the credit limit as to a particular Account
Debtor will not cause any Receivables owing by that Account
Debtor as of the date of such reduction not to qualify as
Eligible Receivables;
(n) where there are facts, events or occurrences which would
impair the validity or enforceability of or otherwise the
legal right to collect that Receivable or would give the
Account Debtor relating to that Receivable the legal right to
reduce the amount payable or delaying payment of that
Receivable; and
(o) which are not Sterling Receivables.
"L/CS" means letters of credit, merchandise purchase or other
guarantees which are from time to time either (a) issued or opened by
Burdale for the account of the Company or (b) with respect to which
Burdale has agreed to indemnify the issuer or guaranteed to the
issuer the performance by the Company of its obligations to such
issuer.
"L/C EXPOSURE" in relation to any L/C means an amount equal to 100%
of the face amount of such L/C and all other commitments and
obligations made or incurred by Burdale with respect to such L/C.
"L/C LIMIT" means the Facility Limit provided that at any time the
sum of the L/C exposure, the Canadian Letter of Credit Accommodations
(as defined in the Loan
<PAGE>
Agreement) and the Letter of Credit Accommodations (as so defined)
shall not exceed the Sterling equivalent of $30,000,000 (calculated
at the Exchange Rate) at such time.
"L/C REQUEST" means a request for a Utilisation of the Receivables
Finance Facility by way of the issue of an L/C in substantially the
form set out in Schedule 2 Part III.
"LIBOR" means:
(a) the thirty day LIBOR sterling rate quoted on the first
Business Day of each month in the Financial Times, London
edition as conclusively determined by Burdale; or
(b) (if for any reason the Financial Times, London edition ceases
or fails to quote such a rate) Burdale's cost of funds from
whatever source it may reasonably request.
"LOAN AGREEMENT" means the loan and security agreement dated on or
about today's date between Congress as Lender and GLNS, BVL, GLA and
GLS as Borrowers.
"MARGIN" means 2.75%, PROVIDED THAT (a) effective from the beginning
of the interest period next following Burdale's receipt of financial
statements of GLC for any fiscal quarter of GLC (commencing with the
third fiscal quarter of GLC's fiscal year 2000 delivered in
accordance with the Loan Agreement, subject to paragraph (b) below,
the Margin shall be increased or decreased, as the case may be, to
the Margin as set forth below based on the EBITDA of GLC for the
consecutive four fiscal quarter period ended such fiscal quarter
calculated based on such financial statements for such quarter as
follows:
<TABLE>
<CAPTION>
-------------------------- ------------------------------------------
MARGIN EBITDA OF GLC
<S> <C>
-------------------------- ------------------------------------------
-------------------------- ------------------------------------------
3.00% Equal to or less than $10,000,000
-------------------------- ------------------------------------------
-------------------------- ------------------------------------------
2.75% Greater than $10,000,000 but
equal to or less than $30,000,000
-------------------------- ------------------------------------------
-------------------------- ------------------------------------------
2.5% Greater than $30,000,000
-------------------------- ------------------------------------------
</TABLE>
and (b) the EBITDA amounts set forth above shall be reduced by that
portion of the EBITDA for the four (4) fiscal quarter period ended
any such fiscal quarter that is attributable to any Subsidiary of GLC
that has been sold or disposed of pursuant to a sale or disposition
permitted by this Agreement, the Loan Agreement or the Canadian Loan
Agreement.
"MATERIAL ADVERSE EFFECT" means an effect that results in or causes,
or has a reasonable likelihood of resulting in or causing, a material
adverse change in any of:
(a) the business, performance, operations or properties of the
Company and the Related Companies (other than GL Bermuda)
taken either individually or as a whole; and/or
<PAGE>
(b) the ability of the Company or any Related Company (other than
GL Bermuda) to perform its respective obligations under any of
the Finance Documents; and/or
(c) the rights and remedies of Burdale under any Finance Document.
"MATURITY DATE" means in respect any Receivable the Business Day
which is, or immediately succeeds the date which is 90 days after the
date of the invoice in respect of such Receivable, save in respect of
Eligible Unbilled Receivables.
"MORTGAGED PROPERTY" means any Property which is from time to time
charged in favour of Burdale by way of a first legal mortgage.
"OBLIGATIONS" means any and all financial accommodations made to the
Company pursuant to this Agreement and all other obligations,
liabilities and indebtedness of every kind, nature and description
owing by any Obligor or Related Company to Burdale and/or its
affiliates, including principal, interest, charges, fees, costs and
expenses, however evidenced, whether as principal, surety, endorser,
guarantor or otherwise, whether arising under this Agreement or
otherwise, whether now existing or hereafter arising, whether arising
before, during or after the initial or any renewal term of this
Agreement, whether direct or indirect, absolute or contingent, joint
or several, due or not due, primary or secondary, liquidated or
unliquidated, secured or unsecured, and however acquired by Burdale.
"OBLIGOR" means the Company and any other person who guarantees
and/or grants security for any of the Company's indebtedness or other
obligations to Burdale at any time, other than a Related Company.
"OTHER ACCOUNTS" means the bank accounts of the Corporate Obligors
specified as Other Accounts in the Debenture and/or such other bank
accounts of the Corporate Obligors with Account Banks as Burdale may
permit.
"OTHER RECEIVABLES" means all Receivables which are not Sterling
Receivables.
"OUTSTANDING PURCHASE PRICE" means the aggregate from time to time of
the Purchase Prices of Eligible Receivables and Eligible Unbilled
Receivables paid to the Company in respect of which Burdale has not
received payment from the relevant Account Debtor or the Company.
"PAYMENT ACCOUNT" means such account in the name of Burdale, as may
be notified to the Company by Burdale from time to time.
"PERMITTED ACQUISITION" means any transaction, or any series of
related transactions by which any Corporate Obligor directly or
indirectly acquires a Subsidiary or any going business or all or
substantially all the assets of another person and which meets each
of the following criteria:
<PAGE>
(a) the aggregate consideration to be paid by such Corporate
Obligor in connection with such transaction or transactions
together with all other consideration paid by all Corporate
Obligors in connection with any other Permitted Acquisition,
and by GL Canada and any Borrower (as defined in the Loan
Agreement) in connection with any transaction or series of
transactions by which GL Canada or such Borrower, as the case
may be, directly or indirectly has acquired a Subsidiary or
any going business or all or substantially all the assets of
another person during the term of this Agreement, does not
exceed $5,000,000 (or its equivalent in other currencies);
(b) no Event of Default exists or has occurred and is continuing
immediately prior to and after giving effect to such
transaction or transactions; and
(c) Total Excess Availability is not less than Ten Million Dollars
($10,000,000) (or its equivalent in other currencies) after
giving effect to such transaction or transactions.
Notwithstanding anything to the contrary set forth herein, Burdale
shall have no obligation to include any Receivable acquired pursuant
to a Permitted Acquisition as an Eligible Receivable.
"PROPERTY" means the Corporate Obligors' freehold, leasehold and
rented premises and land from time to time, wherever situated and in
any jurisdiction.
"PURCHASE COMMISSION" is defined in Clause 7.2.
"PURCHASE DATE" in relation to a Purchased Receivable means the date
of delivery of a Purchase Request by the Company with respect to such
Purchased Receivable.
"PURCHASE PRICE" means the purchase price to be paid by Burdale for
Purchased Receivables being:
(a) 85% of the face value of each Eligible Receivable; and
(b) 65% of Eligible Unbilled Receivables,
to be purchased under the Receivables Finance Facility less maximum
discounts, credits and allowances of any nature which may be taken by
or granted to any Account Debtor or other person in connection with
such Eligible Receivable or Eligible Unbilled Receivable as the case
may be.
"PURCHASE RATE" means the aggregate of LIBOR and the Margin.
"PURCHASE REQUEST" means a Request for a Utilisation of the
Receivables Finance Facility in substantially the form set out in
Schedule 2 Part I.
"PURCHASED RECEIVABLE" means a Receivable purchased or agreed to be
purchased by Burdale from the Company in accordance with the terms of
this Agreement.
<PAGE>
"RECEIVABLE" means, at any time, the aggregate present and future
obligations of any debtor of the Company for the payment of money to
the Company at such time together with all connected rights, claims,
deposits and payments.
"RECEIVABLES FINANCE FACILITY" is defined in Clause 3.1.
"RECEIVABLES INFORMATION" means the information regarding Receivables
provided to Burdale pursuant to Clause 8.
"RECEIVER" is defined in the Debenture.
"RELATED COMPANIES" means:
(a) GLC; and
(b) GL Bermuda,
(each a "RELATED COMPANY").
"REQUEST" means a request substantially in the form set out in the
relevant Part of Schedule 2 for a Utilisation of the Facility.
"SECURITY DOCUMENTS" means the Debenture, the GLC Guarantee and any
other guarantee or security documents executed in favour of Burdale
from time to time in relation to the obligations or indebtedness of
the Company.
"SENIOR NOTES" is defined in the Loan Agreement.
"STERLING" and "(L)" means the lawful currency for the time being
of the United Kingdom.
"STERLING RECEIVABLES" means all Receivables denominated in Sterling
(each a "STERLING RECEIVABLE").
"SUBSIDIARY" has the meaning given to that term by Section 736 of the
Companies Act 1985 and includes a "Subsidiary Undertaking" as defined
in Section 258 of the Companies Act 1985 (inserted by Section 21 of
the Companies Act 1989).
"TAXES" includes all present and future income and other taxes,
levies, assessments, deductions, charges and withholdings of whatever
nature together with interest, additions to tax, penalties and fines
in relation to such items and "TAX" and "TAXATION" will be construed
accordingly.
"TOTAL EXCESS AVAILABILITY" means at any time, the aggregate of the
UK Excess Availability, the US Excess Availability and the Canadian
Excess Availability at such time.
<PAGE>
"UK DAILY EXCESS AVAILABILITY" means from time to time the amount at
such time by which A exceeds B where:
A =
(1) 85% of the face value of the Eligible
Receivables and 65% of the face value of the
Eligible Unbilled Receivables less maximum
discounts, credits and allowances of any nature
which may be taken by or granted to any Account
Debtor or any other person in connection with
such Eligible Receivables or Eligible Unbilled
Receivables as the case may be; LESS
(2) the amount of Availability Reserves established
by Burdale; and
B = The aggregate amount of:
(3) Outstanding Purchase Price; and
(4) all L/C Exposures.
"UK EXCESS AVAILABILITY" means from time to time the amount at such
time by which A exceeds B where:
A =
(1) 85% of the face value of the Eligible
Receivables and 65% of the face value of the
Eligible Unbilled Receivables less maximum
discounts, credits and allowances of any nature
which may be taken by or granted to any Account
Debtor or any other person in connection with
such Eligible Receivables or Eligible Unbilled
Receivables as the case may be; LESS
(2) the amount of Availability Reserves established
by Burdale; and
(3) the sum of (i) the amount of all then
outstanding and unpaid Obligations, (ii) the
aggregate amount of all trade payables of the
Company which are more than sixty (60) days past
due as of the last day of the immediately
preceding calendar month and (iii) the aggregate
amount of the Company's past due lease and notes
payable; and
B = The aggregate amount of:
(1) Outstanding Purchase Price; and
(2) all L/C Exposures.
"US BORROWERS" is defined in the Loan Agreement.
<PAGE>
"US EXCESS AVAILABILITY" is defined in the Loan Agreement.
"US FACILITY" means the credit facility in the maximum amount of
$50,000,000 (which may be adjusted in accordance with the terms of
the Loan Agreement and the Canadian Loan Agreement) provided by
Congress to the US Borrowers pursuant to the Loan Agreement.
"UTILISATION" means a utilisation of a Facility under this Agreement
(with the delivery of a Purchase Request and the payment of Purchase
Price by Burdale pursuant to a Cash Request constituting separate
Utilisations of the Receivables Finance Facility).
"UTILISATION DATE" in relation to a Utilisation means the date on
which such Utilisation is made (being in relation to any Utilisation
of the Receivables Finance Facility, both the Purchase Date and the
date on which any payment of Purchase Price is made to the Company
pursuant to a Cash Request).
"VAT" means Value Added Tax imposed in the United Kingdom and any
equivalent tax applicable in any European jurisdiction.
1.2 CONSTRUCTION
(a) In this Agreement, unless the contrary intention appears, a
reference to:
(i) an "AFFILIATE" of any person includes any Subsidiary,
group member, shareholder, director or employee of
such person;
(ii) "ASSETS" includes properties, revenues and rights of
every description, both present and future;
(iii) an "AUTHORISATION" or a "CONSENT" includes an
approval, authorisation, consent, exemption, filing,
licence, registration and resolution, in each case
given or made in writing;
(iv) financial statements or accounts includes the notes
to such statements or accounts;
(v) a "MONTH" means a calendar month starting on any day;
(vi) a "REGULATION" includes any directive, guideline,
regulation, request or rule (whether or not having
the force of law) of any governmental agency, body,
department or other regulatory or self-regulatory
authority;
(vii) an enactment (be it express or implied) includes
references to any amendment, re-enactment, and/or
legislation subordinate to that enactment and/or any
permission of whatever kind given under that
enactment;
<PAGE>
(viii) a Finance Document or other document is a reference
to that Finance Document or other document as
amended, novated, supplemented or replaced (in whole
or in part);
(ix) a "PERSON" includes any individual, company,
corporation, partnership, firm, joint venture,
association, organisation, trust, state or state
agency (in each case whether or not having separate
legal personality);
(x) any party or person includes any person deriving
title from it and any successor, transferee and
assignee;
(xi) a time of day is a reference to London time; and
(xii) Clauses and Schedules are to the clauses of and
schedules to this Agreement.
(b) Unless the contrary intention appears, a term used in any
other Finance Document or in any notice relating to any
Finance Document has the same meaning in that Finance Document
or notice as in this Agreement.
(c) The headings in this Agreement do not affect its
interpretation.
(d) Save where the context requires otherwise, words in the
singular shall import the plural and vice-versa.
2. CONDITIONS PRECEDENT
2.1 DOCUMENTARY CONDITIONS
The obligations of Burdale to the Company under this Agreement are
subject to the condition precedent that Burdale shall have received
all of the documents and evidence specified in Schedule 1 in a form
and substance satisfactory to it.
2.2 FURTHER CONDITIONS
The obligations of Burdale in respect of any Utilisation are subject
to the further conditions precedent that both on the date of the
relevant Request and the proposed Utilisation Date:
(a) the representations and warranties set out in Clauses 8 and 13
to be repeated on such dates are true and correct in all
material respects; and
(b) no Default has occurred and remains outstanding or would
result from the making of such Utilisation.
<PAGE>
3. THE FACILITY
3.1 AVAILABLE FACILITY
Subject to the terms of this Agreement and in reliance on the
representations and warranties set out in Clauses 8 and 13, Burdale
agrees to make available to the Company a Receivables Finance
Facility pursuant to which Burdale will from time to time during the
Availability Period (i) purchase Receivables from the Company and
(ii) issue, or procure the issue of, L/Cs for the account of the
Company (the "RECEIVABLES FINANCE FACILITY").
3.2 PURPOSE
The Company will use the Facility only for its general operating,
working capital and other proper corporate purposes and always in a
manner which is not inconsistent with the Finance Documents. Without
affecting the obligations of the Company in any way, Burdale is not
obliged to monitor or verify the application of the Facility.
4. RESTRICTIONS ON UTILISATIONS
4.1 LETTERS OF CREDIT
No Request may be delivered for an L/C to be issued pursuant to the
Receivables Finance Facility unless and until the form of L/C has
been approved by Burdale, the relevant issuer and the proposed
beneficiary of such L/C.
4.2 OVERALL LIMIT
The aggregate amount of:
(a) Outstanding Purchase Price; and
(b) all L/C Exposures.
shall not at any time exceed the Facility Limit.
4.3 SPECIFIC LIMITS
(a) UNBILLED LIMIT: The Outstanding Purchase Price in relation to
Eligible Unbilled Receivables shall not at any time exceed
L1,500,000.
(b) L/C UTILISATIONS: The aggregate amount of all L/C Exposures
shall not at any time exceed the L/C Limit.
(c) AVAILABILITY: Subject to paragraph (d) below, the aggregate
amount of:
(i) Outstanding Purchase Price; and
<PAGE>
(ii) all L/C Exposures,
shall not at any time exceed the sum of:
(1) 85% of the face value of the Eligible
Receivables and 65% of Eligible Unbilled
Receivables less maximum discounts, credits
and allowances of any nature which may be
taken by or granted to any Account Debtor or
any other person in connection with the
Eligible Receivables or Eligible Unbilled
Receivables as the case may be; LESS
(2) the amount of Availability Reserves
established by Burdale,
at such time.
(d) In the event that Section 2.1(b)(i)(C) of the Loan Agreement
restricts the aggregate amount of the Loans, Letter of Credit
Accommodations and other Obligations (each as defined in the
Loan Agreement) outstanding at any time under the Loan
Agreement then the aggregate amount of:
(i) Outstanding Purchase Price; and
(ii) all L/C Exposures,
shall be restricted to such amount which Burdale deems
necessary to ensure compliance with Section 2.1(b)(i)(C) of
the Loan Agreement.
4.4 PROHIBITION
No Utilisation may be made by the Company which would cause the
provisions of this Clause 4 to be breached.
4.5 BURDALE'S RIGHTS NOT AFFECTED
In the event that the aggregate amount of Outstanding Purchase Price
and L/C Exposures exceeds the amounts available under the relevant
Availability Limit(s) or the Facility Limit, as applicable, such
event shall not limit, waive or otherwise affect any rights or
Burdale in that circumstance or on any future occasions.
4.6 COMPANY'S LOAN ACCOUNT(S)
Burdale will maintain one or more loan accounts, receivable accounts
and foreign exchange accounts on its books in which will be recorded
(a) all Utilisations of the Receivables Finance Facility and other
liabilities of the Company pursuant to the Finance Documents and
details of the Collateral, (b) all payments made by or on behalf of
the Company and (c) all other appropriate debits and credits as
provided in this Agreement, including, without limitation, fees,
charges, costs, expenses and interest. All
<PAGE>
entries in such account(s) shall be made in accordance with Burdale's
customary practices as in effect from time to time.
4.7 STATEMENTS
Burdale will render to the Company each month a statement setting
forth the balance in the Company's loan account, receivables accounts
and foreign exchange accounts maintained by Burdale for the Company
pursuant to the provisions of this Agreement, including principal,
commission, interest, fees, costs and expenses. Each such statement
may be subject to subsequent adjustment by Burdale but shall, in the
absence of manifest error or omission, be considered correct and
deemed accepted by the Company and will be conclusively binding upon
the Company as an account stated except to the extent that Burdale
receives a written notice from the Company of any specific exception
of the Company within 30 days after the date such statement has been
mailed by Burdale. Until such times as Burdale has rendered to the
Company a written statement as provided above, the balance in the
Company's loan accounts, invoice discount accounts and foreign
exchange accounts will be prima facie evidence of the amounts due and
owing to Burdale by the Company.
5. UTILISATION OF FACILITY
5.1 AVAILABILITY OF RECEIVABLES FINANCE FACILITY
(a) Subject to the terms of this Agreement, the Company shall
offer to sell its Receivables to Burdale by delivering to
Burdale from time to time duly completed Purchase Requests
(together with all deeds and documents referred to in such
Purchase Request), delivery of which shall oblige the Company
to sell the Receivables stated in such Purchase Request upon
the terms and subject to the conditions of this Agreement.
(b) A Purchase Request will not be regarded as having been duly
completed unless it is in substantially the form set out in
Schedule 2 Part I.
(c) As soon as reasonably practicable following delivery of a
Purchase Request, Burdale shall determine the Purchase Price
for the Receivables specified in such Purchase Request and
will, upon being requested by the Company, advise the Company
of such determination.
5.2 UTILISATION OF RECEIVABLES FINANCE FACILITY
(a) Subject to the terms of this Agreement, the Company may from
time to time request that Burdale pay sums to the Company of
up to the amount of any unpaid Purchase Price by delivering a
duly completed Cash Request to Burdale not later than 11.00
a.m. on the proposed Utilisation Date for such payment.
(b) A Cash Request will not be regarded as having been duly
completed unless it is in substantially the form set out in
Schedule 2 Part II and, in particular, specifies:
<PAGE>
(i) the proposed Utilisation Date, being a Business Day
falling during the Availability Period;
(ii) the amount of the sum to be paid by Burdale which
must be less than or equal to the aggregate of unpaid
Purchase Price; and
(iii) if not already notified to Burdale, the details of
the Other Account into which the payment is to be
made on the Utilisation Date.
(c) Payments made by Burdale pursuant to a Cash Request shall be
deemed to be payments of any unpaid Purchase Price to the full
extent of such unpaid Purchase Price.
(d) Burdale's obligation to pay the Purchase Price of any
Receivable (or any unpaid portion of it as the case may be)
shall be terminated on the earlier of the Actual Day of
Payment and the Maturity Date of such Receivable.
5.3 L/C UTILISATIONS
(a) Subject to the terms of this Agreement, the Company may
request the issue of an L/C by delivering a duly completed L/C
Request to Burdale not later than 11.00 a.m. at least one
Business Day before the proposed Utilisation Date for that
L/C.
(b) An L/C Request will not be regarded as having been duly
completed unless it is substantially in the form attached in
Schedule 2 Part III and, in particular, specifies:
(i) the proposed Utilisation Date, being a Business Day
falling during the Availability Period;
(ii) the amount of the L/C required, the L/C Exposure of
which must be equal to or less than the
undrawn/unutilised amount of the Receivables Finance
Facility and within the relevant Availability Limits
as at the proposed Utilisation Date;
(iii) if not already notified to Burdale, the details of
the beneficiary, payee or addressee of such L/C.
5.4 GENERAL PROVISIONS REGARDING L/Cs
(a) Nothing in this Agreement shall be deemed or construed to
grant the Company any right or authority to pledge the credit
of Burdale in any manner. Burdale shall have no liability of
any kind with respect to any L/C provided by an issuer other
than Burdale unless Burdale has duly executed and delivered to
such issuer the application or a guarantee or indemnification
in writing with respect to such L/C. The Company shall be
bound by an interpretation made in good faith by Burdale, or
any other issuer or correspondent under or in connection with
any L/C or any documents, drafts or acceptances in relation to
any L/C, notwithstanding that such
<PAGE>
interpretation may be inconsistent with any instructions of
the Company. Burdale shall have the sole and exclusive right
and authority to, and the Company shall not:
(i) at any time an Event of Default exists or has
occurred and is continuing:
(1) approve or resolve any questions of
non-compliance of documents;
(2) give any instructions as to acceptance or
rejection of any documents or goods; or
(3) execute any and all applications for
steamship or airway guarantees, indemnities
or delivery orders and at all times;
(ii) at any time:
(1) grant any extensions of the maturity of,
time of payment for, or time of presentation
of, any drafts, acceptances, or documents;
and
(2) agree to any amendments, renewals,
extensions, modifications, changes or
cancellations of any of the terms or
conditions of any of the applications, L/Cs,
or documents, drafts or acceptances in
relation to any L/C or any letters of credit
included in the Collateral. Burdale may take
such actions either in its own name or in
the Company's name.
(b) Any rights, remedies, duties or obligations granted
or undertaken by the Company to any issuer or
correspondent in any application for any L/C, or any
other agreement in favour of any issuer or
correspondence relating to any L/C, shall be deemed
to have been granted or undertaken by the Company to
Burdale. Any duties or obligations undertaken by
Burdale to any issuer or correspondence in any
application for any L/C, or any other agreement by
Burdale in favour of any issuer or correspondence
relating to any L/C, shall be deemed to have been
undertaken by the Company to Burdale and to apply in
all respects to the Company.
(c) None of Burdale, any L/C issuer (or any of their
respective correspondents) or any advising,
negotiating or paying bank with respect to any L/C
shall be responsible in any way for:
(i) the performance by any beneficiary under any
L/C of that beneficiary's obligations to the
Company; or
(ii) the form, sufficiency, correctness,
genuineness, authority of any person signing
or the legal effect of any documents called
for under any L/C if such documents appear
on their face to be in order.
5.5 DEEMED PAYMENT
<PAGE>
All payments made by Burdale in accordance with the terms of any L/C
or any guarantee or indemnity given by Burdale to the issuer of any
L/C (as the case may be) shall be deemed to be a payment of Purchase
Price to the Company in an amount equal to such payment, drawn down
on the date of such payment and subject to the provisions of this
Agreement with respect to Outstanding Purchase Price (including,
without limitation, as to commission and repayment).
6. REPAYMENT AND PREPAYMENT
6.1 RECEIVABLES FINANCE FACILITY
(a) If in relation to a Purchased Receivable Burdale determines on
the Maturity Date in respect of such Purchased Receivable that
it has not received payment in accordance with Clause 9.1 of
the full amount of such Purchased Receivable, the Company
shall, on demand by Burdale pay to Burdale an amount equal to
the Outstanding Purchase Price of such Purchased Receivable
for which payment has not been received PROVIDED THAT this
provision shall not restrict (nor oblige) Burdale in any way
in or from pursuing and obtaining payment in respect of such
Purchased Receivable from the Account Debtors or otherwise
(which payment shall be made into the Blocked Accounts) and
the Company undertakes that it will do all such reasonable
acts or things necessary or desirable to help Burdale in
pursuing and obtaining such payment.
(b) Burdale shall be entitled to deduct from payments made by
Account Debtors and/or the Company into the Blocked Accounts
in respect of Purchased Receivables the then Outstanding
Purchase Price in respect of such Purchased Receivables and
the balance remaining after such deduction shall be applied in
accordance with Clause 6.2.
6.2 OTHER UTILISATIONS
Subject as provided below all amounts standing to the credit of the
Blocked Accounts from time to time following the deductions referred
to in Clause 6.1(b) shall be applied as follows:
(a) FIRST in payment of any fees, costs and expenses due from the
Company to Burdale under the Finance Documents;
(b) SECOND in payment of all Purchase Commission (or in making
provision for Purchase Commission which will fall due for
payment on the last Business Day of the current calendar
month);
(c) THIRD in or towards satisfaction of any other payment
obligation of the Company under the Finance Documents; and
(d) FOURTH to the Company by way of payment into such Other
Account as the Company may specify to Burdale in writing from
time to time.
<PAGE>
Notwithstanding the above, at all times following the occurrence of
an Event of Default and whilst the same is continuing, amounts
standing to the credit of the Blocked Accounts shall be applied to
such of the liabilities of the Company under the Finance Documents
and in such order as Burdale may in its absolute discretion
determine.
6.3 REUTILISATION
Subject to the terms of this Agreement, all amounts of Outstanding
Purchase Price recovered and paid to Burdale, may, subject to the
terms of this Agreement, be reutilised as Utilisations of the
Receivables Finance Facility.
6.4 PREPAYMENT
If at any time the outstanding Utilisations or any part of them cause
any Availability Limit to be exceeded then the Company will
immediately pay into the Payment Account, as cash collateral in
respect of Outstanding Purchase Price and/or any contingent
obligation of Burdale in relation to any L/C or other Utilisation, to
the extent required to ensure compliance with that Availability Limit
and, until such time as that Availability Limit is no longer
breached, no further Utilisations may be requested (including, for
the avoidance of doubt, pursuant to a Cash Request) or will, at
Burdale's option, be made or issued.
6.5 REDUCTION OF FACILITY LIMIT
At the request of the Company by giving not less than ten Business
Day's prior written notice to Burdale, the Facility Limit may from
time to time be reduced provided that on or before the effective date
for such reduction the Company shall pay to Burdale:
(a) such amount as may be necessary as cash collateral for
Outstanding Purchase Price and/or Burdale's contingent
obligations under any issued L/C to ensure that the Company
remains in compliance with the Availability Limits; and
(b) a fee calculated by applying to the amount of the reduction
the applicable percentage set out in column (2) below:
<TABLE>
<CAPTION>
(1) (2)
DATE OF REDUCTION APPLICABLE PERCENTAGE
<S> <C>
On or before the first anniversary of today's 2%
date
After the first but on or before the second 1%
anniversary of today's date
After the second but on or before the third 0.5%
anniversary of today's date
</TABLE>
Any exercise by Burdale of its rights under Clause 15.2(b) and/or
15.3 and/or the operation of Clause 12.1 shall be deemed for the
purposes of paragraph (b) above to be
<PAGE>
a reduction in the Facility Limit in an amount equal to the amount of
the Facility so cancelled.
6.6 FINAL REPAYMENT
The Company will, on the Final Repayment Date, pay to Burdale in full
all outstanding and unpaid liabilities under the Finance Documents
(whether by way of principal, interest, commission, fees, costs,
expenses or otherwise) and shall pay to Burdale such amount as is
necessary to provide full cash collateral for Outstanding Purchase
Price and any contingent obligations which Burdale may have in
respect of any L/C or other outstanding Utilisation. Such payment
shall be denominated in Sterling and will be made by wire or other
automatic transfer to the Payment Account. If the amounts so paid are
received in the Payment Account later than 1.00 p.m. on the Final
Repayment Date then the Company will pay interest on such amounts to
Burdale at the Default Rate until payment has been made in full.
7. INTEREST AND COMMISSION
7.1 DEFAULT INTEREST
(a) Upon the occurrence of an Event of Default and whilst the same
is continuing unremedied or unwaived for 5 Business Days after
notification by Burdale to the Company, all amounts
outstanding under this Agreement shall bear interest (both
before and after judgment) at the Default Rate.
(b) Interest at the Default Rate will be compounded at the end of
each period designated by Burdale and will be determined by
Burdale on the first Business Day of each such period.
7.2 PURCHASE COMMISSION
The Company shall pay to Burdale commission in respect of each
Purchased Receivable at a rate equivalent to the Purchase Rate
applied to the Outstanding Purchase Price for such Receivable from
the date on which Burdale paid such Purchase Price to the Company
down to the Actual Date of Payment (the "PURCHASE COMMISSION").
Burdale shall calculate the Purchase Commission on a daily basis and
it shall be paid by the Company monthly in arrears on the first
Business Day of each month.
8. RECEIVABLES, STOCK AND EQUIPMENT
8.1 REPORTING REGARDING RECEIVABLES
The Company will provide Burdale with the following documents with
all amounts expressed in Sterling and otherwise in a form
satisfactory to Burdale:
(a) on a daily basis with a schedule of Receivables, collections
received and credits issued and on a monthly basis with a
stock report substantially in the form set out
<PAGE>
in Schedule 3 Part II together with such further information
regarding Receivables as Burdale may reasonably request;
(b) as soon as practicable and in any event within 15 days of the
end of each month or more frequently as Burdale may reasonably
request:
(i) ageings of creditors and Receivables with details of
all dated invoices; and
(ii) an analysis of preferential creditors in
substantially the form set out in Schedule 3 Part
III;
all in a format to be agreed with Burdale (acting reasonably).
(c) promptly from time to time as Burdale may reasonably request:
(i) copies of shipping and delivery documents relating to
stock and Equipment;
(ii) copies of the ageings of all Receivables paid to the
Company, on a monthly basis by invoice date;
(iii) full details of all Account Debtors (including their
addresses) together with copies of customer
statements and credit notes, remittance advices,
collection schedules and reports and copies of
deposit slips and all monthly bank statements of the
Company and its Subsidiaries or statements for such
other period as Burdale may require;
(iv) such other reports regarding the Collateral as
Burdale may reasonably request from time to time;
(d) on a daily basis, details of any Receivables which have become
or are purported to be, by the relevant Account Debtor or
otherwise, subject to any prohibitions or restriction on
charge or assignment; and
(e) immediately upon becoming aware of the same, details of any
creditor of the Company whose ordinary terms of business
include title retention provisions which are not already
specified in Schedule 3 Part I.
8.2 REPORTING REGARDING ACCOUNT DEBTORS
(A) NOTIFICATION: The Company will notify Burdale promptly of:
(i) any material delay in the Company's performance of
any of its obligations to any Account Debtor or the
assertion of any claims, offsets, defences or
counterclaims by any Account Debtor, or any material
disputes with Account Debtors, or any settlement,
adjustment or compromise of any such matter;
<PAGE>
(ii) all material adverse information known to the Company
relating to the financial condition of any Account
Debtor; and
(iii) any event or circumstance which, to the Company's
knowledge, would cause Burdale to consider any then
existing Receivables as no longer constituting
Eligible Receivables or Eligible Unbilled Receivables
as the case may be.
(B) DISPUTES AND SETTLEMENTS WITH ACCOUNT DEBTORS: No credit,
discount, allowance or extension or agreement for any of the
foregoing will be granted to any Account Debtor without
Burdale's consent, except in the ordinary course of the
Company's business in accordance with proper practices and
policies operated by the Company prior to the date of this
Agreement. At any time while an Event of Default is
outstanding, Burdale will, at its option, have the exclusive
right to settle, adjust or compromise any claim, offset,
counterclaim or dispute with any Account Debtor and to grant
any credits, discounts or allowances in relation to such
matters.
8.3 REPRESENTATIONS AND UNDERTAKINGS AS TO RECEIVABLES
With respect to each Receivable, the Company represents and warrants
to Burdale that and undertakes to ensure that at all times:
(a) the amounts shown on any invoice delivered to Burdale and in
any Receivables Information delivered to Burdale are true and
complete;
(b) no payments have been or will be made on such Receivable
except payments collected by the Company and immediately
transmitted or delivered to Burdale or elsewhere pursuant to
the terms of this Agreement;
(c) no credit, discount, allowance or extension or agreement for
any of the foregoing will be granted to any Account Debtor
except as reported to and agreed by Burdale except for
credits, discounts, allowances or extensions made or given in
the ordinary course of the Company's business in accordance
with its proper practices and policies operated prior to
today's date as disclosed to Burdale in writing;
(d) to the best of the Company's knowledge, there are no set-offs,
deductions, defences, counterclaims or disputes existing or
asserted with respect to such Receivable except as reported to
and agreed by Burdale;
(e) none of the transactions giving rise to any Receivable breach
any applicable law or regulation and all documentation
relating to such Receivable is legally enforceable in
accordance with its terms;
(f) each Receivable is genuine, is and will be in all respects
what it purports to be, and is not the subject of a court
judgment;
<PAGE>
(g) each Receivable represents undisputed, bona fide
transaction(s) completed in accordance with the terms and
provisions contained in any documents delivered to Burdale
with respect to such Receivable;
(h) the amounts shown on the relevant Receivables Information, the
Company's books and records and all invoices and statements
which may be delivered to Burdale with respect thereto are
actually and absolutely owing to the Company and are not in
any way contingent;
(i) to the best of the Company's knowledge, there are no facts,
events or occurrences which in any way impair the validity or
enforceability of any such Receivable or tend to reduce the
amount payable in respect of such Receivable as shown on the
relevant Receivables Information, the Company's books and
records and all invoices and statements delivered to Burdale
with respect to such Receivable;
(j) to the best of the Company's knowledge, all Account Debtors
have the capacity to contract and are solvent;
(k) the services furnished and/or goods sold giving rise to each
Receivable are not subject to any Encumbrance (except for an
Encumbrance which is permitted by Clause 14(g)); and
(l) to the best of the Company's knowledge, there are no
proceedings or actions which are threatened or pending against
any Account Debtor which might reasonably be expected to
result in a material adverse change in such Account Debtor's
financial condition.
8.4 VERIFICATION
Burdale will have the right from time to time, in the name of any
nominee, to verify the validity, amount or any other matter relating
to any Receivable or other Collateral, by mail, telephone, facsimile
or otherwise.
8.5 RIGHTS AFTER AN EVENT OF DEFAULT
(A) DEALING WITH COLLATERAL AND RECEIVABLES: Burdale may, at any
time that a Default has occurred and is continuing and without
prejudice to any of its rights under Clause 15.2 or otherwise
under this Agreement or any other Finance Document:
(i) extend the time of payment of, compromise, settle or
adjust for cash, credit, return of merchandise or
otherwise, and upon any terms or conditions, any and
all Receivables or other obligations included in the
Collateral and thereby discharge or release any
Account Debtor or any other party or parties in any
way liable for payment of any Receivable without
affecting any of the Receivables, demand or enforce
payment of any Receivables, but without any duty to
do so, and Burdale will not be liable for its failure
to
<PAGE>
enforce the payment of any Receivable nor for the
negligence of its agents or attorneys with respect to
any Receivable; and
(ii) take whatever other action Burdale may deem necessary
for the protection of its interests in the
Collateral.
(B) NOTICE TO DEBTORS: At any time that a Default is outstanding,
Burdale or its nominees may, at Burdale's discretion do any of
the following:
(i) having given prior notification to the Company,
notify any or all Account Debtors that the
Receivables have been assigned to Burdale and that
payments in respect of Receivables are to be
redirected to such account as is specified by
Burdale;
(ii) request the Company to give the notification referred
to in Clause 8.5(b)(i) above and/or to ensure that
all invoices and statements in respect of Receivables
issued to the Account Debtors state the information
referred to in Clause 8.5(b)(i); and
(iii) direct any or all relevant Account Debtors to make
all payments in respect of Receivables direct to
Burdale at such account as Burdale may specify.
8.6 BURDALE'S RIGHT TO CURE
Burdale may, at its option:
(a) after giving five days notice to the Company, cure any default
by the Company under any agreement with an Account Debtor in
respect of a Receivable (other than bona fide disputes in the
ordinary course of the Company's business where no Event of
Default has occurred and is continuing) or under any other
agreement with a third party as may be required by Burdale in
good faith to facilitate the collection of the Receivables or
to enable Burdale to have access to any of the Collateral or
any Equipment;
(b) after giving five days notice to the Company, pay or make a
bond in respect of or appeal any judgment entered into against
the Company which, upon execution, attachment or the exercise
of any similar remedy in respect of such judgment, would
result in an Encumbrance being imposed on the Collateral or
would impair Burdale's ability to obtain possession of,
realise or collect any of the Collateral;
(c) discharge taxes, Encumbrances or other encumbrances at any
time levied on or existing with respect to the Collateral; and
(d) pay any amount, incur any expense or perform any act including
without limitation the payment to any creditors in respect of
plant and/or machinery, which, in Burdale's judgment, is
necessary or appropriate to reserve, protect, insure or
maintain the Collateral and the rights of Burdale with respect
to it.
<PAGE>
Burdale may charge any monies so expended or costs so incurred by it
to the Company's account, such amounts to be repayable by the Company
on demand. Burdale will be under no obligation to effect any such
cure or payment or incur any such cost and will not, by doing so, be
deemed to have assumed any obligation or liability of the Company.
Any payment made or other action taken by Burdale under this Clause
will be without prejudice to any right it may have to assert an Event
of Default under this Agreement and to proceed accordingly.
8.7 ACCESS TO PROPERTY
From time to time as requested by Burdale on one Business Day's
notice (for the purpose of carrying out an audit in accordance with
Clause 14(j) and in the case of emergency as determined by Burdale)
(but subject to Clause 16.1(g) regarding daily charge rates), at the
cost and expense of the Company:
(a) Burdale or its nominees will have complete access to all of
the Company's Property during normal business hours and having
given prior notice to the Company, or at any time and without
notice to the Company if an Event of Default is outstanding,
for the purposes of inspecting, verifying and auditing the
Collateral and all of the Company's books and records;
(b) the Company will promptly furnish to Burdale or its nominees
such copies of or extracts from such books and records as may
be reasonably requested from the Company; and
(c) Burdale or its nominees may have access to, during normal
business hours, and use, such of the Company's personnel,
equipment, supplies and Property as may be reasonably
necessary for the purpose of inspecting, verifying and
auditing the Collateral and all of the Company's books and
records and if an Event of Default has occurred and is
continuing for the collection of the Receivables and the
realisation of the other Collateral.
8.8 BURDALE'S DISCLAIMER
Burdale will not be responsible for the safekeeping of, any loss or
damage to, any diminution in value of or any act or default of any
carrier, warehouseman, bailee or other person in relation to the
stock, finished goods, Equipment or Receivables.
9. COLLECTION OF RECEIVABLES
9.1 FLOW OF FUNDS
Subject to Clause 9.2, the Company undertakes that during the period
commencing on the date of this Agreement and ending when all its
liabilities under the Finance Documents have been discharged in full
and Burdale is under no further obligation under any of the Finance
Documents:
<PAGE>
(a) the Company will collect as agent and trustee for Burdale all
Receivables and immediately pay (or procure that payment is
made) all amounts due:
(i) in respect of each Sterling Receivable, into the
Blocked Accounts; and
(ii) in respect of each other Receivable, into an Other
Account,
provided however that until payment into the relevant Charged
Account it will hold all money so received upon trust for
Burdale and will not commingle in any Charged Account any
monies which are not Receivables or which are not payable to
Burdale;
(b) without prejudice to the Company's obligations under
Clause14(l) and Clause15.1(b), in the event that any Account
Debtor makes a payment in respect of Receivables into another
Charged Account not in accordance with paragraph (a) above,
the Company will ensure that the amounts representing such
payment are promptly transferred into the relevant Charged
Account and will immediately direct the relevant Account
Debtor to make all future payments into such relevant Charged
Account;
(c) all the transfers and collections referred to in paragraphs
(a) and (b) above shall be carried out daily prior to the
occurrence of any Default and thereafter at such intervals as
Burdale may, at its discretion, specify to the Company; and
(d) in the event that during any three month period the average of
amounts due in respect of Other Receivables (converted into
Sterling at the Exchange Rate if necessary) is equal or
greater than 10% of all amounts due in respect of Receivables
(converted into Sterling at the Exchange Rate if necessary)
during such period, the Company will promptly at Burdale's
request:
(i) provide Burdale with security over further bank
accounts (in relation to receipts in the relevant
currency) in London (the "NEW ACCOUNTS") on
substantially the same terms as the security provided
by the Company over the Blocked Accounts in the
Debenture; and
(ii) immediately direct all relevant Account Debtors to
pay all amounts due in respect of the Other
Receivables into the relevant New Account.
9.2 FAILURE OF DEBENTURE
In the event that the Debenture in respect of any Account Bank is
not, at any time, effective or is not in full force and effect, the
Company will (unless otherwise directed by Burdale and without
prejudice to Burdale's rights and remedies under the Finance
Documents), for so long as the Debenture is ineffective or not in
full force and effect and ending on the date when all the liabilities
of the Company under the Finance Documents have been repaid or
discharged in full and Burdale is under no further obligation under
any of the Finance Documents, collect as agent and trustee for
Burdale all Receivables which would otherwise have been payable into
the Blocked Accounts and immediately
<PAGE>
pay (or procure the payment of) all amounts due in respect of those
Receivables into the Payment Account.
9.3 REIMBURSEMENT
The Company agrees to reimburse Burdale on demand for any liability
of Burdale to any Account Bank or any other bank or person involved
in the transfer of funds to or from the Blocked Accounts arising out
of Burdale's payments to or indemnification of that bank or person,
and this obligation to reimburse shall survive the termination or
non-renewal of this Agreement.
9.4 EXCESS AMOUNTS
Any amounts received by Burdale from or for the account of the
Company in excess of the amounts then due and payable by the Company
will be dealt with in accordance with the terms of Clause 6 and the
Debenture.
9.5 TIME OF APPLICATION
For the purposes of calculating any Purchase Commission, payments or
other funds received by Burdale will be applied (conditional upon
final collection) in satisfaction or reduction of the Company's
liabilities under the Finance Documents one (1) Business Day
following the date of receipt of funds by Burdale in the Payment
Account. For the purposes of calculating the Facility Limit such
payments will be applied (conditional upon final collection) in
satisfaction or reduction of the Company's liabilities under the
Finance Documents on the Business Day of receipt by Burdale in the
Payment Account, provided that such payments are received within
sufficient time (in accordance with Burdale's usual and customary
practices as in effect from time to time) to credit the Company's
loan and receivable and foreign exchange account on such day, and if
not, then on the next Business Day.
10. PAYMENTS AND TAXES
10.1 PAYMENTS
(a) Subject to Clause 9, all payments to be made by the Company to
Burdale under the Finance Documents will be made on or before
their due date in Sterling in cleared funds for value not
later than 11.00 a.m. on the day in question to the Payment
Account.
(b) If any payment under the Finance Documents would otherwise be
due on a day which is not a Business Day, it will be due on
the next succeeding Business Day or, if that Business Day
falls in the following month, on the preceding Business Day.
(c) If after receipt by Burdale of any payment of, or proceeds of
Collateral applied to the payment of, any of the Company's
payment liabilities, Burdale is required to surrender or
return such payment or proceeds to any person for any reason,
then
<PAGE>
the payment liabilities intended to be satisfied by such
payment or proceeds shall be treated as not having been
received by Burdale. The Company shall be liable to pay to
Burdale the amount of any payments or proceeds so surrendered
or returned. This Clause 10.1(c) shall remain effective
notwithstanding any action which may be taken by Burdale in
reliance upon such payment or proceeds and will survive the
termination or non-renewal of this Agreement.
10.2 TAXES
(a) Subject to Clause 10.2(c), all Taxes (other than Tax on the
overall net income of Burdale) due in respect of this
Agreement or any amounts paid or payable under the Finance
Documents will be paid by the Company when due and in any
event prior to the date on which penalties attach to such
Taxes, and the Company will indemnify Burdale for any cost,
loss or liability incurred by Burdale in respect of all such
Taxes.
(b) Subject to Clause 10.2(c), all payments by the Company of any
nature under the Finance Documents will be made without regard
to any equities between the Company and Burdale and in full
and free and clear of, and without any deduction or
withholding (whether in respect of set-off, restriction,
counterclaim, Taxes or otherwise whatsoever) unless the
deduction or withholding is required by law, in which event
the Company will:
(i) ensure that the deduction or withholding does not
exceed the minimum amount legally required;
(ii) pay to Burdale (or procure the payment to Burdale of)
an additional amount being the amount required to
procure that the aggregate net amount received by
Burdale will equal the full amount which would have
been received by it had no deduction or withholding
been made (including, for the avoidance of doubt, any
withholding or deduction on any additional amount
paid);
(iii) pay to the relevant taxation or other authorities
within the period for payment permitted by the
applicable law such amount as is required to be paid
in consequence of the deduction or withholding
(including, but without prejudice to the generality
of the foregoing, the full amount of any deduction or
withholding from any additional amount paid pursuant
to paragraph (ii) above) and supply Burdale with
written evidence that it has made the appropriate
payment; and
(iv) indemnify Burdale against any costs, loss or
liability incurred by it by reason of any failure of
the Company to make any deduction or withholding or
by reason of any increased payment not being made on
the due date for payment.
(c) If the Company has made an additional payment under Clause
10.2(b) in respect of any Tax and such Tax was not properly or
legally been charged or levied then Burdale will, upon the
Company's request and at the Company's expense, provide
<PAGE>
such documents to the Company as it may reasonably request to
enable it to contest the imposition of such Tax provided
always that the provision of such documents and the contesting
of the relevant Tax liability shall have no reasonable
likelihood of resulting in any liability for Burdale.
(d) If the Company has made an additional payment under Clause
10.2(b) in respect of any Tax and Burdale subsequently
receives a credit, relief or allowance in respect of that
payment then Burdale will, once a year during the term of this
Agreement or immediately after the term of this Agreement (if
applicable), apply the total amount of such credits, reliefs
or allowances to the reduction of the Company's liabilities
under the Finance Document in such manner as it thinks fit
(provided that (A) such payment to the Company does not result
in any additional liability for Burdale, (B) the Company has
made all the additional payments due from it under Clause
10.2(b) and (C) the Company has supplied evidence of such
payments to Burdale) and thereafter account to the Company for
any balance. Burdale will use reasonable endeavours to obtain
a tax credit as referred to above provided that it will not be
required to seek any such credit if that will result in
additional costs or legal or regulatory burdens on it which
are deemed by Burdale, in good faith, to be material. Burdale
shall have an absolute discretion as to whether to claim any
tax credit and if it does claim, the extent, order and manner
in which it does so. Burdale shall not be obliged to disclose
any information regarding its tax affairs or computations to
any other party.
11. INCREASED COSTS
11.1 INCREASED COSTS
If the result of any change in or introduction of or change in the
interpretation or application of any law, regulation, treaty or
official directive or official request (whether or not having the
force of law but, if not, being of a type with which Burdale is
accustomed to comply) or compliance by Burdale with the same
including, without limitation, those relating to Taxation (but not
Tax on overall net income of Burdale), or any other form of banking
or monetary controls is to:
(a) increase the cost to Burdale of entering into this Agreement
or making or maintaining the Facility or maintaining any of
its commitments under the Finance Documents;
(b) increase the cost to Burdale of funding or having outstanding
any other amount paid out by it under the Finance Documents;
(c) reduce any amount payable to Burdale under the Finance
Documents or the effective return on its capital; or
(d) result in Burdale making any payment or foregoing any interest
or other return on or calculated by reference to any amount
received or receivable by it from the Company under the
Finance Documents,
<PAGE>
then and in each such case:
(i) Burdale will notify the Company in writing and
provide to the Company reasonable details of such
event promptly upon its becoming aware of the same;
and
(ii) upon demand from time to time by Burdale, the Company
will pay to Burdale such amount as is necessary to
compensate Burdale for such increased cost (or the
proportion of such increased cost as is, in the
reasonable opinion of Burdale, attributable to its
entering into this Agreement or making or maintaining
the Facility or maintaining any commitment under the
Finance Documents), reduction, payment or foregone
interest or other return.
11.2 CERTIFICATE CONCLUSIVE
The certificate of Burdale specifying the amount of compensation
payable under Clause 11.1 will, in the absence of manifest error, be
conclusive. Burdale will provide calculations in reasonable detail
showing the calculation of any such amount, provided that Burdale
will not be obliged to reveal any information which is confidential
to Burdale.
12. ILLEGALITY AND MONETARY UNION
12.1 ILLEGALITY
In the event that any change in or introduction of or change in the
interpretation or application of any law, regulation, treaty, or
official directive or official request (whether or not having the
force of law but, if not, being of a type with which Burdale is
accustomed to comply) makes it unlawful (or contrary to such
directive or request) in any jurisdiction applicable to Burdale for
Burdale to make available or maintain the Facility or to give effect
to its obligations under the Finance Documents, Burdale may give
seven Business Days written notice to that effect to the Company
whereupon the Facility will be cancelled and all the provisions of
this Agreement will apply as if the cancellations or terminations had
been a reduction of the Facility Limit to zero pursuant to Clause
6.5.
12.2 EFFECT OF MONETARY UNION
If the country of any national currency in which any amount is
expressed to be payable under this Agreement participates in Economic
and Monetary Union in accordance with article 109J of the treaty on
European Union, then:
(a) any amount expressed to be payable under this Agreement in
that national currency shall be made in that national currency
or in euro as Burdale may, by not less than three Business
Days' notice to the Company to that effect, require;
<PAGE>
(b) any amount so required to be paid in euro shall be converted
from that national currency at the rate stipulated pursuant to
Article 109L(4) of the Treaty on European Union and payment of
the amount in euro derived from such conversion shall
discharge the obligation of the relevant party to pay such
national currency amount in accordance with, and subject to,
the Regulation(s) made pursuant to Article 109L(4);
(c) after consultation with the Company, Burdale shall be entitled
to make such amendments to this Agreement as it may reasonably
determine to be necessary to take account of monetary union
and any consequent changes in market practices (whether as to
the settlement or rounding of obligations, the calculation of
interest or otherwise howsoever).
Any amendment so made to this Agreement by Burdale shall be promptly
notified to the Company and shall be binding on the Company.
13. GENERAL REPRESENTATIONS AND WARRANTIES
13.1 ACKNOWLEDGEMENT AND WARRANTIES
The Company represents and warrants to Burdale that:
(a) CORPORATE EXISTENCE, POWER AND AUTHORITY; SUBSIDIARIES: Each
Corporate Obligor and each Related Company is a corporation
duly organised and in good standing under the laws of its
state of incorporation and is duly qualified as a foreign
corporation and in good standing in all jurisdictions where
the nature and extent of the business transacted by it or the
ownership of assets makes such qualification necessary, except
for those jurisdictions in which the failure to so qualify
would not have a Material Adverse Effect. The execution,
delivery and performance of this Agreement, the other Finance
Documents and the transactions contemplated hereunder and
thereunder are all within each Corporate Obligor's and each
Related Company's corporate powers, have been duly authorised
and are not in contravention of law or the terms of such
person's constituent or other organisational documentation or
any indenture, agreement or undertaking to which such person
is a party or by which such person or its property are bound.
This Agreement and the other Finance Documents constitute
legal, valid and binding obligations of each Corporate Obligor
and each Related Company (as the case may be) enforceable in
accordance with their respective terms. The Company has no
Subsidiaries except the other Corporate Obligors.
(b) FINANCIAL STATEMENTS; NO MATERIAL ADVERSE CHANGE: All
financial statements relating to any Corporate Obligor which
have been or may hereafter be delivered by such Corporate
Obligor to Burdale have been or will have been prepared in
accordance with GAAP and fairly present the financial
condition and the results of operations of such Corporate
Obligor as at the dates and for the periods set forth therein.
Except as disclosed in any interim financial statements
furnished by any Corporate Obligor or on behalf of any
Corporate Obligor to Burdale prior to the date of this
Agreement, there has been no material adverse change in the
assets,
<PAGE>
liabilities, properties and condition, financial or otherwise,
of such Corporate Obligor, since the date of the most recent
audited financial statements furnished by such Corporate
Obligor or on behalf of such Corporate Obligor to Burdale
prior to the date of this Agreement.
(c) PRIORITY OF SECURITY; TITLE TO PROPERTIES: The Encumbrances
and security interests granted to Burdale under the Finance
Documents constitute valid and perfected first priority
mortgages and charges and security interests in and upon the
Collateral subject only to the permitted pursuant to Clause
14(g). Each Corporate Obligor and each Related Company has
good and marketable title to all of its properties and assets
subject to no mortgages, pledges, security interests,
encumbrances or charges of any kind, except (i) those granted
to Burdale (ii) Encumbrances granted by GL Bermuda in favour
of the Company and (iii) such others as are specifically
permitted under Clause 14(g).
(d) TAX RETURNS: The Company has filed, or caused to be filed, in
a timely manner all Tax returns, reports and declarations
which are required to be filed by it (without requests for
extension except as previously disclosed in writing to
Burdale). All information in such Tax returns, reports and
declarations is complete and accurate in all material
respects. The Company has paid or caused to be paid all Taxes
due and payable or claimed due and payable in any assessment
received by it, except Taxes the validity of which are being
contested in good faith by appropriate proceedings diligently
pursued and available to the Company and with respect to which
adequate reserves have been set aside on its books. Adequate
provision has been made for the payment of all accrued and
unpaid domestic, foreign and other Taxes whether or not yet
due and payable and whether or not disputed.
(e) LITIGATION: Except as set forth on the Information Certificate
of the Company, there is no present investigation by any
governmental agency pending, or to the best of the Company's
knowledge threatened, against or affecting the Company, its
assets or business and there is no action, suit, proceeding or
claim by any person pending, or to the best of the Company's
knowledge threatened, against the Company or its assets or
goodwill, or against or affecting any transactions
contemplated by this Agreement, which has a material
possibility (as reasonably determined by Burdale) of being
adversely determined against the Company, and if adversely
determined would result in any Material Adverse Effect.
(f) COMPLIANCE WITH OTHER AGREEMENTS AND APPLICABLE LAWS: No
Corporate Obligor is in default under, or in violation of any
of the terms of, any agreement, contract, instrument, lease or
other commitment to which it is a party or by which it or any
of its assets are bound and each Corporate Obligor is in
compliance with all applicable provisions of laws, rules,
regulations, licenses, permits, approvals and orders of any
English, foreign, or local governmental authority where such
default or noncompliance would result in a Material Adverse
Effect.
(g) BANK ACCOUNTS: All of the deposit accounts, investment
accounts or other accounts in the name of or used by the
Company maintained at any bank or other
<PAGE>
financial institution are set forth on Schedule 9 to the
Debenture, subject to the right of a Company to establish new
accounts in accordance with Clause 14(l) below.
(h) YEAR 2000 COMPLIANCE: Any reprogramming required to permit the
proper functioning, in and following the year 2000, of (i) the
computer systems of the Company and (ii) equipment containing
embedded microchips (including systems and equipment supplied
by others or with which the systems of the Company interface)
and the testing of all such systems and equipment, as so
reprogrammed, has been completed in all material respects. The
computer and management information systems of the Company are
and, with ordinary course upgrading and maintenance, will
continue for the term of this Agreement to be, sufficient to
permit the Company to conduct its business without a material
adverse effect on its assets, business or condition (financial
or other).
(i) ACCURACY AND COMPLETENESS OF INFORMATION: All information
furnished by or on behalf of any Corporate Obligor in writing
to Burdale in connection with this Agreement or any of the
other Finance Documents or any transaction contemplated hereby
or thereby, including, without limitation, all information on
the Information Certificate of such Corporate Obligor is true
and correct in all material respects on the date as of which
such information is dated or certified and does not omit any
material fact necessary in order to make such information not
misleading. No event or circumstance has occurred which has
had or could reasonably be expected to have a material adverse
affect on the business, assets or condition (financial or
otherwise) of any Corporate Obligor, which has not been fully
and accurately disclosed to Burdale in writing.
13.2 SURVIVAL OF WARRANTIES; CUMULATIVE
All representations and warranties contained in this Agreement or any
of the other Finance Documents shall survive the execution and
delivery of this Agreement and shall be deemed to have been made
again to Burdale on each date a Request is submitted and on each
Utilisation Date and shall be conclusively presumed to have been
relied on by Burdale regardless of any investigation made or
information possessed by Burdale. The representations and warranties
set forth herein shall be cumulative and in addition to any other
representations or warranties which the Company shall now or
hereafter give, or cause to be given, to Burdale pursuant to any
Finance Document.
14. GENERAL UNDERTAKINGS
The Company undertakes to Burdale that:
(a) MAINTENANCE OF EXISTENCE: The Company shall at all times
preserve, renew and keep in full force and effect its
corporate existence and rights and franchises with respect
thereto and maintain in full force and effect all permits,
licenses, trademarks, trade names, approvals, authorisations,
leases and contracts necessary to carry on the business as
presently or proposed to be conducted PROVIDED, however, that
the Company may (i) cause any other Corporate Obligor to
dissolve
<PAGE>
or otherwise surrender any of the foregoing and (ii) abandon
any permit, license, trademark, trade name, approval or
authorisation it no longer deems material to its business. The
Company shall give Burdale thirty (30) days' prior notice of
any proposed change of name or structure, which notice shall
set forth the proposed new name or structure and Company shall
deliver to Burdale a copy of the amendment to the applicable
constituent document of the Company providing for such change
appropriately certified as soon as it is available.
(b) COMPLIANCE WITH LAWS, REGULATIONS, ETC.: The Company shall, at
all times, comply in all material respects with all laws,
rules, regulations, directives, licenses, permits, consents,
authorisations, approvals and orders applicable to it and duly
observe all requirements of any national or local governmental
authority, and all statutes and any guidance, circular or
regulations issued thereunder, subordinate legislation, common
law, equity, rules, orders, permits and stipulations relating
to environmental pollution and employee health and safety,
where such non-compliance would result in a Material Adverse
Effect.
(c) PAYMENT OF TAXES AND CLAIMS: The Company shall duly pay and
discharge all Taxes, assessments, contributions and
governmental charges upon or against it or its properties or
assets, except for Taxes the validity of which are being
contested in good faith by appropriate proceedings diligently
pursued and available to the Company and with respect to which
adequate reserves have been set aside on its books. The
Company shall be liable for any Tax or penalties imposed on
Burdale as a result of the financing arrangements provided for
herein and the Company agrees to indemnify and hold Burdale
harmless with respect to the foregoing, and to repay to
Burdale on demand the amount thereof, and until paid by the
Company such amount shall be added and deemed part of the
Outstanding Purchase Amount. The foregoing indemnity shall
survive the payment of the Obligations and the termination or
non-renewal of this Agreement.
(d) INSURANCE: The Company shall, at all times, maintain with
financially sound and reputable insurers insurance with
respect to the Collateral against loss or damage and all other
insurance of the kinds and in the amounts customarily insured
against or carried by corporations of established reputation
engaged in the same or similar businesses and similarly
situated. The Company shall furnish certificates, policies or
endorsements to Burdale as Burdale shall require as proof of
such insurance, and, if the Company fails to do so, Burdale is
authorised, but not required, to obtain such insurance at the
expense of the Company. All policies shall provide for at
least thirty (30) days prior written notice to Burdale of any
cancellation. The Company shall cause Burdale to be named as a
loss payee and an additional insured (but without any
liability for any premiums) under such insurance policies and
the Company shall obtain non-contributory lender's loss
payable endorsements to all casualty insurance policies in
form and substance satisfactory to Burdale. At its option,
Burdale may apply any insurance proceeds received by Burdale
at any time to the cost of repairs or replacement of
Collateral and/or to payment of the Obligations, whether or
not then due, in any order and in such manner as Burdale may
determine or hold such proceeds as cash collateral for the
Obligations.
<PAGE>
(e) FINANCIAL STATEMENTS AND OTHER INFORMATION:
(i) The Company shall keep proper books and records in
which true and complete entries shall be made of all
dealings or transactions of or in relation to the
Collateral and the business of the Company and its
Subsidiaries in accordance with GAAP and the Company
shall furnish or cause to be furnished to Burdale:
(1) within thirty (30) days after the end of each
fiscal month, monthly unaudited consolidated and
consolidating financial statements of the Company and
its Subsidiaries (including in each case balance
sheets, statements of profit and loss, statements of
cash flow and statements of shareholders' funds), all
in reasonable detail, fairly presenting the financial
position and the results of the operations of the
Company and its Subsidiaries as of the end of and
through such month, (2) within sixty (60) days after
the end of each fiscal quarter, quarterly unaudited
consolidated and consolidating financial statements
of the Company and its Subsidiaries (including in
each case balance sheets, statements of profit and
loss, statements of cash flow and statements of
shareholders' funds, stock figures and valuations for
that quarter, a breakdown of the value and identity
of preferential creditors for that quarter and
details of all input and output VAT at the end of
each VAT quarter), all in reasonable detail, fairly
presenting the financial position and the results of
the operations of the Company and its Subsidiaries as
of the end of and through such fiscal quarter, and
(3) within one hundred twenty (120) days after the
end of each fiscal year, audited consolidated and
consolidating financial statements of the Company and
its Subsidiaries (including in each case balance
sheets, statements of profit and loss, statements of
cash flow and statements of shareholders' funds), and
the accompanying notes thereto, all in reasonable
detail, fairly presenting the financial position and
the results of the operations of the Company and its
Subsidiaries as of the end of and for such fiscal
year, together with the opinion of the Company's
auditors, which shall be a nationally recognised
independent accounting firm or, if not, another
independent accounting firm selected by the Company
and reasonably acceptable to Burdale, that such
financial statements have been prepared in accordance
with GAAP, and present a true and fair view of the
results of operations and financial condition of the
Company and its Subsidiaries as of the end of and for
the fiscal year then ended.
(ii) The Company shall promptly notify Burdale in writing
of the details of (i) any loss, damage,
investigation, action, suit, proceeding or claim
relating to the Collateral or any other property
which is security for the Obligations or which would
result in any material adverse change in any
Company's business, properties, assets, or condition,
financial or otherwise and (ii) the occurrence of any
Default.
(iii) The Company shall promptly after the sending or
filing thereof furnish or cause to be furnished to
Burdale copies of all financial reports which GLC
<PAGE>
sends to its stockholders generally and copies of all
reports and registration statements which any GLC or
any other Borrower (as defined in the Loan Agreement)
with the U.S. Securities and Exchange Commission, any
U.S. national securities exchange or the National
Association of Securities Dealers, Inc.
(iv) The Company shall furnish or cause to be furnished to
Burdale such budgets, forecasts, projections and
other information in respect of the Collateral and
the business of the Company, as Burdale may, from
time to time, reasonably request. Burdale is hereby
authorised to deliver a copy of any financial
statement or any other information relating to the
business of any Obligor and any Related Company to
any court or other government agency or to any
participant or assignee or prospective participant or
assignee. The Company hereby irrevocably authorises
and directs all accountants or auditors to deliver to
Burdale, at Company's expense, copies of the
financial statements of any Corporate Obligor or
Related Company and any reports or management letters
prepared by such accountants or auditors on behalf of
any Corporate Obligor or Related Company and to
disclose to Burdale such information as they may have
regarding the business of any Corporate Obligor or
Related Company. Any information provided to Burdale
pursuant to this Clause 14(e)(iv) shall be subject to
the provisions of Clause 24.2. Any documents,
schedules, invoices or other papers delivered to
Burdale may be destroyed or otherwise disposed of by
Burdale one (1) year after the same are delivered to
Burdale, except as otherwise designated by the
Company to Burdale in writing.
(f) SALE OF ASSETS, CONSOLIDATION, MERGER, DISSOLUTION, ETC.: The
Company shall not, directly or indirectly:
(i) merge, amalgamate or consolidate with any other
person or permit any other person to merge,
amalgamate or consolidate with it;
(ii) sell, assign, lease, transfer, abandon or otherwise
dispose of any stock or indebtedness to any other
person or any of its assets to any other person
(except for (1) sales of stock in the ordinary course
of business, (2) the disposition of worn-out or
obsolete Equipment or Equipment no longer used in the
business of the Company so long as (A) any proceeds
are paid into the Blocked Accounts and (B) such sales
do not involve Equipment having an aggregate fair
market value in excess of the Sterling equivalent of
One Million Dollars ($1,000,000) for all such
Equipment disposed of in any fiscal year of the
Company and (3) in connection with the sale of all or
substantially all the assets of the Company or a
Subsidiary of the Company or the sale of all the
share capital of the Company or a Subsidiary of the
Company, sales of such assets or share capital having
an aggregate fair market value not to exceed the
Sterling equivalent of Twenty Five Million Dollars
($25,000,000) less the fair market value of any
assets or share capital previously sold by the
Company or such Subsidiary in connection with the
sale of all or substantially all the assets of the
Company or such
<PAGE>
Subsidiary or the sale of all the share capital of
such Subsidiary during the term of this Agreement,
PROVIDED THAT (A) no Default exists or has occurred
and is continuing immediately prior to and after
giving effect to such sale and (B) the Company shall
pay to Burdale the greater of (1) fifty percent (50%)
of the amount by which the aggregate amount (net of
Taxes, assumed liabilities and transaction costs)
received by the Company from all such sales exceeds
the Sterling Equivalent of Five Million Dollars
($5,000,000) and one-hundred percent (100%) of the
amount by which the aggregate amount (net of Taxes,
assumed liabilities and transaction costs) received
by the Company from all such sales exceeds the
Sterling Equivalent of Ten Million Dollars
($10,000,000) or (2) the portion of the amount of
then Outstanding Purchase Price advanced against any
Receivables sold in connection with any such sales
(it being agreed that any such payments to Burdale
shall not reduce the Facility Limit unless made
pursuant to Clause 6.5 and shall not be included in
calculating the lending limits hereunder);
(iii) form any Subsidiaries, unless the aggregate amount of
all contributions made by the Company to such
Subsidiaries is less than the Sterling equivalent of
Three Million Dollars ($3,000,000) in the aggregate
during the term of this Agreement and PROVIDED THAT
(1) no Event of Default or Default, exists or has
occurred and is continuing immediately prior to and
after giving effect to the formation of each such
Subsidiary, (2) if any such Subsidiary is formed on
or prior to April 15, 2000, Total Excess Availability
exceeds Fifteen Million Dollars ($15,000,000)
immediately prior to and after giving effect to such
formation or if any such Subsidiary is formed after
April 15, 2000, Total Excess Availability exceeds Ten
Million Dollars ($10,000,000) immediately prior to
and after giving effect to such formation, (3) any
such Subsidiary formed engages in a line of business
compatible but not competitively adverse with the
Company's line of business and (4) the Company shall
not contribute to any such Subsidiary any Collateral
with a fair market value exceeding in the aggregate
more than Ten Thousand Dollars ($10,000) during the
term of this Agreement or any proprietary information
except that a license to use such proprietary
information on a non-exclusive basis shall not be
deemed to be a contribution of proprietary
information for purposes of this Clause 14(f)(iii);
(iv) acquire the share capital of any person in which such
person would become a Subsidiary of the Company
except for Permitted Acquisitions;
(v) wind up, liquidate or dissolve except following the
transfer of all or substantially all of its assets in
a transaction permitted by Clause 14(f)(iii)(3) and
14(f)(iii)(4) of this Clause 14(f); or
(vi) agree to do any of the foregoing.
(g) ENCUMBRANCES: No Corporate Obligor shall create, incur, assume
or suffer to exist any security interest, mortgage, pledge,
lien, charge or other Encumbrance
<PAGE>
of any nature whatsoever on any of its assets or properties,
including, without limitation, the Collateral, except:
(i) the Encumbrances and security interests of Burdale;
(ii) easements, licenses, covenants and other restrictions
affecting the use of real property which do not
interfere in any material respect with the use of
such real property or ordinary conduct of the
business of such Obligor as presently conducted
thereon or materially impair the value of the real
property which may be subject thereto;
(iii) purchase money security interests in Equipment
(including finance leases) not so long as such
security interests do not apply to any property of
such Obligor other than the Equipment so acquired,
and the indebtedness secured thereby does not exceed
the cost of the Equipment so acquired, as the case
may be; and
(iv) the security interests and Encumbrances granted by
the Company in favour of Barclays Bank PLC as at the
date of this Agreement or replacements therefor that
do not extend to any other property or increase the
amounts secured.
(h) INDEBTEDNESS: No Corporate Obligor shall incur, create,
assume, become or be liable in any manner with respect to, or
permit to exist, any obligation for borrowed money or
indebtedness, except:
(i) the Obligations;
(ii) trade obligations and normal accruals in the ordinary
course of business not yet due and payable, or with
respect to which such Corporate Obligor is contesting
in good faith the amount or validity thereof by
appropriate proceedings diligently pursued and
available to such Corporate Obligor, and with respect
to which adequate reserves have been set aside on its
books;
(iii) purchase money indebtedness (including finance
leases) to the extent not incurred or secured by
Encumbrances (including finance leases) in violation
of any other provision of this Agreement;
(iv) indebtedness set forth on the Information Certificate
of such Corporate Obligor, PROVIDED THAT, (1) such
Corporate Obligor may only make regularly scheduled
payments of principal and interest in respect of such
indebtedness in accordance with the terms of the
agreement or instrument evidencing or giving rise to
such indebtedness as in effect on the date hereof,
(2) such Corporate Obligor shall not, directly or
indirectly, (A) amend, modify, alter or change the
terms of such indebtedness or any agreement, document
or instrument related thereto as in effect on the
date hereof, or (B) except as otherwise permitted
under this Agreement, redeem, retire, defease,
purchase or otherwise acquire such indebtedness, or
set aside
<PAGE>
or otherwise deposit or invest any sums for such
purpose, and (3) such Corporate Obligor shall furnish
to Burdale all notices or demands in connection with
such indebtedness either received by such Corporate
Obligor or on its behalf, promptly after the receipt
thereof, or sent by such Corporate Obligor or on its
behalf, concurrently with the sending thereof, as the
case may be;
(v) indebtedness owing to a Borrower, GL Canada, GLC or
GIFL, PROVIDED THAT no Default exists or has occurred
and is continuing immediately prior to and after
giving effect to the incurrence, creation or
assumption of such indebtedness; and
(vi) other indebtedness together with other indebtedness
of all other Borrowers not otherwise permitted under
paragraphs (h)(i) to (h)(v) above at any one time not
exceeding the Sterling equivalent of Two Million
Dollars ($2,000,000) outstanding in the aggregate.
(i) LOANS, INVESTMENTS, GUARANTEES, ETC.: No Corporate Obligor
shall, directly or indirectly, make any loans or advance money
or property to any person, or invest in (by capital
contribution, dividend or otherwise) or purchase or repurchase
the stock or indebtedness or all or a substantial part of the
assets or property of any person, or guarantee, assume,
endorse, or otherwise become responsible for (directly or
indirectly) the indebtedness, performance, obligations or
dividends of any person or agree to do any of the foregoing,
except:
(i) the endorsement of instruments for collection or
deposit in the ordinary course of business;
(ii) investments in: (1) short-term direct obligations of
the United Kingdom and (2) negotiable certificates of
deposit issued by any bank satisfactory to Burdale,
payable to the order of the relevant Corporate
Obligor or to bearer and delivered to Burdale,
PROVIDED THAT as to any of the foregoing, unless
waived in writing by Burdale, the relevant Corporate
Obligor shall take such actions as are deemed
necessary by Burdale to perfect the security interest
of Burdale in such investments;
(iii) the guarantees set forth in the Information
Certificate of each Corporate Obligor;
(iv) Permitted Acquisitions and any transaction permitted
by Clause 14(a) and 14(f) ;
(v) loans or advances to, or investments in, or purchases
or repurchases of the shares, assets or indebtedness
of a Borrower or GL Canada or guarantees or the
assumption of letter of credit obligations for the
benefit of a Borrower or GL Canada; provided that,
(1) no Default exists or has occurred and is
continuing immediately prior to and after giving
effect to any such loan, advance, investment,
purchase, repurchase, guarantee or assumption of
letter
<PAGE>
of credit obligation and (2) such loans, advances,
investments, purchases or repurchases do not violate
the capitalisation requirements of the relevant
Corporate Obligor under applicable laws;
(vi) loans or advances to GIFL or GLC; provided that, (i)
no Default exists or has occurred and is continuing
immediately prior to and after giving effect to such
loans or advances, (ii) such loans or advances do not
violate the capitalisation requirements of the
relevant Corporate Obligor under applicable laws, and
(iii) all the proceeds of such loans or advances are
immediately loaned or advanced by GIFL or GLC, as the
case may be, to GL Canada or a Borrower;
(vii) loans or advances to the GLC (1) for the purpose of
paying interest due under the Senior Notes, (2) for
the purpose of paying management fees to the Sponsors
(as defined in the Loan Agreement) or any of their
affiliates in an aggregate amount not to exceed the
Sterling equivalent of Seven Hundred Thousand Dollars
($700,000) less amounts paid by any Borrower or GL
Canada for such purpose in any fiscal year of the
Company, or loans or advances to GLC for the purposes
set forth in Schedule 9.10 of the Loan Agreement in
an aggregate amount not to exceed the Sterling
equivalent of $23,000,000 less amounts paid by the
Borrowers or GL Canada for such purposes in any
fiscal year of the Company PROVIDED THAT, (1) no
Default exists or has occurred and is continuing
immediately prior to and after giving effect to such
loans, advances, guarantees or the assumption of
letter of credit obligations, (2) such loans,
advances, guarantees or the assumption of letter of
credit obligations do not violate the capitalisation
requirements of the relevant Corporate Obligor under
applicable laws;
(viii) loans or advances to, or guarantees or the assumption
of letter of credit obligations for the benefit of
GLC or a Subsidiary of GLC (other than a Borrower, GL
Canada) PROVIDED THAT (1) no Default exists or has
occurred and is not continuing immediately prior to
and after giving effect to such loans, advances,
guarantees, (2) such loans, advances, guarantees or
the assumption of letter of credit obligations do not
violate the capitalisation requirements of the
relevant Corporate Obligor under applicable laws, (3)
if such loans, advances, guarantees or assumption of
letter of credit obligations are made on or prior to
April 15, 2000, Total Excess Availability exceeds
Fifteen Million Dollars ($15,000,000) immediately
prior to and after giving effect to such loans,
advances, guarantees or the assumption of letter of
credit obligations or if such loans, advances,
guarantees or the assumption of letter of credit
obligations are made after April 15, 2000, Total
Excess Availability exceeds Ten Million Dollars
($10,000,000) immediately prior to and after giving
effect to such loans, advances, guarantees or the
assumption of letter of credit obligations and (iv)
such loans or advances are evidenced by a promissory
note or notes, the rights to which have been
collaterally pledged to Burdale; and
<PAGE>
(ix) other outstanding loans or advances by the Corporate
Obligors not to exceed in aggregate the Sterling
equivalent of One Million Dollars ($1,000,000) at any
time.
(j) DIVIDENDS AND REDEMPTIONS: The Company shall not, directly or
indirectly, declare or pay any dividends on account of any
shares of any class of share capital, as the case may be, of
the Company now or hereafter outstanding, or set aside or
otherwise deposit or invest any sums for such purpose, or
redeem, retire, defease, purchase or otherwise acquire any
shares of any class of share capital or, as the case may be,
(or set aside or otherwise deposit or invest any sums for such
purpose) for any consideration other than ordinary share
capital or apply or set apart any sum, or make any other
distribution (by reduction of capital or otherwise) in respect
of any such shares, as the case may be, or agree to do any of
the foregoing.
(k) TRANSACTIONS WITH AFFILIATES: No Corporate Obligor shall enter
into any transaction for the purchase, sale or exchange of
property or the rendering of any service to or by any
affiliate, except in the ordinary course of and pursuant to
the reasonable requirements of such Corporate Obligor's
business and upon fair and reasonable terms no less favourable
to such Corporate Obligor than such Corporate Obligor would
obtain in a comparable arm's length transaction with an
unaffiliated person. For this purpose, affiliate shall not
include any Borrower, any Corporate Obligor, GL Canada, GLC,
GL Bermuda or GIFL.
(l) ADDITIONAL BANK ACCOUNTS: No Corporate Obligor shall, directly
or indirectly, open, establish or maintain any deposit
account, investment account or any other account with any bank
or other financial institution, other than the Charged
Accounts as set forth in Schedule 9 to the Debenture, except:
(i) as to any new or additional Blocked Accounts and other
such new or additional accounts which contain any Collateral
or proceeds thereof, with the prior written consent of Burdale
and subject to such conditions thereto as Burdale may
establish or as required by this Agreement and (ii) as to any
accounts used by such Company to make payments of payroll,
Taxes or other obligations to third parties, after prior
written notice to Burdale.
(m) FURTHER ASSURANCES: At the request of Burdale at any time and
from time to time, the each Corporate Obligor shall, at its
expense, duly execute and deliver, or cause to be duly
executed and delivered, such further agreements, documents and
instruments, and do or cause to be done such further acts as
may be necessary or proper to evidence, perfect, maintain and
enforce the security interests and the priority thereof in the
Collateral and to otherwise effectuate the provisions or
purposes of this Agreement or any of the other Finance
Documents. Burdale may at any time and from time to time
request a certificate from an officer of any Corporate Obligor
representing on behalf of such Corporate Obligor that all
conditions precedent to the making of a Utilisation and
providing of any L/C contained herein are satisfied. In the
event of such request by Burdale, Burdale may, at its option,
cease to allow any further Utilisation or provide any further
<PAGE>
L/C's until Burdale has received such certificate and, in
addition, Burdale has determined that such conditions are
satisfied.
15. EVENTS OF DEFAULT
15.1 DEFAULT
Each of the events specified below constitutes an Event of Default:
(a) any Obligor or GLC fails to pay when due any of the
Obligations (other than interest or fees due hereunder);
(b) the Company fails to pay any interest or fees within three (3)
days after such interest or fees become due hereunder,
PROVIDED THAT such three (3) day period shall not apply in the
event that Company intentionally diverts payments on
Receivables or other proceeds of Collateral from the Blocked
Accounts;
(c) any Obligor or GLC fails to perform any of the terms,
covenants, conditions or provisions contained in this
Agreement or any of the other Finance Documents and such
failure shall continue for ten (10) Business Days, PROVIDED
THAT, such ten (10) Business Day period shall not apply in the
case of (1) any failure to perform a term, covenant, condition
or provision which results in the occurrence of an Event of
Default addressed in any other provision or paragraph of this
Clause 15.1, (2) any failure to perform any such term,
covenant, condition or provision that has been the subject of
two (2) previous failures within the prior twelve (12) month
period or (3) an intentional breach by any Obligor or GLC of
such term, covenant, condition or provision;
(d) any representation, warranty or statement of fact made by the
Company to Burdale in this Agreement, the other Finance
Documents or any other agreement, schedule, confirmatory
assignment or otherwise shall when made or deemed made be
false or misleading in any material respect;
(e) any Obligor or any Related Company revokes or terminates any
of the terms, covenants, conditions or provisions of any
guarantee, endorsement or other agreement of such party in
favour of Burdale;
(f) any judgment for the payment of money is rendered against any
Obligor in excess of the Sterling equivalent of Two Million
Five Hundred Thousand Dollars ($2,500,000) in any one case or
in excess of the Sterling equivalent of Five Million Dollars
($5,000,000) in the aggregate and shall remain undischarged or
unvacated for a period in excess of thirty (30) days or
execution shall at any time not be effectively stayed, or any
material judgment other than for the payment of money, or
injunction, attachment, sequestration, distress, garnishment
or execution is rendered against the Company or any of its
assets;
(g) any Obligor dissolves or suspends or discontinues doing
business;
<PAGE>
(h) Any liquidator, trustee in bankruptcy, judicial custodian,
compulsory manager, receiver, administrative receiver,
administrator or the like is appointed in respect of any
Obligor or any material part of its assets.
(i) The directors of any Corporate Obligor request the appointment
of a liquidator, trustee in bankruptcy, judicial custodian,
compulsory manager, receiver, administrative receiver,
administrator or the like.
(j) Any other steps are taken to enforce any Encumbrance over any
material part of the assets of any Obligor.
(k) Any Obligor is, or is deemed for the purposes of any law to
be, unable to pay its debts as they fall due or to be
insolvent, or admits inability to pay its debts as they fall
due.
(l) Any Obligor suspends making payments on all or any class of
its debts or announces an intention to do so, or a moratorium
is declared in respect of any of its indebtedness.
(m) Any Obligor, by reason of financial difficulties, begins
negotiations with all or any class of its creditors with a
view to the readjustment or rescheduling of any of its
indebtedness.
(n) Any step (including petition, proposal or convening a meeting)
is taken with a view to a composition, assignment or
arrangement with any creditors of any Obligor.
(o) A meeting of any Corporate Obligor or is convened for the
purpose of considering any resolution for (or to petition for)
its winding-up or for its administration or any such
resolution is passed.
(p) Any person presents a petition for the winding-up or for the
administration or for the bankruptcy of any Obligor unless
(other than in the case of a petition for administration) the
relevant Obligor can demonstrate to the satisfaction of
Burdale (acting reasonably) that the relevant petition is
frivolous, vexatious or an abuse of process of the court or
that it relates to a claim to which the relevant Obligor has a
good defence which it is diligently pursuing.
(q) An order for the winding-up or administration or bankruptcy of
any Obligor is made.
(r) Any other step (including petition, proposal or convening a
meeting) is taken with a view to administration,
custodianship, liquidation, winding-up, dissolution or
bankruptcy of any Obligor or any other insolvency or analogous
proceedings involving any such person unless, in the case of a
petition (other than in the case of a petition for
administration) the relevant Obligor can demonstrate to the
satisfaction of Burdale (acting reasonably) that the relevant
petition is frivolous,
<PAGE>
vexatious or an abuse of process of the court or that it
relates to a claim to which the relevant Obligor has a good
defence which it is diligently pursuing.
(s) There occurs, in relation to any Obligor, any event anywhere
which, in the opinion of Burdale, appears to correspond with
any of those mentioned in paragraphs (h) to (r) (inclusive)
above.
(t) any default by any Obligor or any Related Company under any
agreement, document or instrument relating to any indebtedness
for borrowed money owing to any person other than Burdale, or
any capitalised lease obligations, contingent indebtedness in
connection with any guarantee, letter of credit, indemnity or
similar type of instrument in favour of any person other than
Burdale, in any case in an amount in excess of the Sterling
equivalent of Two Million Five Hundred Thousand Dollars
($2,500,000), which default continues for more than the
applicable cure period, if any, with respect thereto;
(u) GLC ceases to hold, directly or indirectly, all of the share
capital of the Company;
(v) the indictment or threatened indictment of any Corporate
Obligor or any Related Company under any criminal statute, or
the commencement or threatened commencement of criminal or
civil proceedings against any Corporate Obligor or any Related
Company, pursuant to which statute or proceedings the
penalties or remedies sought or available include forfeiture
of any of the material property of such Corporate Obligor or
Related Company (as the case may be);
(w) any default by any Borrower or GL Canada or an "Event of
Default" shall occur under the terms of the Loan Agreement or
the Canadian Loan Agreement or any other agreement, document,
note and/or instrument executed or delivered in connection
therewith;
(x) there shall be a material adverse change in the business,
assets or condition (financial or otherwise) of any Corporate
Obligor or any Related Company after the date hereof; or
(y) there shall be an Event of Default under any of the other
Finance Documents and/or Financing Agreements.
15.2 ACTION ON DEFAULT
Upon the occurrence of any Event of Default and whilst the same is
continuing, and without prejudice to any of Burdale's rights under
this Agreement, Burdale may, by notice to the Company:
(a) declare that an Event of Default has occurred; and/or
(b) declare that the Facility shall be cancelled, whereupon the
Facility shall be so cancelled and all fees (including without
limitation pursuant to Clause 6.5(b))
<PAGE>
payable in relation to the Facility shall become immediately
due and payable; and/or
(c) declare that the Company shall forthwith pay or procure the
payment to Burdale of a sufficient sum to cover the amount of
all Outstanding Purchase Price and/or any contingent
obligations of Burdale under any outstanding L/Cs, whereupon
the same shall become immediately due and payable and, once
paid, shall be held by Burdale in an interest bearing account
for application against such Outstanding Purchase Price or
contingent obligation (as the case may be), provided that any
sum remaining after settling such payments shall be applied
first in settlement of any other amounts then due and payable
to Burdale under the Finance Documents and, subject to that,
any balance shall be promptly repaid to the Company or other
person entitled to the balance.
15.3 APPOINTMENT OF INSOLVENCY OFFICER
If any liquidator, trustee in bankruptcy, judicial custodian,
compulsory manager, receiver, administrative receiver, administrator
or any other insolvency officer (or its equivalent in any
jurisdiction) is appointed in respect of any Obligor or any Related
Company or any part of its assets (whether on the application or with
the consent of Burdale or otherwise) then Burdale may (with or
without it first having exercised any of its other rights under the
Finance Documents), by notice to the Company, declare that the fee
specified in Clause 6.5(b) be immediately due and payable or, at
Burdale's option, payable upon demand as if the Facility Limit at
such time had been reduced to zero, whereupon such fee shall become
immediately due and payable or payable on demand (as the case may
be).
16. COSTS, EXPENSES AND FEES
16.1 COSTS AND EXPENSES
The Company shall pay to Burdale on demand all reasonable costs,
expenses, filing fees and Taxes paid or payable in connection with
the preparation, negotiation, execution, delivery, recording,
administration, collection, liquidation, enforcement and defence of
the Obligations, Burdale's rights in the Collateral, this Agreement,
the other Financing Agreements and all other documents related hereto
or thereto, including any amendments, supplements or consents which
may hereafter be contemplated (whether or not executed) or entered
into in respect hereof and thereof, including, but not limited to:
(a) all costs and expenses of filing, registering or recording
(including filing Taxes and fees, documentary Taxes,
intangibles Taxes and mortgage recording Taxes and
presentation fees, if applicable);
(b) all costs and expenses and fees for title insurance and other
insurance premiums, environmental audits, surveys,
assessments, engineering reports and inspections, appraisal
fees and search fees;
<PAGE>
(c) costs and expenses of remitting loan proceeds, collecting
cheques and other items of payment, and establishing and
maintaining the Charged Accounts, together with Burdale's
customary charges and fees with respect thereto;
(d) charges, fees or expenses charged by any bank or issuer in
connection with the L/C's;
(e) costs and expenses of preserving and protecting the
Collateral;
(f) costs and expenses paid or incurred in connection with
obtaining payment of the Obligations, enforcing the security
interests and Encumbrances of Burdale, selling or otherwise
realising the Collateral, and otherwise enforcing the
provisions of this Agreement and the other Finance Documents
or defending any claims made or threatened against Burdale
arising out of the transactions contemplated hereby and
thereby (including, without limitation, preparations for and
consultations concerning any such matters);
(g) all out-of-pocket expenses and costs incurred by Burdale's
examiners in the conduct of their periodic field examinations
of the Collateral and any Company's operations, plus a charge
at the rate of the Daily Rate, per day for Burdale's examiners
in the field and office; and
(h) the fees and disbursements (plus VAT) of legal advisors to
Burdale in connection with any of the foregoing.
16.2 FEES
(A) FACILITY FEE: The Company will pay to Burdale today a facility
fee equal to 0.75% on the amount of the Facility Limit.
(B) COMMITMENT FEE: The Company will pay to Burdale a commitment
fee computed at the rate of 0.375% per annum on the daily
undrawn/unutilised balance of the Facility Limit. Accrued
Commitment Fee shall be payable monthly in arrears from
today's date and also on the date on which the Facility is
terminated. Commitment fee shall accrue from day to day and be
calculated on the basis of a 365 day year and for the actual
number of days elapsed.
(C) MONITORING FEE: The Company will pay to Burdale a monitoring
fee of $2,000 monthly in advance with the first payment to be
made on today's date.
(D) L/C FEE: The Company will pay to Burdale a fee equal to 1.25%
per annum on the face amount of each L/C issued at the
Company's request in respect of the period between the date of
issue of the L/C and the End Date of such L/C. The fee shall
be calculated on the basis of a 365 day year and shall be paid
monthly in arrears and on the End Date of such L/C.
17. INDEMNITIES
17.1 CURRENCY INDEMNITY
<PAGE>
If any amount payable by the Company under or in connection with any
of the Finance Documents is received by Burdale in a currency other
than that agreed to be payable under the Finance Documents, whether
as a result of any judgment or order or other enforcement, the
liquidation or bankruptcy of the Company or otherwise howsoever and
the amount produced by converting the currency so received into the
agreed currency is less than the relevant amount of the agreed
currency, then the Company will indemnify Burdale for the deficiency
and any loss sustained as a result. Such conversion will be made at
the Exchange Rate, on such date and in such market as is determined
by Burdale as being most favourable for such conversion. The Company
will in addition pay the costs of such conversion.
17.2 OTHER INDEMNITIES
The Company will indemnify Burdale on demand against any loss or
liability which Burdale incurs as a result of:
(a) the occurrence of any Event of Default;
(b) any payment of principal or other amount being received from
any source otherwise than on its due date under this
Agreement;
(c) any Utilisation not being effected after the Company has
delivered a Request in respect of such Utilisation other than
as a result of Burdale's negligence or default;
(d) any prepayment or provision of cash collateral by the Company
not being made in accordance with the terms of this Agreement.
In each case the Company's liability includes (without limitation)
any loss of margin or anticipated profits or other loss or expense on
account of funds borrowed, contracted for or utilised to fund any
amount payable under any Finance Document and on account of any
security given by Burdale in relation to those funds and in relation
to any amount repaid or prepaid in relation to any Finance Document.
17.3 STAMP DUTY
Immediately upon demand, the Company shall pay and indemnify Burdale
against any liability it incurs for any stamp, registration or
similar tax or duty (and any applicable penalties) which is or
becomes payable because of the entry into, performance or enforcement
of any Finance Document.
17.4 GENERAL PROVISIONS REGARDING INDEMNITIES
Each of the indemnities contained in Clauses 17.1 to 17.3 inclusive
(the "INDEMNITIES") will remain in full force and effect until such
time as all amounts to which such Indemnities are expressed to relate
have been paid in full. The Indemnities are additional to and not
instead of any security or other guarantee or indemnity at any time
existing in favour of any person.
<PAGE>
18. EVIDENCE OF INDEBTEDNESS
In any proceedings relating to any Finance Document a statement as to
any amount due to Burdale under this Agreement which is certified as
being correct by an officer of Burdale will in the absence of
manifest error be conclusive evidence that such amount is in fact due
and payable.
19. NOTICES
19.1 DELIVERY AND RECEIPT
All notices pertaining to this Agreement shall be given in writing or
facsimile and shall be deemed to be given as follows:
(a) if in writing, when delivered; and
(b) if by facsimile, when received,
save that any notice delivered or received on a non-working day or
after business hours shall be deemed to be given on the next working
day at the place of delivery or receipt.
19.2 ADDRESSES
(a) The Company's address and facsimile number for notices are:
Royal Court
81 Tweedy Road
Bromley
Kent
BR1 1TW
Facsimile no: 0208 626 6855
For the attention of: David Lund
or such as the Company may notify to Burdale by not less than
10 days' notice.
(b) Burdale's address and facsimile number for notices are:
53 Queen Anne Street
London W1M 0HP
Facsimile no: 0171 935 5445
For the attention of: Company Secretary
or such as Burdale may notify to the Company by not less than
10 days' notice.
20. WAIVER, REMEDIES CUMULATIVE
<PAGE>
The rights of Burdale under the Finance Documents:
(a) may be exercised as often as necessary;
(b) are cumulative and not exclusive of its rights under the
general law; and
(c) may be waived only in writing and specifically.
Delay in exercising or non-exercise of any right shall not be deemed
to be a waiver of that right.
21. INVALIDITY
If any of the provisions of any Finance Document become invalid,
illegal or unenforceable in any respect under any law, the validity,
legality and enforceability of the remaining provisions will not in
any way be affected or impaired.
22. ASSIGNMENT AND PARTICIPATION
22.1 ASSIGNMENT
The Finance Documents shall be binding upon and inure to the benefit
of and be enforceable by Burdale, the Company and their respective
successors and assigns, except that the Company may not assign its
rights under any Finance Document. Burdale may, after notice to the
Company, assign its rights and delegate any or all of its obligations
under the Finance Documents.
22.2 TRANSFER BY BURDALE
Burdale may at any time assign, transfer or offer participations in
all or a proportion of all its rights and obligations under the
Finance Documents to any other bank or financial institution.
23. GOVERNING LAW AND JURISDICTION
23.1 GOVERNING LAW
This Agreement will be governed by and construed in accordance with
English law.
23.2 JURISDICTION
For the benefit of Burdale, the Company irrevocably agrees that the
courts of England will have non-exclusive jurisdiction to settle any
disputes which may arise out of or in connection with this Agreement
and that accordingly any suit, action or proceeding arising out of or
in connection with this Agreement may be brought in such courts.
23.3 PROCESS AGENT
<PAGE>
For the benefit of Burdale, the Company irrevocably accepts its
appointment as GLC's agent for the service of process pursuant to the
GLC Guarantee.
24. DISCLOSURE OF INFORMATION
24.1 PUBLICITY
Burdale may advertise or publicise in such publications and to such
persons as Burdale may in its discretion think fit such particulars
of this transaction as Burdale may in its absolute discretion deem
appropriate.
24.2 CONFIDENTIAL INFORMATION
Burdale agrees to hold, in accordance with its customary procedures
for handling confidential information and safe and sound lending
practices, any confidential information that it may receive from any
Obligor or Related Company pursuant to this Agreement in confidence,
except for disclosure:
(a) to legal counsel, accountants, auditors and other professional
advisors to any Obligor or any Related Company or Burdale;
(b) to regulatory officials having jurisdiction over Burdale;
(c) as required by applicable law or legal process (provided that
in the event Burdale is so required to disclose any such
confidential information, that Burdale shall endeavour
promptly to notify the Obligor or Related Company (as the case
may be), so that the Obligor or Related Company (as the case
may be) may seek a protective order or other appropriate
remedy) or in connection with any legal proceeding to which
Burdale or such Obligor or Related Company (as the case may
be) are adverse parties;
(d) to another financial institution or its counsel in connection
with an assignment or disposition or proposed assignment or
disposition to that financial institution of all or part of
Burdale's interests hereunder or a participation interest
herein, provided that such disclosure is made subject to an
appropriate confidentiality agreement on terms substantially
similar to this Clause; and
(e) to prospective purchasers of any Collateral (other than
competitors of any Obligor or Related Company or their
Subsidiaries unless all Obligations are 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 Clause.
For purposes of the foregoing, "confidential information" shall mean
all information respecting any Obligor or any Related Company, other
than (a) information previously filed with any governmental agency
and available to the public, (b) information previously published in
any public medium from a source other than, directly or
<PAGE>
indirectly, Burdale, and (c) information previously disclosed by GLC
or any of its Subsidiaries to any person not associated with GLC
without a written confidentiality agreement.
Nothing in this Clause 24 shall be construed to create or give rise
to any fiduciary duty on the part of Burdale to any Obligor or any
Related Company or their Subsidiaries.
25. COUNTERPARTS
This Agreement may be executed in any number of counterparts and all
of such counterparts taken together will be deemed to constitute one
and the same instrument.
This Agreement has been entered into on the date stated at the beginning of the
Agreement.
<PAGE>
SCHEDULE 1
CONDITIONS PRECEDENT
AUTHORISATIONS
1. A certified copy of the memorandum and articles of association and
certificate of incorporation and all certificates of incorporation on
change of name of each Corporate Obligor and copies of the equivalent
US constitutional documentation for GLC.
2. A certified copy of a resolution of the board of directors of each
Corporate Obligor and GLC approving each of the Finance Documents to
which it is a party and the transactions contemplated by each of such
Finance Documents and authorising a specified person or persons to
execute each of the Finance Documents (as a deed where necessary) and
to give all notices, requests, instructions, certificates and other
documents to Burdale in connection with such Finance Documents.
3. A director's certificate executed by a director of each Corporate
Obligor and a secretary's certificate executed by the secretary of
GLC:
(a) certifying that all corporate action of such Corporate Obligor
or Related Company (as the case may be) required to enable it
to enter into, execute and perform each of the Finance
Documents to which it is a party and to authorise the
transactions contemplated therein has been taken;
(b) setting out the specimen signatures of those persons referred
to in 2 above; and
(c) in relation to the Corporate Obligors only, certifying that
utilisation of the Facility Limit would not cause any
borrowing limit binding on it to be exceeded.
4. A certified copy of all other resolutions, authorisations, approvals,
consents and licences (corporate, official or otherwise (including
exchange control consents)) necessary or desirable for the entry into
and performance of the Finance Documents to which each Obligor and
each Related Company is party and/or for the enforceability and
validity of such Finance Documents.
5. A telephone and facsimile indemnity in the form set out in Schedule
4.
DOCUMENTS AND SECURITY
6. The Finance Documents duly executed by each party to them (excluding
Burdale).
7. A certified copy of each notice required to be despatched pursuant to
the Debenture.
8. Acknowledgements from all recipients of the notices referred to in 7
above as required by the Debenture or agreement by the relevant
recipient of the form of acknowledgement to be given by it.
<PAGE>
9. Evidence of the level and extent of the insurance of the Company and
that Burdale is stated as loss payee and joint insured and that the
insurance policies comply with the requirements of the Finance
Documents.
10. Details of the amounts standing to the credit of each Charged Account
as at, or immediately prior to, today's date.
WAIVERS AND CONSENTS
11. All waivers, releases, terminations and other documents as Burdale
may request to evidence and effect the termination of any existing
financing arrangements of each Corporate Obligor with any other
lender and the termination and release by any such other lenders of
any and all of its/their interests pursuant to their financing
arrangements with each Corporate Obligor.
12. All consents, waivers, acknowledgements and other agreements from
third persons which Burdale may deem necessary or desirable in order
to permit, protect and perfect the security interests granted by the
Corporate Obligors to Burdale including, without limitation, waivers
by lessors, owners or mortgagees, processors, warehousers or
consignees of any security interests, or other claims which such
persons may have in relation to the Collateral.
AVAILABILITY LIMIT INFORMATION
13. A schedule of Receivables and all such other information as Burdale
requires pursuant to Clause 4 in order to determine the amount of
Eligible Receivables and Eligible Unbilled Receivables as at today's
date.
14. Such information as Burdale may require in order to determine each
Availability Limit for the purposes of Clause 4.
15. Burdale having determined the Availability Limits pursuant to Clause
4 to apply as from today's date.
MISCELLANEOUS
16. Evidence that the total amount available for Utilisation immediately
following the proposed Initial Utilisations shall not be less than
L1,000,000.
17. Any fees due and costs to be met pursuant to Clause 16 having been
paid.
18. Satisfactory results to all final company searches in relation to
each Corporate Obligor.
19. Opinion from Counsel in California.
20. A certified copy of any Inter-company loan agreement.
<PAGE>
21. Copies of such other deeds, documents, consents or authorities as it
requires having regard to the transactions contemplated by this
Agreement and the reasonable requirements of Burdale to protect its
interests as a lender.
<PAGE>
SCHEDULE 2
PART I - FORM OF PURCHASE REQUEST
Date: *
To: Burdale Financial Limited
53 Queen Anne Street
LONDON W1M 0HP
Attention: Company Secretary
Dear Sirs,
FACILITY AGREEMENT DATED * (THE "FACILITY AGREEMENT")
We refer to the Facility Agreement, terms defined in which have the same meaning
when used in this Purchase Request.
1. We wish to sell to Burdale on or before * or such later date as the
Company agrees with Burdale (the "PURCHASE DATE") the Receivables
numbered assignment * amounting to L* details of which are set out in
the attached Schedule, initialled on each page for the purposes of
identification.
2. We hold the invoice (if any) strictly to your order and agree to
supply it, or a copy (certified by an officer of the Company or
otherwise as Burdale may from time to time approve) together with
certified copies of relevant shipping documents in respect of such
Receivables, and a copy of our irrevocable instructions to the
Account Debtor to pay the full amount of the relevant Receivable
(without deduction, withholding or set off) at maturity to the
Blocked Accounts, forthwith upon your request.
3. We further confirm that the relevant Receivables offered are readily
identifiable from the books of the Company.
[TO BE INSERTED IN FIRST PURCHASE REQUEST ONLY]
4. [In addition to the offer made in paragraph 1 above, we hereby offer
to sell to you all future Receivables (during the continuance of the
Facility Agreement) subject to the terms of the Facility Agreement
(including in relation to the calculation of the Purchase Price).
This offer together with the offer made in paragraph 1 above shall be
regarded as a single composite offer which may be accepted or
rejected in its entirety but not in part only. Your acceptance of
this offer shall be demonstrated by the payment to us of any amount
of Purchase Price in relation to the Receivables described in
paragraph 1 above.]
We confirm that no Default has occurred and is continuing or would result from
Burdale purchasing the Receivables offered, no Availability Limit will be
breached as a result of Burdale
<PAGE>
purchasing the Receivables offered and all the representations and warranties in
Clauses 8 and 13 of the Facility Agreement which are to be made or repeated as
at the date of this Purchase Request are true and correct.
The terms of the Agreement shall apply to this Purchase Request.
Yours faithfully
for and on behalf of
[the Company]
SCHEDULE
INVOICE NO ACCOUNT DEBTOR INVOICE DATE
<PAGE>
PART II - FORM OF CASH REQUEST
Date: *
To: Burdale Financial Limited
53 Queen Anne Street
LONDON W1M 0HP
Attention: Company Secretary
Dear Sirs,
FACILITY AGREEMENT DATED * (THE "FACILITY AGREEMENT")
We refer to the Facility Agreement, terms defined in which have the same meaning
when used in this Cash Request.
Pursuant to the terms of Clause 5.2, we wish you to pay to us the sum of L* as
follows:
(a) Utilisation Date: *
(b) Payment Instructions: Please credit the following account:
Account Name: *
Bank: * Bank plc
Branch: * Branch
Account No: *
Sort Code: **-**-**
We confirm that no Default has occurred and remains outstanding or would result
from the requested Utilisation being made, no Availability Limit would be
breached by the making of the requested Utilisation and that all the
representations and warranties in Clauses 8 and 13 which are to be made or
repeated as at the date of this Cash Request are true and correct.
Yours faithfully
for and on behalf of
[the Company]
<PAGE>
PART III - FORM OF L/C REQUEST
Date: *
To: Burdale Financial Limited
53 Queen Anne Street
LONDON W1M 0HP
Attention: Company Secretary
Dear Sirs,
FACILITY AGREEMENT DATED * (THE "FACILITY AGREEMENT")
We refer to the Facility Agreement, terms defined in which have the same meaning
when used in this L/C Request.
We wish to have [state type of L/C] opened for our account under the Facility
Agreement as follows:
(a) Issue Date: *
(b) Expiry Date: *
(c) Requested Amount: *
(d) Beneficiary: *
(e) Beneficiary's bank account: *
(f) Concerning: [Reference the agreement
under which the liability
arises, describe its nature
and quantify it]
We confirm that no Default has occurred and is continuing or would result from
the requested Utilisation, no Availability Limit will be breached as a result of
the requested Utilisation and all the representations and warranties in Clauses
8 and 13 of the Facility Agreement which are to be made or repeated as at the
date of this L/C Request are true and correct.
Yours faithfully
for and on behalf of
[the Company]
<PAGE>
SCHEDULE 3
PREFERENTIAL CREDITOR LISTING
To: Burdale Financial Limited
53 Queen Anne Street
LONDON W1M 0HP
Attention: Company Secretary
Dear Sirs,
As at the month ended * preferential creditors were as follows:
<TABLE>
<CAPTION>
L Period Due Date
<S> <C> <C> <C>
Wages & Salary
PAYE/NIC
VAT
Other (Please specify)
Total
--------------------
--------------------
</TABLE>
- --------------------------------------------------------------------------------
Payments during the month ended * were as follows:
<TABLE>
<CAPTION>
L Period Due Date
<S> <C> <C> <C>
Wages & Salary
PAYE/NIC
VAT
Other (Please specify)
Total
--------------------
--------------------
</TABLE>
- --------------------------------------------------------------------------------
I certify that the information contained in this report is correct:
Signature:....................................
Name:.......................................... Date:
<PAGE>
SCHEDULE 4
TELEPHONE AND FACSIMILE INDEMNITY
CORPORATE MANDATE FOR TELEPHONE AND
FACSIMILE INSTRUCTIONS
1. We, (Name of ......................................................(the
"COMPANY") of.............................................. (Registered
Office) refer to the Facility Agreement dated..........................
between Burdale Financial Limited ("BURDALE") and the Company (the
"FACILITY AGREEMENT") pursuant to which Burdale is to operate
account(s) and/or credit or other facilities or banking arrangements
for the Company (together the "FACILITIES").
2. In consideration of Burdale entering into the Agreement and agreeing to
make the Facilities available to act in accordance with the terms of
this Mandate:
(a) notwithstanding the terms of the Facility Agreement, any
existing contractual relationship or any future mandate or
other agreement or course of dealing between Burdale and the
Company, Burdale is requested and authorised to rely upon, and
act in accordance with, any notice, demand or other
communication in respect of the Facilities (each an
"INSTRUCTION" and together "INSTRUCTIONS") which may from time
to time be, or purport to be, given by way of the methods of
communication specified in the Schedule on behalf of the
Company by any two of the persons identified in the relevant
sections in the Schedule without any enquiry on Burdale's part
as to the authority or identity of the persons giving or
purporting to give such Instruction or Instructions and
regardless of the circumstances prevailing at the time of such
Instruction or Instructions;
(b) Burdale shall be entitled to treat any Instruction as fully
authorised by, and binding upon, the Company and shall be
entitled (but not bound) to take such steps in connection
with, or in reliance upon, such Instruction as Burdale in its
sole and absolute discretion may consider appropriate, whether
such Instruction includes an instruction to pay money or
otherwise to debit or credit any account, or relates to the
disposition of any money, securities or documents, or purports
to bind the Company to any agreement or other arrangement with
Burdale or with any other person or to commit the Company to
any other type of transaction or arrangement whatsoever,
regardless of the nature of the transaction or arrangement or
the amount of money involved and notwithstanding any error or
misunderstanding or lack of clarity in the terms of such
Instruction; and
(c) the Company undertakes forthwith on demand by Burdale to
indemnify Burdale and to keep Burdale indemnified against all
losses, claims, actions, proceedings, demands, damages, costs
and expenses incurred or sustained by Burdale, of any nature
and howsoever arising, out of or in connection with its
acknowledgement and compliance with any Instruction or
Instructions.
<PAGE>
3. The Company acknowledges and agrees that Burdale and each of Burdale's
nominees or agents shall not be responsible for any claim, action,
proceeding, demands, loss, damage, liability cost or expenses of any
nature and howsoever suffered or incurred arising directly or
indirectly as a result of any act or thing which Burdale and/or such
nominee or agent allows, takes or does or omits to allow, take or do in
relation to the Instructions or any of them under or pursuant to this
mandate other than in respect of Burdale's negligence or wilful
default.
4. The terms of this Mandate shall remain in full force and effect unless
and until Burdale receives a written notice of termination of this
Mandate from the Company giving not less than seven days' notice of
termination and signed by an officer of the Company (as to whose
identity and authority Burdale shall be under no obligation or duty to
the Company to make any enquiry whatsoever) PROVIDED THAT such seven
days' notice period shall not commence until the date, Burdale
acknowledges receipt of such written notice that such termination will
not release the Company from any liability under this Mandate in
respect of any act performed by Burdale in accordance with the terms of
this Mandate prior to the effective date of termination of this
Mandate.
5. This Mandate shall be governed by, and construed in accordance with
English Law. The Company agrees for the benefit of Burdale that the
courts of England shall have jurisdiction to hear and determine any
suit, action proceeding and to settle any disputes which may arise
under or in connection with this Mandate and for such purpose the
Company irrevocably submits to the non-exclusive jurisdiction of such
courts.
Signed........................................................
Dated.........................................................
Duly authorised for and on behalf of (Name of Company)..........................
pursuant to a Resolution of the Board of Directors dated........................
<TABLE>
<CAPTION>
THE SCHEDULE
- ---------------------------------- --------------------------------------------- -------------------------------
*METHOD OF COMMUNICATION PERSONS AUTHORISED TO GIVE INSTRUCTIONS SIGNATURE
<S> <C> <C>
- ---------------------------------- --------------------------------------------- -------------------------------
Telephone
- ---------------------------------- --------------------------------------------- -------------------------------
- ---------------------------------- --------------------------------------------- -------------------------------
- ---------------------------------- --------------------------------------------- -------------------------------
Facsimile
- ---------------------------------- --------------------------------------------- -------------------------------
- ---------------------------------- --------------------------------------------- -------------------------------
- ---------------------------------- --------------------------------------------- -------------------------------
Other (specify):
- ---------------------------------- --------------------------------------------- -------------------------------
- ---------------------------------- --------------------------------------------- -------------------------------
<PAGE>
- ---------------------------------- --------------------------------------------- -------------------------------
- ---------------------------------- --------------------------------------------- -------------------------------
</TABLE>
* Complete as appropriate - in the absence of completion, no instructions
will be accepted in relation to that method of communication.
SIGNATORIES
THE COMPANY:
GEOLOGISTICS LIMITED
By:
BURDALE:
BURDALE FINANCIAL LIMITED
By:
<PAGE>
EXHIBIT 21.1
GEOLOGISTICS CORPORATION
<TABLE>
<CAPTION>
STATE OR JURISDICTION %
OF INCORPORATION OF OWNERSHIP
------------------------ -----------------
<S> <C> <C>
- - ILLCAN, Inc............................................................. Delaware 100%
- GeoLogistics Co. ..................................................... Canada 50%
- Trans Navigation, Inc............................................... Canada 100%
- Ultra Warehousing, Inc.............................................. Canada 100%
- Geologistics International Finance Ltd. ............................ Ireland 100%
- - ILLSCOT, Inc............................................................ Delaware 100%
- GeoLogistics Co....................................................... Canada 50%
- - Geologistics Americas, Inc.............................................. Delaware 100%
- LEP Fairs, Inc...................................................... Georgia 100%
- Air Freight Consolidators International, Inc........................ New York 100%
- The Bekins Company................................................ Delaware 100%
- - Bekins Van Lines Company................................................ Nebraska 100%
- Bekins Heritage Transport, Inc.................................... Illinois 100%
- Bekins Liberty Forwarders, Inc.................................... Illinois 100%
- Bekins Independence Forwarders, Inc............................... Illinois 100%
- The Primary Source for Transportation, Inc........................ Illinois 100%
- Bekins Worldwide Solutions Inc.................................... Delaware 100%
- GeoLogistics Services, Inc. (Matrix).............................. Delaware 100%
- Seabridge Container Lines..................................... Delaware 100%
- Bay Area Matrix, Inc.......................................... Delaware 100%
- L.A. Matrix, Inc.............................................. Delaware 100%
- Southwest Matrix, Inc......................................... Delaware 100%
- Matrix CT Inc................................................. Delaware 100%
- - LIW Holdings Corp....................................................... Delaware 100%
- LEP International Worldwide Limited................................... UK 100%
- GeoLogistics A/S ................................................... Denmark 100%
- Geologistics International Holdings Ltd............................. UK 100%
- Geologistics Holdings Bermuda Ltd................................. Bermuda 100%
- ACI Trading (Far East) Ltd...................................... Hong Kong 50%
- Geologistics International (Asia/Pacific) Ltd. (BVI).............. British Virgin Islands 100%
- ACI Trading (Far East) Ltd...................................... Hong Kong 50%
- Geologistics (China) Ltd........................................ Hong Kong 100%
- GeoLogistics Ltd. .............................................. Taiwan 100%
- GeoLogistics Ltd. .............................................. Japan 100%
- GeoLogistics Ltd. .............................................. Malaysia 100%
- Geologistics (Malaysia) Sdn Bnd ................................ Malaysia 100%
- LEP International NV............................................ Neth. Antilles 100%
- GeoLogistics Inc. .............................................. Philippines 90%
- GeoLogistics (Subic) Inc...................................... Philippines 100%
- GeoLogistics Ltd. .............................................. Hong Kong 100%
- GeoLogistics (Thailand) Co. Ltd................................. Thailand 51%
- GeoLogistics Pte Ltd. 90%....................................... Singapore 90%
- PT LEP Internasional Indonesia Perdana.......................... Indonesia 65%
- LEP Ltd......................................................... New Zealand 100%
- LEP International (NZ) Ltd.................................... New Zealand 25%
- LEP International (PTY) Ltd................................. Australia 100%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATE OR JURISDICTION %
OF INCORPORATION OF OWNERSHIP
------------------------ -----------------
<S> <C> <C>
- GeoLogistics Ltd................................................ India 100%
- GeoLogistics International Management Ltd........................... UK 100%
- Spectre Anstalt..................................................... Lichtenstein 100%
- ECT Transport Ltd................................................... Hong Kong 100%
- LEP European Holding BV............................................... Netherlands 100%
- Telmidas AMS BV Netherlands......................................... Netherlands 100%
- GeoLogistics BV................................................... Netherlands 100%
- GeoLogistics NV................................................... Belgium 100%
- GeoLogistics SA................................................... France 100%
- LEP Shipping AG................................................... Switzerland 100%
- LEP Holdings GmbH................................................. Germany 100%
- Geologistics GmbH............................................. Germany 100%
- Geologistics Lassen GmbH...................................... Germany 100%
- GeoLogistics SpA.................................................. Italy 76%
- Lassen Transportes Lda. Portugal.................................. Portugal 100%
- AB GeoLogistics................................................... Sweden 100%
- GeoLogistics SA................................................... Spain 100%
- GeoLogistics Ltd...................................................... UK 100%
- GeoLogistics Ltd.................................................... Ireland 100%
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0001015527
<NAME> GEOLOGISTICS CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 2,628
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<RECEIVABLES> 265,747
<ALLOWANCES> 20,255
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<PP&E> 98,631
<DEPRECIATION> 22,648
<TOTAL-ASSETS> 447,656
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<BONDS> 110,000
0
14,550
<COMMON> 2
<OTHER-SE> (60,932)
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<TOTAL-REVENUES> 1,558,204
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<OTHER-EXPENSES> 428,954
<LOSS-PROVISION> 7,323
<INTEREST-EXPENSE> 23,086
<INCOME-PRETAX> (20,975)
<INCOME-TAX> 27,258
<INCOME-CONTINUING> (48,233)
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (51,811)
<EPS-BASIC> (24.31)
<EPS-DILUTED> (24.31)
</TABLE>
